Didyasarin v Thai Airways International Public Company Limited

BACKGROUND 3 On 26 May 2020 Thai Airways filed a petition for a business reorganisation (Thai Reorganisation Proceeding) at the Central Bankruptcy Court of Thailand (Thai Bankruptcy Court). 4 On 22 June 2020 Air Chief Marshal Chaiyapruk Didyasarin and Mr Peraphon Thawornsupacharoen, as foreign representatives of Thai Airways (Original Foreign Representatives) appointed by Thai Airways under a power of attorney, commenced this proceeding seeking recognition of the Thai Reorganisation Proceeding under the Model Law. 5 On 3 August 2020 this Court made orders including orders that: (1) pursuant to Art 17 of the Model Law the Thai Reorganisation Proceeding be recognised as a foreign main proceeding under the Model Law; (2) the Original Foreign Representatives be recognised as foreign representatives within the meaning of Art 2(d) of the Model Law; and (3) for the purposes of Art 20(2) of the Model Law and s 16 of the CBI Act, the scope, and the modification or termination, of the stay and suspension referred to in Art 20(1) of the Model Law with respect to Thai Airways are the same as would apply if the stay or suspension arose under Pt 5.3A in Ch 5 of the Corporations Act 2001 (Cth), and as if: (a) Pt 5.3A of the Corporations Act applied to Thai Airways (as a company subject to administration under that Part); and (b) references in Pt 5.3A of the Corporations Act to the consent of Thai Airways' administrators are taken to be references to the consent of the company, see Didyasarin v Thai Airways International Public Company Limited [2020] FCA 1154 (Thai Airways (No 1)). 6 On 14 September 2020 the Thai Bankruptcy Court granted the business reorganisation order sought by Thai Airways and appointed Air Chief Marshal Chaiyapruk Didyasarin, Mr Chakkrit Parapuntakul, Mr Pirapan Salirathavibhaga, Mr Boontuck Wungcharoen, Mr Piyasvasti Amranand, Mr Chansin Treenuchagron and EY Corporate Advisory Services Limited (together, Planners) as the planners of Thai Airways for the purposes of preparing a plan for its reorganisation. 7 On 16 September 2020, following the resignation of one of the Original Foreign Representatives, Mr Peraphon Thawornsupacharoen, as a director of Thai Airways, the Planners executed a power of attorney appointing Air Chief Marshal Chayaprik Didyasarin and Mr Chansin Treenuchagron (Current Foreign Representatives) as their attorneys to conduct foreign proceedings in respect of Thai Airways, including in Australia, and authorising them to act as representatives of Thai Airways in those foreign proceedings. 8 On 14 October 2020, on the application of the Original Foreign Representatives, this Court made orders including an order granting leave to amend the originating process to remove Mr Peraphon Thawornsupacharoen as a party and to substitute Mr Chansin Treenuchagron, in his capacity as foreign representative of Thai Airways, as a plaintiff and an order recognising the Current Foreign Representatives as foreign representatives within the meaning of Art 2(d) of the Model Law: see Didyasarin v Thai Airways International Public Company Limited (No 2) [2020] FCA 1509 (Thai Airways (No 2)). 9 On 2 March 2020 the Planners submitted a business reorganisation plan for Thai Airways (Reorganisation Plan) to the Thai Official Receiver. 10 In about March 2021 the Official Receiver provided notice to all of Thai Airways' creditors who had lodged a proof of debt with the Official Receiver informing them that the creditors' meeting to consider and approve the Reorganisation Plan (Creditors' Meeting) was to be held on 12 May 2021. 11 On 12 May 2021 at the Creditors' Meeting a resolution was passed postponing the meeting to consider amendments to the Reorganisation Plan filed by the Planners and some creditors. 12 On 19 May 2021 the Official Receiver held the adjourned Creditors' Meeting. At that time creditors with an aggregated debt amount of 91.56% of the total debt of those creditors who attended the meeting resolved pursuant to s 94/46 of the Thai Bankruptcy Act B.E.2483 (1940) that the Reorganisation Plan and three amendment petitions be approved and that Mr Piyasvasti Amranand, Mr Pornchai Thiraveja, Mr Siri Jirapongphan, Mr Kraisorn Barameeauychai and Mr Chansin Treenuchagron (together, Plan Administrators) be appointed as reorganisation plan administrators of Thai Airways. 13 On 28 May 2021 the Thai Bankruptcy Court considered the Reorganisation Plan, the amendments approved by the Creditors on 19 May 2021 and three objection petitions. On 15 June 2021 the Thai Bankruptcy Court made orders approving the Reorganisation Plan and the amendments approved by the resolution of creditors passed at the adjourned Creditors' Meeting. In approving the Reorganisation Plan the Thai Bankruptcy Court said: The Court made an assessment and believes that the implementation of plan would bring in more income than expenses for the Debtor's business. Therefore, the business reorganization plan demonstrates the opportunity and potential for success. 