FEDERAL COURT OF AUSTRALIA

Alari (Trustee), in the matter of Rizzo-Bottiglieri-de Carlini Armatori SpA (Trustees in Bankruptcy appointed) v Rizzo-Bottiglieri-de Carlini Armatori SpA (No 2) [2018] FCA 1067

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to section 6 of the Cross-Border Insolvency Act 2008 (Cth) (Act) and clause 1 of Article 17 of the Model Law, the decision n. 3/2018 in proceeding n. 121/2017 and n. 141/2014-142/2014 and 152/14 in the Court of Torre Annunziata, Italy (Italian bankruptcy proceeding) dated 11 January 2018 in respect of Rizzo-Bottiglieri-De Carlini Armatori SpA (Company), pursuant to Legge Fallimentare Italiana (Legge n. 267/1942)  (the Italian Bankruptcy Act), by which the Company was declared bankrupt and the Plaintiffs were appointed Bankruptcy Trustees of the Company, be and is hereby recognised as a foreign proceeding, within the meaning of Article 2(a) and Article 17(1) of the Model Law.

2.    Pursuant to section 6 of the Act and clause 2 of Article 17 of the Model Law, the Italian bankruptcy proceeding be and is hereby recognised as a foreign main proceeding within the meaning of Article 2(b) and Article 17(2) of the Model Law.

3.    The Plaintiffs, Messrs Giovanni Alari, Luciano Caiazzo and Vincenzo Ruggiero, be and are hereby recognised as a foreign representative within the meaning of Article 2(d) of the Model Law in respect of the Italian bankruptcy proceeding.

4.    For the purpose of section 16 of the Act and Article 20(2) of the Model Law, the scope and modification or termination of the stay and suspension referred to in Article 20(1) of the Model Law are the same as would apply if the stay and suspension arose under Part 5.4 of Chapter 5 of the Corporations Act 2001 (Cth).

5.    Notwithstanding Order 4, any application for the issue of a warrant of arrest in Australia of any vessel owned or chartered by the Defendant be made to a Judge of this Court with these orders and the reasons for judgment in this case and in Yu v STX Pan Ocean Co Ltd (South Korea), in the matter of STX Pan Ocean Co Ltd [2013] FCA 680 and Yakushiji v Kaisha [2015] FCA 1170, drawn to the attention of the Court at the time any such application is made.

6.    Orders 1, 2 and 3 or the Orders made in these proceedings on 5 February 2018 are vacated.

7.    Unless the Court otherwise orders, the stay and suspension referred to in Order 4 will terminate and Orders 1-5 will be vacated without further order on 13 October 2018, with effect from that date.

8.    In satisfaction of paragraphs (c) and (d) of Rule 15A.7(1) of the Federal Court (Corporations) Rules 2000, the Plaintiffs are directed, within 14 days of the making of the Orders above, to:

(a)    publish a notice of the making of Orders 1-7 above in accordance with Form 21 in Daily Cargo News;

(b)    publish a notice of the making of Orders 1-7 above in accordance with Form 21 in Lloyd's List International; and

(c)    send a notice of the making of Orders 1-7 above in accordance with Form 21 to each Australian creditor of the Company known to the Plaintiffs.

9.    The plaintiffs are directed to inform the Court forthwith in the event that completion of the sale of the Company’s fleet of vessels occurs earlier than 12 October 2018.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

RARES J:

1    This is an application for recognition of the fallimento proceeding commenced by the trustees appointed by the Court of Torre Annunziata of Naples in the Republic of Italy (the Italian Court) on 11 January 2018 to administer the liquidation of Rizzo-Bottiglieri-De Carlini Armatori SpA, an Italian shipping fleet owner, in the circumstances that I explained when granting the trustees interim relief in Board of Directors of Rizzo-Bottiglieri-De Carlini Armatori SpA v Rizzo-Bottiglieri-De Carlini Armatori SpA [2018] FCA 153.

Background

2    The trustees supplemented their evidence that I considered earlier this year with further material including a document, prepared as an affidavit, by one of the trustees, Giovanni Alari, on 27 February 2018, that was before me on the first day of the hearing on 1 March 2018 (that Mr Alari was unable to verify because of a severe snowstorm in Naples on that day) and the affidavits of Fabio Cadeddu, the Italian lawyer for the trustees, sworn 20 February 2018 and 28 June 2018. I am satisfied that Mr Alari’s draft affidavit is true and accurate by reason of Mr Cadeddu’s verification of it in his affidavit of 28 June 2018. Mr Cadeddu has updated the factual position in his most recent affidavit.

