Federal Court of Australia

Duncan (Trustee) v Shrestha, in the matter of Shrestha [2022] FCA 1601

ORDERS

THE COURT ORDERS THAT:

1.    The proceeding in the High Court of the Republic of Singapore styled “In the matter of ASHISH MAN SHRESTHA (Australia Passport No. PE0383658)” with High Court of Singapore case number HC/B 870/2022 relating to the Respondent (the Foreign Proceeding), in which the Applicants were appointed as trustees in bankruptcy for the estate of the Respondent be recognised as a foreign proceeding in relation to Ashish Man Shrestha as bankrupt 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 section 6 of the Cross-Border Insolvency Act 2008 (Cth) (the CBIA).

2.    The Foreign Proceeding be recognised as a foreign non-main proceeding, within the meaning of Article 2(c) of the Model Law, pursuant to section 6 of the CBIA and clause 2(b) of Article 17 of the Model Law.

3.    Pursuant to section 6 of the CBIA and Article 21(1)(a)-(c) of the Model Law, except with leave of the Court or with the Applicants’ written consent:

(a)    the commencement, continuation or enforcement of any individual action or legal proceeding (including without limitation, any arbitration, mediation, or any judicial, quasi-judicial, administrative action, proceedings or process whatsoever) against the Respondent or any of his assets, rights and obligations be stayed;

(b)    the enforcement or any execution of judgment, order or award against the Respondent or his assets be stayed;

(c)    the right to transfer, encumber or otherwise dispose of any of the Respondent’s property be suspended,

to the same extent that would apply if each such stay or suspension arose under the Bankruptcy Act 1966 (Cth) (Bankruptcy Act).

4.    The administration and realisation of the Respondent’s assets located in Australia be entrusted to the Applicants and foreign representatives, being Cameron Lindsay Duncan and David Dong-Won Kim of Korda Mentha, 16 Collyer Quay, #30-01, Singapore 049318, Singapore pursuant to section 6 of the CBIA and Article 21(1)(e) of the Model Law.

5.    All powers normally available to a trustee in bankruptcy appointed under the provisions of the Bankruptcy Act be made available to the Applicants pursuant to section 6 of the CBIA and Article 21(1)(g) of the Model Law, subject to the provisions of the Bankruptcy Act.

6.    Without limitation to order 5 above, the Applicants may apply to the Court to require the Respondent to attend an examination and produce books and information concerning the Respondent’s assets, affairs, rights, obligations and liabilities, to the same extent as would apply pursuant to s 81 of the Bankruptcy Act.

7.    The Applicant’s costs of and incidental to this proceeding be costs in the bankruptcy of the Respondent and accorded the same priority as costs of the proceedings incurred by a trustee in bankruptcy appointed under the Bankruptcy Act.

8.    Pursuant to r 10.24 of the Federal Court Rules 2011 (Cth) (Rules) and for the purposes of r 14.07(1)(b) of the Federal Court (Bankruptcy) Rules 2016 (Bankruptcy Rules) the Applicants shall be taken to have effected service on the respondent of these orders by sending a copy of those documents, marked to the attention of the respondent, to the email address: chairman@bishwoholdings.com.

9.    Pursuant to r 1.34 of the Rules, r 14.07(1)(d) of the Bankruptcy Rules be dispensed with.

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

REASONS FOR JUDGMENT

O’SULLIVAN J:

Overview

1    On 12 May 2022, the High Court of the Republic of Singapore appointed the applicants as the respondent’s trustees in bankruptcy.

2    The respondent is an Australian citizen, is or has been a director of at least two Singaporean companies, Bishwo Holdings and Airways Pte Ltd (Bishwo) and Tulsi investment Holdings Pte Ltd (Tulsi), and is a director of an Australian company ASDB Holdings Pty Ltd (ACN 640 941 939) (ASDB).

