Federal Court of Australia

Bradley, in the matter of Astora Women’s Health, LLC v Astora Women’s Health, LLC (No 2) [2022] FCA 1268

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to Art 17(1) of the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (Model Law) and s 6 of the Cross-Border Insolvency Act 2008 (Cth) (Cross-Border Insolvency Act), that Case No. 22-22594 (which is being jointly administered for procedural purposes only with Docket No. 22-22549) in the United States Bankruptcy Court for the Southern District of New York (US Proceeding) in relation to the defendant, Astora Women's Health, LLC (Astora LLC) be recognised as a foreign proceeding.

2.    Pursuant to Art 17(2)(a) of the Model Law, that the US Proceeding be recognised as a foreign main proceeding within the meaning of Art 2(b) of the Model Law.

3.    The plaintiff, Mark Thomas Bradley, be recognised as a foreign representative of Astora LLC within the meaning of Art 2(d) of the Model Law.

4.    For the purposes of Article 20(2) of the Model Law and s 16 of the Cross-Border Insolvency Act, the scope, and the modification or termination, of the stay and suspension referred to in Article 20(1) of the Model Law with respect to Astora LLC be the same as would apply if the stay or suspension arose under Part 5.3A in Chapter 5 of the Corporations Act 2001 (Cth) (Corporations Act), and as if:

(a)    Part 5.3A of the Corporations Act applied to Astora LLC (as a company subject to administration under that Part); and

(b)    references in Part 5.3A of the Corporations Act to the consent of the company's administrators are taken to be references to the consent of the plaintiff as foreign representative.

5.    The requirements of rule 15A.7(1) of the Federal Court (Corporations) Rules 2000 (Cth) be dispensed with and in lieu thereof:

(a)    within ten business days of the making of these orders, the plaintiff publish a notice in the form appearing in Schedule 1 to these orders (Notice 1) in The Australian and Australian Financial Review newspapers;

(b)    Notice 1 be distributed as follows:

Applicants in Federal Court of Australia proceeding NSD35 of 2018 (Astora Class Action)

(i)    within five business days of the making of these orders, the plaintiff give Notice 1 to the applicants in the Astora Class Action by sending a copy of Notice 1 to the applicants’ solicitors, Shine Lawyers.

Other known claimants

(ii)    within five business days of the making of these orders, the plaintiff give Notice 1 to Tanya Prime, Belinda Kranz and Kristi Chapman by sending a copy of Notice 1 to their solicitors, AJB Stevens Lawyers.

(iii)    within five business days of the making of these orders, the plaintiff give Notice 1 to Professor Ajay Rane by sending a copy of Notice 1 to his solicitors, Moray & Agnew.

(c)    within five business days of the making of these orders, the plaintiff send to Shine Lawyers notice in the form appearing in Schedule 2 to these orders (Notice 2) together with a copy of these orders;

(d)    within five business days of receipt of Notice 2 pursuant to paragraph 5(c), Shine Lawyers distribute Notice 2 to the last known email or postal address of the persons who have submitted a claimant registration form in the Astora Class Action and who have not opted out of the Astora Class Action.

6.    Any person affected by these orders is at liberty to apply.

SCHEDULE 1

IN THE FEDERAL COURT OF AUSTRALIA     No. NSD 752 of 2022

IN THE MATTER OF ASTORA WOMEN'S HEALTH, LLC    

Mark Thomas Bradley in his capacity as Foreign Representative of Astora Women's Health, LLC

Plaintiff

Astora Women's Health, LLC

Defendant

TO all the creditors of Astora Women's Health, LLC (Astora LLC) TAKE NOTICE that:

1.    An application under the Cross-Border Insolvency Act 2008 (Cth) (Act) for recognition of Case No. 22-22594 (which is being jointly administered for procedural purposes only with Docket No. 22-22549) filed in the United States Bankruptcy Court for the Southern District of New York in relation to Astora LLC (US Proceeding) as a foreign proceeding was commenced by Mark Thomas Bradley in his capacity as Foreign Representative of Astora LLC on 9 September 2022, and has proceeding number NSD 752 of 2022 (Model Law Application).

2.    On 26 October 2022, Justice Lee of the Federal Court of Australia made the following orders under the Act in the Model Law Application in relation to Astora LLC:

The address for service for Mark Thomas Bradley and for Astora LLC is: C/- Baker McKenzie, Solicitors, Tower One - International Towers Sydney, Level 46, 100 Barangaroo Avenue, Sydney NSW 2000 Email: Maria.O'Brien@bakermckenzie.com

PLEASE NOTE: You do not need to progress any claim you may have against Astora LLC in this proceeding or in communication with Baker McKenzie. If you have questions about the US Proceeding please contact Astora LLC’s Claims and Noticing Agent, Kroll Restructuring Administration LLC, at +1 (929) 284-1688, or by email at endoinquiries@ra.kroll.com. You may also find more information at https://restructuring.ra.kroll.com/Endo.