14 The Reorganisation Plan was in evidence before me. It provides for: (1) two new credit facilities in Baht to be provided by the public sector and the private sector; (2) a capital restructuring in which Thai Airways: (a) reduces its registered capital by means of write-off of approximately 516 million shares; (b) increases its registered capital by means of issuing ordinary shares to class 4 creditors and new credit facility creditors; and (c) in the fourth year after the approval of the Reorganisation Plan, increases the registered share capital in preparation for the debt to equity conversion for class 4, class 5, class 6 and debenture holding creditors; (3) repayment of debts which arose prior to the date on which the Thai Bankruptcy Court approved the Reorganisation Plan (being 15 June 2021) (Pre-Plan Debts) to creditors as follows: (a) the debts of the Export-Import Bank of Thailand and Triumph Aviation Services Asia Company Limited, both secured creditors, are to be repaid in full within two years, which period may be extended up to four years; (b) the debts of unsecured creditors, other than class 13 and class 14 creditors, are to be repaid in full over a period of up to 15 years depending on the class of the debt; and (c) the debts of class 13 and class 14 creditors (respectively creditors from outstanding compensation payable to ticket agents and creditors that place deposits/guarantees for ticket purchase) are to be repaid in full by granting credit to each creditor to be utilised in lieu of cash for the purchase of Thai Airways goods or services; (4) the discharge of Pre-Plan Debts, either on 15 June 2021 or when the relevant creditors receive full payment; (5) to allow for the future determination of contested debts, the repayment of Pre-Plan Debts is subject to any final debt repayment ordered to be made in future by the Official Receiver, the Central Bankruptcy Court, the Court of Appeal for "Specialized Cases" or the Supreme Court; (6) class 16 creditors (being persons eligible to use Royal Orchard Plus Frequent Flyer Miles) to continue to be entitled to use their miles for an extended period. The Planners believe they should not be entitled to receive debt repayment, and their rights will ultimately be determined in the final debt repayment order; (7) sale, disposal, transfer or leasing of non-core assets to third parties; and (8) cash flow from the disposal of assets and debt collection to be applied in the following order: (a) normal operational expenses essential for the business continuity of Thai Airways and expenses associated with the administration of the Reorganisation Plan; (b) capital expenditure to support Thai Airways' operation; (c) debt repayment of principal and interest and expenses relating to the new credit facilities; (d) debt repayment of secured and unsecured creditors in accordance with the criteria and methods determined in cl 5.3 of the Reorganisation Plan; and (e) excess cash to be reserved for payment of normal operating expenses, capital expenditure and debt prepayment.

LEGISLATIVE FRAMEWORK 15 Section 6 of the CBI Act provides that, subject to that Act, the Model Law with the modifications set out in Pt 2 of the CBI Act has the force of law in Australia. 16 Article 2 of the Model Law defines a number of terms used in the Model Law including relevantly at (d) "foreign representative" to mean "a person or body, including one appointed on an interim basis, authorised in a foreign proceeding to administer the reorganisation or the liquidation of the debtor's assets or affairs or to act as a representative of the foreign proceeding". 17 Article 15 of the Model Law relevantly provides: 1. A foreign representative may apply to the court for recognition of the foreign proceeding in which the foreign representative has been appointed. 18 Article 17 of the Model Law relevantly provides: 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. … 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 Article 18 of the Model Law obliges a foreign representative to inform the Court promptly of "any substantial change in the status of the recognised foreign proceeding or the status of a foreign representative's appointment" and "any other foreign proceeding regarding the same debtor that becomes known to the foreign representative". 20 Article 20, as modified by s 16 of the CBI Act, relevantly provides: 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. 2. The scope, and the modification or termination, of the stay and suspension referred to in paragraph 1 of the present article are subject to [Chapter 5 (other than Parts 5.2 and 5.4A) of the Corporations Act 2001]. 21 Article 21 relevantly provides: 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; (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; (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; (f) Extending relief granted under paragraph 1 of article 19; (g) Granting any additional relief that may be available to [a trustee (within the meaning of subsection 5(1) of the Bankruptcy Act 1966 (Cth)) or a registered liquidator (within the meaning of section 9 of the Corporations Act 2001 (Cth)) under the laws of this State].