3    Rizzo has a fleet of 13 vessels, most of which were built from about 2010. All of the vessels are subject to mortgages registered in the Italian Ships Register in favour of European banks or lenders and governed by the laws of Italy. The fleet trades worldwide and none of the vessels has interrupted its ordinary trading activities since the Italian Court made its decree on 11 January 2018 placing the company into its fallimento process, that I am satisfied is, equivalent, or most closely analogous, to a liquidation under Pt 5.4 of the Corporations Act 2001 (Cth) for the purposes of s 16 of the Cross-Border Insolvency Act 2008 (Cth). The activities of the trustees under the fallimento are directed to winding the company up.

4    On 14 May 2018, the trustees published a notice of an auction of the fleet that is to take place on 24 July 2018. The notice was published in English in Lloyd’s List International and is also available in English on the trustees’ website. It requires any interested party to deliver to the Italian Court a sealed envelope containing its firm and irrevocable bid in the Italian language that will be deemed to be an offer, together with a cashier’s or bank cheque payable in favour of the Italian Court or otherwise making arrangements for such payment. The starting price fixed in the notice of the auction is USD 200 million, and the bidders are required to bid for the entire 13-ship fleet. There are other terms and conditions of the auction that are not necessary to set out for present purposes, other than to say that the purchaser must agree to take over the employment of all crews on the vessels on the then current terms and conditions in their articles of agreement for their employment.

5    Mr Cadeddu said that if the fleet is sold successfully at the auction on 24 July 2018, the purchaser will have a maximum of 80 days to complete the sale and that the trustees expect, on information presently available to them, that a sale will occur in consequence of the auction.

6    In those circumstances, the trustees wish to continue to trade the vessels internationally and expect one vessel, Giuseppe Mauro Rizzo, to arrive in Australia to load coal at Abbot Point in Queensland in about two weeks’ time. Thus, the trustees seek to have final orders for recognition made today so as to protect the fleet’s ability to continue trading and to be available, for the purposes of the auction, to be delivered to any purchaser without unnecessary complications that might stem from an arrest on a general maritime claim.

7    The trustees are content, however, for the recognition orders to include what is now a usual order in this Court that any application by a creditor to arrest a vessel the subject of the stay under the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law set out in Sch 1 to the Cross-Border Insolvency Act should be subject to the ability of any person wishing to apply for an arrest of one of Rizzo’s ships to make that application to a judge of the Court and bring to the judge’s attention the order for recognition and the authorities, being Yu v STX Pan Ocean Co Ltd (2013) 223 FCR 189 and Yakushiji v Daiichi Chuo Kaisen Kaisha [2015] FCA 1170. That will ensure that the judge asked to consider the issue of an arrest warrant will be able to evaluate whether the claim in rem sought to be asserted by the plaintiff has a sufficiently arguable foundation to warrant the arrest to be made in the circumstances of the existence of the recognition of the foreign main proceeding.

8    Mr Cadeddu’s evidence, that I accept, is that Arts 51, 54, 111 and 111(2) of the Italian Bankruptcy Act have the effect that privileged, being secured, creditors, including those who may hold a maritime lien, are not permitted to arrest the ship in Italy, but will be accorded in the fallimento process the priority of their securities when the trustees sell the asset, being the ship.

9    The trustees have pointed out an error in late Professor Berlingieri’s most recent edition of Arrest of Ships, (6th ed, 2017) where, at [16.100] the learned author opined that in some States including Italy, notwithstanding the liquidation of the shipowner, a ship could be arrested on a maritime lien. However, Professor Berlingieri based that paragraph on the response to a questionnaire on the implementation of the 1952 Arrest Convention that had been completed by the Italian Maritime Law Association in 2005 (see at 419-423). This information had not been updated following an amendment in 2007 to Art 51 of the Italian Bankruptcy Act to add the words “or protective action” to the text that now reads, in translation, as follows:

Except as otherwise provided by law, from the day the bankruptcy decree is issued, no individual, enforcement or protective action, even for credits matured during the bankruptcy, may be started or pursued on the assets of the bankruptcy estate.