Date:

Baker McKenzie

SCHEDULE 2

[ CONTENT OF COVERING EMAIL OR LETTER ]

[## ADDRESSEE INFORMATION]

[## Salutation]

The Federal Court of Australia has ordered us to send you the enclosed notice.

Yours faithfully

[## Sign off]

[ ENCLOSURE - TO BE PUBLISHED ON FEDERAL COURT OF AUSTRALIA LETTERHEAD ]

ASTORA WOMEN’S HEALTH CLASS ACTION - IMPORTANT NEWS

Why did you get this notice?

You are a registered group member in a class action against Astora Women’s Health, LLC (Astora) in the Federal Court of Australia.

Astora is now in bankruptcy

Astora is an American company.

On 16 August 2022, Astora entered bankruptcy in the United States of America.

On 26 October 2022, the Federal Court of Australia recognised Astora’s bankruptcy.

What does that mean for you?

At least while the bankruptcy continues, the class action will not continue against Astora. Shine will let you know as to what will happen with the class action.

No other cases against Astora in Australia can be started or continued without the permission of an Australian court, or Astora’s representative Mr Mark Bradley.

You do not have to do anything about the class action right now.

Do you have questions about the class action or this notice?

If you have a solicitor acting for you, you should contact that person.

If you do not have a solicitor, you should contact Shine Lawyers on [## details].

Legal information

You can tell your solicitor that:

-    The legal name for the class action is Philipsen & Anor v Astora Women’s Health, LLC.

-    Its proceeding number is NSD 35 of 2018.

-    The Court’s recognition decision is called Bradley, in the matter of Astora Women’s Health, LLC v Astora Women’s Health, LLC [2022] FCA 1268

-    That decision and the orders can be read here: https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2022/2022fca1268.

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

REASONS FOR JUDGMENT

Delivered ex tempore

LEE J:

A    INTRODUCTION

1    Before the Court today is an application under s 6 of the Cross‑Border Insolvency Act 2008 (Cth) (Act) and s 90-15 of Sch 2 to the Corporations Act 2001 (Cth) (Corporations Act) seeking recognition of a proceeding brought in the United States under the United States Bankruptcy Code 11 USC § 1110 (Bankruptcy Code) as a foreign proceeding pursuant to the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency (Model Law), being Sch 1 to the Act.

2    On 28 September 2022, Halley J, in his Honour’s capacity as the Commercial and Corporations Duty Judge, made orders on the application of the plaintiff, Mr Bradley, in his capacity as the foreign representative of the defendant, Astora Women’s Health, LLC (Astora), including an order for interim relief under Art 19(1)(a) of the Model Law, as implemented by s 6 of the Act, and directions as to the notification of creditors in place of the requirements in rr 15A.3(4)(a) and 15A.6(1) of the Federal Court (Corporations) Rules 2000 (Cth) (Rules): Bradley, in the matter of Astora Women’s Health, LLC v Astora Women’s Health, LLC [2022] FCA 1195.

3    This proceeding has arrived before me because the application for interim relief was heard together with an application by Astora in the related class action proceedings of Philipsen v Astora Women’s Health, LLC (NSD 35 of 2018) (class action) allocated to my docket. By that application, Astora sought release from the implied undertaking that documents obtained in the course of the class action as a result of compulsory process or a court order will not be used for any purpose extraneous to the class action: Philipsen v Astora Women’s Health, LLC [2022] FCA 1196. This has historically been referred to as the Harman undertaking (taking its name from Harman v Secretary of State for the Home Department [1983] 1 AC 280), but should probably now be known in this country as the implied Hearne v Street obligation: Hearne v Street [2008] HCA 36; (2008) 235 CLR 125.

4    By his originating process, Mr Bradley seeks a final order that the bankruptcy proceeding, commenced under Ch 11 of Title 11 of the Bankruptcy Code (Astora Chapter 11 Proceeding), be recognised as a “foreign main proceeding” pursuant to Art 17 of the Model Law. This requires two preliminary findings: first, that the Astora Chapter 11 Proceeding is a “foreign proceeding” within the meaning of Art 17(1); and secondly, that Mr Bradley is a “foreign representative” of Astora within the meaning of Art 2(d) of the Model Law. If I do find that the Astora Chapter 11 Proceeding should be recognised under Art 17, Mr Bradley seeks further orders that:

(1)    the scope, and the modification of termination, of the stay consequentially required under Art 20(1) of the Model Law be the same as would apply if the stay arose under Ch 5 Pt 5.3A of the Corporations Act;

(2)    the requirements in r 15A.7(1) of the Rules be dispensed with, and be replaced by an alternative form of notice; and

(3)    any party affected by the orders have liberty to apply.

