De'ath (liquidator) v Digital Fuel Marketing Limited

Introduction 1 By amended originating process dated 25 November 2021, the Plaintiffs, Mr Lee Michael De'ath and Mr Richard Howard Toone, acting in their capacity as joint and several insolvency liquidators appointed to the Defendant, Digital Fuel Marketing limited (in administration) (the Company), seek recognition of a United Kingdom insolvency proceeding (UK Proceeding) as a "foreign proceeding" pursuant to Art 17(1) of the UNCITRAL Model Law on Cross-Border Insolvency, found in Schedule 1 to the Cross-Border Insolvency Act 2008 (Cth) (the Insolvency Act). The Plaintiffs also seek recognition of the UK Proceeding as a "foreign main proceeding" pursuant to Art 17(2) of the Model Law, on the grounds that the proceeding has been instituted in the state where the debtor (the Company) has its centre of main interest (COMI). 2 In this application, the Plaintiffs' rely on the following affidavits: (1) Affidavit of Mr Lee Michael De'ath sworn 25 June 2021 and filed 2 July 2021. (2) Affidavit of Mr Lee Michael De'ath sworn 11 August 2021 and filed 12 August 2021. (3) Affidavit of Mr Lee Michael De'ath sworn 14 January and filed 15 November 2021. (4) Affidavit of Ms Anne Maree Flanagan sworn 14 January 2022 and filed 18 January 2022. (5) Affidavit of Mr William Edwin Nerlich sworn 14 January 2022 filed 18 January 2022. 3 The Plaintiffs also filed cogent written submissions with the Court on 22 January 2022, which I acknowledge, and gratefully adopt in delivering my reasons. Moreover, I note that none of the creditors filed any affidavits or submissions with the Court, nor did they oppose the relief sought by the Plaintiffs in the originating process.

Background 4 On 21 July 2013, the Company was incorporated in the United Kingdom. The Company operates a business providing digital marketing services to companies in the "i-gaming" industry. The Company's offices are in the United Kingdom, the United States of America (New York) and Australia with its main business activities taking place in the United Kingdom. Its director and majority shareholder Mr Toby Stephen Oddy resides in England. 5 On or around 1 March 2021, the Plaintiffs were appointed joint administrators of the Company by resolution of the sole director pursuant to the Insolvency Act 1986 (UK) (UK Insolvency Act). The Plaintiffs' appointment was registered in the High Court of Justice in London and endorsed by that court in proceeding number CR-2021-000381 on 1 March 2021. On 5 October 2021, the Company moved from administration into creditor's voluntary liquidation and the Plaintiffs were appointed as joint liquidators of the Company. 6 The records maintained by Australian Securities and Investments Commission (ASIC) show that the Company was registered in Australia as a foreign company with an Australian Registered Body Number and an Australian Business Number. The Company's Australian address was registered in Sydney, New South Wales and its registered office in its place of incorporation was in the United Kingdom. The Company ceased trading in Australia prior to the Plaintiffs' appointment in March 2021. According to financial records of the Company's Australian operations for the financial year ended 30 June 2019, the Australian operations were insolvent. 7 As a result of the Australian operations being insolvent, on 21 April 2021, Mr De'ath lodged a Form 406 with ASIC, being a notification of cessation, winding up or dissolution of a foreign company or registered Australian body. 8 The Company has 127 known creditors in the total amount of £745,638.74. Of the 127 creditors of the Company, it is known that at least 16 creditors are located in Australia. Those 16 creditors are owed the total amount of £72,515.17. 9 The Company held three bank accounts with the Westpac Bank Ltd (Bank). The Bank requires the Plaintiffs' appointment be registered in an Australian Court in accordance with the Model Law to enable the transfer of funds held in the bank accounts to be processed. 10 On 13 August 2021, I made interim orders for service in accordance with the Rules, including that a notice be sent to each creditor known to the Plaintiffs and that a notice be published in a daily newspaper circulating at the Company's last known place of business, being Sydney, New South Wales. 11 For the reasons that follow, I am satisfied that the orders sought in the originating process should be made.

Preliminary matters 12 Pursuant to Art 2(d) of the Model Law, a "foreign representative" is a person or body, including one appointed on an interim basis, authorised in a foreign proceeding to administer the reorganisation or liquidation of the debtor's assets or affairs, or to act as a representative of the foreign proceeding. 13 As stated above, the Plaintiffs' appointment as joint administrators of the Company was registered in the High Court of Justice in London and was endorsed by that Court on 1 March 2021. Further, Mr De'ath deposed in his affidavit sworn 9 November 2021 that, on 5 October 2021, the Plaintiffs were appointed as joint liquidators of the Company after it moved from administration to creditors' voluntary liquidation. Shortly thereafter, notices giving effect to their appointment were lodged with Companies House. Accordingly, I am satisfied that the Plaintiffs are foreign representatives within the meaning of Art 2(d) of the Model Law. 14 I am also satisfied that there has been compliance with the orders that I made on 13 August 2021, namely that notice was given to each of the creditors of the Company that were known to the Plaintiffs and notice was in Sydney Morning Herald newspaper on 7 January 2022. Those matters were deposed in the Affidavit of Ms Anne Maree Flanagan, which annexes the newspaper publication, and the Affidavit of Mr William Edwin Nerlich, which annexes the notice and covering email sent to each of the relevant creditors.

