Akers v Deputy Commission of Taxation

Federal Court of Australia|2019-10-22|Before: Anastassiou J

Counsel for the Plaintiff: Mr S. J. Maiden QC with Mr N. Wallwork

Solicitor for the Interveners: King & Wood Mallesons

BETWEEN: SENVION GMBH ARBN 159 827 773 Plaintiff and Defendant

PACIFIC HYDRO PORTLAND WIND FARM PTY LTD Second Intervener

PACIFIC HYDRO YALOAK PTY LTD Third Intervener

JUDGE: ANASTASSIOU J DATE OF ORDER: 22 October 2019

Pursuant to Article 17(1) of the United Nations Commission on International Trade Model Law on Cross-border Insolvency (the Model Law) which is sch 1 to the Cross-Border Insolvency Act 2008 (Cth) (the Act), the eröffnetes Insolvenzverfahren which was commenced in respect of the defendant in the Amtsgericht Hamburg, Germany on 1 July 2019 (the Proceeding) is recognised as a foreign proceeding within the meaning of Article 2(a) of the Model Law.
Pursuant to Article 17(2) of the Model Law the Proceeding is recognised as a foreign main proceeding within the meaning of Article 2(b) of the Model Law.
The plaintiff is recognised as foreign representative of the Proceeding within the meaning of Article 2(d) of the Model Law.
For the purposes of Article 20(2) of the Model Law and s 16 of the 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 the defendant 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 the defendant (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 company.
The Pacific Hydro Entities have leave pursuant to s 440D(1) of the Corporations Act 2001 (Cth) to continue their proceeding No. S ECI 2019 02905 in the Supreme Court of Victoria against the defendant. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ANASTASSIOU J: 1 There are two applications before the court. The first is an application by Amended Originating Process dated 7 October 2019. The plaintiff (Senvion GmbH, which is also the defendant for reasons explained below) applies pursuant to Article 15 of the UNCITRAL Model Law on Cross-Border Insolvency for recognition of an insolvency proceeding in it has entered in the Amtsgericht Hamburg, Germany (the Proceeding), as a "foreign proceeding" and as a "foreign main proceeding" within the meaning of Articles 17(1), and 17(2)(a) and (b) of the Model Law respectively. The Model Law is Schedule 1 to the Cross Border Insolvency Act 2008 (Cth) and has the force of law pursuant to s 6 of the Act. 2 The second application is by an interlocutory process filed on 19 August 2019. The applicants, Pacific Hydro Crowlands Pty Ltd, Pacific Hydro Portland Wind Farm Pty Ltd and Pacific Hydro Yaloak Pty Ltd (collectively the Pacific Hydro Entities) seek an order that if the Proceeding is recognised pursuant to Article 17, the effect of the stay arising by operation of Article 20(1) of the Model Law be modified to exclude from the stay a pending proceeding in the Supreme Court of Victoria between the Pacific Hydro Entities and Senvion in proceeding No. S ECI 2019 02905 (the Supreme Court Proceeding), or alternatively for an order pursuant to s 440D(1) of the Corporations Act 2001 (Cth) for leave to continue the Supreme Court Proceeding.

background 3 Senvion, together with its associated companies, is a global manufacture of onshore and offshore wind turbines. It designs and manufactures wind turbines and installs them worldwide. Senvion monitors turbines from its facility located at Osterrönfeld, Germany, wheresoever the turbines may be situated. It also maintains the turbines pursuant to agreements with owners of wind farms. 4 In Australia, Senvion employs approximately 110 staff through its wholly owned subsidiary, Senvion Australia Pty Ltd. Senvion is registered under Division 2 of Part 5B.2 of the Corporations Act and carries on business within Australia. It has an Australian Registered Body Number and an Australian Business Number. Senvion is the primary trading entity of the Senvion group of companies. It is ultimately owned through several tiers of holding companies by Senvion S.A. which is located in Luxembourg and is listed on the Prime Standard of the Frankfurt Stock Exchange. 5 In Australia, Senvion is currently a party to three engineering, procurement and construction contracts (EPC contracts). One of those contracts is for the construction of 31 wind turbines at Crowlands Wind Farm. The counter party to that contract is Pacific Hydro Crowlands Pty Ltd, one of the Pacific Hydro Entities. Senvion is also party to nine service contracts, including service contracts with the Pacific Hydro Entities. 6 On 9 April 2019 Senvion filed a petition with the Local Court in Hamburg, Germany, to commence a preliminary self-administration proceeding pursuant to s 270a of the German Insolvency Code. The Local Court ordered the commencement of the Preliminary German Administration Proceeding on that day. The Preliminary German Administration Proceeding was supervised and controlled by Dr Christoph Morgen, a preliminary court-appointed creditors' custodian. 7 On 1 July 2019, the Local Court at Hamburg made an order to open a formal insolvency proceeding pursuant to s 270 of the German Insolvency Code. The formal insolvency proceeding had the effect of bringing the Preliminary German Administration Proceeding to an end and commencing the formal self-administration procedure under the German Insolvency Code (the Formal Self-Administration Proceeding). The primary purpose of the Formal Self-Administration Proceeding is to devise an insolvency plan and by arrangement with creditors restructure the company's financial position in order to maintain the enterprise. If any arrangement cannot be reached the company's assets are liquidated and distributed. 8 The Formal Self-Administration Proceeding is the proceeding in respect of which the plaintiff seeks recognition as a foreign proceeding pursuant to Article 17(2)(a) of the Model Law and as a foreign main proceeding pursuant to Article 17(2)(b) of the Model Law. A foreign main proceeding is defined as a foreign proceeding taking place in the state where the debtor has its centre of main interests (COMI) (Article 2(b)). 9 The registered office of Senvion is in Hamburg. Its business headquarters is in Hamburg. It has offices located in other cities in German, including Bremerhaven, Osterrönfeld and Osnabrück. The Senvion Group's product development, design and manufacturing centre is located in Osterrönfeld, and the global wind turbine fleet remote monitoring team, technical support and service department is also located at its centre in Osterrönfeld. Although Senvion has business operations and assets spread all over the world, its business is managed from Germany, principally from Hamburg. Its books and records are kept in Hamburg, board meetings of the directors of Senvion are held in Hamburg, the principal accountants, auditors and solicitors are primarily located in Hamburg and its principal bankers are primarily located in Frankfurt and Munich. Each of the Senvion directors resides in Germany, save for the chief executive officer who resides in Paris, France.