B    FURTHER BACKGROUND

B.1    Astora

5    Astora is a limited liability company incorporated in Delaware. It has no ongoing business operations and no assets. For reasons that are unclear on the evidence, its operations are limited to defending litigation, primarily in the United States, but also in certain other jurisdictions including Australia, brought against it by patients who received treatment with implantable surgical mesh products manufactured and distributed by it or its predecessor entities.

6    Endo International plc (Endo), a company incorporated in the Republic of Ireland in 2014, is the parent company of a number of companies (Endo Group), including Astora.

7    On 16 August 2022, Astora, along with Endo and a large number of other companies in the Endo Group, filed petitions in the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court) to commence a slew of bankruptcy proceedings under Ch 11 of Title 11 of the Bankruptcy Code (Chapter 11 Cases). As at the date on which the Chapter 11 Cases were commenced, it is said that the Endo Group’s long-term debt obligations arising out of various financial instruments totalled approximately USD $8.15 billion (although there was no evidence before me as to the asset position of the Endo Group or companies within the group). These obligations are said to be guaranteed by the majority of the members in the Endo Group, including Astora (although it is again unclear on the Delphic evidence as to whether this liability is actual or contingent).

8    Although the Astora Chapter 11 Proceeding was filed in a coordinated process with all of the Chapter 11 Cases, and the Bankruptcy Court has ordered that all cases be jointly administered, the cases have apparently not been substantively consolidated. Accordingly, the Astora Chapter 11 Proceeding remains a separate bankruptcy case in respect of Astora.

9    It appears a concatenation of events led to the Chapter 11 Cases, being: (1) an adverse litigation outcome relating to one of the Endo Group’s highest revenue-generating products; (2) slower than expected growth in respect of certain other products; and (3) litigation “overhang” from thousands of actions related to the sale and manufacture of opioids. Neither Astora nor any of its predecessors were involved in the manufacture or sale of opioid products, and Astora is not subject to any litigation in relation to such products. The circumstances by which Astora was apparently transformed from a trading company providing pelvic mesh implant products in Australia and elsewhere to a company wholly concerned with the defence of litigation, is wholly unclear to me on the evidence adduced in this proceeding.

10    In any event, on 16 August 2022, in advance of filing the Chapter 11 Cases, the Endo Group, including Astora, entered into a restructuring support agreement (RSA) with a majority by value of the Endo Group’s senior secured lenders. The RSA contemplates a sale of the Endo Group’s businesses pursuant to § 363 of the Bankruptcy Code, with a credit bid from the Endo Group’s first lien-secured lenders as a “stalking horse” bid.

B.2    Mr Bradley

11    Mr Bradley is the Chief Financial Officer of Astora and Endo. He was appointed by resolution of the member manager of Astora, and then by order of the Bankruptcy Court on 18 August 2022, as the foreign representative of Astora’s estate in respect of the Astora Chapter 11 Proceeding, for purposes including seeking recognition in Australia and the United Kingdom pursuant to the Model Law.

C    SUMMARY OF PRINCIPLES APPLICABLE TO RECOGNITION

12    A foreign proceeding must be recognised by this Court if the following provisions are the subject of compliance: (1) Art 17 of the Model Law; (2) Art 15 of the Model Law, as modified by s 13 of the Act; and (3) div 15A of the Rules.

C.1    Article 17

13    Article 17 provides that a foreign proceeding will be recognised in the following circumstances:

Decision to recogni[s]e a foreign proceeding

1.    Subject to article 6, a foreign proceeding shall be recogni[s]ed if:

(a)    The foreign proceeding is a proceeding within the meaning of subparagraph (a) of article 2;

(b)    The foreign representative applying for recognition is a person or body within the meaning of subparagraph (d) of article 2;

(c)    The application meets the requirements of paragraph 2 of article 15; and

(d)    The application has been submitted to the court referred to in article 4.

2.    The foreign proceeding shall be recogni[s]ed:

(a)    As a foreign main proceeding if it is taking place in the State where the debtor has the centre of its main interests; or

…

3.     An application for recognition of a foreign proceeding shall be decided upon at the earliest possible time.

14    As can be seen, five matters are therefore required to be established:

(1)    the foreign proceeding meets the definition of the same in Art 2(a);

(2)    the foreign representative is a person or body within the meaning of Art 2(d);

(3)    the application satisfies the procedural requirements in Art 15(2);

(4)    the application has been submitted to a court “competent to perform functions under the Model Law” pursuant to Art 4 and s 10 of the Act; and

(5)    the foreign proceeding is taking place in a state where the debtor has its “centre of main interests”, and so should be recognised as a foreign main proceeding.

