Arab v Pan, in the matter of Pan

Introduction 1 The applicants are the joint and several trustees of the bankrupt estate of the respondent, Pan Sutong. They seek relief under Arts 15, 17, and 21 of the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (the Model Law) set out in Sch 1 to the Cross-Border Insolvency Act 2008 (Cth) (the Act) which, by s 6 of the Act, has the force of law in Australia. 2 In substance, they seek: (a) orders that the bankruptcy proceeding in the High Court of the Hong Kong Special Administrative Region Court of First Instance (the Court of First Instance), in which a bankruptcy order was made against the respondent (namely, proceeding HCB 6548/2021), be recognised as a "foreign proceeding" and, specifically, as a "foreign main proceeding"; and (b) certain orders consequent upon that recognition. 3 On 25 November 2021, a bankruptcy petition was presented against the respondent in the Court of First Instance. On 8 July 2022, the respondent was adjudged bankrupt by the Court of First Instance and the Official Receiver (being the Official Receiver appointed under s 75 of the Bankruptcy Ordinance (Chapter 6) (the Bankruptcy Ordinance or the Ordinance) was appointed as the provisional trustee of the bankrupt estate. At a general meeting of creditors on 11 August 2022, the applicants were appointed as joint and several trustees of the bankrupt estate pursuant to the procedure contemplated by s 17 of the Bankruptcy Ordinance. 4 The proceeding in this Court was commenced by the filing of an application dated 4 July 2023 (the Application). On 14 July 2023, the Court made orders providing for the service of the Application on the respondent and on each person whose claim to be a creditor of the respondent was known to the applicants. Orders were also made for publication of the filing of the Application and for listing the proceeding for hearing on 9 August 2023 for the relief claimed in prayers 1 to 3 and 6 to 11 of the Application. 5 Seashore Global Group Limited (SGG) has filed a proof of debt in the bankrupt estate for HK$19,283,314,208.77. The applicants' primary method of contact with SGG has been by post at an address in the British Virgin Islands. 6 On about 21 July 2023, the applicants gave notice to SGG's Hong Kong solicitors of the hearing of the Application. On 31 July 2023, those solicitors requested the applicants to provide them with copies of all documents filed in this proceeding. On 1 August 2023, the solicitors made a further request for the documents, this time to the applicants' Australian solicitors. As no production was forthcoming in response to these requests, SGG's Australian solicitors, Addisons, made another request for documents, which was answered on the afternoon of 4 August 2023. 7 On 4 August 2023, Addisons informed the Court that SGG wished to be heard on the question of the relief claimed in prayers 1 to 3 and 6 to 11 of the Application. However, they also informed the Court that SGG was not in a position to proceed on 9 August 2023. They contended that SGG had not been given sufficient time within which to file an affidavit, as required by the notice served on it (namely, to file an affidavit at least 3 days before the date fixed for the hearing). 8 On 9 August 2023, I considered SGG's application for adjournment. I was satisfied that an adjournment was warranted in the circumstances. Apart from the late provision of the documents that SGG had requested, I was told that, on 29 August 2023, the Court of First Instance was to hear an application that the resolution appointing the applicants as joint and several trustees of the bankrupt estate be set aside. 9 Consequently, I listed the hearing for the relief claimed in prayers 1 to 3 and 6 to 11 of the Application on 4 October 2023. I also listed the proceeding for a further case management hearing on 11 September 2023. 10 On 9 August 2023, I also made orders dispensing with personal service of the Application and affidavit in support on the respondent and providing for substituted service of those documents: Arab v Pan, in the matter of Pan [2023] FCA 948. 11 On 11 September 2023, I was informed that the hearing in the Court of First Instance had taken place, and that judgment was reserved with the delivery of judgment expected before the end of November 2023. 12 In those circumstances, SGG sought to vacate the 4 October 2023 hearing date. I refused that application. Article 17(3) of the Model Law requires that an application for recognition of a foreign proceeding be decided upon at the earliest possible time. I was not persuaded that there was any cogent reason why the hearing of the Application should be delayed further. First, there was no certainty that judgment by the Court of First Instance would be delivered before the end of November this year. Secondly, the outcome of the proceeding in the Court of First Instance was uncertain. Thirdly, SGG was not able to inform me that it had any substantive opposition to the relief sought in the Application.

