Appleyard, in the matter of Crawford Farms Limited v Crawford Farms Limited

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 466 of 2012

In the matter of crawford farms limited (administrators appointed) united kingdom company number 03451799 BETWEEN: ANDREW APPLEYARD AND CHRISTOPHER RATTEN IN THEIR CAPACITY AS THE FOREIGN REPRESENTATIVES OF CRAWFORD FARMS LIMITED (ADMINISTRATORS APPOINTED) UNITED KINGDOM COMPANY NUMBER 03451799

AND: CRAWFORD FARMS LIMITED (ADMINISTRATORS APPOINTED) UNITED KINGDOM COMPANY NUMBER 03451799

JUDGE: NORTH J DATE: 8 NOVEMBER 2012 PLACE: MELBOURNE

BACKGROUND 1 Crawford Farms Limited (Administrators appointed) United Kingdom Company Number 03451799, the defendant, is a company incorporated in the United Kingdom (the Company). Andrew Appleyard and Christopher Ratten, the plaintiffs, have been appointed by the High Court of Justice of England and Wales (UK Proceeding) as administrators of the Company. The plaintiffs apply to the Court for orders under the Cross-Border Insolvency Act 2008 (Cth) (the Act) in general terms to have the UK Proceeding recognised as a foreign proceeding for the purposes of the Model Law on Cross-Border Insolvency (Model Law) as set out in Schedule 1 of the Act. The plaintiffs also seek to have Neil Raymond Cribb appointed as an Australian representative of the Company and to give Mr Cribb powers to administer the Company's assets in Australia. 2 The evidence in support of the application is contained in four affidavits, one sworn by Andrew Appleyard on 23 May 2012; two sworn by the solicitor for the plaintiffs, Georgina Elizabeth Coleman, one on 31 August 2012 and one on 7 November 2012; and one by Brendon Robert Watkins, a partner in the firm of solicitors acting on behalf of the plaintiffs, sworn on 12 October 2012. 3 The Company holds a one-third interest in a farming property that is approximately 4,500 acres in York in Western Australia known as Malebelling Farm. The evidence establishes that Ian Malcolm Crawford is the director of the Company. Mr Crawford also holds the remaining two-thirds interest in Malebelling Farm and lives on the property. 4 The plaintiffs were appointed as administrators by the Royal Bank of Scotland plc (RBS) under a charge which it holds over the assets of the Company. In the administration, RBS claim ₤227,342.45 secured by the charge. Further, the Australia and New Zealand Banking Group Limited (ANZ) holds a mortgage over Malebelling Farm which secures repayment of approximately $AUD 4 million pursuant to a guarantee provided to ANZ.