3    The respondent was declared bankrupt in Singapore following a judgment obtained in Singapore by the petitioning creditor BCG International Sdn Bhd (BCG) against the respondent in his capacity as guarantor of certain obligations owed by Bishwo to BCG.

4    The applicants now seek orders recognising the Singaporean bankruptcy proceedings as “foreign non-main proceedings” pursuant to s 6 of the Cross Border Insolvency Act 2008 (Cth) (Act) and Art 17 of the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (Model Law) set out in Schedule 1 to the Act.

5    Consequent upon recognition, the applicants seek a number of orders pursuant to Art 21 of the Model Law.

6    On 17 September 2022, Goodman J made orders for service of the originating application and other documents on the respondent by email to the respondent’s email address. The proceedings were served in accordance with Goodman J’s orders. On 7 December 2022, I heard the application. The respondent did not attend the hearing.

7    After hearing submissions, I made orders and indicated I would publish reasons for doing so. These are those reasons.

Legislative framework

8    The Model Law, is given operation in Australia by reason of s 6 of the Act and by s 8 of the Act has force of law in Australia as if it referred to the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), wherever it “… provides that the laws of the enacting State relating to insolvency are to be identified.”

9    Pursuant to s 10 of the Act, for the purposes of Art 4 of the Model Law this Court is specified as a court competent to perform the functions referred to in the Model Law relating to recognition of foreign proceedings and co-operation with foreign courts.

10    In Wong (Trustee), in the matter of Mackellar (Bankrupt) v Mackellar [2020] FCA 1151, (Wong) at [16]-[28] Derrington J set out a comprehensive summary of the operation of the Model Law and the Act insofar is relevant to an application such as that before Court. Relevant provisions are:

(a)    Article 1(a) of the Model Law has application where assistance is sought in Australia by a foreign court or a foreign representative in connection with a foreign proceeding;

(b)    Some of the terms used in Art 1(a) are defined by Art 2: Art 2(a) defines “foreign proceeding”; Art 2(d) defines a Foreign Representative.

(c)    Article 2 also provides definitions for other important terms, namely, a “foreign main proceeding”; “foreign non-main proceeding”, and “establishment”.

(d)    The effect of Art 4, together with s 10 of the Act, is that the functions referred to in the Model Law relating to the recognition of foreign judgments and cooperation with foreign courts shall be performed by the Federal Court where the proceedings involve a debtor who is an individual.

(e)    Article 15 of the Model Law makes provision for a foreign representative to apply for recognition of the foreign proceedings.

(f)    Section 13 of the Act imposes additional requirements on the making of an application for recognition

(g)    Article 16 of the Model Law is a facilitative provision which assists in the proof of the matters required to be established under Art 15.

(h)    The circumstances in which a foreign proceedings will be recognised are identified in Art 17.

(i)    The effect of the above articles and provisions of the Act is that if the prescriptive requirements set out in the article of the Model Law and the provision of the Act, are satisfied the foreign proceedings must be recognised by the Court unless such recognition would be manifestly contrary to the public policy of Australia (as to which, see Art 6).

(j)    If recognised as a foreign main proceeding, the effect is set out in Art 20(1).

(k)    Article 21 grants power to the Court to accord the foreign representative additional relief irrespective of whether the proceedings recognised are main or non-main proceedings.

(l)    There are a number of additional procedural requirements on the making of an application for recognition imposed by r 14.03 of the Federal Court (Bankruptcy) Rules 2016 (Cth) (Federal Court Bankruptcy Rules).

Evidence on the application

11    In support of that application, the applicants read:

(a)    The affidavit of David Dong-Won Kim sworn 28 July 2022 (first Kim affidavit);

(b)    The affidavit of David Dong-Won Kim sworn 12 September 2022 (second Kim affidavit);

(c)    The affidavit of David Dong-Won Kim sworn 18 November 2022 (third Kim affidavit);

(d)    The affidavit of Peter Andrew Hession affirmed 28 July 2022; and

(e)    The affidavit of Megan Lowe affirmed 24 October 2022.