The evidence 13 The present application is supported by: (a) an affidavit affirmed by the second-named applicant, Wong Kwok Keung, on 29 June 2023. This affidavit comprises 77 paragraphs and the documents referred to as Exhibit "WKK-1"; (b) an affidavit affirmed by Mr Wong on 8 August 2023; (c) an affidavit of Tsang Siu Yee Nicole affirmed on 8 August 2023; (d) an affidavit affirmed by Mr Wong on 3 October 2023; (e) an affidavit affirmed by Choi Wai Heung on 3 October 2023; (f) an affidavit affirmed by Cheung Tak Cheong on 3 October 2023; (g) an affidavit affirmed by Law Chun Man on 3 October 2023; and (h) an affidavit affirmed by So Chi Hung on 3 October 2023. 14 SGG appeared at the hearing of the Application on 4 October 2023. It did not seek to adduce evidence and did not make any submission in opposition to the Application. No other creditor appeared. 15 The applicants are not presently aware of any Australian creditors of the respondent's bankrupt estate. They wish, however, to investigate the respondent's affairs in Australia for the benefit of all creditors.

Relevant provisions of the Model Law 16 Article 15 of the Model Law requires the observance of particular procedural steps in relation to an application for recognition of a foreign proceeding: 1. A foreign representative may apply to the court for recognition of the foreign proceeding in which the foreign representative has been appointed. 2. An application for recognition shall be accompanied by: (a) A certified copy of the decision commencing the foreign proceeding and appointing the foreign representative; or (b) A certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of the foreign representative; or (c) In the absence of evidence referred to in subparagraphs (a) and (b), any other evidence acceptable to the court of the existence of the foreign proceeding and of the appointment of the foreign representative. 3. An application for recognition shall also be accompanied by a statement identifying all foreign proceedings in respect of the debtor that are known to the foreign representative. 4. The court may require a translation of documents supplied in support of the application for recognition into an official language of this State. 17 Article 15 is supplemented by s 13 of the Act: In addition to the requirement in paragraph 3 of Article 15 of the Model Law (as it has the force of law in Australia) that an application for recognition be accompanied by a statement identifying all foreign proceedings in respect of the debtor that are known to the foreign representative, the application must be accompanied by a statement identifying: (a) all proceedings under the Bankruptcy Act 1966 in respect of the debtor; and (b) any appointment of a receiver (within the meaning of section 416 of the Corporations Act 2001), or a controller or a managing controller (both within the meaning of section 9 of that Act), in relation to the property of the debtor; and (c) all proceedings under Chapter 5 of the Corporations Act 2001, section 601CL of that Act or Schedule 2 to that Act, in respect of the debtor; that are known to the foreign representative. 18 Article 17 imposes certain duties on the Court hearing the application for recognition: 1. Subject to article 6, a foreign proceeding shall be recognized if: (a) The foreign proceeding is a proceeding within the meaning of subparagraph (a) of article 2; (b) The foreign representative applying for recognition is a person or body within the meaning of subparagraph (d) of article 2; (c) The application meets the requirements of paragraph 2 of article 15; (d) The application has been submitted to the court referred to in article 4. 2. The foreign proceeding shall be recognized: (a) As a foreign main proceeding if it is taking place in the State where the debtor has the centre of its main interests; or (b) As a foreign non-main proceeding if the debtor has an establishment within the meaning of subparagraph (f) of article 2 in the foreign State. 3. An application for recognition of a foreign proceeding shall be decided upon at the earliest possible time. 4. The provisions of articles 15, 16, 17 and 18 do not prevent modification or termination of recognition if it is shown that the grounds for granting it were fully or partially lacking or have ceased to exist. 19 The terms "foreign proceeding", "foreign main proceeding", "foreign representative", and "foreign court" are defined in Art 2, as follows: 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; (b) "Foreign main proceeding" means a foreign proceeding taking place in the State where the debtor has the centre of its main interests; (c) … (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; (e) "Foreign court" means a judicial or other authority competent to control or supervise a foreign proceeding; (f) … 20 Article 21 provides that, upon recognition of a foreign proceeding, the Court may, at the request of the foreign representative, grant appropriate relief. Relevantly to the present hearing, prayer 3 of the Application seeks orders that: (a) the administration and realisation of the Respondent's assets located in Australia be entrusted to the Applicants in their capacity