RECOGNITION OF FOREIGN PROCEEDING AND RELIEF 5 Articles 15, 16, 17, 20 and 21 are relevant to the present application. 6 Article 15(1) provides that a foreign representative may apply to this Court for recognition of the foreign proceeding. Foreign proceeding and foreign representative are respectively defined by Art 2(a) and Art 2(d) of the Model Law as follows: Definitions For the purposes of the present Law: (a) "Foreign proceeding" means a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganization or liquidation; (d) "Foreign representative" means a person or body, including one appointed on an interim basis, authorized in a foreign proceeding to administer the reorganization or the liquidation of the debtor's assets or affairs or to act as a representative of the foreign proceeding; 7 The UK Proceeding is a foreign proceeding within the definition of Art 2(a) and the plaintiffs are a foreign representative as defined by Art 2(d) of the Model Law. The plaintiffs are therefore entitled to bring an application for recognition of the UK Proceeding as required by Art 15(1). 8 Article 15(2)(a) requires that an application for recognition shall be accompanied by a certified copy of the decision commencing the foreign proceeding and appointing the foreign representative. The evidence establishes that the foreign proceeding has been commenced and the foreign representative has been appointed, as required by Art 15(2)(a). 9 Article 15(3) provides that an application for recognition of a foreign proceeding must be accompanied by a statement identifying all foreign proceedings in respect of the debtor that are known to the foreign representative. The evidence establishes that there are no foreign proceedings, within the meaning of Art 2(a), against the Company which are known to the plaintiffs. 10 Article 17(1) then provides that a foreign proceeding shall be recognised if the following requirements are met: 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. 11 The UK Proceeding is a foreign proceeding, within the definition of Art 2(a) and the plaintiffs are foreign representatives within the meaning of Art 2(d). The requirement of proof of the facts as required by Art 15(2) has been established. Article 17(1)(d) requires that the application be submitted to a court referred to in Art 4. Article 4 of the Model Law provides that the local enacting act must specify the court or courts which are competent to perform the functions relating to recognition of foreign proceedings. The relevant courts are specified in the Act. Section 10 of the Act includes this Court as a relevant holder of jurisdiction. 12 The Model Law draws a distinction between a foreign main proceeding and a foreign non-main proceeding in Art 17(2) as follows: 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 [Emphasis added] (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. [Emphasis added] 13 The consequence of this distinction is that under Art 20(1), upon recognition of a foreign proceeding that is a foreign main proceeding, certain orders or certain consequences flow automatically. Article 20(1) provides: Article 20 Effects of recognition of a foreign main proceeding 1. Upon recognition of a foreign proceeding that is a foreign main proceeding: (a) Commencement or continuation of individual actions or individual proceedings concerning the debtor's assets, rights, obligations or liabilities is stayed; (b) Execution against the debtor's assets is stayed; (c) The right to transfer, encumber or otherwise dispose of any assets of the debtor is suspended. 14 If the proceeding is a foreign non-main proceeding, then the orders which might be made, which are similar to those under Art 20, are at the discretion of the Court. 15 A foreign main proceeding is one which takes place where the debtor has the centre of its main interests (Art 17(2)(a)). The evidence in the present case is that the Company is incorporated in the UK and has its registered office in the UK. Article 16(3) provides that, in the absence of proof to the contrary, the company's registered office is presumed to be the centre of its main interests. Mr Bigos, who appeared as counsel on behalf of the plaintiffs, also drew attention to the fact that the Company has accountants in the UK. On the other hand, the evidence shows that the primary asset of the Company is Malebelling Farm in Western Australia. Mr Crawford, who is the director of the Company, lives on the farm and, it appears, has operated it. Thus, the centre of the Company's main interests is in Western Australia, where this significant asset of the Company is and where its business is conducted. Consequently, the foreign proceeding is a foreign non-main proceeding, within the meaning of Art 17(2)(b). 16 The question then arises what orders should be made in these circumstances. Mr Bigos pressed for the automatic orders under Art 20(1). However, as the UK Proceeding is not a foreign main proceeding, the orders are not available automatically. Rather, orders are available under Art 21, at the discretion of the Court, including Art 21(a), (b) and (c) as follows: Article 21 Relief that may be granted upon recognition of a foreign proceeding 1. 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: (a) Staying the commencement or continuation of individual actions or individual proceedings concerning the debtor's assets, rights, obligations or liabilities, to the extent they have not been stayed under paragraph 1 (a) of article 20; (b) Staying execution against the debtor's assets to the extent it has not been stayed under paragraph 1 (b) of article 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 article 20; 17 These orders would create a moratorium on dealings with the assets of the company subject to the administration. They provide for a stay on individual proceedings against a debtor's assets, a stay on execution and a suspension of the right in effect to deal with the assets. Other than the claim in administration made by RBS in the UK, there is no evidence of any present actions against the Company. There is a demand made by the ANZ under the mortgage. However, the ANZ has indicated that it intends to take no part in this proceeding, and that there is no execution threatened. In these circumstances, it is appropriate to make orders generally following the form of Art 21(1)(a), (b) and (c).

AUSTRALIAN REPRESENTATIVE 18 The plaintiffs also sought an order pursuant to Art 21(1)(e) of the Model Law which provides as follows: Article 21 Relief that may be granted upon recognition of a foreign proceeding 1. 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: (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; 19 The plaintiffs sought to appoint Neil Raymond Cribb as an Australian representative to administer the assets located in Australia. Mr Cribb has consented to act in that capacity. As noted earlier in this judgment, Mr Crawford who is the director of the Company, lives on the farm and, it appears, has operated it. Mr Crawford has entered into a contract of sale in respect of Malebelling Farm. It appears from the evidence that the main function of the Australian representative would be to complete that transaction of sale. Mr Crawford has not attended the hearing of this proceeding. However, in communications between Mr Crawford and representatives of the plaintiffs, Mr Crawford expressed the view that the sale of Malebelling Farm should not be delayed and that it was unnecessary to incur further expense by appointing an Australian representative of the Company to administer the sale transaction. The Court raised with Mr Bigos whether the supervision of this sale transaction could be undertaken by a solicitor in Australia who could be as easily instructed by the plaintiffs as by an Australian representative, and that the interposition of an Australian representative may involve duplication and hence unnecessary cost. 20 Mr Bigos, however, submitted that the plaintiffs did not have the legal capacity to deal with the sale transaction as their power was limited to property in the United Kingdom. Consequently the appointment of an Australian representative was necessary. This argument should be accepted. However, in the administration care should be taken to avoid duplication of the functions of the plaintiffs and the Australian representative. An order pursuant to Art 21(1)(e) is the central empowering order for the administration by the Australian representative of the property of the Company, and, in those circumstances, it is appropriate to make that order. 21 Next, Mr Bigos sought an order mirroring the provision in Art 21(1)(d) which provides as follows: Article 21 Relief that may be granted upon recognition of a foreign proceeding 1. 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: (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; 22 In support of an order under Art 21(1)(d), Mr Bigos drew attention to evidence that the plaintiffs were aware that the Company owned certain farming machinery, but had not been able to ascertain its whereabouts. Further, that the plaintiffs had sought information from Mr Crawford, but he had not responded by providing that information. In those circumstances, it is appropriate to make the order allowing for the further investigation of the circumstances of the assets.

ADDITIONAL RELIEF 23 The plaintiffs then sought an order under Art 21(1)(g) which, taking account of the operation of ss 11 and 19 of the Act, provides: Article 21 Relief that may be granted upon recognition of a foreign proceeding 1. 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: (g) Granting any additional relief that may be available to the trustee (within the meaning of subsection 5(1) of the Bankruptcy Act 1966) or a registered liquidator (within the meaning of s 9 of the Corporations Act 2001 under the laws of the Commonwealth. [Emphasis added] 24 The additional relief sought was an order in the terms of s 437A(1) of the Corporations Act 2001 (Cth) (Corporations Act) which provides: Role of administrator (1) While a company is under administration, the administrator: (a) has control of the company's business, property and affairs; and (b) may carry on that business and manage that property and those affairs; and (c) may terminate or dispose of all or part of that business, and may dispose of any of that property; and (d) may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not under administration. 25 It appears that in similar cases, such as Pink v MF Global UK Limited (in Special Administration) [2012] FCA 260 and Ackers (as joint foreign representative) v Saad Investments Company Limited (in official liquidation) (a company registered in the Cayman Islands) [2010] FCA 1221, an order was made in the following terms: Subject to the provisions of the Corporations Act, all powers normally available to liquidators appointed under the provisions of the Corporations Act be made available to the plaintiffs. 26 The practice has not been universal, see Moore, as Debtor-in-Possession of Australian Equity Investors v Australian Equity Investors [2012] FCA 2012. It should be noted that the orders made in the cases which the plaintiffs have relied on, dealt with the powers normally available to liquidators, whereas in this case, the plaintiffs have sought an order which would give the Australian representative the powers normally available to an administrator. There are two questions which then arise: 1. whether the relief in the terms of s 437A(1) of the Corporations Act, which applies to the role of an administrator, is relief that may be available to a registered liquidator within the meaning of s 9 of the Corporations Act; and 2. whether an order in the terms of s 437A(1), provides additional powers than are encompassed within any of the relief which has already been granted to the plaintiffs under the other limbs of Article 21. 27 In relation to the first question, s 448B of the Corporations Act relevantly provides that an administrator must be a registered liquidator. Thus, to be appointed as an administrator and therefore have the powers in the terms of s 437A(1) of the Corporations Act, a person must as a prerequisite be a registered liquidator. Thus, relief in the terms of s 437A(1) is relief that may be available to a registered liquidator within the meaning of s 9 of the Corporations Act. On the other hand, it might be argued that the additional relief that might be granted is limited to the powers of registered liquidator acting in the capacity of a liquidator. If that be the case, then the powers available under s 437A(1) to an administrator would not be available under Art 21(1)(g) of the Model Law. In view of the conclusion reached below as to the second question, it is not necessary to answer the first question. 28 In respect of the second question, the plaintiffs must show that the relief sought is additional relief. The order under Art 21(1)(e) entrusts the administration of the Company's assets located in Australia to Mr Cribb. Section 437A(1) of the Corporations Act does not go beyond or provide additional powers or functions than are already provided under Art 21(1)(e). Mr Bigos provided two illustrations of functions which might be outside Art 21(1)(e), but within s 437A(1)(d), namely the Company paying tax, or paying employees. On the facts known in the present case, both of these functions would fall within the power of the Australian representative to administer the Company's assets in Australia under the order made pursuant to Art 21(1)(e). Thus, the terms of Art 21(1)(g) are not activated because no additional powers would be conferred on the Australian representative which the Australian representative would not already have by virtue of the order made pursuant to Art 21(1)(e). In any event, an order in those terms should not be made in the present case because there are no facts before the Court which indicate circumstances which call for Mr Cribb to exercise any powers or functions beyond those which fall within the order to be made under Art 21(1)(e).

NOTICE 29 Then Mr Bigos sought orders necessary to ensure compliance with the requirements of r 15A(7)(1) of the Federal Court (Corporation) Rules 2000 (Cth). Paragraph (c) requires a notice to be sent in accordance with Form 21 to each person claiming to be a creditor who is known to the plaintiffs. It is appropriate to make such an order limiting the time within which to serve such notice to seven days from the making of these orders. Then, Mr Bigos submitted that in order to comply with r 15A(7)(1)(d), that orders should be made for the publication of notice in accordance with Form 21 which notifies of the appointment of the Australian representative in a daily newspaper circulating generally in Australia. In the circumstances of this case, a notice should be published in The Australian newspaper being a newspaper published throughout Australia, The West Australian, which is a newspaper circulating within Western Australia and, further, in The Avon Valley Advocate, being a newspaper circulating in the area in which the Company's farming operation is undertaken. In view of the scope of this order, an appropriate time for the publication of this notice is fourteen days.

costs 30 Finally, the plaintiffs sought an order that the costs be costs in the administration of the Company and accorded the same priority as costs of proceedings incurred by administrators appointed under the Corporations Act. It is appropriate to make that order in the circumstances. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice North.