Abate, in the matter of Chang Rajii v Chang Rajii

GLEESON J: 1 On 22 March 2019, I made further orders in this proceeding on the ex parte application of the liquidator, Mr Abate. These are my reasons for making those orders.

Background 2 Mr Abate is the liquidator in a compulsory insolvency proceeding commenced in Chile in respect of the respondent, referred to as "Mr Chang" by Mr Abate. 3 On 29 and 30 January 2018, I made orders: (1) recognising proceeding number C-22090-2016 of the 15th Civil Court of Santiago in Chile as a "foreign proceeding" and a "foreign main proceeding" pursuant to the Cross-Border Insolvency Act 2008 (Cth) ("Act") and the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (1997) ("Model Law"); (2) recognising Mr Abate as a "foreign representative" within the meaning of Art 2 of the Model Law; and (3) entrusting Mr Abate with the administration and realisation of certain assets of Mr Chang located in Australia subject to the lifting of a freezing order made by the Fourth Criminal Court of Santiago ("Chilean Criminal Court") on 29 September 2016 ("Chilean freezing order"): Abate, in the matter of Chang Rajii v Chang Rajii (No 2) [2018] FCA 241 ("first judgment"). 4 Background facts concerning the Chilean insolvency proceeding are set out in the first judgment. Defined terms used in this judgment have the meaning stated in the first judgment. 5 On 18 June 2018, the Chilean Criminal Court lifted the Chilean freezing order, which is at tab 24 of exhibit CAPA-2. 6 On about 14 July 2018, a judge of the Chilean Criminal Court issued a letter of request addressed to Court of Competent Jurisdiction in Australia. A certified translation of the letter states that the letter requests cooperation in the processing of a request for international assistance in criminal matters. The request is expressed to be made pursuant to several articles of the United National Convention on Transnational Organized Crime 2000 and Art XXII of the Extradition Treaty between Australia and the Republic of Chile. The letter requests that the Court: (1) lift the interim measures prohibiting acts or contracts with respect to certain assets; and (2) place the Elizabeth St property at the disposal of Mr Abate. 7 By interim application filed 11 February 2019, Mr Abate sought further orders under the Act and the Model Law: (1) modifying the orders made on 30 January 2018 to ensure that all assets, including those previously the subject of the Chilean freezing order, would be entrusted to Mr Abate; (2) recording Mr Abate as the registered proprietor of the property located at 410/141-143 Elizabeth Street Sydney NSW 2000 and referred to in order 1(b) of the 30 January 2018 orders ("Elizabeth St property"); (3) permitting Mr Abate to transfer monies currently held in certain bank accounts to his solicitors' trust accounts in Australia and the United States; (4) after satisfying Mr Chang's one Australian creditor (being the Owners Corporation of Strata Plan 89074 in the sum of $48,089.22, which relates to the Elizabeth St property), allowing Mr Abate to distribute the proceeds of sale from the sale of the Elizabeth St property to his solicitors' trust accounts; and (5) for the issue of an examination summons to Ms Anne Elizabeth Miller (who was previously a director of two Australian companies associated with Mr Chang). 8 On 12 February 2019, this Court made orders for (a) service of the interim application and supporting affidavits on Mr Chang, the Australian Federal Police ("AFP"), the Chilean insolvency and criminal authorities, the occupier and Owners Corporation for the Elizabeth St property, and the Registrar-General of NSW; and (b) notice of the interim application to be published in Chile, in the Boletin Concursal, and in The Australian newspaper in Australia. 9 Although the documents were served and published in accordance with the orders of 12 February 2019, delivery of the email intended to serve the documents on the Chilean Head Prosecutor, Public Prosecutor's Office for Highly Complex Matters, failed. After obtaining instructions from a US attorney acting for Mr Abate, the documents were served on Mr Felipe Sepúlveda Araya. Mr Araya subsequently confirmed that, since 2018, he has been responsible for the criminal case concerning Mr Chang.

Evidence 10 In support of his application, Mr Abate relied on the following affidavits: (1) affidavit of Mr Abate sworn 14 November 2017, other than the second sentence of [50] and the entirety of [87], together with exhibit CAPA-2; (2) affidavit of Mr Abate sworn 28 November 2018, together with exhibit CAPA-3; (3) affidavit of Joseph Khoury sworn 13 March 2019; and (4) three affidavits of John Mitchell, each affirmed 21 March 2019.