Recognition of the Formal Self-Administration Proceeding 10 The German insolvency statute permits self-administration, with the effect that the insolvent company remains in control of its own assets subject to the supervision of the monitor. The definition of "foreign representatives" under Article 2(d) of the Model Law is: …a person or body, including one appointed on an interim basis, authorized [sic] in a foreign proceeding to administer the reorganisation of the liquidation of the debtor's assets or affairs or to act as a representative of the foreign proceeding. 11 This definition is sufficiently broad in the case of a self-administration to allow for the recognition of the debtor company to be recognised as the foreign representative. See Moore, as Debtor-in-Possession of Australian Equity Investors v Australian Equity Investors [2012] FCA 1002; 11 ABC(NS) 20 at [7] and [12]; Board of Directors of Rizzo-Bottiglieri-De Carlini Armatori SpA as Debtor-in-Possession of Rizzo-Bottiglieri-De Carlini Armatori SpA v Rizzo-Bottiglieri-De Carlini Armatori SpA [2013] FCA 157 at [5]-[7]; Re Pacific Northstar Property Group LLC [2009] NZHC 965 at [7]; Re 19 Entertainment Ltd [2016] EWHC 1545 (Ch), [17]; and, Re Videology Ltd [2018] EWHC 2186 (Ch) at [17] and [21]. 12 On 1 July 2019 the Local Court at Hamburg ordered that the debtor (Senvion) is entitled, under the supervision of the custodian, to administer the insolvency assets and dispose of them pursuant to ss 270 to 285 of the German Insolvency Code. Those sections constitute Part VII of the German Insolvency Code which is headed "Debtor-in-Possession Management". Section 270(1) states: The debtor may manage and dispose of the assets involved in insolvency proceedings under the supervision of an insolvency monitor if the insolvency court orders such debtor-in-possession management. 13 Accordingly, Senvion as the debtor in possession is the proper plaintiff in this application for recognition. Paradoxically, it is also the proper defendant as r 15A.3(2)(b) of the Federal Court (Corporations) Rules 2000 (Cth) Div 15A requires the debtor to be the defendant. 14 Article 17 of the Model Law 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; and (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. 15 I am satisfied that the criteria for recognition of the Formal Self-Administration Proceeding have been met and accordingly it should be recognised as a foreign proceeding within the meaning of Article 17(2)(a) of the Model Law and that the Proceeding should be recognised as a foreign main proceeding within the meaning of Article 17(2)(b) of the Model Law. I am also satisfied that Senvion should be recognised as the foreign representative of the Formal Self-Administration Proceeding within the meaning of Article 2(d) of the Model Law. 16 I am satisfied of these matters upon the evidence deposed to by Dr Christian Wolf in affidavits in support of the application and the affidavits of Mr Thomas Maitland McMahon. 17 Subject to Article 6 of the Model Law, if the criteria specified in Article 17 are satisfied, the foreign proceeding must be recognised and, where applicable, recognised as a foreign main proceeding. Article 6 provides: Nothing in this Law prevents the court from refusing to take an action governed by this Law if the action would be manifestly contrary to the public policy of this State. There is no public policy reason preventing recognition of the proceeding.