Recognition as a foreign main proceeding 15 Further, I am satisfied that the elements for the recognition of the UK Proceeding as a foreign proceeding and a foreign main proceeding have been made out. 16 Pursuant to Art 17(1) of the Model Law, I must recognise the foreign proceeding if certain substantive and procedural requirements have been satisfied: see Art 17 of the Model Law, Art 15 of the Model Law (as modified by s 13 of the Insolvency Act), and Div 15A of the Rules. 17 The following elements in Art 17(1)(a) have been satisfied such that the UK Proceeding is a "foreign proceeding" within the meaning of Art 2(a) of the Model Law: (1) A creditors' voluntary winding up is a collective judicial or administrative proceeding in a foreign State, being the United Kingdom; (2) It is a proceeding conducted pursuant to a law relating to insolvency, being the UK Insolvency Act; (3) In a creditors' winding up the assets and affairs of the company are subject to control or supervision by a foreign court (the High Court of Justice) for the purpose of liquidation; and (4) The UK Proceeding commenced for the purpose of the liquidation of the Company. 18 In relation to Art 17(1)(b), as I have indicated above at [13], the Plaintiffs satisfy the definition of "foreign representative" as defined in Art 2(d) of the Model Law. 19 To satisfy Art 17(1)(c) of the Model Law, the application must meet the requirements of Art 15(2) of the Model Law which states: 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. 20 In the present case, no documents of certification as described in Art 15(2) are available. Nevertheless, the following evidence has been adduced which has satisfied me that the requisite requirements of Art 15(2) have been met: (1) Notice of appointment of administrators endorsed by the High Court of Justice in London. (2) Notice of appointment lodged with Companies House. (3) Notice of Administrators Proposal and accompanying Statement. (4) Statement of proposal for achieving the purpose of administration pursuant to Paragraph 49 of Schedule B1 to the UK Insolvency Act and Rule 3.34 of the Insolvency (England and Wales) Rules 2016. (5) Final Progress Report of the Joint Administrators for the period 1 March 2021 to 31 August 2021. (6) Notice of move from administration to creditor's voluntary liquidation. (7) Notice of Appointment of Liquidators. (8) Companies House filing history in relation to the Company. See 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 [48] (Yates J) for examples of "other evidence acceptable to the Court". 21 In addition, Art 15(3) requires an application for recognition to be accompanied by a statement identifying all foreign proceedings in respect of the debtor that are known to the foreign representative. Section 13 of the Insolvency Act modifies that requirement, such that the application must also be accompanied by a statement identifying, relevantly, any appointment of a receiver within the meaning of s 416 of the Corporations Act and all proceedings under Ch 5 of the Corporations Act that are known to the foreign representative. 22 These requirements are satisfied by the matters deposed in the Affidavit of Mr De'ath, namely that he is not aware of: (a) any other foreign proceedings; (b) any receivers having been appointed to the Company; (c) any controller or controller manager having been appointed in relation to the property of the Company; or (d) any proceedings under Ch 5, s 601CL or Sch 2 of the Corporations Act against the Company.

Recognition as foreign main proceeding 23 To satisfy Art 17(2)(a) of the Model Law, and be recognised as a foreign main proceeding, the foreign proceeding must take place in the State where the debtor has its COMI. 24 Based on the following evidence produced, I am satisfied that the Company has its COMI in the United Kingdom, and accordingly, the foreign proceeding should also be recognised as a foreign main proceeding: (1) At all times since its incorporation, the Company's registered offices have been located in England: see Art 16.3 of the Model Law which states that in the absence of proof to the contrary, a company's COMI is presumed to be in the State in which its registered office is located. (2) The Company's sole director resides in England. (3) The trading address of the Company was Fuel Studios, Kiln House, Pottergatte, Norwich in the United Kingdom. (4) The Company accountants were Larkin Gowan, an English accounting firm that operated from several offices in the United Kingdom. (5) The Company's books and records were predominately maintained and stored at is registered office in the United Kingdom. (6) The Company's strategic decision making took place in the United Kingdom.

Article 20 - Application of stay 25 I am also satisfied that the operation of the stay that arises under Art 20(1)(a) of the Model Law is appropriately modified in these orders, for the purposes of Art 20(2) of the Model Law and s 16 of the Insolvency Act. In substance, the UK Proceeding is a liquidation whereby the Company's business relationships will be resolved, its assets realised and the proceeds distributed to creditors. That is to say, the purpose of the UK Proceeding, and the procedures for giving effect to that purpose, are akin to a liquidation under Australian law. Accordingly, it is appropriate to, in effect, regard the foreign proceeding, for the purposes of any potential claim that may be made in future, as triggering a stay pursuant to Pt 5.4B of Ch 5 of the Corporations Act.

Article 21 - Relief sought under the Model Law 26 I am also satisfied that there is a proper basis under Art 21 of the Model Law to entrust the Plaintiffs with the administration, realisation and distribution of the Company's assets located in Australia, and permit the Plaintiffs, if so advised, to invoke the power to examine witnesses, take evidence and require the delivery up of information concerning the Company's affairs, rights, obligations and liabilities as if they were a liquidator appointed under Pt 5.4B of the Corporations Act. This will assist with the liquidation of the Company and allow for the efficient identification of assets and liabilities in Australia. 27 The power in Art 21 of the Model Law is similar to a public examination by a liquidator of persons who may have information concerning the affairs of the company in question. The exercise of that power is subject to an application in the usual way to a Registrar of the Court for leave to examine particular persons. The exception to this is the Plaintiffs would not require leave to examine the directors of the Company. However, in circumstances where the Company's director, and majority shareholder, reside in England, it is unlikely that he will travel to Australia without knowing he may be examined should they do so. Accordingly, I am satisfied it is appropriate to make the order in relation to Art 21.

Dispoisiton 28 For the above reasons, I am satisfied that it is appropriate to make the orders sought by the Plaintiffs in the form I have indicated. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Anastassiou.