12    The following matters arise from the affidavit material.

13    Pursuant to orders of the High Court of the Republic of Singapore, the applicants were appointed as the respondent’s trustees in bankruptcy on 12 May 2022.

14    The respondent is an Australian citizen who was declared bankrupt following a judgment debt obtained by the petitioning creditor, BCG, against the respondent in his capacity as a guarantor of obligations owed to it by Bishwo.

15    The respondent is a director of, amongst other entities, Bishwo, Tulsi and ASDB.

16    The respondent attended Singapore from time to time although he did not hold any work pass or permit in Singapore. In September 2022 he informed the applicants’ staff that is usual place of residence was in Melbourne, Australia.

17    Searches conducted by the applicants identified the respondent as a joint proprietor of a property at Cranbourne North, Victoria although the respondent denies a connection with the property.

18    The respondent has not provided a statement of affairs to the applicants notwithstanding the applicants were appointed trustees on 12 May 2022. The only creditors of which the applicants are currently aware are BCG and the Commonwealth Bank of Australia (CBA). The judgment debt due to BCG is USD $1,289,338.85 and SGD $22,855.27. The respondent has informed the applicants that he has a credit card debt to the CBA in the order of $4500 as well as asserting he owns a number of loans to "friends” of between AUD $30,000-$50,000.

19    The respondent has approximately AUD $1,000 in an Australian bank account and has a number of shares in failed or dormant companies. One of the reasons the applicants seek recognition in Australia of the Singaporean proceedings is for the purpose of investigating and realising any assets the respondent may have in Australia.

20    The respondent was served with the proceedings on 19 September 2022 and was represented by a legal practitioner at first case management hearing. When the matter was called on, it was called in the precincts of the Court. The respondent did not attend on this application.

21    The applicants have caused notice of this application to be published in the Australian Financial Review on 19 October 2022. BCG and CBA have been informed of the proceedings. No creditor or other interested person has filed an appearance in the proceedings.

The application

22    The applicants apply for recognition pursuant to Art 15 of the Model Law.

23    Article 15 provides:

Article 15 - Application for recognition of a foreign proceeding

1.    A foreign representative may apply to the court for recognition of the foreign proceeding in which the foreign representative has been appointed.

2.    An application for recognition shall be accompanied by:

(a)    A certified copy of the decision commencing the foreign proceeding and appointing the foreign representative; or

(b)    A certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of the foreign representative; or

(c)    In the absence of evidence referred to in subparagraphs (a) and (b), any other evidence acceptable to the court of the existence of the foreign proceeding and of the appointment of the foreign representative.

3.    An application for recognition shall also be accompanied by a statement identifying all foreign proceedings in respect of the debtor that are known to the foreign representative.

24    In addition to the requirement in paragraph 3 of Art 15 of the Model Law, s 13 of the Act provides that an application for recognition:

 i)    must be accompanied by a statement identifying all foreign proceedings in respect of the debtor that are known to the foreign representative;

ii)    must be accompanied by a statement identifying:

a)    all proceedings under the Bankruptcy Act 1966 in respect of the debt; and

b)    any appointment of a receiver (within the meaning of section 416 of the Corporations Act 2001), or a controller or a managing controller (both within the meaning of section 9 of that Act), in relation to the property of the debtor; and

c)    all proceedings under Chapter 5 of the Corporations Act 2001, section 601 CL of that Act or Schedule 2 to that Act, in respect of the debtor;

that are known to the foreign representative.

25    The applicants have satisfied the requirements of Art 15 and s 13 of the Act. In particular:

(a)    The applicants have been appointed trustees and are applying to this Court for recognition of the Bankruptcy Proceedings in Singapore in which they have been appointed the respondents’ trustees in bankruptcy;

(b)    The application is accompanied by a certified copy of the Bankruptcy Order issued by the High Court of the Republic of Singapore;

(c)    In the first Kim affidavit, Mr Kim confirms:

(i)    No outstanding domestic or foreign legal proceedings in respect of the respondent are known to him; and

(ii)    There are no insolvency proceedings under Australian insolvency law or any other pending proceedings in Australia in relation to the respondent.