as trustee in bankruptcy of the estate of Pan Sutong; (b) the Applicants may, as they deem appropriate, examine witnesses, take evidence and obtain delivery of information concerning the Respondent's assets, affairs, rights, obligations or liabilities; (c) the distribution of all of the Respondent's assets located in Australia be entrusted to the Applicants; (d) subject to the provisions of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), all powers normally available to a trustee in bankruptcy appointed under the provisions of the Bankruptcy Act, be made available to the Applicants; (e) the Respondent be subject to all of the obligations that a bankrupt has under the Bankruptcy Act as if he were a bankrupt under the Bankruptcy Act and as if the Applicants were the trustees of his bankrupt estate under the Bankruptcy Act; and (f) section 81 of the Bankruptcy Act applies to any examination as if the Applicants were the trustees of the Respondent's bankrupt estate under the Bankruptcy Act. 21 Article 6 provides: Nothing in the present Law prevents the court from refusing to take an action governed by the present Law if the action would be manifestly contrary to the public policy of this State. 22 Finally, I note that Art 16 of the Model Law provides for certain assumptions to be made. Article 16(3) provides that, in the absence of proof to the contrary, the habitual residence of a debtor, who is an individual, is presumed to be the centre of the debtor's main interests: refer to the definition of "foreign main proceeding".

Analysis 23 On the evidence before me, I am satisfied that the proceeding in the Court of First Instance is a "collective judicial … proceeding in a foreign State" within the definition of "foreign proceeding" in Art 2 of the Model Law. 24 First, the proceeding is in the Hong Kong Special Administrative Region of the People's Republic of China and, self-evidently, in a "foreign State". 25 Secondly, the Court of First Instance, sitting in its bankruptcy jurisdiction, is a "foreign court" within the meaning of Art 2(e) as it is a "judicial … authority competent to control or supervise a foreign proceeding". Section 2 of the Bankruptcy Ordinance defines the Court of First Instance as the "court" for the purposes of the Ordinance. Section 3 of the Ordinance confers jurisdiction on the Court of First Instance, and grants it the power, to make a bankruptcy order on petitions presented to it. Self-evidently, the proceeding in which the respondent was adjudged to be bankrupt, and which is sought to be recognised in the present proceeding, is a "judicial" proceeding: see also in this regard, ss 61A, 84, 97 and 99(1) of the Bankruptcy Ordinance. 26 Thirdly, the proceeding is a "collective" proceeding in the sense that it affects all the creditors and assets of the respondent's bankrupt estate and transforms the rights of creditors into rights to participate in the distribution of the bankrupt estate : see, for example, ss 12, 26, 34, 58, 67, 72 and the definition of "property" in s 2 of the Bankruptcy Ordinance; see also Katayama v Japan Airlines Corporation [2010] FCA 794; 79 ACSR 286 at [24]; Raithatha (liquidator) v Ariel Industries plc (in creditors voluntary liquidation), in the matter of Ariel Industries plc (in creditors voluntary liquidation) [2012] FCA 1526; 212 FCR 139 at [29]; Wong (Trustee), in the matter of Mackellar (Bankrupt) v Mackellar [2020] FCA 1151 at [33]; Bradley, in the matter of Astora Women's Health, LLC v Astora Women's Health LLC (No 2) [2022] FCA 1268 at [35]. 27 I am also satisfied that, for the purposes of the definition of "foreign proceeding", the bankruptcy proceeding in the Court of First Instance is a "proceeding pursuant to a law relating to insolvency" (namely, the Bankruptcy Ordinance) in which "the assets and affairs of the debtor" (here, the respondent) are "subject to the control or supervision by a foreign court" (namely, the Court of First Instance) for the purposes of "liquidation". 28 For these reasons, the definition of "foreign proceeding" in Art 2(a) is met and the requirement of Art 17(1)(a) is satisfied. 29 Further, I am satisfied that the foreign proceeding is a "foreign main proceeding" within the meaning of Art 2(b). The proceeding has been conducted in the Hong Kong Special Administrative Region and remains under the control of the Court of First Instance. The orders made by the Court of First Instance on 8 July 2022 disclose that the respondent's address is a given address in Hong Kong. In correspondence, the respondent's solicitors have also said that the respondent's "matrimonial home" is another given address in Hong Kong. Further, the evidence shows that the respondent is a holder of a Hong Kong passport and a Hong Kong Permanent Identity Card. There is evidence that the respondent travels overseas to seek medical attention, and his current whereabouts are not known. I nevertheless infer that, despite the last-mentioned matters, Hong Kong is the respondent's habitual residence. In the absence of proof to the contrary, I will proceed on the basis that Hong Kong is the centre of the respondent's main interests: see Art 16(3). Therefore, the requirement of Art 17(2)(a) is satisfied. 