Ackers v Saad Investments Company Limited

RARES J: 1 The plaintiff, Michele Bottiglieri Armatore SpA, is incorporated in Italy. It is undergoing a debtor in possession process known as a concordato preventivo under the Italian Bankruptcy Law. Bottiglieri owns three Kamsarmax vessels, whose length overall does not exceed 229 metres, and two Post-Panamax vessels, which are vessels too large to transit the Panama Canal, one of which, MBA Giovanni, is due to arrive in Australia imminently. 2 Bottiglieri has filed an originating process seeking recognition of the concordato preventivo as a foreign main proceeding under the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law, which, as modified in the Cross-Border Insolvency Act 2008 (Cth), has force of law in Australian pursuant to s 6. In an interlocutory process filed on 5 July 2021, it also seeks an interim stay of proceedings against it and its assets, rights and obligations, including Giovanni, under Art 19 of the Model Law. 3 As I noted in my reasons in Board of Directors of Rizzo-Bottiglieri-De Carlini Armatori SpA v Rizzo-Bottiglieri-De Carlini Armatori SpA [2017] FCA 331 at [2], the effect of a concordato preventivo under Italian law is similar to a debtor in possession reorganisation under Ch 11 of the Bankruptcy Code of the United States Code. In Tai-Soo Suk v Hanjin Shipping Co Limited [2016] FCA 1404, Jagot J concluded that debtor in possession proceedings of that kind were more closely analogous to proceedings under Pt 5.3A of the Corporations Act 2001 (Cth) than to other proceedings under Ch 5 of that Act, and, accordingly, the stay contemplated in the delphically expressed Art 20(2) of the Model Law and s 16 of the Cross-Border Insolvency Act should be a stay imposed under Pt 5.3A. Subsequently, other decisions have taken a similar view of the appropriate statutory source of the stay here for debtor in possession reconstructions.

Background 4 Bottiglieri fears that one of its secured creditors, namely Davy Investment Fund Services Limited, will seek to arrest Giovanni when she arrives here. Davy appears to have become the assignee of debt finance provided to Bottiglieri by three Italian banks. 5 According to the pre-petition for the commencement of the concordato preventivo that Bottiglieri filed on 13 April 2021 with the Tribunale di Napoli (the Italian court), Davy has been unwilling to negotiate with the company during the course of the previous three years. According to the eponymous Michele Bottiglieri, the chairman of the Bottiglieri board and its chief executive officer, in his affidavit sworn on 2 July 2021, during that period there were changes in the international shipping market brought about, first, by a collapse, worldwide, in industrial production in 2018 in sectors utilising the company's ships to carry cargo and, secondly, by the effects of the COVID-19 pandemic on global industrial production and consumption, and the need for ships' crews to quarantine on entering some jurisdictions. The pre-petition asserted that Davy has sought to pursue the objective of having Bottiglieri's mortgaged vessels assigned to them. It is not clear on the evidence before me whether Davy has a registered ship's mortgage over Giovanni, or the other ships, or is otherwise a secured creditor generally over the company's assets and undertaking. 6 Bottiglieri is particularly concerned that Davy will seek to have Giovanni arrested here, as it had previously sought in the People's Republic of China and as it or an associated company did with a sister ship in Canada, MBA Giuseppe. 7 On 28 April 2021, the Italian court made a decree for the commencement of the concordato preventivo proceeding. The decree recited that Art 168 of the Italian Bankruptcy Law applied from the date of publication (on 14 April 2021) of the pre-petition in the Companies Register until a ratification decree of an arrangement with creditors becomes irrevocable so that all creditors with claims anterior to the commencement of the concordato preventivo are forbidden to commence enforcement or precautionary actions against Bottiglieri's assets. 8 Professor Bruno Inzitari provided a legal opinion as to the concordato preventivo procedure. He opined that under the Italian Bankruptcy Law, the concordato preventivo procedure allows an enterprise facing financial difficulties or insolvency to seek a rearrangement with its creditors and or to restructure its debt. He noted that the Italian court's decree had approved under Art 161(6) the filing of the pre-petition for a composition of creditors and that, at that stage, there was no proposed plan for the composition. Under the Italian Bankruptcy Law, a company has 120 days in which to submit a proposal after negotiating with its creditors as to any suggested restructure. The Italian court will then review the proposal, including hearing argument and submissions as to whether it should be adopted, reinforced, or rejected. 9 Mr Bottiglieri swore his affidavit in support of the application for interim recognition here. He noted that the company's registered office is in Naples, it was incorporated under Italian law on 5 May 2008 and its directors all lived and worked in Italy. The company has a nominal and fully paid up share capital of €40 million. He said that Bottiglieri's corporate purpose was the carrying out of ship owning activities in the maritime sector through the use of its own or third party's vessels, the recruitment of crew, as well as the purchase, sale, non-financial lease and management of vessels. Its operations are in the dry cargo shipping sector. As at 31 December 2020, it had 130 employees, 15 of whom are based in the registered office in Naples, while the rest are crew members based on the ships. 