Federal Court of Australia

Frege in his Capacity as Foreign Representative of Greensill Bank AG v Greensill Bank AG [2021] FCA 330

File number:

VID 157 of 2021

Judgment of:

ANASTASSIOU J

Date of judgment:

31 March 2021

Date of publication of reasons

7 April 2021

Catchwords:

BANKRUPTCY AND INSOLVENCY – interim relief sought in proceeding relating to recognition of foreign insolvency whether to stay proceedings against the company in Australia – whether to grant powers of examination to the liquidator – whether to make orders simplifying publication and service requirements for the recognition application – interim relief granted in part

Legislation:

Cross-Border Insolvency Act 2008 (Cth), ss 6, 10, 16, Schedule 1United Nations Commission on International Trade Law Model Law on Cross-Border Insolvency (Arts 2, 15, 17, 19)

Federal Court (Corporations) Rules 2010 (Cth), rr 15A.3(4), 15A.4(2), 15A.6(1), 15A.7(1)(b)-(d)

Division:

General Division

Registry:

Victoria

National Practice Area:

Commercial and Corporations

Sub-area:

Corporations and Corporate Insolvency

Number of paragraphs:

11

Date of hearing:

31 March 2021

Counsel for the Applicant:

Mr S. J Maiden QC with Ms V. E Bell

Solicitor for the Applicant:

MinterEllison

Counsel for the Interested Parties (BBC Trade Credit Pty Ltd and Tokio Marine Management (Australasia) Pty Ltd):

Mr J. Hutton

Solicitor for the Interested Parties (BBC Trade Credit Pty Ltd and Tokio Marine Management (Australasia) Pty Ltd):

Polczynski Robinson

Counsel for the Interested Party (Aleris Aluminium Duffel):

Mr S. Aspinall

Solicitor for the Interested Party (Aleris Aluminium Duffel):

Norton Rose Fulbright

Solicitor for the Interested Party (The German Deposit Protection Fund of the Federal Association of German Banks):

Mr T. Grave of Clifford Chance

ORDERS

VID 157 of 2021

BETWEEN:

MICHAEL FREGE IN HIS CAPACITY AS FOREIGN REPRESENTATIVE OF GREENSILL BANK AG

Applicant

AND:

GREENSILL BANK AG

Respondent

order made by:

ANASTASSIOU J

DATE OF ORDER:

31 MARCH 2021

THE COURT ORDERS THAT:

1.    Pursuant to Art 19(1)(a) of the Model Law, until the determination of the application for relief under Art 17 of the Model Law, or further order of the Court:

(a)    any and all execution against the defendant’s assets be stayed;

(b)    no person within the jurisdiction of the Court other than the relevant defendant may transfer, encumber or otherwise dispose of, or take possession of or otherwise recover, any assets of the defendant; and

(c)    no proceeding against the defendant, or in relation to any of its property, may be begun or proceeded with; and

(d)    no enforcement process in relation to the property of the defendant can be begun or proceeded with.

2.    An order that the requirements of rr 15A.3(4), 15A.4(2), 15A.6(1) and 15A.7(1)(b)-(d) of the Federal Court (Corporations) Rules 2000 (Cth) be dispensed with and in lieu thereof the plaintiff, within 10 business days of the making of these Orders:

(a)    must cause to be published a notice substantially in the form of Forms 20 and 21 in the Australian and Australian Financial Review newspapers;

(b)    publish notice substantially in the form of Forms 20 and 21 on the defendant’s website; and

(c)    give notice of making of these Orders substantially in the form of Forms 20 and 21 by email to each person whom:

(i)    to the knowledge of the defendant is a creditor of the defendant or claims to be a creditor of the defendant; and

(ii)    either:

A.     is domiciled in Australia; or

B.    has a claim to be a creditor arising from dealing with the defendant in Australia.

3.    Any person affected by these Orders has liberty to apply on three days’ notice.

4.    The originating process be set down for hearing on a date to be fixed by the Court.

5.    Further hearing of the plaintiff’s application for the orders sought in paragraph 2 of his interlocutory process dated 29 March 2021 is adjourned to 9 April 2021 at 2.15pm.

6.    Costs in the cause.

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

REASONS FOR JUDGMENT

(Delivered ex tempore, revised from transcript)

ANASTASSIOU J:

INTRODUCTION

1    This is an interlocutory application, brought on an urgent basis, for interim relief pending the hearing and determination of the Plaintiff’s claim for recognition of a foreign insolvency proceeding under the Cross-Border Insolvency Act 2008 (Cth).

2    Greensill Bank AG, the Respondent, is a company registered in Germany. Its assets are estimated to be worth approximately 3.85 billion euros and its liabilities are estimated to exceed 4 billion euros.

3    The Plaintiff, Dr Michael Frege, is the equivalent under German insolvency law of a liquidator under Australian insolvency law. The Plaintiff has been appointed as the insolvency administrator of Greensill Bank, pursuant to the Insolvenzordung (the German Insolvency Act), by orders of the Amtsgericht Bremen (a German local court) made on 16 March 2016 (the Proceeding).