Orders 2 and 4 11 As the Chilean freezing order has now been lifted, Mr Abate sought orders 1 and 3 to facilitate the distribution of Mr Chang's assets in Australia. 12 The orders were sought pursuant to s 6 of the Act and Art 21(1)(e) of the Model Law. Section 6 of the Act provides that the Model Law has the force of law in Australia. Article 21(1)(e) of the Model Law provides that upon recognition of a foreign proceeding, whether main or non-main, where necessary to protect the assets of the debtor or the interests of the creditors, the Court may, at the request of the foreign representative, grant any appropriate relief, including: entrusting the administration or realisation of all or part of the debtor's assets located in this State to the foreign representative or another person designated by the Court. 13 Pursuant to Art 22, in granting or denying relief under Art 21, the Court must be satisfied that the interests of the creditors and other interested persons, including the debtor, are adequately protected. 14 Having previously ordered that the administration and realisation of all of Mr Chang's assets located in Australia, other than six bank accounts referred to in the Chilean freezing order and the Elizabeth St property, be entrusted to Mr Abate, I was satisfied that the proposed orders are necessary to protect the interests of the creditors of Mr Chang, those interests being to obtain a distribution of Mr Chang's assets. The purpose of excluding the bank accounts and the property from the earlier orders was to avoid a conflict with orders made by the Chilean Criminal Court and other potential action by the AFP to obtain possession of the Elizabeth St property as proceeds of crime. There is no longer a risk of conflict and the Chilean Criminal Court requested orders of the kind sought. The AFP was served with the interim application and did not oppose the orders sought. 15 Mr Abate gave evidence that, based on his investigations, the only Australian creditor of Mr Chang is the Owners Corporation for the Elizabeth St property. The proposed orders provided for the full payment of the amount claimed by the Owners Corporation. 16 Accordingly, in making orders 2 and 4, I was satisfied that the interests of creditors and other interested persons, including Mr Chang, were adequately protected.

Order 3 17 Mr Abate sought order 3 in order that he be recorded as the registered proprietor of the Elizabeth St property, to facilitate the administration and realisation of that property and the distribution of the sale proceeds. 18 Order 3 was sought pursuant to s 138 of the Real Property Act 1900 (NSW), which provides that a court may, in proceedings for the recovery of any land, estate or interest from the person registered as proprietor of the land, make ancillary orders of the kind set out in s 138(3), if the court is of the opinion that the circumstances of the case require any such order to be made. 19 Subsection 138(3) provides that a court may order the Registrar-General to do one or more of the following: (a) cancel or amend a folio of the Register, (b) cancel, amend or make a recording in a folio of the Register, (c) create a new folio of the Register, (c1) create a new edition of a computer folio, (d) issue a new certificate of title. 20 I accepted that this Court has jurisdiction to make an order under s 138 of the Real Property Act. Counsel for Mr Abate, Mr Sulan, noted that in respect of an earlier version of s 138, the Full Court held that it did not have jurisdiction and that the relevant application was required to be brought in the Supreme Court: Turner v Official Trustee in Bankruptcy [1999] FCA 1817; (1999) 97 FCR 241 at [22]. The earlier version of s 138 referred to "The Court" and when read with s 136 and s 137, the Full Court concluded that the reference to "The Court" did not include the Federal Court. 21 The reference to "The Court" in s 138 was amended to "a court" by the Real Property and Conveyancing Legislation Amendment Act 1999 No 58 (NSW), with effect from 1 January 2000. The reference to "a court", which is not a defined term, is plainly broad enough to include the Federal Court. Section 138 may be contrasted with s 136 and s 137, which refer in terms to the Supreme Court. Further, in Commonwealth of Australia v State of New South Wales; in the matter of Condobolin Bila CDEP Ltd [2006] FCA 1330; (2006) 59 ACSR 682, Gyles J made orders under s 138. 22 I was satisfied that order 3 is the kind of relief that may be granted under Art 21(1)(e), and that the order is necessary to protect the interests of the creditors of Mr Chang, those interests being the administration and realisation of the property and, ultimately a distribution of the proceeds of sale. 23 In making order 3, I was satisfied that the interests of the creditors and other interested persons, including the debtor, were adequately protected. 24 Mr Abate noted that if the Court made order 2, with the result that Mr Abate would have control over the Elizabeth St property, it was his intention to search that property for the Certificate of Title. Mr Abate foreshadowed that in due course, he may apply for an order that he be issued with a new Certificate of Title.

Orders 5 and 6 25 By order 5, Mr Abate sought that moneys held in the accounts specified in annexure A to the interim application be paid to the trust account of Arnold Bloch Leibler in the sum of $120,000 and the balance to the trust account of Mr Abate's US lawyers, Sequor Law ("Sequor Law Trust Account"). The accounts specified in annexure A include two of the ANZ Accounts referred to in the 30 January 2018 orders, and one additional account recently identified, all of which are accounts in the name of Mr Chang. 26 By order 6, Mr Abate also sought that the proceeds of sale of the Elizabeth St property be paid in an amount of around $48,089.22 (or such amount as may be proved to be owing at the time) to the only known Australian creditor being the Owners Corporation, the sum of $50,000 to the Arnold Bloch Leibler trust account and the balance to Sequor Law Trust Account. 27 Orders 5 and 6 were sought pursuant to s 6 of the Act and Art 21(1)(e) of the Model Law. 28 I accepted that it was reasonably necessary to grant the relief sought to protect the interests of the creditors by enabling Mr Abate's access to the funds in the bank accounts and the proceeds of sale of the Elizabeth St property. 29 Again, in making orders 5 and 6, I was satisfied that the interests of the creditors and other interested persons, including the debtor, were adequately protected.