10 Mr Bottiglieri said that the five bulk carrier vessels referred to above were the company's assets and they are each flagged in Italy. He said that all the company's bank accounts were based in Italy. He said that the lenders for the purchase of the fleet were all Italian banks that were owed a total between them of USD122.8 million. The governing law of those debts is Italian law. 11 He said that the company's owned and chartered ships trade to Australia on a regular basis and that, at the time he made his affidavit, Giovanni was due here on about 6 July 2021, but could be delayed some days. He deposed that there was no property of the company in Australia and it has no creditors here. He said that, except for the company's Italian banks, most if not all of its creditors were based outside Italy because Bottiglieri's vessels were trading worldwide and rarely, if ever, called home. 12 Mr Bottiglieri said that, as a result of the market collapse, freight rates that Bottiglieri could charge had fallen to below its operating costs for its vessels, leading to its financial difficulties the subject of the concordato preventivo. He expressed optimism that, based on his experience in the sector, the emergence of the world economy from the effects of the pandemic and the expansive monetary policy of a number of nation states would have a positive effect on the raw material market and dry cargo shipping sector, which would lead to an uptake in the company's fortunes. 13 He said that on 7 May 2021 the Superior Court of Quebec in Canada, District of Montreal, had recognised Mr Bottiglieri's application, as the foreign representative in those proceedings, for recognition of the concordato preventivo proceeding as a foreign main proceeding. The Superior Court's order noted that Bottiglieri had applied to the Federal Court of Canada to obtain the release of Giuseppe without providing bail or security for the arrest and to stay further proceedings before that Court. Mr Bottiglieri noted that Giuseppe had been arrested on 9 April 2021 in Quebec City by Davy Global Fund Management Limited, which I infer is a related company of Davy, claiming to exercise rights of a former mortgagee creditor, Banca Intesa Sanpaolo. He said that Bottiglieri had challenged the arrest and the Federal Court of Canada's decision was reserved. Apart from those proceedings, he was not aware of any other proceedings in respect of Bottiglieri and stated that there was no Australian insolvency proceeding or Australian insolvency officeholder in respect of the company. He said that there is no receiver, or receiver and manager, of Bottiglieri's property acting in respect of the company. He said that the company wanted to protect its ongoing shipping operations from disruption. 14 Mr Bottiglieri noted that, although the Italian court supervises the management of a company during the moratorium while a concordato preventivo is in place, no external person is appointed to administer the debtor in possession process under the concordato preventivo, but rather the company administers that process itself. 15 Professor Inzitari told Mr Bottiglieri that the restructuring plan and proposal for arrangement with creditors would be filed by about mid-October 2021, taking advantage of a 60-day extension of the 120-day period provided in Art 161(6) of the Italian Bankruptcy Law. When that occurs, the creditors would be able to vote on the proposal in the following 120 days. If the creditors approved, the Italian court would then set a hearing date to consider whether to approve the arrangement, which, his lawyers had told Mr Bottiglieri, would be around July 2022. Professor Inzitari noted that under Italian law, all proceedings, including ones on a ship's mortgage, hypothec or similar security, are prohibited during the period of the stay under Art 168 of the Italian Bankruptcy Law and cited a judgment of the Italian Court of Cassation of 28 June 2002 (number 9488) that stated that there were no exceptions to the application of the stay in Art 168 in Italy. 16 Mr Bottiglieri anticipated that major potential creditors such as crewing agencies, managers, ship agents, providers of victualing and bunkers were all likely to be based outside Italy and they would be unlikely to have access to Italian newspapers. However, the banks were all located in Italy and had been notified of the concordato preventivo. He said that, based on his experience, Lloyd's List International was widely read and he believed that publication of notice of this application in it would be likely to bring the existence of this proceeding to the attention of any international creditors, together with publication of a notice in the Daily Cargo News, published here. Mr Bottiglieri believed that most of the creditors, including Davy Global and Dea Capital Alternative Fund SGR SpA, each of which had taken separate assignments of Bottiglieri's indebtedness to different Italian banks, would have access to those publications. I accept that evidence. 17 Mr Bottiglieri seeks interim recognition of the concordato preventivo as a foreign main proceeding under Art 17 of the Model Law and a stay under Art 21(1).