10    Mr Cadeddu explained that the present effect of Art 51 was applied both to secured and unsecured creditors. He also explained that Art 89 of the Italian Bankruptcy Act required the trustees to maintain a list of all claims and to identify in it privileged claims, so that they may be paid out in proper order of priority. Mr Cadeddu also deposed that, to the best of his knowledge, since the date of the Italian Court’s decree on 11 January 2018, first, no crew members on board any of Rizzo’s vessels had any outstanding claims in respect of their wages, entitlements or disbursements and that the crews are being paid as and when their wages and entitlements fall due, and, secondly, no party has made any collision or salvage claim in respect of any of the fleet and he was not aware of any existing potential claims of that nature, and, thirdly, no mortgagee had attempted to enforce its security. He said that, with the exception of the fallimento proceeding before the Italian Court, for which the trustees now seek recognition here, and in South Africa and the United States, to which I referred to in Rizzo [2018] FCA 153 at [49], he is not aware of any foreign proceedings in respect of Rizzo, including in Australia.

11    I am satisfied by his evidence that no receiver, controller or managing controller has been appointed in this country under the provisions of the Corporations Act and that the moratorium or stay granted in the United States in recognition of the fallimento proceeding is still in place. I am also satisfied that the position remains unchanged since I gave my reasons in Rizzo [2018] FCA 153 at [41] as to the identity of, and debts due to, the three unsecured local creditors.

12    Mr Cadeddu confirmed that Rizzo has no assets in Australia and that, once the proposed sale of the fleet has been completed, the trustees will cease to have any interest in any of the ships, so that the recognition orders and stay can then be vacated.

How long should the stay under Art 20(2) of the Model Law remain in force?

13    During the course of argument today the practical course emerged of making orders first, granting a final recognition order and stay and then, later, automatically bringing those orders to an end 81 days after the completion of the sale, being 13 October 2018. The orders would allow the trustees to apply in the event that some difficulty emerges in the sale process and it would require them to inform the Court forthwith if the sale has completed earlier than the anticipated period of 80 days, thereby rendering the recognition and stay orders of no further utility to them in the conduct of the liquidation for the Italian Court. Such a practical course appears to have been contemplated by the provisions of Art 17(4) which allow “modification or termination of recognition if it is shown that the grounds to granting it … have ceased to exist”.

14    In my opinion, that is a practical course. In the event that the sale proceeds, as is expected, and is completed on or around 13 October 2018, it would not serve any useful purpose to require the trustees to incur further expense and to readvertise the expiry of orders of the kind discussed above, since that will already have been achieved by the advertisement of the orders to be made today that must be made under r 15A.7 of the Federal Court (Corporations) Rules 2000 (see Rizzo [2018] FCA 153 at [39]-[42]).

15    Thus, all actual creditors, and those with potential claims, will be aware from today’s orders of the stay’s limited temporal duration. However, if the position turns out otherwise, then, if and when, that eventuality occurs, appropriate orders can be developed to take account of the new circumstances, including advertising any different outcome. It is unnecessary for the trustees to serve the orders on Rizzo since they control it under the auspices of the Italian Court and such service would be of no benefit to anyone.

16    For these reasons and those I gave in Rizzo [2018] FCA 153, I am satisfied for the purposes of the Model Law that:

    the fallimento in the Italian Court is a foreign proceeding within the meaning of Art 2(a) of the Model Law;

    the trustees are foreign representatives within the meaning of Art 2(d);

    the application meets the requirements of Art 15(2); and

    the fallimento is a foreign main proceeding because it is taking place in Italy where Rizzo has its centre of main interests in accordance with Art 17(2)(a).

17    Accordingly, I am satisfied that the proceeding should be recognised by this Court in accordance with the requirements of Art 17. However, for the reasons I have given, it is appropriate to protect the interests of Rizzo, the trustees and creditors to condition the recognition and stay under Art 22 of the Model Law by limiting its temporal effect so as to achieve the object identified by the trustees of securing, as best can be done, the ability of the fleet to trade without the threat of an arrest, unless a judge considers that the person claiming an entitlement to effect that arrest has made out a sufficient case to warrant it and then to bring the recognition and stay orders to an end consequent upon the anticipated completion of sale of the fleet.

18    I will make orders in the terms proposed by the trustees.

Associate:

Dated:    16 July 2018