Order 7 30 Mr Abate also sought an order for the examination of Anne Elizabeth Miller. Order 7 was sought pursuant to Art 21(1)(d) of the Model Law and s 81 of the Bankruptcy Act 1966 (Cth), as applied by s 8 of the Act and Art 21(1)(g) of the Model Law. 31 Section 8 of the Act provides, relevantly, that the Model Law has the force of law in Australia as if the Model Law referred to the Bankruptcy Act wherever the Model Law provides that the laws of the enacting State relating to insolvency are to be identified. 32 Article 21(1)(d) and (g) of the Model Law provide that upon recognition of a foreign proceeding, whether main or non-main, where necessary to protect the assets of the debtor or the interests of the creditors, the Court may, at the request of the foreign representative, grant any appropriate relief, including (relevantly): (d) providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor's assets, affairs, rights, obligations or liabilities; and (g) granting any additional relief that may be available to a trustee in bankruptcy under the laws of this State. 33 Section 81 of the Bankruptcy Act relevantly provides that: (1) Where a person (in this section called the relevant person) becomes a bankrupt, the Court or a Registrar may at any time (whether before or after the end of the bankruptcy), on the application of: ... (b) the trustee of the relevant person's estate; … summon the relevant person, or an examinable person in relation to the relevant person, for examination in relation to the bankruptcy. (1A) A summons to a person by the Court or the Registrar under subsection (1) shall require the person to attend: (a) at a specified place and at a specified time on a specified day, being a place, time and day that are reasonable in the circumstances; and (b) before the Court or the Registrar or, if the Court or the Registrar thinks fit, a magistrate; to be examined on oath under this section about the relevant person and the relevant person's examinable affairs. (1B) A summons to a person under subsection (1) may require the person to produce at the examination books (including books of an associated entity of the relevant person) that: (a) are in the possession of the first-mentioned person; and (b) relate to the relevant person or to any of the relevant person's examinable affairs. 34 In Crumpler (as liquidator and joint representative) of Global Tradewaves Ltd (a company registered in British Virgin Islands) v Global Tradewaves (in liquidation) [2013] FCA 1127; (2013) 246 FCR 138 at [18], Logan J held that the Court has power to issue an examination summons or to direct the issuing of such a summons by virtue of Art 21(1)(d) and Art 21(1)(g) read with s 8 of the Act by reference to s 581 of the Corporations Act 2001 (Cth). By parity of reasoning, I accept that the Court has similar power in this case by virtue of Art 21(1)(d), and also Art 21(1)(g) read with s 8 of the Act by reference to s 81 of the Bankruptcy Act. 35 Mr Abate gave evidence of his understanding that Ms Miller: (1) was previously employed by Mr Chang to manage his affairs in Australia; (2) was a director of Onix Capital Pty Ltd and Future Solar Technologies Pty Ltd (which Mr Abate refers to as Mr Chang's two Australian companies); (3) was the managing director of one of Grupa Arcano in Australia; (4) assisted Mr Chang with the purchase of the Elizabeth St property; and (5) was a signatory to accounts conducted by Mr Chang's Australian companies with the ANZ Bank. 36 Mr Abate says that the face of the fraud committed by Mr Chang was Grupo Arcano SA, a company incorporated by Mr Chang in Chile. 37 For these reasons, Mr Abate believes that Ms Miller may have in her possession, custody or control, books and records relating to Mr Chang's business affairs in Australia and may have personal knowledge of Mr Chang's business affairs which may assist Mr Abate with his investigations. 38 Mr Abate also gave evidence that when, in January 2018, he made a number of attempts to organise a meeting with Ms Miller via text message, she was unable to meet with him. 39 Mr Sulan submitted that the examination of, and production of documents by Ms Miller will assist Mr Abate in investigating Mr Chang's affairs and, to the extent possible, in tracing funds owned by Mr Chang and his creditors that may have been brought to Australia. 40 I accepted this submission and, therefore, that it was appropriate for the Court to make proposed order 7.

Order 8 41 In order to seek to notify the relevant interested persons of the orders made in the interim application, Mr Abate proposed to follow the same course that was ordered in respect of service of the orders made in previous applications, except that an email should be sent to Mr Sepúlveda Araya instead of Mr Gajardo. 42 In conformity with the previous orders, Mr Abate also proposed to advertise the fact of the orders made in the Application in the Boletin Concursal and The Australian newspaper. 43 I accepted that this form of service and notification was appropriate and accordingly made order 8.

Costs and Ancillary Orders 44 Pursuant to s 43 of the Federal Court of Australia Act 1976 (Cth), I made a costs order in terms that would have been available under s 32 of the Bankruptcy Act in a proceeding under that Act. The order as to priority was made pursuant to Art 21(1)(g) of the Model Law. 45 As the orders were made ex parte, I accepted that it was appropriate to grant liberty to apply on three business days' notice for each party and each creditor or person claiming to be a creditor of Mr Chang, and any other person affected by these orders. 46 To facilitate the due administration of the Chilean insolvency proceeding, I also granted liberty to Mr Abate to apply on 24 hours' notice. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.