15    As to the first matter, Art 2(a) states that a foreign proceeding is:

a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorgani[s]ation or liquidation.

16    With respect to the second matter, Art 15 allows a foreign representative to apply for recognition of a foreign proceeding in Australia. A foreign representative is, per Art 2(d):

a person or body, including one appointed on an interim basis, authori[s]ed in a foreign proceeding to administer the reorgani[s]ation or the liquidation of the debtor’s assets or affairs or to act as a representative of the foreign proceeding.

17    This definition has been said to capture a debtor that remains in possession after the commencement of insolvency proceedings: see, for example, Senvion GmbH, in the matter of Senvion GmbH (No 2) [2019] FCA 1732; (2019) 140 ACSR 20 (at 23 [11] per Anastassiou J).

18    As to the fifth matter, Art 2(b) defines a foreign main proceeding as, unsurprisingly, a “foreign proceeding taking place in the State where the debtor has the centre of its main interests”.

19    In the absence of proof to the contrary, a company’s “centre of its main interests” is presumed to be in the state in which its registered office is located: Art 16(3) of the Model Law. This presumption may be rebutted if there exist factors, objective and ascertainable by third parties (including creditors), warranting a conclusion that an “actual situation” exists which locates the centre of the debtor’s main interests somewhere other than the place of its registered office: Kapila, in the matter of Edelsten [2014] FCA 1112; (2014) 320 ALR 506 (at 517 [54] per Beach J); Wood v Astra Resources Ltd (UK Company No 07620218) [2016] FCA 1192 (at [14] per White J). As such, it is important to have regard not only to what the debtor is doing but to what the debtor is objectively perceived to be doing. The need for an element of permanency is also important: Kapila (at 517 [53] per Beach J).

20    Put another way, the true centre of main interests is where the debtor conducts the administration of the debtor’s interests on a regular basis: Kapila (at 517 [53] per Beach J); Moore, as Debtor-in-Possession of Australian Equity Investors v Australian Equity Investors [2012] FCA 1002 (at [20] per Emmett J); Ackers (as joint foreign representative) v Saad Investments Company Limited (in official liquidation) (a company registered in the Cayman Islands) [2010] FCA 1221; (2010) 190 FCR 285 (at 295–296 [49] per Rares J).

21    The onus of proof is on the party seeking to rebut the presumption: Young, Jr, in the matter of Buccaneer Energy Limited v Buccaneer Energy Limited [2014] FCA 711; (2014) 32 ACLC 14-038 (at 482 [14] per Jagot J).

22    In Kapila, Beach J (at 517 [54]) aptly reflected that simply to state these principles is not greatly illuminating; “[t]heir generality conceals rather than reveals practical criteria that may inform the question”. UNCITRAL’s Model Law on Cross-Border Insolvency with Guide to Enactment and Interpretation (January 2014) is a helpful tool to this end, and has been deployed by this Court when conducting an Art 17 analysis: see Kapila (at 515 [36] per Beach J). That document states (at 73 [150]) that:

The purpose of article 17 is to establish that, if recognition is not contrary to the public policy of the enacting State (see article 6) and if the application meets the requirements set out in the article, recognition will be granted as a matter of course.

(Emphasis added).

23    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. Indeed, as the Full Court noted in LFDB v SM [2017] FCAFC 178; (2017) 256 FCR 218 (at 227 [36]–[37] per Besanko, Jagot and Lee JJ), courts are slow to invoke public policy as a reason for refusing recognition or enforcement of a foreign judgment. Considerations of comity are essential in this regard: see also Jenton Overseas Investment Pty Ltd v Townsing [2008] VSC 470; (2008) 21 VR 241 (at 246 [20] per Whelan J).

C.2    Recognition of Ch 11 Proceedings in Australia

24    This Court has previously recognised that Ch 11 proceedings satisfy the requirements of Art 17: see Young, Jr, in the matter of Buccaneer Energy Limited (at 483 [15] per Jagot J); Kapila (at [32] per Beach J); Moore (at [12] per Emmett J).

25    In Legend International Holdings Inc (as debtor in possession of the assets of Legend International Holdings Inc) v Legend International Holdings Inc [2016] VSC 308; (2016) 52 VR 1, Randall AsJ also recognised a Ch 11 proceeding under Art 17 of the Model Law. His Honour undertook a thorough analysis of Ch 11 of the Bankruptcy Code (at 10–16 [31]–[61]), and the centre of main interests test (at 16–26 [62]–[97]).