30 Further, I am satisfied that each applicant is a "foreign representative" within the meaning of Art 2(d). As I have noted, following the provisional appointment of the Official Receiver, the applicants were appointed as trustees pursuant to a general meeting of the respondent's creditors on 11 August 2022, in accordance with the procedure contemplated by the Bankruptcy Ordinance which applies to the foreign proceeding: see s 17A of the Ordinance. 31 In this regard, the evidence includes a certified copy of the orders made by the Court of First Instance on 8 July 2022 and a certified copy of the Memorandum to Court of Resolutions Passed at the General Meeting of Creditors, filed with the Court of First Instance on 12 August 2022. The Memorandum records the appointment of the applicants as the joint and several trustees of the respondent's property with effect from 11 August 2022 at a meeting at which the Chief Insolvency Officer, acting on behalf of the Official Receiver (the provisional trustee), presided as Chairman. These documents are acceptable evidence, within the meaning of Art 15(2)(c) of the Model Law, of the existence of the foreign proceeding and of the appointment of the foreign representatives (the applicants) as trustees of the respondent's bankrupt estate. 32 I am satisfied, further, that the applicants have been "authorized in a foreign proceeding to administer … the liquidation of the debtor's assets or affairs". This is not gainsaid by the fact that in the Court of First Instance SGG seeks to challenge the validity of the resolution appointing the applicants as trustees. Therefore, the requirement of Art 17(1)(b) is satisfied. 33 Further, the requirement of Art 15(2) of the Model Law is met with the consequence that the requirement of Art 17(1)(c) is satisfied. 34 I note that s 10 of the Act appoints this Court as the competent court for performing the functions referred to in the Model Law relating to recognition of foreign proceedings and cooperation with foreign courts involving a debtor who is an individual. Therefore, the requirement of Art 17(1)(d) is satisfied. 35 I also note that the evidence discloses the existence of various foreign proceedings in relation to the respondent, including proceeding no. BVIHCOM2022/0229 in the Eastern Caribbean Supreme Court in the High Court of Justice (Virgin Islands) commenced by the applicants as trustees of the respondent's bankrupt estate. 36 Further, Mr Wong has deposed that he is not aware of: (a) any proceedings under the Bankruptcy Act in respect of the respondent; (b) any appointment of a receiver (within the meaning of s 416 of the Corporations Act 2001 (Cth) (the Corporations Act)), or a controller or a managing controller (both within the meaning of s 9 of the Corporations Act), in relation to the property of the respondent; or (c) any proceedings under Ch 5 of the Corporations Act, s 601CL of the Corporations Act, or Sch 2 to the Corporations Act, in respect of the respondent. 37 Based on this evidence, I am satisfied that the statements required by s 13 of the Act and Art 15(3) of the Model Law have been given. 38 As the requirements of Arts 15(1) - (3), 17(1) and 17(2)(a) of the Model Law are satisfied, it is appropriate that the foreign proceeding be recognised as a "foreign main proceeding" and that relief substantially to the effect of prayers 1 and 2 of the Application be granted. 39 I am also satisfied that the relief sought in prayers 3(a) to (f) of the Application should be granted, pursuant to Art 21 of the Model Law. 40 In this connection, r 14.08 of Federal Court (Bankruptcy) Rules 2016 (Cth) (the Bankruptcy Rules) provides: 14.08 Relief after recognition (1) If the Court has made an order for recognition of a foreign proceeding, any application by the applicant for relief under paragraph 1 of article 21 of the Model Law must be made by filing an interim application, and any supporting affidavit, in accordance with Form B3. (2) Unless the Court otherwise orders, an interim application under subrule (1) and any supporting affidavit must be served at least 3 days before the date fixed for the hearing of the interim application on the following persons: (a) the respondent; (b) any person that the Court directed be served with the originating process by which the application for recognition was made; (c) any other person that the Court directs. (3) A person who intends to appear before the Court at the hearing of an application under subrule (1) must file and serve the documents mentioned in rule 2.04. 41 As this relief was already claimed in the Application, and as notice of the Application has already been given to the respondent and the creditors, it is appropriate that, in the present case, the Court make an order dispensing with this requirement of the Bankruptcy Rules. 42 I am satisfied, further, that the orders sought in prayers 6 to 10 of the Application, with some minor variations, should be granted. 43 I record that there is nothing before me that would indicate that the granting of any of the relief sought by the applicants would be manifestly contrary to the public policy of Australia: see Art 6 of the Model Law.