4    The above mentioned Proceeding in Germany is the foreign proceeding which the Plaintiff seeks recognition of as a foreign proceeding pursuant to Art 17(1) of the United Nations Commission on International Trade Model Law on Cross-border Insolvency (UNCITRAL Model Law), being Schedule 1 to the Cross-Border Insolvency Act. The Plaintiff also seeks recognition of the foreign insolvency proceeding as a “foreign main proceeding” pursuant to Art 17(2) of the Model Law, on the grounds that the Proceeding has been instituted in the state where the debtor (Greensill Bank) has its centre of main interest (COMI).

The Present Application

5    As I have indicated, the present application is for interim orders pending the hearing and determination of the Plaintiff’s application for recognition. The orders sought on an interim basis in the interlocutory process are as follows:

1.    Pursuant to Art 19(1)(a) of the Model Law, until the determination of the application for relief under Art 17 of the Model Law, or further order of the Court:

(a) any and all execution against the defendant’s assets be stayed;

(b) no person within the jurisdiction of the Court other than the relevant defendant may transfer, encumber or otherwise dispose of, or take possession of or otherwise recover, any assets of the defendant; and

(c) no proceeding against the defendant, or in relation to any of its property, may be begun or proceeded with; and

(d) no enforcement process in relation to the property of the defendant can be begun or proceeded with.

2.    Pursuant to Art 19(1)(c) of the Model Law, until the determination of the application for relief under Art 17 of the Model Law, or further order of the Court, the plaintiff may examine witnesses, take evidence or require the delivery of information concerning the defendant’s affairs, rights, obligations or liabilities as if he were a liquidator appointed to the defendant under Part 5.4B of the Corporations Act 2001 (Cth).

3.    An order that the requirements of rr 15A.3(4), 15A.4(2), 15A.6(1) and 15A.7(1)(b)-(d) of the Federal Court (Corporations) Rules 2000 (Cth) be dispensed with and in lieu thereof the plaintiff, within 10 business days of the making of these Orders:

(a) must cause to be published a notice substantially in the form of Forms 20 and 21 in the Australian and Australian Financial Review newspapers;

(b) publish notice substantially in the form of Forms 20 and 21 on the defendant’s website; and

(c) give notice of making of these Orders substantially in the form of Forms 20 and 21 by email to each person whom:

(i) to the knowledge of the defendant is a creditor of the defendant or claims to be a creditor of the defendant; and

(ii) either:

(A) is domiciled in Australia; or

(B) has a claim to be a creditor arising from dealing with the defendant in Australia.

4.    Any person affected by these Orders has liberty to apply on three days’ notice.

5.    The originating process be set down for hearing on a date to be fixed by the Court.

6.    Costs in the cause.

6    The interlocutory process is supported by an affidavit Dr Charlotte Louise Schildt dated 29 March 2021 (Schildt Affidavit), which relates to the substantive matters in the application, and an affidavit of Elizabeth Ann Yick dated 30 March 2021, which concerns service of documents on Greensill Bank’s major creditors.

7    For the reasons advanced by the Plaintiff in thorough and helpful written submissions, and further explained by senior counsel in oral submissions, I propose to make orders as sought by the Plaintiff, other than those in paragraph 2 of the interlocutory process.

8    The further hearing of the interlocutory process in relation to paragraph 2 was initially stood over for hearing until 2:15pm on 9 April 2021. However, on 6 April 2021, after the making of interim orders, the Plaintiff informed the Court that he would not press paragraph 2 of the interlocutory process.

consideration

9    I agree with the Plaintiff’s submissions that a matter of relevance to the question of whether interim orders should be made is the likelihood that the foreign proceeding will be recognised. In saying that the likelihood of obtaining an order for recognition at the final hearing is relevant to whether an interim order should be made is in no way to prejudge the outcome of the recognition application. The question of recognition will be considered after hearing full argument, including any reasons advanced by interested parties as to why recognition should not be granted.

10    That said, I am satisfied that the Plaintiff has a strong case for recognition at the final hearing for the reasons set out in paragraphs [10]-[28] of his written submissions. The prima facie strength of the Plaintiff’s application for recognition provides a proper basis for making interim orders. For convenience, I extract below the Plaintiff’s submissions in that regard:

Recognition is likely to be granted

10. The strength of the case for recognition of the foreign proceeding and the relief likely to be granted at that hearing are relevant to the question of whether the interim relief now sought ought to be granted

11. Pursuant to Art 17(1) of the Model Law, a foreign proceeding must be recognised if certain prescribed requirements are complied with. Those substantive and procedural requirements, addressed below are found in:

(a) Art 17 of the Model Law;

(b) Art 15 of the Model Law, as modified by s 13 of the Act; and

(c) Corporations Rules div 15A.

12. While the Court is not required to make a final determination as to the application for recognition at this interlocutory stage, it can be satisfied that it is unlikely that there will be any controversy in the matter of recognition, for the reasons set out below.

Article 17 requirements

13. The Proceeding is a ‘foreign proceeding’ within the meaning of Art 2(a) as:

(a) It is a collective judicial or administrative proceeding in a foreign State: the Proceeding was opened by a court in Bremen, Germany, and the collective nature of the proceeding can be ascertained from the face of the court order and from the provisions of the German Insolvency Statute, And from Dr Schildt’s description of the proceeding.

(b) It is conducted pursuant to a law relating to insolvency: the proceeding is governed by the German Insolvency Statute, which is by its nature a law relating to insolvency.

(c) The assets and affairs of the debtor during the proceeding are subject to control or supervision by a foreign court: section 58 of the German Insolvency Statute (attached) provides that the insolvency administrator shall be subject to supervision by the court.

(d) The proceeding is for the purpose of reorganisation or liquidation: the purpose of the Proceeding is to wind up the company.

14. In respect of Art 17(1)(b), the plaintiff satisfies the definition of ‘foreign representative’ in Art 2(d).

15. Article 17(1)(c) is satisfied by the annexure to the Schildt Affidavit of a certified copy of the decision of the Bremen Local Court, together with a copy of the orders made by that court and certified translations of both. The Court is entitled to presume that documents submitted in support of the application for recognition are authentic, whether or not they have been legalised, pursuant to Art 16(2).

16. In respect of Art 17(1)(d), the Federal Court of Australia is a Court referred to in Art 4 of the Model Law by operation of s 10(b)(i) of the Act.

Article 15 requirements, as modified by s 13 of the Act

17. The requirements of Art 15(2) are picked up by Art 17(1)(c), which has been addressed above.

18. Article 15(3) requires an application for recognition to be accompanied by a statement identifying all foreign proceeds in respect of the debtor that are known to the foreign representative. Section 13 of the Act modifies that article, and requires that the application must also be accompanied by a statement identifying, relevantly, any appointment of a receiver and all proceedings under Chapter 5 of the Corporations Act 2001 (Cth) and s 601L and Sch 2 to that Act that are known to the foreign representative. That requirement is satisfied by paragraphs 42 to 44 of the Schildt Affidavit.

Recognition as foreign main proceeding

19. The plaintiff seeks an order that the Proceeding be recognised as a foreign main proceeding pursuant to Art 17(2)(a). Article 2(b) defines ‘foreign main proceeding’ as a foreign proceeding taking place in the State where the debtor has its centre of main interests (COMI).

20. Article 16(3) provides that in absence of proof to the contrary, a company’s COMI is presumed to be in the State in which its registered office is. The registered office of Greensill Bank AG is Martinistrasse 48, 28195 Bremen, Germany.

21. There is nothing to rebut the presumption. That would require factors which are both objective and ascertainable by third parties, and which warrant a conclusion that an actual situation exists which is different from that which locating it at the registered office is deemed to rebut.

22. Greensill Bank AG’s main business involved the purchase of receivables from international trade finance transactions through Greensill Capital UK. This activity was funded through Greensill Bank AG’s deposit-taking business in Germany. The management of the receivables, including collection, was managed for Greensill Bank AG by Greensill Capital UK pursuant to ‘Service Level Agreements’. Accordingly, the core of Greensill Bank AG’s operations was in Germany.

23. In this case, the following additional factors buttress the conclusion that the COMI of Greensill Bank AG is in Germany:

(a) it had 137 employees situated in Germany and no employees in any other jurisdiction;

(b) it does not have any branches outside of Germany;

(c) it owns the land at its business address in Bremen, Germany;

(d) it primarily collected deposits from investors in Germany (although may have provided origination support services to Greensill Capital UK in other jurisdictions);

(e) its banking licence is issued by the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht); and

(f) the majority of its creditors are situated in Germany (see paragraph 37 below).

24. The Court can also draw comfort from the fact that under the European Insolvency Regulation, the German court would not have opened the proceeding without being satisfied that Greensill Bank AG’s COMI was in Germany: Reg 2015/848, r 3, 4 and In re Eurofood IFSC Ltd [2006] Ch 508, 543 [40]-[42].

The Art 20 stay

25. The German insolvency regime is set out in parts one to five of the German Insolvency Statute. Those chapters contain a process for realising the assets of a debtor and distributing the proceeds to creditors. The closest analogy in an Australian context is winding up under Part 5.4B of the Corporations Act. Accordingly, at the hearing of the recognition application, the plaintiff will argue that the stay that should be applied by Model Law Art 20 should be the same as that created under Part 5.4B of the Corporations Act.

Conclusion as to likelihood of recognition

26. Article 17(1) requires that a foreign proceeding be recognised (subject to Art 6) if the requirements of Art 17(1) are satisfied.

27. Article 6 provides that the Court may refuse to take any action governed by the Model Law if the action would be manifestly contrary to the public policy of Australia. There is no call for the operation of Art 6 in the present case.

28. Accordingly, at the hearing of the originating process, the plaintiff will submit that it is entitled to recognition of the proceeding as a foreign main proceeding, and that the stay which would apply by operation of Art 20 is that imposed by Part 5.4B of the Corporations Act.

[Footnotes omitted]

Disposition

11    For those reasons, I am satisfied that the interim orders sought in the interlocutory process should be made, save for paragraph 2.

I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Anastassiou.

Associate:

Dated:    7 April 2021