Federal Court of Australia

Naumets (Trustee), in the matter of Dorokhov (Bankrupt) v Dorokhov [2022] FCA 748

ORDERS

THE COURT ORDERS THAT:

1.    The proceeding in the Arbitration Court of Primorsky Krai 690091, Vladivostok, 27 Oktyabrskaya Street in the Russian Federation, case number A 51 – 3180/2019 (the Foreign Proceeding) in relation to Mr Igor Anatolievich Dorokhov as bankrupt be recognised as a foreign proceeding pursuant to Article 17(1) of the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (the Model Law) and s 6 of the Cross-Border Insolvency Act 2008 (Cth).

2.    The Foreign Proceeding be recognised as a foreign main proceeding pursuant to Article 17(2) of the Model Law.

3.    The administration, realisation and distribution of the respondent’s assets located in Australia the entrusted to the applicant pursuant to Article 21(1)(e) of the Model Law.

4.    All powers normally available to a trustee in bankruptcy appointed under the provisions of the Bankruptcy Act 1966 (Cth) be made available to the applicant pursuant to Article 21(1)(g) of the Model Law.

5.    The applicant’s costs of and incidental to this proceeding be costs in the bankruptcy of the respondent.

6.    There be liberty to apply on written notice for any further consequential orders.

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

REASONS FOR JUDGMENT

MCELWAINE J

1    Dmitry Fyodorovich Naumets (applicant) is a “Foreign representative” as defined in Article 2 of the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (Model Law), which has the force of law in Australia pursuant to the Cross-Border Insolvency Act 2008 (Cth) (Act). By an originating application filed on 30 June 2021, the applicant applies to this Court for recognition of a foreign proceeding pursuant to the Model Law being a proceeding in the Russian Federation where the respondent debtor Igor Anatolievich Dorokhov (respondent) is subject to the administration of his estate as an insolvent person (Russian Proceeding). When the proceeding was commenced, the respondent was the registered proprietor of real estate in Australia being unit 23106/5 Lawson Street Southport in the State of Queensland (the Property).

2    On 28 October 2021, Anastassiou J made orders pursuant to rule 10.43 (2) of the Federal Court Rules 2011 (Cth) that leave be granted to the applicant to serve the originating application and the affidavits in support by post upon the respondent at his address in the Russian Federation, translated into the Russian language by a certified translator. I am satisfied, based on the evidence set out in an affidavit of service of Kristina Watson made on 24 February 2022, that service was effected upon the respondent by international registered post addressed to him at his address in the Russian Federation, that the documents arrived at a post office in Vladivostok on 31 January 2022 and were collected by him on 16 February 2022. The respondent has not participated in this proceeding.

3    The respondent entered into a contract to sell the Property on 14 October 2021 and the sale settled on 10 November 2021. The respondent on 28 October 2021, signed an irrevocable authority addressed to his solicitor to account for the net sale proceeds by payment to the trust account of the solicitor for the applicant. The applicant now holds an amount of $59,294.36 in the trust account of the firm being the net proceeds from the sale of the Property (the Proceeds).

4    The applicant now applies for the following orders:

(a)    in accordance with Article 15 of the Model Law recognition of the Russian Proceeding in this Court; and

(b)    in accordance with Article 21 of the Model Law an order entrusting of the distribution of all of the respondent’s assets located in this jurisdiction to the applicant or another person designated by the Court pursuant to paragraph (2) of Article 21 of the Model Law.

5    On 6 May 2022, I made orders that this application be determined on the papers subject to the filing of further affidavits for the applicant and written submissions from his solicitor. Those orders have been complied with.

6    In Official Assignee in Bankruptcy of the Property of McCormick v McCormick [2018] FCA 410 (McCormick), Rangiah J comprehensively summarised the scheme of the Act, the provisions of the Model Law, the facts that must be established to recognise a foreign proceeding and the form of appropriate consequential orders. I gratefully adopt his Honour’s summary and proceed in accordance with his sequential analysis. There are status-based and procedural criteria that must be satisfied before a Foreign Proceeding may be recognised under Articles 15 and 17 of the Model Law and Part 14 of the Federal Court (Bankruptcy) Rules 2016 (Cth) (Rules).

7    I deal first with the status-based criteria. I am satisfied that the Russian Proceeding is a “foreign proceeding” within the meaning of Article 2 of the Model Law in that it is a judicial or administrative proceeding in a foreign State relating to insolvency in which the assets and affairs of the respondent are subject to control or supervision by a foreign court. Those facts are set out in an affidavit made by the applicant on 8 June 2021 (the applicant’s affidavit) which attaches a certified copy of the decisions commencing the Russian Proceeding. There are two relevant decisions. One, a judgment of the Arbitration Court of Primorsky Krai dated 7 November 2019 and the other a judgment of that Court dated 30 November 2020. The applicant’s affidavit, as required, attaches a certified copy of each of those judgments as translated into English by an accredited translator. In the first, orders were made to the effect that the respondent was declared insolvent and made bankrupt and a procedure was approved for the disposal of his property for a period of 6 months. The applicant was appointed as the financial manager. In the second, the period of administration of the affairs of the respondent was extended.