Stay of Proceedings 18 Upon the grant of recognition of a foreign proceeding pursuant to Article 17, the commencement or continuation of individual actions concerning the debtor's assets, rights, obligations or liabilities are stayed to the extent determined by legislation in the local jurisdiction. Article 20(2) of the Model Law provides: The scope, and the modification or termination, of the stay and suspension referred to in paragraph 1 of this article are subject to [refer to any provisions of law of the enacting State relating to insolvency that apply to exceptions, limitations, modifications or termination in respect of the stay and suspension referred to in paragraph 1 of this article]. 19 Section 16 of the Act provides: For the purposes of paragraph 2 of Article 20 of the Model Law (as it has the force of law in Australia), the scope and the modification or termination of the stay or suspension referred to in paragraph 1 of that Article, are the same as would apply if the stay or suspension arose under: (a) the Bankruptcy Act 1966; or (b) Chapter 5 (other than Parts 5.2 and 5.4A) of the Corporations Act 2001; as the case requires. 20 The effect of s 16 of the Act is that upon recognition the stay of proceedings operates as if the stay arose under Chapter 5 of the Corporations Act. See Hur v Samsun Logix Corporation [2015] FCA 1154; (2015) 238 FCR 483 at [21]. 21 Senvion submitted that although the Formal Self-Administration regime involving the debtor-in-possession has no precise analogue under Australian insolvency law, it is most closely analogous to a voluntary administration. Accordingly, the plaintiff submits that the appropriate provisions to be applied in accordance with Article 20(2) are those under Part 5.3A of the Corporations Act. 22 In its written submissions, Senvion submitted that voluntary administration is the closest analogue to formal self-administration for the following reasons: Consistently with s 1 of the Insolvency Statute, the objective of the Formal Self-Administration proceeding is to serve the collective needs of Senvion's creditors by reaching an arrangement for an insolvency plan in order to maintain the enterprise if possible, or by liquidation if the plan fails. This objective reflects the objectives of administration proceedings under Part 5.3A described in s 435A of the Corporations Act. The essential structure of the Formal Self-Administration proceeding is demonstrated by the following provisions of the Insolvency Statute. Voluntary proceedings may be opened on written request by either the creditors or the debtor: s 13. Proceedings may be opened where a company is overindebted or insolvent, or insolvency is imminent: ss 16-19. The proceeding is commenced by order of an insolvency court and is supervised by the court: see e.g. ss 58 and 59. Upon the opening of the insolvency proceeding, creditors are only able to enforce their claims under the provisions governing insolvency proceedings: s 87. Creditors may not execute actions against the insolvency estate or debtor's other property during the insolvency proceeding: ss 89, 91. The 'insolvency estate' includes all of the assets owned by the debtor at the time the proceeding was opened and those assets acquired by the debtor during the proceeding: s 35. The estate is used to satisfy the well-founded claims held by creditors on the date the proceeding was opened: s 38. If the debtor transfers a part of the insolvency estate after the opening of the proceeding, that transfer is legally invalid: ss 81 and 91. An independent natural person experienced in business affairs is appointed as an 'insolvency administrator': s 56(1). Upon the opening of the proceeding the debtor's right to manage and transfer the estate is vested in the administrator and the administrator takes possession of all of the estate: ss 80 and 148. In self-administration proceedings, the debtor's assets and affairs remain within its own control: s 270, and the court appoints an 'insolvency monitor' rather than an administrator: ss 270a, 270c, 274. The insolvency administrator (or the debtor with the verification of the monitor: s 281) establishes a record of the insolvency estate and creditors, to be deposited with the insolvency court: ss 151-153. The administrator will report on the economic situation of the debtor at a 'report meeting': s 156. At the report meeting, the creditors' assembly decides whether the debtor's enterprise should be closed down or temporarily continued, or alternatively, the creditors' assembly may commission the administrator to establish an 'insolvency plan': s 157. The debtor (or, if commissioned by the report meeting, the administrator), may propose an insolvency plan to the court: s 218. An insolvency plan is an arrangement between the debtor and the creditors to avoid the liquidation of the debtor: ss 217. If the plan satisfies certain preconditions, the court dockets a meeting of creditors to discuss and vote on the plan: s 235. If the plan is approved by the meeting, it then requires approval of the court: s 248. The insolvency plan must preserve the pari passu distribution of the estate within each relevant class of creditors, unless all of the affected parties consent: s 226. The proceeding is terminated following finalisation of an insolvency plan: s 258. Unless the creditors' assembly resolved otherwise at the report meeting (ie no insolvency plan was adopted), the debtor's estate is liquidated and distributed following the report meeting: s 159. The final distribution of the estate requires the consent of the insolvency court, which is required to docket a meeting for the final creditors' assembly: ss 196(2) and 197. The proceeding is terminated following the final distribution: s 200. In conclusion, while they are not entirely coterminous, the goals and procedures of the Formal Self-Administration align more closely with voluntary administration than with any other form of external administration available under Australian law. It is therefore appropriate that the Court order that the stay under art 20(1)(a) operate as if it arose under Part 5.3A of the Corporations Act. 23 For the reasons advanced by Senvion I agree that a voluntary administration is the closest relevant analogue and accordingly a stay for the purposes of Article 20(2) should be the same as would apply if the stay or suspension arose under Part 5.3A of Chapter 5 of the Corporations Act. Further, as the Proceeding concerns a formal self-administration proceeding, it is appropriate that references in Part 5.3A of the Corporations Act to the company's administrator should be taken to be references to the consent of Senvion.

Scope of the Stay 24 The Pacific Hydro Entities contend that the scope of the stay arising under Article 20(1)(a) should be modified to exclude from its operation the Supreme Court Proceeding. Alternatively, they seek leave to continue the Supreme Court Proceeding pursuant to s 440D(1) of the Corporations Act. Senvion submits that there is no power to modify the scope of the stay and that the correct procedure is for the Pacific Hydro Entities to seek leave to proceed, as they have in the alternative, pursuant to s 440D. 25 The Pacific Hydro Entities submit that in circumstances where leave to proceed would be granted under s 440D an order limiting the scope of, or modifying, the stay under Article 20(1)(a) can and should be made. The Pacific Hydro Entities contend that there is a correlation, indeed an equivalence, between the underlying grounds for modifying a stay pursuant to Article 20(1)(a) and granting leave to proceed under s 440D. 26 The question of whether the Pacific Hydro Entities should be permitted to proceed with the Supreme Court Proceeding as a result of a modification of the stay, or by giving leave to proceed under s 440D, is in my opinion academic, notwithstanding the Pacific Hydro Entities contention that there may be substantive juridical differences between a modified stay excluding the Supreme Court Proceeding on one hand, and leave to proceed with the Supreme Court Proceeding under s 440D on the other. The Pacific Hydro Entities were not able to say what particular juridical differences might arise in respect of their interests if the stay arising pursuant to Article 20(2)(a) was not modified to exclude the Supreme Court Proceeding but rather leave was given pursuant to s 440D to continue the Supreme Court Proceeding. In this regard, it should be noted that Senvion does not dispute that leave may be granted pursuant to s 440D. Notwithstanding the practical inutility in this case of the question of whether the scope of the stay may be modified, it is appropriate that I should determine this question, as relief on this basis was pressed. 27 The Pacific Hydro Entities contend that the Court has power to modify the scope of the stay pursuant to Article 20(2) of the Model Law. I do not agree. Article 20(2) must be read together with s 16 of the Act. That section is the legislative embodiment of the enacting state contemplated by Article 20(2). Once recognition has been granted, the task of the Court is to identify the relevant parts of the Corporations Act or Bankruptcy Act 1966 (Cth), as the case may be, to be deemed to apply for the purposes of Article 20(2). The stay under Article 20(2) arises as a consequence of the recognition of the foreign proceeding by operation of law, subject to the evaluative judgment concerning which of the specified provisions of the Corporations Act or Bankruptcy Act should be applied. See Akers v Deputy Commission of Taxation [2014] FCAFC 57; 223 FCR 8; 311 ALR 167; 32 ACLC 14-028; 100 ACSR 287; 142 ALD 451; 9 BFRA 276 at [55]; Tai-Soo Suk v Hanjin Shipping Co Ltd [2016] FCA 1404 at [45]. In Tai-Soo Suk Jagot J at [45] said: …in determining what the "case requires" under article 20 of the Model Law (read subject to s 16 of the [Act]) the relevant exercise is evaluative, but not discretionary. 28 Respectfully, her Honour's characterisation of the relationship between Article 20(2) and s 16 is plainly correct and it is congruent with what was said by Allsop CJ, with whom Robertson and Griffiths JJ agreed, in Akers at [60]: It is important to note that Art 22 does not provide for the amelioration of the legal effect of recognition in Art 20. Such, if it is to occur, comes from the results of an application under the laws picked up by Art 20.2 and s 16 of the CBI Act. 29 The court is not given a discretionary power under s 16 of the Act to make bespoke modifications to the stay arising by operation of law upon recognition of the foreign proceeding and accordingly cannot exclude a particular proceeding or proceedings from the effect of the stay. As Allsop CJ said in Akers, the amelioration, "if it is to occur, comes from the results of an application under the laws picked up by Art 20.2 and s 16 of the [Act]". Relevantly here, those laws include s 440D of the Corporations Act and that is the proper source of power for the amelioration of the effect of the stay arising upon recognition of the Proceeding under Article 20 and s 16 of the Act. 30 I turn now to the alternative application by the Pacific Hydro Entities for leave to continue the Supreme Court Proceeding pursuant to s 440D of the Corporations Act.