Compliance with the Court's orders 44 On the evidence before me, I am satisfied that the applicants have complied with Orders 3 and 4 made on 14 July 2023. 45 I am also satisfied that the applicants have complied with Order 4 made on 9 August 2023. 46 Order 4 provided: 4. Pursuant to r 10.24 of the Federal Court Rules 2011 (Cth), substituted service of the applicants' application filed on 4 July 2023, and the affidavit affirmed by Wong Kwok Keung on 29 June 2023 comprising 77 paragraphs and exhibit WKK-1, be effected on the respondent by hand delivering the documents to Messrs Patrick Mak & Tse, solicitors, at Rooms 901-905, 9th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong, the date of service being the date that the documents are hand delivered. 47 There is, however, an additional matter to be noted. It is apparent that Order 4 did not refer to Mr Wong's affidavit of 8 August 2023. Amongst other things, this affidavit supplements Mr Wong's affidavit of 29 June 2023 with respect to the disclosure of foreign proceedings in respect of the respondent: Art 15(3). 48 On 3 October 2023, the applicants delivered a copy of Mr Wong's affidavit of 8 August 2023 to the office of Messrs Patrick Mak & Tse at Rooms 901 - 905, 9th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong (the address referred to in Order 4). 49 Rule 14.03 of the Bankruptcy Rules concerns the requirements for filing and serving an application for recognition of a foreign proceedings under Art 15 of the Model Law: 14.03 Application for recognition (1) An application by a foreign representative for recognition of a foreign proceeding under article 15 of the Model Law must be made by filing an application in accordance with Form B2. (2) The application must: (a) be accompanied by the statements mentioned in article 15 of the Model Law and in section 13 of the Cross‑Border Insolvency Act; and (b) name the foreign representative as the applicant and the debtor as the respondent; and (c) be accompanied by an affidavit verifying the matters mentioned in paragraphs 2 and 3 of article 15 of the Model Law and in section 13 of the Cross‑Border Insolvency Act. (3) When filing the application, the foreign representative must file, but need not serve, an interim application seeking directions as to service, and the Court may give any directions about service, and make any incidental orders, that it thinks just. (4) The applicant must serve a copy of the application and the other documents mentioned in subrule (2): (a) unless the Court otherwise orders - on each respondent (if any) to the proceeding as soon as practicable after filing an application and, in any case, at least 5 days before the date fixed for hearing; and (b) on any other persons the Court may direct at the hearing of the interim application. (5) A person who intends to appear before the Court at the hearing of an application for recognition must file and serve the documents mentioned in rule 2.04. 50 It is apparent that r 14.03(4)(a) has not been complied with in respect of the service of Mr Wong's affidavit of 8 August 2023 to the extent that the affidavit makes the supplementary disclosure of foreign proceedings in respect of the respondent. However, on the evidence before me, the respondent appears to be a party to all these proceedings. In these circumstances, I am satisfied that the respondent is not prejudiced by the late service of Mr Wong's affidavit of 8 August 2023. I am prepared to make an order that the delivery of this affidavit on 3 October 2023 be taken as sufficient compliance with r 14.03(4)(a).

Further relief 51 As I indicated at the case management hearing held on 14 July 2023, I propose to rely on s 35A(1)(h) of the Federal Court of Australia Act 1976 (Cth) and r 2.02(1)(a) of the Bankruptcy Rules to refer the application for the relief sought in prayers 4 and 5 of the Application to a Registrar of the Court for determination.

Disposition 52 Orders will be made accordingly. I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates.