Asafuji (in his capacity as the Foreign Representative of the Sanko Steamship Co., Ltd) v The Sanko Steamship Co., Ltd

REASONS FOR JUDGMENT 1 In May 1997 the United Nations Commission of International Trade Law adopted a Model Law on Cross-Border Insolvency, ("The Model Law"). The purpose of the Model Law was to provide effective and efficient mechanisms for dealing with cross-border insolvency. The Model Law has been incorporated into Sch 1 of the Cross-Border Insolvency Act 2008 (Cth) ("the Act"). The application, which seeks the recognition of a foreign proceeding, is made under Art 15 of Sch 1, and relief is sought under Art 21. Interim orders were made on 15 October 2012 (see Asafuji (in his capacity as the Foreign Representative of the Sanko Steamship Co Ltd) v The Sanko Steamship Co Ltd [2012] FCA 1154). The application for final relief is unopposed. For the reasons which follow I have determined to make the orders sought by the plaintiff subject to minor modifications. 2 The plaintiff, Mr Hisashi Asafuji, was appointed by the Tokyo District Court to serve as the trustee of the defendant on 23 July 2012 as part of the commencement of corporate reorganisation proceedings concerning the defendant instituted in Japan. 3 The defendant, the Sanko Steamship Co ("Sanko"), is a Japanese company in the business of international marine transportation. Its business activities are centred around the operation of bulk carriers, tankers, LPG carriers and offshore support vessels. The global financial crisis in conjunction with significant prior financial commitments, lead to Sanko's insolvency in late May 2012. 4 On 2 July 2012, Sanko petitioned the Tokyo District Court for the commencement of corporate reorganisation proceedings under Japanese law. On the same day, interim orders were made protecting Sanko's assets, prohibiting Sanko from discharging obligations to major creditors and appointing an examiner to inquire into Sanko's affairs. On 23 July 2012, the same Court made an order for the commencement of corporate reorganisation proceedings, and appointed the plaintiff as Sanko's trustee. As trustee, the plaintiff has the power to conduct Sanko's business and manage its property, subject to the Tokyo District Court's supervision. 5 The corporate reorganisation proceedings referred to above is more precisely described as Case 2012 (Mi) No.11, Case for Corporate Reorganisation in the Tokyo District Court, Eighth Civil Division, ("the Tokyo Proceeding"). 6 Before the orders sought by the plaintiff can be made, I must be satisfied that the requirements stipulated in Art 17 of Sch 1 to the Act have been made out. The Tokyo Proceeding must be a "foreign proceeding" and the plaintiff must be a "foreign representative" within the meaning of Sch 1 of the Act. These two requirements are dealt with in more detail below. The application must be accompanied by evidence attesting to the foreign proceeding and the appointment of the foreign representative. The plaintiff has put documentation before the Court satisfying this requirement. Finally, the application must have been submitted to a court identified in the Act as an eligible court, of which the Federal Court of Australia is one. 7 The term "foreign proceeding" is defined in Art 2 of Sch 1 of the Act as: [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. 8 The Tokyo Proceeding is a judicial proceeding being conducted in a foreign State. That proceeding has been instituted and is being conducted pursuant to the Japanese Corporate Reorganisations Act as well as the Rules of Corporate Reorganisation, being laws relating to insolvency. The Tokyo District Court has exercised and continues to exercise control or supervision over the assets and affairs of Sanko. In addition to the 2 July 2012 orders referred to above, the plaintiff requires the approval of the Tokyo District Court before performing certain activities, listed in the 23 July 2012 orders. These include the transfer of property owned or possessed by Sanko, the purchase of property, offering loans and settlement of agreements. I am satisfied that the Tokyo Proceeding is a foreign proceeding for the purposes of Sch 1 of the Act. 9 The definition of "foreign representative" is also found in Art 2 of Sch 1 of the Act: '[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.' 10 As noted above, the plaintiff was appointed as trustee of the defendant in the Tokyo Proceeding. He has the power to conduct Sanko's business and manage its property, subject to the Tokyo District Court's supervision, although I note that under Japanese law, the day to day management of the debtor company remains throughout in the hands of existing management, with the trustee acting as the representative director of the debtor company. The trustee is also required to report on Sanko's financial status, including asset values as well as profitability. I am satisfied that the plaintiff is a foreign representative for the purposes of Sch 1 of the Act. For those reasons, the requirements of Art 17 have been met and I am satisfied that the Tokyo Proceeding should be recognised as a foreign proceeding. 11 On the basis that the Tokyo Proceeding is a foreign proceeding, Art 17(2) requires determination of whether it is a "foreign main proceeding" or a "foreign non-main proceeding". The Tokyo Proceeding falls within the definition of a foreign main proceeding (provided in both Art 17(2) as well as the definition in Art 2), as it is taking place in the State where Sanko "has the centre of its main interests". Under Art 16(3), there is a presumption that, in the absence of proof to the contrary, a debtor's registered office is the centre of its main interests. Sanko's registered office is located in Toyko, Japan. There is nothing in the materials before me suggesting that the centre of Sanko's main interests is anywhere other than Japan. Moreover, Mr Tadaaki Matsumura, a Japanese lawyer with the conduct of the Tokyo Proceeding, has deposed to the fact that Sanko directors' and shareholders' meetings are held in Japan, Sanko's books and records are kept in Japan and Sanko holds itself out to the word as operating from Japan. I will make an order recognising the Tokyo Proceeding as a foreign main proceeding. 12 Upon recognition that the Tokyo Proceeding is a foreign main proceeding under the Act, commencement or continuation of individual actions or proceedings against the defendant's assets, rights, obligations or liabilities is stayed. Execution against the defendant's assets are also stayed and the right to transfer, encumber or otherwise dispose of any of the debtor's assets is suspended (Art 20(1)). 13 Under Art 21, orders may be made where necessary to protect the assets of the debtor or the interests of the creditors. The Court must be satisfied, in making such orders, that the interests of the creditors and other interested persons, including the debtor, are adequately protected (Art 22). 14 Pursuant to orders made by me on 15 October 2012, the plaintiff was required to publish a notice of the filing of this application in a daily newspaper circulating generally in Australia. The plaintiff was also required to send a Notice of Filing of Application for Recognition of Foreign Proceedings to each of the defendant's Australian creditors known to it. In compliance with that order, the plaintiff sent letters to its Australian creditors. As part of that correspondence, the plaintiff noted that the hearing was to take place at 9:30am on 1 November 2012 at the Federal Court of Australia in Melbourne, and indicated that creditors wishing to make an appearance at that hearing should file appropriate documentation with the Court. No creditors appeared. In order to further ensure that the creditors' interests are adequately protected, I propose to require notification of my orders to Australian creditors. If affected by those orders, creditors will have the capacity to apply to the Court for relief from the orders made. For those reasons, I am satisfied that the interests of Sanko's Australian creditors are adequately protected. 15 As to the interests of the debtor (the defendant), the evidence before me is that a number of Sanko's ships visit Australia regularly and Sanko has various Australian creditors. While none have issued legal proceedings at this stage, those creditors were owed ¥1,568,121 (approximately AU$19,000) as at 12 October 2012. There is a possibility of the defendant's ships being arrested by its Australian creditors. The interests of the defendant therefore require that orders be made in order that, without the leave of the Court, no action be taken which may interfere with the corporate reorganisation proceedings in the Tokyo District Court. 16 The scope of the relief which flows from recognition of a foreign main proceeding under Art 20 is determined with reference to s 16 of the Act. That section provides that any stay or suspension pursuant to Art 20 is to apply in the same way as it would if the stay or suspension arose under Chapter 5 (other than Parts 5.2 and 5.4A) of the Corporations Act 2001 (Cth). The relevant part of the Corporations Act in this context is Chapter 5.3A. The orders which I will make should reflect the orders which could be made under Chapter 5.3A in relation to an Australian corporation in administration. The plaintiff has sought orders under Art 21 which broadly reflect those available under Chapter 5.3A. I have determined to grant those orders, subject to two minor modifications made to ensure consistency with Chapter 5.3A of the Corporations Act. First, regarding the stay of proceedings in respect of company property, the orders will contain an exception for "criminal" and "prescribed proceedings" which reflects the terms of s 440D(2) of the Corporations Act. Second, the order will not apply to the kind of liens or pledges which would be exempted by s 440JA of the Corporations Act. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromberg.

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