26    Furthermore, there it was said that the public policy exception in Art 6 is not triggered by a “mere difference” in substantive law between the United States and Australia: Legend International Holdings (at 10 [33] per Randall AsJ). Rather, the question is whether recognition would “impinge the value and import of the statutory rights” of the Australian company and its liquidator creditors: Legend International Holdings (at 10 [33]).

C.3    Article 15

27    The procedural requirements in Art 15(2) of the Model Law are picked up by Art 17(1)(c). In broad terms, it requires an application for recognition to be accompanied by certified evidence of the foreign proceeding and related matters.

28    Art 15(3) also requires an application to be accompanied by a statement identifying all relevant foreign proceedings known to the foreign representative. Section 13 of the Act modifies that article, requiring that the application be accompanied by a statement identifying, relevantly: first, any appointment of a receiver within the meaning of s 416 of the Corporations Act; and secondly, all proceedings in respect of the debtor under Ch 5 of the Corporations Act or s 601CL and Sch 2 to that Act that are known to the foreign representative.

C.4    Division 15A of the Rules

29    Division 15A of the Rules sets out that:

(1)    pursuant to r 15A.3, an application for recognition by a foreign representative under Art 15 of the Model Law must be made by filing an originating process in the specified form and with the specified contents;

(2)    the plaintiff must comply with the notification and publication requirements in r 15A.6; and

(3)    if the Court makes an order for recognition, the plaintiff must comply with the notice and publication requirements in r 15A.7.

D    THE DECISION OF HALLEY J

30    Justice Halley was satisfied that Mr Bradley had established a robust case for recognition of the Astora Chapter 11 Proceeding as a foreign main proceeding under the Model Law. His Honour founded this conclusion on six factors:

(1)    first, the Astora Chapter 11 Proceeding is a foreign proceeding for the purposes of Art 2 of the Model Law because it is a collective, judicial proceeding in a foreign state, for the purposes of a reorganisation or liquidation of a debtor; it is conducted pursuant to a law relating to insolvency; and the assets and affairs of a debtor during the proceeding are subject to control or supervision by a foreign court (at [29]);

(2)    secondly, Mr Bradley is a foreign representative per Art 2(d) (at [31]), and was expressly authorised as such by the Bankruptcy Court (at [32]);

(3)    thirdly, this Court, by reason of s 10(b)(i) of the Act, is a Court for the purposes of Art 4 of the Model Law (at [33]);

(4)    fourthly, the procedural matters in Art 15(3) were also, in Halley J’s view, met for the purposes of the interim application (at [34]);

(5)    fifthly, the Astora Chapter 11 Proceeding is a foreign main proceeding on the basis that the presumption that the United States is the centre of Astora’s main interests was not displaced (at [35]–[36]); and

(6)    sixthly, his Honour noted that Art 17(1) provides that a foreign proceeding must be recognised (subject to Art 6) if each of its requirements is satisfied: (at [43]). In Halley J’s view, Art 6 is unlikely to preclude the recognition of the Astora Chapter 11 Proceeding because the formal restructuring process, provided for the benefit of all creditors under Ch 11, is not manifestly contrary to the public policy of Australia: (at [44]). Although there is no identical procedure available under Australian insolvency law, Ch 11 has many of the characteristics of the voluntary administration procedure under Ch 5 Pt 5.3A of the Corporations Act: (at [44]).

E    CONSIDERATION

31    There is no controversy as to the satisfaction of the procedural and substantive requirements stipulated in Section C above.

32    I am satisfied that Mr Bradley duly affected the practical matters in Art 15 of the Model Law, as modified by s 13 of the Act. Mr Bradley swore an affidavit outlining litigation involving Astora in Australia (at [48]–[53]) and in other jurisdictions (at [54]–[58]); annexed the orders of the Bankruptcy Court dated 18 August 2022, relevant sections of the hearing transcript for the 18 August 2022 hearing, and other relevant court documents; and deposed that he was not aware of the appointment of a receiver, or a controller or managing controller within the meaning of s 9 of the Corporations Act.

33    Further, Mr Bradley has complied with div 15A of the Rules. First, the originating application is in the form required by r 15A.3(1). Secondly, the affidavit of Mr Cal Anthony Diolúin, affirmed 24 October 2022, evinces that Mr Bradley met the notification and publication requirements provided for by the orders of this Court. Justice Halley exercised the discretion in r 15A.6(1) to dispense with the requirement in r 15A.3(4)(a), and made orders setting out a customised notification and publication regime. This required Mr Bradley to give notice of the application and the hearing date to certain persons, and to publish the notice in The Australian and the Australian Financial Review, within 20 days of the making of the orders. When this matter first came before me on 7 October 2022, I listed the application for final hearing and varied the orders of Halley J to provide for notice to be given and published on or before 12 October 2022. This was done.

34    Finally, as to Art 17, the five matters outlined above (at [14]) have been established.

35    First, the Astora Chapter 11 Proceeding is a foreign proceeding within the meaning of Art 2(a) of the Model Law. One might have thought this was obvious but, perhaps superfluously, Mr George Panagakis, an American lawyer, affirmed an affidavit representing his view of United States law. In any event, I am satisfied that the Astora Chapter 11 Proceeding is a foreign proceeding because:

(1)    it is a judicial proceeding, subject in all respects to the supervision of the Bankruptcy Court;

(2)    it is a collective proceeding, in that it considers the rights and obligations of all creditors: Re Betcorp Limited 400 B.R. 266 (Bankr. D. Nev. 2009) (at 281 per Markell J) and it was instigated to restructure the debtor’s liabilities for the benefit of all of the creditors, and all creditors are entitled to participate and vote in relation to a proposed “Plan of Reorganisation”;

(3)    it is a proceeding in a foreign state, being the United States;

(4)    it is being conducted pursuant to “a law relating to insolvency”; UNCITRAL’s Report of the Working Group on Insolvency Law on the Work of its Nineteenth Session, UN Doc A/CN.9/422 (25 April 1996), addresses this phrase (at 12 [49]), opining that it is “sufficiently broad so as to encompass insolvency rules irrespective of the type of statute in which they might be contained”: see also In re Stanford International Bank Ltd [2009] BPIR 1157 (at [41] per Lewison J); Chapter 11 is a comprehensive, federal legal framework for the purpose of reorganisation and liquidation; and

(5)    the assets and affairs of the debtor during the proceeding are subject to control or supervision by the Bankruptcy Court.

36    The second, third and fourth elements are also uncontroversially met: Mr Bradley is a foreign representative for the purposes of Art 2(d); the application satisfies the procedural requirements in Art 15(2); and it has been submitted to a competent court pursuant to Art 4 and s 10 of the Act (being this Court).

37    As to the fifth, the Astora Chapter 11 Proceeding is underway in the state where Astora has its centre of main interests, and so should be recognised as a foreign main proceeding. For the reasons canvassed by Halley J, there is nothing to displace the presumption that Astora’s centre of main interests is the United States. If there was any doubt, the following factors buttress this conclusion:

(1)    in evidence is the “Amended and Restated Limited Liability Company Agreement of Astora Women’s Health, LLC”, cl 21 of which states that the agreement is governed by the law of the State of Delaware; the agreement provides (at cll 10–12) that Astora is to be managed by Endo; Endo is a Delaware-incorporated entity with the same registered office as Astora, and its two directors are both based in Pennsylvania and Astora’s officers are also appointed by Endo (see cl 12);

(2)    Astora’s seven appointed officers are based in Pennsylvania;

(3)    Astora does not have business premises, staff or any business operations outside of the United States;

(4)    Astora is not and has never been managed from Endo’s group head office in the Republic of Ireland; and

(5)    Astora’s only business is apparently defending litigation, conducted from its registered office in Delaware.

38    Finally, as to the public policy exception in Art 6, I raised at the hearing the relevance of the fact that a company previously supplying pelvic mesh implant products in this country (and facing a class action as a consequence), is now apparently without assets. If there was a basis for suspecting that transactions denuding Astora of assets had occurred with the intent to defraud or defeat its creditors, then it may have been appropriate to appoint a contradictor, and issues of public policy would arise. But absent broad generalities, the evidence of why Astora is now a litigation defence shell is silent. At present, any concern as to these developments could not be based on anything but speculation, and this recognition proceeding is an inapt vehicle for any appropriate investigations and, to the extent such investigations are relevant, they will be matters for the foreign proceeding.

39    In the circumstances, I accept that: first, Mr Bradley is a foreign representative of Astora within the meaning of Art 2(d); secondly, the Astora Chapter 11 Proceeding is a foreign proceeding pursuant to Art 17(1); and thirdly, the Astora Chapter 11 Proceeding is a foreign main proceeding within the meaning of Art 2(b) for the purposes of Art 17(2)(a). I will make orders to this effect, as proposed in the originating process (at [1]–[3]).

F    FURTHER ORDERS SOUGHT

40    Mr Bradley seeks three further orders: first, a stay of all individual actions or proceedings concerning Astora’s assets, rights, obligations or liabilities; secondly, a bespoke scheme for the notification and publication of the application for recognition and any orders made; and thirdly, that any party affected by the orders have liberty to apply to the Court.

F.1    Stay

41    Upon recognition of a foreign proceeding that is a foreign main proceeding, Art 20(1)(a) of the Model Law requires the Court to order a stay of the kind described above.

42    The Court does not have a discretion regarding the imposition and scope of this automatic stay: see Senvion (at 26–27 [24]–[29] per Anastassiou J); Tai-Soo Suk v Hanjin Shipping Co Ltd [2016] FCA 1404 (at [45] per Jagot J); Akers v Deputy Commissioner of Taxation [2014] FCAFC 57; (2014) 223 FCR 8 (at 20–21 [55] per Rares J).

43    Pursuant to s 16 of the Act, the scope and the modification or termination of the stay is to be the same as if the stay arose under Ch 5 Pt 5.3A of the Corporations Act. The operation of s 16 has been said to be “beguilingly ambiguous”, as the Corporations Act has a variety of different stay mechanisms which differentially affect the position of secured creditors: Hur v Samsun Logix Corporation [2015] FCA 1154; (2015) 238 FCR 483 (at 487 [21] per Rares J). However, on a plain reading of the provision, the stay granted is to be “the same as would apply if the stay or suspension arose under” the Corporations Act: Hur v Samsun Logix Corporation [2009] FCA 372 (at [13] per Jacobson J).

44    As such, it is necessary to ascertain whether Ch 11 of the Bankruptcy Code has an analogue in Australian law. None of the Australian decisions recognising Ch 11 proceedings referred to above directly assists in this inquiry. But it seems to me that a proceeding under Ch 11 of the Bankruptcy Code is most closely analogous to voluntary administration under the Corporations Act: see, similarly, Senvion (at 26 [23] per Anastassiou J); Didyasarin v Thai Airways International Public Company Limited [2020] FCA 1154 (at [53], [56] per Markovic J).

45    The reasons for this are threefold.

46    First, while the analogy is not perfect, the framework and aims of Ch 11 align most closely with voluntary administration than with any other form of external administration available under Australian law. The overarching purpose is to maximise the chance of the company, or as much as possible of its business, continuing in existence: s 435A(a) of the Corporations Act. If this is not possible, the company is to be administered in a way that results in a better return for its creditors and members than would result from an immediate winding up: s 435A(b) of the Corporations Act.

47    Similarly, Ch 11 is intended to keep the company alive and pay creditors over time. It sets out a regime for business reorganisation whereby, as explained by Lord Hoffmann in Cambridge Gas Transportation Corporation v Official Committee of Unsecured Creditors of Navigator Holdings plc [2007] 1 AC 508 (at 513–514 [4]), “the management of the insolvent company [remains] in control (as ‘debtor in possession’) until a plan of reorganisation has been approved by the court”.

48    Secondly, the analogy stands notwithstanding the fact that Ch 11 is a debtor-in-possession regime and voluntary administration under Ch 5 Pt 5.3A is not. The regimes are comparable as both provide for:

(1)    a restructuring plan (in Australia, a deed of company arrangement (DOCA), and in the United States, a “plan of reorgani[s]ation” pursuant to § 1126 of the Bankruptcy Code) to be proposed and voted on by creditors;

(2)    curial intervention: a plan of reorganisation must also be confirmed by the Bankruptcy Court pursuant to § 1129, and in Australia, while court approval is not required, a court can set aside a DOCA on application (see, for example, s 445D); and

(3)    asset sales during the course of the proceeding, by way of s 439C of the Corporations Act and § 1112 of the Bankruptcy Code.

49    Both also make provision for winding up if no plan is approved: s 439C of the Corporations Act; § 1112 of the Bankruptcy Code.

50    Thirdly, the automatic stay mechanism in § 362 of the Bankruptcy Code resembles a stay in an Australian voluntary administration, in that it affects a general moratorium on claims by creditors: s 440D of the Corporations Act; In re Atlantic Business and Community Corp, 901 F 2d 325 (3rd Cir, 1990).

51    During oral submissions, counsel fairly raised the issue as to whether Pt 5.3B of the Corporations Act, which established a formal debt restructuring process, might be regarded as a better analogue, given it allows for debt restructuring and contemplates directors retaining a measure of residual control, subject to supervision of a restructuring practitioner. But I accept the submissions made that it is not a particularly apt analogy. Although this regime commencing at the beginning of 2021 allows financially distressed but viable companies to restructure their existing debts (and the process follows the structure and many of the key aspects of Pt 5.3A), the regime is a streamlined one and directed to small and less complex businesses. More specifically, r 5.3B.03(1) of the Corporations Regulations 2001 (Cth) provides that a company is eligible to enter the restructuring process if the total liabilities of the company on the day that restructuring begins does not exceed $1 million.  

52    In all the circumstances, it is appropriate the Court order that the automatic stay under Art 20(1)(a) of the Model law operate as if it arose under Ch 5 Pt 5.3A of the Corporations Act.