Leave to proceed under s 440D of the Corporations Act

Background Facts regarding the Pacific Hydro Entities' application for leave to proceed under s 440D and scope of the Supreme Court Proceeding 31 The Pacific Hydro Entities are owners of three wind farms constructed by Senvion and in respect of which Senvion is the operations and maintenance contractor pursuant to certain Maintenance Agreements. The Maintenance Agreements remain on foot. However, for reasons referred to below the Maintenance Agreements are not presently enforceable. 32 In the Supreme Court Proceeding the Pacific Hydro Entities seek a mandatory injunction for the delivery up by Senvion of "Access Devices" (as defined below) required for the operation and maintenance of wind farms. The Pacific Hydro Entities contend that Senvion is obliged to provide the Access Devices to them upon request but has failed or refused to do so. The relevant clause of each Maintenance Agreement provides: The Supplier must provide to the Principal, as soon as practicable following the Principal's request, and on the termination of this Maintenance Agreement, all keys, passwords, usernames, access codes and similar access devices to all systems to which access is required or used to provide the Maintenance Services (including, without limitation, physical locks, hardware, firmware and software) (collectively 'Access Devices'). The Supplier must not change any Access Device without the Principal's prior consent (not to be unreasonably withheld). Following any change to an Access Device the Supplier must provide the Principal with an updated version of the Access Device (whether that is a physical key, a password or any other type of device). (Clause 26(c)). 33 Senvion contends that clause 26(c) creates an obligation to provide the Access Devices to the Pacific Hydro Entities only upon termination of the relevant Maintenance Agreement and not before. It was common ground that the Maintenance Agreements have not been terminated, notwithstanding formal notice being given by Senvion that it is unable to continue to perform the Maintenance Agreements. 34 A further controversy between the Pacific Hydro Entities and Senvion in the Supreme Court Proceeding concerns the definition of "Access Devices", in particular, whether source code underlying the software used for monitoring and managing the wind turbines remotely falls within the scope of the definition. In correspondence the Pacific Hydro Entities sought clarification from Senvion of its view as to the scope of material covered by the definition of Access Devices, but to date Senvion has not stated with any precision what material it considers to come within the meaning of the definition. Rather, in the course of submissions, Senvion contended that certain material, for example source codes for the relevant software, is not covered by the definition of Access Devices. 35 The Supreme Court Proceeding was commenced on an urgent basis on 28 June 2019, prior to the order made in the Amtsgericht Hamburg, Germany on 1 July 2019 referred to above. On 1 July 2019, the Honourable Justice Riordan made orders referring the proceeding to mediation before a Judicial Registrar of the Supreme Court and adjourned the hearing of the Pacific Hydro Entities' application for interlocutory relief until 9 July 2019. 36 On 4 July 2019, the Originating Process in this proceeding was filed. On 5 July 2019, the Honourable Justice Lee made interlocutory orders pursuant to Article 19 of the Model Law, the effect of which was to allow the continuation of the Supreme Court Proceeding until the determination of the present application for recognition, and such further application as may be made by the Pacific Hydro Entities permitting the continuation of the Supreme Court Proceeding in the event that the Supreme Court Proceeding was recognised as a foreign proceeding pursuant to the Act and Model Law. 37 Interim Arrangements have been agreed between the Pacific Hydro Entities and Senvion to ensure that certain of the Access Devices are retained in safe keeping by Senvion. The Interim Arrangements permit an independent third party nominated by the Pacific Hydro Entities to have access to inspect those Devices (defined in the Interim Arrangements as the Retained Items). The Interim Arrangements were initially to continue until 10 September 2019 but have been extended until 15 November 2019.