Recognition as a foreign proceeding

26    The criteria for recognition are set out in Art 17 which provides:

Article 17 - Decision to recognize a foreign proceeding

1.    Subject to Article 6, a foreign proceeding shall be recognized 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;

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

2.    The foreign proceeding shall be recognized:

(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

(b)    As a foreign non-main proceeding if the debtor has an establishment within the meaning of subparagraph (f) of article 2 in the foreign State.

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

4.    The provisions of articles 15, 16, 17 and 18 do not prevent modification or termination of recognition if it is shown that the grounds for granting it were fully or partially lacking or have ceased to exist.

Article 17(1)(a)

27    Article 2(a) defines a “Foreign proceeding” as a:

… judicial or administrative proceeding in a foreign State, … 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 reorganisation or liquidation.

28    The requirements of Art 17(1)(a) are met.

Article 17(1)(b)

29    Article 2(d) defines a “Foreign representative” as:

… a person or body, including one appointed on an interim basis, authorised in a foreign proceeding to administer the reorganisation or the liquidation of the debtor’s assets or affairs or to act as a representative of the foreign proceeding.

30    Since the applicants were appointed by the High Court of the Republic of Singapore as the respondent’s trustees in bankruptcy, they come within the meaning of a “Foreign representative” in Art 2(d).

31    The requirements of Art 17(1)(b) are met.

Article 17(1)(c)

32    This article provides that the application must meet the requirements Art 15(2). I have found that that the requirements of Art 15 have been satisfied such that the requirements of Art 17(1)(c) are met.

Article 17(1)(d)

33    The article requires the application be submitted to a court referred to in Art 4. This Court is such a court. The requirements of Art 17(1)(d) are met.

Non-main proceedings

34    The next issue is whether the proceedings are main or non-main proceedings.

35    Article 17(2) provides that for a foreign proceeding to be recognised as a “foreign main proceeding” it is taking place in the State where the debtor has the centre of its main interest. Alternatively, the proceedings may be recognised as a “foreign non-main proceeding” if the debtor has an establishment within the meaning of subparagraph (f) of Art 2 in the foreign state.

36    Article 2(f) defines an “Establishment” as meaning any place of operations where the debtor carries out a non-transitory economic activity with human means and goods or services.

37    Article 16(3) provides that in the absence of proof to the contrary, in the case of an individual, the debtor’s habitual residence is presumed to be the centre of the debtor’s main interests.

38    The applicants submit that the respondent’s centre of main interests is in Melbourne, Australia since:

(a)    The respondent has an Australian passport;

(b)    The respondent informed the applicants that he travelled to Singapore on occasions for business but did not have any work pass or permit to work in Singapore and always entered as a tourist;

(c)    A personal name search of the Singapore Accounting and Corporate Regulatory Authority shows the respondent’s address as an address in Southbank, Victoria;

(d)    The respondent is a director of ASDB and the Australian Securities and Investments Commission lists the respondent’s address as an address in Southbank, Victoria;

(e)    The respondent told Mr Kim he was based in Australia during the COVID pandemic;

(f)    The respondent told Mr Kim his usual place of residence is Melbourne, Australia; and

(g)    The respondent has a bank account with CBA in Australia but no bank accounts in Singapore.

39    The circumstances to which Mr Kim deposes in the first Kim affidavit at [27], the second Kim affidavit at [13] concerning the Cranbourne North property (noting the respondent’s denial of any connection with that property notwithstanding a title search reveals the respondent is a joint registered proprietor of that property) satisfies me that the respondent’s habitual residence is in Melbourne, Australia. I am satisfied the presumption in Art 16(3) is available to the applicants and that the respondent’s centre of main interests is in Melbourne, Australia.