8    I am also satisfied that the applicant is the appointed foreign representative within the meaning of Article 2 of the Model Law in that he is a person authorised in the Russian Proceeding to administer the reorganisation or the liquidation of the respondent’s assets or affairs.

9    The final status-based criteria pursuant to Article 17(1)(d), is that the application must be submitted to a court to which Article 4 of the Model Law refers which, relevantly, is this Court pursuant to s 10 of the Act.

10    I turn next to the procedural criteria. I am satisfied that the Russian Proceeding is the “foreign main proceeding” within the meaning of Article 17(2)(a) of the Model Law in that each of the certified copies of the decisions of the Russian Court establishes the existence of the foreign proceeding and the appointment of the applicant as the foreign representative.

11    Article 15(3) requires that the application be accompanied by a statement identifying all foreign proceedings in respect of the respondent that are known to the foreign representative. The applicant’s affidavit states that, to the knowledge of the applicant, the Russian Proceeding is “the only foreign bankruptcy proceeding” against the respondent and I find accordingly.

12    Section 13 of the Act provides that, in addition to the requirements at paragraph 3 of Article 15 of the Model Law, the application must also be accompanied by a statement identifying, relevantly, all proceedings under the Act in respect of the respondent. The applicant relies upon an affidavit of Henry Kwan, solicitor, made on 23 June 2021, which deposes as to the undertaking of a search of the National Personal Insolvency Index on that day and which establishes that there were no Australian bankruptcy proceedings extant in relation to the respondent.

13    Rule 14.03(2) of the Rules applies. The application must be accompanied by the statements mentioned in Article 15 of the Model Law and in s 13 of the Act, must name the foreign representative as the applicant and the debtor as the respondent and be accompanied by an affidavit verifying the matters mentioned in paragraphs 2 and 3 of Article 15 of the Model Law and in s 13 of the Act. For the reasons that I have set out, each of those requirements has been met.

14    Rule 14.03(3) of the Rules also requires that when filing the application, the foreign representative must file, but need not serve, an interim application seeking directions as to service. The application complies with that requirement. Further, the applicant has complied with the requirement to serve a copy of the application and each of the documents mentioned in the Rules upon the respondent and, as I have noted, I am satisfied that service was effected upon the respondent by international registered post on 16 February 2022.

15    Article 17(2)(a) of the Model Law provides that the Foreign Proceeding “shall be recognised” as “a foreign main proceeding if it is taking place in the State where the debtor has the centre of its main interests.” Article 16(3) of the Model Law provides that: “in the absence of proof to the contrary, the debtor’s registered office, or habitual residence in the case of an individual, is presumed to be the centre of the debtor’s main interests.” As explained by Rangiah J in McCormick at [26], the phrase “centre of main interest”:

(a)    should correspond to the place where the debtor conducts the administration of the debtor’s interest on a regular basis and is, therefore, ascertainable by third parties; and

(b)    must be identified by reference to criteria that are both objective and ascertainable by third parties.

16    The application states that the respondent “is an individual judgment debtor and is a Russian citizen who permanently resides at 35 Manchzhurskaya Street, Vladivostok, Primorsky Krai, Russia 690091.” That fact is established by the certified copy of the decision of the Arbitration Court of Primorsky Krai dated 7 November 2019 and the affidavit of service of Kristina Watson made on 24 February 2022. I am therefore satisfied that the respondent’s habitual residence is in Russia so as to engage the presumption under Article 16(3).

17    I am also satisfied that the respondent was the registered proprietor of the Property and that in consequence of the completion of the sale, the Proceeds in the sum of $59,294.36 are held in trust by the solicitor for the applicant.

18    Finally, Article 6 of the Model Law provides that nothing in it “prevents the court from refusing to take an action governed by the [Model Law] if the action would be manifestly contrary to the public policy of this State.” Recognition of the Russian Proceeding would not in my view be contrary to the public policy of Australia.

19    I am, accordingly, satisfied that the applicant is entitled to the relief that he seeks (albeit stated somewhat more fulsomely) and, in addition, I consider it appropriate to make a further order pursuant to Article 21(1)(g) of the Model Law to the effect that all powers normally available to a trustee in bankruptcy appointed under the provisions of the Bankruptcy Act 1966 be made available to the applicant.

Associate:

Dated:    29 June 2022