Recent developments in relation to the insolvency plan 38 On 19 September 2019, Senvion wrote separately to each of the Pacific Hydro Entities giving notice of its decision pursuant to s 103 of the German Insolvency Code. The letters were in identical terms save for the description of the Pacific Hydro entity concerned. Relevantly, the letter stated: Senvion GmbH's right of choice Section 103 of the Code sets out the insolvency administrator's right of choice to perform or to refuse to perform contracts between Senvion GmbH and another party or parties. Under self-administration, the debtor-in-possession (being Senvion GmbH) takes the place of the insolvency administrator and shall exercise the rights under section 103 of the Code, acting in agreement with the court-appointed custodian (sec. 279 of the Code). As a result of the inquiries and requests received to date, and to provide you with greater clarity, it is important that Senvion GmbH confirms its position under Section 103 of the Code in relation to the Contract. Under the Exclusivity Agreement, Senvion GmbH intends to sell and transfer the service business in Australia to Siemens Gamesa, and negotiations regarding the transaction structure are still ongoing. As Senvion GmbH intends to sell the core of its service business first (being Europe and its intellectual property), the insolvency estate of Senvion GmbH cannot, on its own, commit to providing services in Australia on a sustained basis. For these reasons, Senvion GmbH is unable to choose performance of the Contract. In light of the above, and pursuant to sections 103 (2) and 279 of the Code, Senvion GmbH hereby gives notice that it refuses to perform the Contract. Importantly, Senvion GmbH offers to provide an interim services arrangement (detailed below) to allow continuity of operation and maintenance services at your wind farm until the sale process of the Australian service business concludes. Interim Services Agreement As noted above, and whilst the sale process with Siemens Gamesa continues, Senvion GmbH offers to provide operation and maintenance services at your wind farm on the terms and conditions contained in Attachment 1 to this letter. Any interim arrangement will need to be agreed and in place prior to 11 October 2019. You will receive a meeting request from representatives of Senvion GmbH's local subsidiary (Senvion Australia) to discuss the interim services arrangement and any queries you have regarding this letter. Senvion GmbH otherwise confirms that it is willing to continue the without prejudice discussions to resolve the Principal's concerns regarding the Access Devices. (emphasis in original) 39 I shall refer below to some of the terms of the proposed Interim Services Agreement. 40 Dr Christian Wolf is the principal deponent on behalf of Senvion for the purposes of Senvion's application for recognition of the Proceeding. Dr Wolf is a German lawyer and partner of GORG Partnerschaft von Rechtsanwälten mbB. He, together with a fellow partner Dr Christian Bärenz, has the day to day carriage of the Proceeding on behalf of Senvion as it relates to assets and undertakings in Australia. In his sixth affidavit filed in this proceeding on 4 October 2019, Dr Wolf deposes at [10]-[11]: Section 103(1) (read together with s 279 of the Code) sets out a debtor in possession's right of choice to perform or to refuse to perform certain contracts. Section 103(2) requires a debtor who has received a request to exercise the right under s 103 to declare 'without delay' whether or not it will demand performance of the contract. As a consequence of the opening of formal insolvency proceedings in Germany (including self-administration proceedings), bilateral contracts which are not completely fulfilled by both parties become "preliminarily unenforceable" (einstweilen undurchsetzbar). If the debtor-in-possession executes its right to refuse to perform the contract, the rights and obligations under the contract become "finally unenforceable" (endgultig undurchsetzbar). This does not mean that the contract ceases to exist, as it would be the case after a termination. The contract remains in place, but neither party can demand fulfilment of the contractual obligations (including any post-termination obligations). (emphasis added) 41 The Pacific Hydro Entities and Senvion filed evidence concerning the content and effect of German insolvency law. Both objected on various grounds to many parts of the relevant affidavits and expert reports filed by the other concerning German Insolvency law being admitted as evidence of fact as to the content and effect of the German insolvency law. It is unnecessary for me to determine any dispute as to the content or effect of German insolvency law for the purpose of the applications before me. Accordingly, evidence on this subject was admitted as evidence relevant to the scope of the dispute in the Supreme Court Proceeding, or as evidence of the belief of the deponent concerning the content or effect of German insolvency law. The paragraphs of Dr Wolf's sixth affidavit referred to above were admitted as evidence of Dr Wolf's belief concerning the content and effect of ss 103(1) and 279 of the German Insolvency Code. 42 If Dr Wolf's belief as to the effect of s 103 of the German Insolvency Code is found in the Supreme Court Proceeding to correctly correspond with the content and effect of the relevant German insolvency law, further questions may arise as to the enforceability in Germany of any order that may be made in the Supreme Court Proceeding for the delivery up of the Access Devices. There may also be other questions which then arise concerning the effect of the German Insolvency Code upon the enforceability of the Maintenance Agreements. These questions may be affected by what, if any, steps the Pacific Hydro Entities take in relation to their rights under the Maintenance Agreements in response to the letter of 19 September referred to above. The effect of German law may also be affected by the extent to which Victorian and/or Australian law governs the rights of the Pacific Hydro Entities. There may be a number of other conflicts of law questions in connection with the Supreme Court Proceeding, and these questions in turn may depend upon the scope of the relief ultimately sought by the Pacific Hydro Entities and the place where enforcement of any orders of the Supreme Court may be required. Senvion submitted that there were a number of such questions that would arise if the Supreme Court Proceeding were permitted to proceed. It is unnecessary for me to express any view concerning these questions for the purposes of deciding whether leave should be given to the Pacific Hydro Entities pursuant to s 440D to continue with the Supreme Court Proceeding. 