CONSIDERATION 22 Two questions arose for consideration: first whether the Plan Administrators should be recognised as foreign representatives within the meaning of Art 2(d) of the Model Law in place of the New Foreign Representatives; and secondly, whether there was any consequence to this proceeding as a result of the recognition of the Reorganisation Plan and, in particular, whether any variation was required to be made to Order 7 of the Orders made by the Court on 3 August 2020 in relation to the scope, and the modification or termination, of the stay and suspension referred to in Art 20(1)(a) of the Model Law in relation to Thai Airways. 23 I address each of those matters in turn.

The replacement of the Current Foreign Representatives 24 The orders sought were to facilitate the replacement of the Current Foreign Representatives with the Plan Administrators, both as plaintiffs in the proceeding and as foreign representatives of Thai Airways for the purpose of Art 2(d) of the Model Law. 25 Based on the evidence before me the effect of the Thai Bankruptcy Court's approval of the Reorganisation Plan on 15 June 2021 was that: (1) the Thai Bankruptcy Court approved the appointment of the Plan Administrators; (2) as a consequence all rights and duties of the Planners are now vested in the Plan Administrators; and (3) the Plan Administrators have been fully and properly authorised under Thai law to act on behalf of Thai Airways as its representatives, among other things, to pursue steps relating to the recognition of the Reorganisation Plan in this proceeding. 26 I accepted the Current Foreign Representatives' submission that the effect of the Thai Bankruptcy Court's approval of the reorganisation Plan is that the Plan Administrators satisfy the definition of "foreign representatives" in Art 2(d) of the Model Law (see [16] above). They are persons authorised in the proceeding before the Thai Bankruptcy Court to administer the reorganisation of Thai Airways' assets or affairs or, importantly, to act as a representative of the foreign proceeding. 27 In Thai Airways (No 2) I considered the effect of the appointment of the Current Foreign Representatives to Thai Airways and made orders including an order recognising them as the foreign representatives of Thai Airways within the meaning of Art 2(d) of the Model Law. In doing so at [13] I said: I accepted the Former Foreign Representatives' submission that, having regard to the framework of the Model Law and, in particular, given the context provided by Arts 2(d), 15, 17(4) and 18, the relief which the Court can grant under Art 21(1) extends to relief recognising a change in foreign representatives. Such relief is necessary to protect the interests of creditors in circumstances where, as in this case, the Former Foreign Representatives, who were recognised by the orders made on 3 August 2020, no longer have the power to act on behalf of Thai Airways in Australia. 28 For the same reasons it was appropriate for the Court to make orders recognising the Plan Administrators as the foreign representatives within the meaning of Art 2(d) of the Model Law and recognising Air Chief Marshal Didyasarin as having ceased to be a foreign representative of Thai Airways within the meaning of that Article nunc pro tunc from 15 June 2021, being the date on which the Thai Bankruptcy Court approved the Reorganisation Plan.