53    For the avoidance of doubt, however, one matter should be recorded relevant to the stay. It was not disputed that a stay of the type ordered would not prevent an application being made in the class action for the substitution or addition of another respondent, in the event the representative applicant could bring a claim against a third party.

F.2    Notification and publication

54    As soon as practicable after an order for recognition is made, and unless the Court otherwise orders, r 15A.7 of the Rules provides that the foreign representative is required to:

(1)    send a notice of the making of the order to each person whose claim to be a creditor of the defendant is known to the plaintiff; and

(2)    publish a notice of the making of the order in a daily newspaper circulating generally in the State or Territory where the defendant has its principal or last known place of business.

55    In place of r 15A.7 of the Rules, Mr Bradley asks the Court to make orders (like those made by Halley J) to:

(1)    dispense with the requirement to give notice of the recognition application to each known creditor individually, but maintain the requirement to give notice to the applicants in the class action (NSD 35 of 2018) and four other specifically known claimants;

(2)    maintain the requirement to advertise the recognition application but modify it so that the advertisements would be in national newspapers rather than State or Territory newspapers; and

(3)    modify the form of notification by supplementing the prescribed Form 21 format with a customised note to assist those who read the notice to understand the steps they may wish to take in response to it, in the following terms:

PLEASE NOTE: You do not need to progress any claim you may have against Astora LLC in this proceeding or in communication with Baker McKenzie. If you have questions about the US Proceeding please contact Astora LLC’s Claims and Noticing Agent, Kroll Restructuring Administration LLC, at +1 (929) 284-1688, or by email at endoinquiries@ra.kroll.com. You may also find more information at https://restructuring.ra.kroll.com/Endo.

56    Mr Bradley submits that the custom notification regime is an appropriate replacement for the notification regime in r 15A.7 on four bases. First, it is said that creditors will have received, or will receive, notice of the Astora Chapter 11 Proceeding directly from Astora’s US noticing agent, pursuant to the orders made by Halley J, authorising the use of Australian creditor information in order to notify creditors of the Astora Chapter 11 Proceeding. Secondly, there is a real prospect that any attempt to notify potential creditors more widely (and, in particular, any attempt to notify all of the registered class members) would cause confusion, as recipients may not understand that they do not need to take steps in relation to the recognition proceeding in order to exercise their rights in the Astora Chapter 11 Proceeding. Thirdly, creditors who wish to pursue action in Australia despite the recognition orders and accompanying stay will be able to approach the Court for leave to proceed against Astora under s 440D of the Corporations Act, the effect of which will be imported into the scope of the stay by the proposed recognition orders. Fourthly, Mr Bradley seeks an order granting liberty to apply to any person affected by the orders, which should indicate to persons who become aware of the Australian recognition orders that they have a right to approach the Court despite the stay.

57    Justice Halley observed that the similar custom note tabled at the interim hearing would (at [61]):

… assist in making clear to creditors that this proceeding was concerned with the recognition of the foreign Astora Chapter 11 Proceeding rather than progressing their claims by lodging proofs of debt or taking other action to recover the amounts that they contend are owed to them.

58    I am satisfied that the custom note proposed to be included on this occasion would achieve the same purpose to creditors generally, but that is not the end of the matter. As I raised at the hearing, it cannot be ignored that a class action remains on foot. Claims of non-parties to the class action, the group members, will be directly affected by the stay. A notification in the terms proposed by Astora will be gobbledygook to most group members. As I said in Australian Securities and Investments Commission v Commonwealth Bank of Australia (No 2) [2021] FCA 966; [2022] ALMD 1043 (at [17]), there is a:

need to reflect upon what is the appropriate mode to apprise the general public of complicated information. It is a fairy tale to think that in 2021 dense legalistic public advertisements, published in the notices section of daily newspapers, often cheek by jowl with the results of things such as flower shows and greyhound races, amounts to an effective way of communicating information to a broad audience of consumers. The decline in literacy rates in Western societies, and the likelihood that the intended audience is made up of persons at every point of the continuum of sophistication in financial and legal matters, presents real challenges that cannot be simply ignored: J [49]–[51]; see also Lenthall v Westpac Banking Corporation (No 2) [2020] FCA 423; (2020) 144 ACSR 573 (at 587–8 [45]–[50]).

59    I require the group members affected to be told of the consequences of the stay directly (and in plain English), and adjourned the hearing to allow such a notice to be prepared and orders facilitating its distribution to be formulated.

G    CONCLUSION AND ORDERS

60    I will make orders in accordance with the prayers for relief sought in [1]–[4] and [6]–[7] of the originating process, save as indicated above.

Associate:

Dated:    26 October 2022