43 The corollary of the recognition of a foreign proceeding pursuant to Article 20 of the Model Law is, as Allsop CJ succinctly stated in Akers (at [60]), "if it [amelioration] is to occur, [it] comes from the results of an application under the laws picked up by Art 20.2 and s 16 of the [Act]." The question of whether leave should be given must therefore fall to be determined in accordance with the proper exercise of the discretion conferred by s 440D, to which I shall refer below. It is conceivable that in some cases potential conflicts of laws questions arising in the context of cross-border insolvency may be relevant, at least in a collateral way, to the question of whether leave should be given to institute or continue a proceeding. Such questions may have a bearing upon the potential for a proceeding in Australia to disrupt the orderly conduct of the foreign insolvency proceeding and thereby impinge upon the objective of Chapter 5 of the Corporations Act, that Part being the local analogue to the foreign insolvency regime. In this case, for reasons I shall refer to below, such considerations do not outweigh the disadvantage that may be suffered by the Pacific Hydro Entities if they were not permitted to continue the Supreme Court Proceeding. 44 Returning to the proposed Interim Service Agreement referred in the letter of 19 September 2019, Dr Wolf further deposed in his sixth affidavit at [20]-[22]: As a part of the insolvency plan, Senvion intends to sell the core of its service business to Siemens. Relevantly for Australian customers of Senvion, it is anticipated that the following actions will be taken to implement the insolvency plan: (a) Senvion GmbH is going to transfer to its subsidiary, Senvion Deutschland GmbH (Senvion Deutschland), inter alia, Senvion's turbine control centre in Osterrönfeld, Germany (TCC) together with certain personnel and intellectual property; (b) Siemens is going to purchase Senvion Deutschland GmbH in late November or early December; (c) Upon the transfer in control of the TCC, intellectual property and personnel to Siemens, a transitional services agreement between Senvion GmbH and Senvion Deutschland (the latter then being a subsidiary of Siemens) will come into effect. The transitional services agreement will enable Senvion GmbH to meet its contractual obligations pursuant to any interim services agreements it enters with Australian customers following Senvion's determination that it would not affirm the O&M Agreements pursuant to s 103 of the Code; and (d) During the term of the interim services agreements, it will be open to Senvion GmbH's customers in Australia to: (i) negotiate a new operation and maintenance agreement with Siemens; or (ii) negotiate with Senvion GmbH to develop an operating package which would enable the customer to independently control their wind farm; or (iii) make alternative arrangements for the operation and maintenance of their wind farm. Pursuant to the above: (a) the TCC at Osterronfeld is presently operational and will continue to operate; and (b) Senvion GmbH has, and will have for at least the term of the interim services agreements, the capacity to fulfil its obligations pursuant to those interim services agreements. With respect to Siemens' prospective operations in Australia, I understand that Siemens has begun to contact Senvion's current customers in Australia to negotiate operation and maintenance agreements with those customers. I am not aware if Siemens has contacted Pacific Hydro. (emphasis added) 45 The Interim Services Agreement term sheet attached to Dr Wolf's sixth affidavit contained, among others, the following proposed terms: XV. Transition Support (1) Where the Customer does not conclude an agreement with the purchaser of Senvion's Australian assets for the operation and maintenance of the Wind Farm, the Customer may request that Senvion provides (on terms to be agreed) transition services that allow the Customer (or its nominee) to operate and maintain the Wind Farm independently from Senvion's systems, processes and monitoring. (2) Where the Customer does not conclude an agreement with the purchaser of Senvion's Australian assets for the operation and maintenance of the Wind Farm, Senvion will not prevent the field technicians employed on the Wind Farm from ceasing their employment with Senvion (or its subsidiary) and commencing employment with the Customer or its nominated customer. (3) Subject to sect. (2) above, the Customer must not (and must ensure that its employees, officers, agents, contractors or other representatives do not): a) induce, encourage or solicit any of Senvion's (or its subsidiaries') employees, contractors or agents at the Wind Farm, to leave Senvion (or its subsidiaries') employment or agency or to cease providing services to Senvion (or its subsidiaries); b) approach, contact or otherwise engage with the service technicians employed by Senvion (or its subsidiaries') at the Wind Farm for the purposes of discussing or offering them any form of conditional or unconditional employment or contractual arrangement in relation to the Wind Farm; or c) otherwise interfere with, disrupt or attempt to disrupt, the employment of Senvion (or its subsidiaries') service technicians employed at the Wind Farm. 46 Senvion submitted that the combination of Interim Arrangements with respect to the Retained Items and the proposed Interim Service Agreement ameliorated any disadvantage that might otherwise be suffered by the Pacific Hydro Entities if leave were not given to continue the Supreme Court Proceeding. I shall refer to this contention further below, together with other circumstances and factors relevant in this case to whether leave should be given to continue the Supreme Court Proceeding.

Factors relevant to the exercise of discretion under section 440D 47 The discretion conferred under s 440D is broad but must be exercised with the object of Part 5.3A of the Corporations Act in mind. In Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd [2011] NSWSC 1305; 285 ALR 207 Hammerschlag J at [37]-[39] said: The policy underlying Pt 5.3A, as evinced by s 435A, is to maximise the chances of the beleaguered company staying alive. The stay of proceedings imposed by s 440D may facilitate the achievement of this object, amongst others, by (a) affording the administrator time to assess and report on the company without the distraction of the proceedings; (b) putting a brake on legal and associated costs; (c) allowing time for the development of proposals which might preserve the value of the company as a going concern; (d) giving the creditors time to consider their position for the purposes of the creditors' meeting; and (e) in appropriate circumstances, preventing a creditor from obtaining some advantage over other creditors or potential creditors. Whilst the discretion under s 440D must be exercised with the objects of the Part in mind, it remains one at large. A stay is the starting point. There must be circumstances which warrant its displacement. (emphasis added) 48 In Hopkins v AECOM Australia Pty Ltd & Ors [2012] FCA 1204; 91 ACSR 391 Nicholas J adopted some factors, or indicia, that might commonly be considered in the exercise of the discretion under s 440D, which had been helpfully distilled from earlier authorities by Tobias JA (with whom Beazley and Giles JJA agreed) in Attard v James Legal Pty Ltd [2010] NSWCA 311; 80 ACSR 585. Justice Nicholas stated at [20]: In Attard v James Legal Pty Ltd [2010] NSWCA 311 the New South Wales Court of Appeal identified a number of factors relevant to the question of whether leave to proceed should be granted under s 440D. In that case Tobias JA (with whom Beazley and Giles JJA agreed) said (at para [146]-[147]): [146] More recently, Rein AJ (as his Honour then was) summarised in J F Keir Pty Ltd v Priority Management Systems Pty Ltd (admin apptd) [2007] NSWSC 748 at [8] the factors to be taken into account in respect of an application for leave under s 444E(3): • whether the claim has a solid foundation and gives rise to a serious dispute: Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550; • whether the administrator would be unreasonably distracted from his or her statutory duties and be obliged unnecessarily to incur substantial legal costs: Foxcroft v Ink Group Pty Ltd (1994) 12 ACLC 1063; J & B Records v Brashs Pty Ltd (1994) 12 ACLC 534; Pioneer Water Tanks (Aust 94) Pty Ltd v Delat Pty Ltd (1998) 16 ACLC 36; Slater v Global Finance Group Pty Ltd (1999) 150 FLR 264; • whether the company is insured against the liability that is the subject of the proceedings: Foxcroft v The Ink Group Pty Ltd (1994) 12 ACLC 1063; • who appointed the administrator: Wallabah Pty Ltd v Navillo Pty Ltd (1997) 15 ACLC 396; • whether the applicant will suffer any disadvantage if leave is not granted: J & B Records v Brashs Pty Ltd (1994) 12 ACLC 534; Wallabah Pty Ltd v Navillo Pty Ltd (1997) 15 ACLC 396; • whether there are good reasons for allowing a creditor to depart from the general intention of Pt 5.3A, which is that a creditor ought not be able to take action against the company in such circumstances: Foxcroft v The Ink Group Pty Ltd (1994) 12 ACLC 1063; Re Grenadier Constructions No 2 Pty Ltd (1994) 12 ACLC 460. [147] To these factors may be added the following: • who is applying for leave: Wallabah Pty Ltd v Navillo Pty Ltd (1997) 15 ACLC 396; BBC Hardware Ltd v GT Homes Pty Ltd [1997] 2 Qd R 123; • what funds the company has available to defend against litigation: Wallabah Pty Ltd v Navillo Pty Ltd (1997) 15 ACLC 396. 49 In Wallabah Pty Ltd v Navillo Pty Ltd [1997] FCA 142; 15 ACLC 396; 23 ACSR 444 Olney J at 446 said: Each of ss 440D and 440J gives the Court a discretion which it is required to exercise judicially and upon the merits of each individual case. In so doing the Court must have regard to the general legislative policy of the statute and to the specific provisions of the sections under consideration. Each case will of course have to be determined upon its own facts. (emphasis added) 50 While the identification from earlier authorities of factors that are relevant to the discretion is of assistance when considering the exercise of the discretion in a particular case, I respectfully agree with what was said by Olney J referred to above, namely that each case will have to be determined on its own facts. I should add that I do not regard what was said by Tobias JA in Attard as suggesting the contrary. Judges and lawyers alike benefit from the industry of judges, like Tobias JA, who make the effort to distil from the normal distribution of myriad facts and circumstances some common or recurring themes and factors relevant to the exercise of a discretionary power. But it would be wrong to seize upon a particular verbal formulation used by the judge as if it were intended, much less had the effect, of constraining the proper judicial exercise of the discretion in a later case. Senvion submitted that the consideration of disadvantage to the applicant must be shown by the applicant (whatever disadvantage it might be) to be disadvantage it will suffer. I disagree. Although Tobias JA expressed this factor literally in terms that the applicant "will" suffer a disadvantage, his Honour's discussion of commonly accepted criteria should not in my opinion be construed as suggesting that the applicant must establish such disadvantage to any particular degree of likelihood. Indeed, such a construction would be contrary to the first factor identified in Attard, namely that the proceeding has a "solid foundation". 51 The extent to which the litigation in question will disrupt, cause inconvenience, cost or delay to the work of the administrator or liquidator, or in this case the process of reconstruction pursuant to the debtor-in-possession regime applicable under German Insolvency Code, will necessarily be an important factor having regard to the object of Part 5.3A referred to above. In many cases, several of the established factors identified in Attard will assist in informing the exercise of the discretion. But depending upon the facts of the particular case, some will be demonstrably more significant than others and some may not apply at all. 52 In the present case there are two factors of particular weight to the exercise of the discretion under s 440D. The first is the nature of the claim by the Pacific Hydro Entities in the Supreme Court Proceeding. The second is the peculiar vulnerability of the Pacific Hydro Entities to Senvion in the day to day operations of their wind farms. 53 Turning to the first of the above factors, in paragraph 28 of their written submissions as to final relief, the Pacific Hydro Entities submitted that: The Pacific Hydro Entities seek to enforce a contractual right that is of a proprietary, or at least an "essentially proprietary", nature. The Access Devices are a part of - and are necessary for the Pacific Hydro Entities' use and enjoyment of - their property constituting the wind farms. … (emphasis in original) 54 The Supreme Court Proceeding was instituted by Originating motion. Senvion submitted that the bases for the claim to a proprietary interest in the Access Devices has not been clearly formulated. There is force in that submission. However, in my view there is sufficient foundation for the claim to a proprietary interest to give rise to a serious dispute as to this question. If the Pacific Hydro Entities were successful in their claim to having a proprietary interest in the Access Devices, the likely result is that property in the Access Devices would fall outside of the Senvion's property and the Pacific Hydro Entities' claim for recovery of them would not offend the object of Part 5.3A. In Beconwood Securities Pty Ltd v Australia and New Zealand Banking Group Limited [2009] FCA 131 at [7] Finkelstein J said: …where the plaintiff is claiming his own property from a company in liquidation, leave to proceed is granted as a matter of course. 