40    Even were that not the case, the High Court has held that the application of the expression “habitual residence” “… permits a consideration of a wide variety of circumstances that bear upon where a person is said to reside and whether the residence is said to be habitual” and that past and present intentions of the person under consideration will often bear upon the significance that is to be attached to particular circumstances of the duration of a person’s connections with a particular place of residence”: LK v Director General, Department of Community Services [2009] HCA 9; (2009) 237 CLR 582 at [23].

41    Consideration of the circumstances deposed to by Mr Kim as set out above, also satisfy me that in the wide variety of circumstances he has identified, the respondent’s habitual residence is in Melbourne, Australia and as such, the respondent’s centre of main interests is in Melbourne, Australia.

42    The applicants have satisfied the Court that the Singapore proceedings should be recognised as a “foreign non-main proceeding” under Art 17(2)(b).

The applicants are entitled to the relief sought

43    The effect of recognising the Singapore proceedings as a “foreign non-main proceeding” is that pursuant to Art 21 the Court may, at the request of the foreign representative, grant “any appropriate relief” where necessary to protect the assets of the debtor or the interests of the creditors.

44    A number of powers are identified under Art 21(1), however the powers are not intended to be exhaustive and the Court may grant further relief in the assistance of foreign trustees: Tucker v Aero Inventory (UK) Ltd (No 2) (2009) 181 FCR 374; Hung (Trustee), in the matter of Farouk v Farouk (No 2) [2021] FCA 270 at [34] (Derrington J).

45    The applicants apply for relief under Art 21(1)(a)-(c), (e) and (g):

(a)    Staying the commencement or continuation of individual actions or individual proceedings concerning the debtor'’ assets, rights, obligations or liabilities, to the extent they have not been stayed under paragraph 1(a) of Art 20;

(b)    Staying execution against the debtor’s assets to the extent it has not been stayed under paragraph 1(b) of Art 20;

(c)     Suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor to the extent this right has not been suspended under paragraph 1(c) of Art 20;

(d)    …

(e)    Entrusting the administration or realization of all or part of the debtor’s assets located in this State to the foreign representative or another person designated by the court;

(f)    …

(g)    Granting any additional relief that may be available to [a trustee in bankruptcy appointed under the provisions of the Bankruptcy Act] under the laws of this State.

46    The applicants submit the Court should grant the relief it seeks because it is “desirable in the interests of ensuring that the foreign representatives have sufficient ability to carry out their functions so that the creditors’ interests can be advanced”: Wong at [61].

47    In Wong, the bankrupt had refused to comply with his obligations under the foreign bankruptcy laws to provide information or materials to the trustees. Derrington J considered that generated sufficient concern as to what he may do with any assets he has in Australia such that the granting of the powers sought was necessary in the circumstances: at [61]. The same may be said in this matter.

48    His Honour continued at [62] by observing that in the exercise of the discretion to vest the foreign representative with additional powers, Art 22(1) requires the Court to be satisfied that the interests not just of the creditors and other interested persons but also the debtor are adequately protected. In this matter, as with Wong, the interests of the respondent are protected because any extension of power does not go beyond that which would otherwise exist under the Bankruptcy Act.

49    In all the circumstances I am satisfied it is appropriate to make the orders sought by the applicants and there will be orders accordingly.

Costs

50    The applicants seek an order that the applicants’ costs of and incidental this proceeding be costs in the bankruptcy of the respondent and accorded the same priority as costs of the proceedings incurred by a trustee in bankruptcy appointed under the Bankruptcy Act. There is no reason why such an order should not be made. The respondent has failed to comply with Singapore’s insolvency laws in particular that he has not filed a statement of affairs as required. This application was necessitated, at least in part, by that failure. If the order as to costs is made in the form requested, the consequence is that the applicants’ costs will be accorded appropriate priority in the same way as the costs of a trustee in bankruptcy appointed under the Bankruptcy Act.

51    There will be a costs order accordingly.

Associate:

Dated:    20 January 2023