Consideration 18 Article 19(1) of the Model Law provides that once an application for recognition has been filed and until it is determined, the court may grant relief of a provisional nature, including staying proceedings against the company's assets, at the request of the foreign representative, where urgent relief is needed to protect the assets of the debtor or the interests of creditors. 19 Rule 15A.4 of the Federal Court (Corporations) Rules 2000 applies to an application by a plaintiff for provisional relief under Art 19 of the Model Law. 20 I am satisfied, on a prima facie, basis that it is likely that, in due course, the concordato preventivo will be recognised as a foreign main proceeding under Art 17 of the Model Law. That is because it is a foreign proceeding within the meaning of Art 2(a), the foreign representative, being the company itself, as debtor in possession, is a person or body authorised in the concordato preventivo to administer Bottiglieri's reorganisation within the meaning of Art 2(d). I note that Mr Bottiglieri was, however, the foreign representative in Canada, and in the past, on other occasions, a company officer has been nominated as the foreign representative, although that seems not to be necessary here: see eg Re Senvion GmBH (No 2) (2019) 140 ACSR 20 at 23 [11] per Anastassiou J. I am of opinion that, prima facie, the concordato preventivo is taking place in the State in which Bottiglieri appears to have, on the evidence before me at the present time, its centre of main interests, being Italy, within the meaning of Art 2(b): Ackers v Saad Investments Company Limited (in official liquidation) (2010) 190 FCR 285. 21 There is also prima facie evidence that the requirements of Art 15(2) have been satisfied, namely, there is a decree commencing the concordato preventivo and appointing the company as the debtor in possession. There is not yet a certificate affirming the existence of the foreign proceeding, although copies of the decree of the Italian Court in evidence are stamped. I am satisfied that the evidence of the decree is acceptable within the meaning of Art 15(2)(c). Mr Bottiglieri's affidavit has identified all foreign proceedings in respect of Bottiglieri that are known to the company, and the documents have been translated into English: see Art 15(3) and (4). Article 16(2) entitles the Court to presume that the documents presented are authentic.

Conclusion 22 In my opinion there is a sufficient prima facie case for the grant of relief of a provisional nature within the meaning of Art 19(1)(a) that commencement or continuation of proceedings against Bottiglieri, or any of its assets, rights and obligations be stayed, subject to what is now the usual form of order in proceedings involving shipping companies under the Model Law, namely that any person seeking the issue of an arrest warrant for a ship may apply directly to a judge, rather than through the registrar as contemplated in the Admiralty Rules 1988: see Yu v STX Pan Ocean Company Limited (2013) 223 FCR 189 and Yakushiji v Daiichi Chuo Kisen Kaisha [2015] FCA 1170 at [16] per Allsop CJ. 23 I will make orders in accordance with paragraphs 1, 2, 3, 4 and 5 in the interlocutory process. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rares.