55 In my view, notwithstanding the presently imprecise formulation of their claim to a proprietary interest, the Pacific Hydro Entities should be allowed to advance their proprietary claims. 56 I turn now to the second principal factor, namely the likely hardship that may be suffered by the Pacific Hydro Entities if they were prevented from continuing the Supreme Court Proceeding. As I have said above, the Pacific Hydro Entities are peculiarly vulnerable in the day to day operations of their businesses to Senvion. This vulnerability arises fundamentally from the fact that Senvion alone is in possession of the Access Devices necessary to remotely monitor and, if need be, restart the wind turbines. The practical consequences for the Pacific Hydro Entities arising from its dependence upon Senvion are explained in an affidavit of Mr Cesar Eduardo Salvatierra Seguel affirmed on 19 August 2019. Mr Seguel is the Executive Manager, Operations of Pacific Hydro Pty Ltd. He deposes that there are 127 wind turbines spread across the wind farms, comprising of 39 turbines at the Crowlands Wind Farm, 74 turbines associated with the Portland Wind Energy Project situated at Cape Bridgewater, Cape Nelson South, Cape Sir William Grant and Cape Nelson, and 14 wind turbines associated with the Yaloak South Wind Farm. 57 Mr Seguel deposes that a number of requests have been made for the Access Devices but those requests have not been responded to. 58 In paragraph 27 of his affidavit, Mr Seguel says: In the most extreme case, if there were to be an external event which caused or required a shutdown of an entire Wind Farm, and the Pacific Hydro Entities did not have access to the passwords, the entire Wind Farm would remain non-operational indefinitely, unless and until the passwords could be obtained. 59 The Pacific Hydro Entities claim that the passwords are within the definition of Access Devices in the Maintenance Agreements. The definition of Access Devices referred to in clause 26(c) extracted in paragraph [32] above refers to such keys, passwords, user names, access codes and similar access devices required or used to provide Maintenance Services. Maintenance Services are defined in clause 1 of the Maintenance Agreements as: Maintenance Services means: (a) Scheduled Maintenance of the Assets; (b) all Remedial Maintenance of the Assets; (c) remote 24/7 monitoring of the Assets; and (d) the performance of all Assets operations required in order for the Supplier to perform the Scheduled Maintenance and Remedial Maintenance of the Assets (including, but not limited to, starting, stopping and resetting Wind Turbines both at Site and remotely), each in accordance with and as further set out in the terms of this Maintenance Agreement. 60 The Pacific Hydro Entities claim that they are entitled to delivery up of the Access Devices as defined reading clause 26(c) together with the definition of Maintenance Services. Even if the claim to a proprietary interest in the Access Devices was to be characterised as a weak claim, about which I express no view, there is plainly a serious question concerning the Pacific Hydro Entities' contractual entitlements under the Maintenance Agreements. The dependence of the Pacific Hydro Entities' upon Senvion, in my view alone warrants the grant of leave to proceed under s 440D. 61 The vulnerability of the Pacific Hydro Entities to Senvion is not practically ameliorated by the Interim Arrangements in respect of the Retained Items, save only for the purpose of preserving the status quo for the interim period. The proposed Interim Service Agreement also does not ameliorate the Pacific Hydro Entities' vulnerability to Senvion. My conclusion in this regard is fortified by the fact that Senvion has elected pursuant to s 103 of the German Insolvency Code not to perform its obligations under and pursuant to the Maintenance Agreements. Presently, notwithstanding Senvion's election not to perform the Maintenance Agreements, it has indicated a willingness to provide what it claims to be like services under the proposed Interim Services Agreements. The Pacific Hydro Entities have not accepted the offer to enter into the Interim Services Agreements and in submissions expressed dissatisfaction with some of their terms. It is unnecessary to compare the proposed Interim Services Agreements' terms with the terms of the Maintenance Agreements, as the latter are concluded and binding agreements, albeit that they are not presently enforceable under German Law according to Dr Wolf's opinion. Senvion's offer to enter into Interim Services Agreements begs the question in issue in the Supreme Court Proceeding, namely, whether the Pacific Hydro Entities' claims for delivery up of the Access Devices should be accepted. 62 Further, negotiations for the sale of Senvion's business in Australia to a third party are currently ongoing. In the absence of the continuation of the Supreme Court Proceeding, being the process by which the Pacific Hydro Entities may either vindicate their claims to a proprietary interest in the Access Devices or enforceable contractual rights to them, it is self-evident that the bargaining position of the Pacific Hydro Entities would be severely weakened in relation to any negotiations with Senvion concerning any Interim Services Agreements, as well as any negotiations with a third party purchaser concerning the terms of any new maintenance agreements. Indeed, if the Supreme Court Proceeding were not permitted to continue, having regard to the critical significance of the Access Devices to the day to day operations of the wind farms, it is conceivable that the Pacific Hydro Entities would be left in a position of having no practical choice but to agree to terms put to them by Senvion, or by a prospective purchaser of the relevant Senvion business, or else suffer the risk that the operation of the wind farms may be interrupted without the ability to restart the turbines. 63 There were other factors in relation to potential disadvantage raised by the Pacific Hydro Entities. They contended that they would potentially be unable to comply with reporting and regulatory requirements if the Maintenance Services currently performed by Senvion were not continued and they were not in a position themselves to perform those activities or contract with others to do so. In view of the conclusions I have reached concerning the clear disadvantage that may be suffered if leave is not given to continue with the Supreme Court Proceeding, it is unnecessary for me to say anything more about that or other aspects of potential disadvantage to the Pacific Hydro Entities if leave were not given to continue the Supreme Court Proceeding.

disposition 64 For the reasons given above, it is appropriate to recognise the Proceeding as a Foreign Proceeding and Foreign Main Proceeding, and to make consequential orders and to give leave to the Pacific Hydro Entities to continue the Supreme Court Proceeding. 65 I will hear the parties on the question of costs. I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Anastassiou.

Cross Border Insolvency Act 2008(Cth)

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