Does the approval of the Reorganisation Plan have any effect on this proceeding 29 The second question which arose was whether the approval by the Thai Bankruptcy Court of the Reorganisation Plan had any effect on this proceeding particularly insofar as the operation of the stay under Art 20(1)(a) of the Model Law was concerned. That was a matter properly brought to the Court's attention by the Current Foreign Representatives given the approval by the Thai Bankruptcy Court of the Reorganisation Plan. 30 Based on the evidence before me and submissions made on behalf of the Current Foreign Representatives I was satisfied that no modification was required. My reasons for reaching that conclusion follow. 31 Ms Paralee Techajongjintana, a principal partner of Baker & McKenzie Limited in Thailand and the Thai counsel to the Current Foreign Representatives, gave evidence on the application including in relation to the scope of the stay that applied to Thai Airways under Thai law both before and after approval of the Reorganisation Plan. Her evidence can be summarised as follows: (1) the stay that applies to Thai Airways, following approval of the Reorganisation Plan has two sources: the automatic stay in s 90/12 of the Thai Bankruptcy Act (Automatic ‍Stay); and the terms of the Reorganisation Plan. Where there is inconsistency between the terms of s 90/12 and the terms of the Reorganisation Plan, the latter prevail; (2) under the Automatic Stay: (a) creditors are prohibited from, amongst other things, commencing litigation to wind up the affairs of the debtor, revoking licences, commencing a civil case or arbitration concerning a debt incurred before approval of the Reorganisation Plan, enforcing a judgment against the debtor's assets or suspending utility services; (b) secured creditors are prohibited from enforcing their security unless the Thai Bankruptcy Court gives its approval or a period of one year has passed since the date of that court's order accepting the Reorganisation Petition. However, once the Reorganisation Plan is approved, pursuant to s 90/60 of the Thai Bankruptcy Act, the rights of creditors will be governed by the Reorganisation Plan. Ms Techajongjintana explains that cl 6.1 of the Reorganisation Plan prohibits the enforcement of security by secured creditors during the period of debt repayment for creditors; (c) an owner of property which is essential for the operation of the debtor's business under a contract of hire is not permitted to exercise the right to recover the property in possession of the debtor; and (d) a debtor may not dispose of or encumber its property except as necessary for conducting its ordinary business or as otherwise provided by a court order; and (3) certain aspects of the Automatic Stay only apply to Pre-Plan Debts, such as commencing a civil case or arbitration regarding the debtor's assets and enforcing a judgment against the debtor's assets, and certain aspects only apply beyond the Pre-‍Plan Debts, such as commencing proceedings to wind up the affairs of the debtor, revoking licences to undertake various activities or ordering the debtor to cease such activities, commencing a bankruptcy petition against the debtor, enforcing security without the approval of the Thai Bankruptcy Court and suspending utility services. 32 The Automatic Stay continues until the earliest of: (1) the expiration of the period of time fixed for the implementation of the Reorganisation Plan; (2) the date of successful completion of the implementation of the Reorganisation Plan; (3) the date of the Thai Bankruptcy Court's order dismissing the petition or striking the action out of the case list or cancelling the business reorganisation order or cancelling the business reorganisation; or (4) the absolute receivership against the debtor. 33 Under the Reorganisation Plan the business reorganisation of Thai Airways is considered complete upon: (1) registration of the capital increase and receipt of the new facilities in an amount sufficient for business operation; (2) implementation of the Reorganisation Plan without any default for a consecutive period of five years from 15 June 2021; (3) having earnings before interest, tax, depreciation, and amortisation (EBITDA) from operation after deducting cash used for repayment under the aircraft lease agreement, in an average amount not less than 20 billion Baht per annum for two years prior to the successful outcome of the business reorganisation being reported to the court whereby the EBITDA in the latter year shall not be lower than 20 billion Baht; and (4) the appointment of new directors if there is a change in shareholders. 34 Ms Techajongjintana explains that, under cl 10.11 of the Reorganisation Plan, the time fixed for its implementation shall not exceed five years from the date on which the Thai Bankruptcy Court makes an order approving the plan, unless that court grants an order for extension of time in accordance with the provisions of the Thai Bankruptcy Act. Thus, unless the Thai Bankruptcy Court extends time, the Reorganisation Plan will continue until 15 June 2026. The period for implementation of the Plan can be extended by up to two years (or longer if it is apparent that the plan is almost complete) provided the Thai Bankruptcy Court grants an order for extension of time in accordance with the provisions of the Thai Bankruptcy Act. 35 Upon completion of the business reorganisation under the Reorganisation Plan the Plan Administrators are required to file a motion with the Thai Bankruptcy Court and/or the Official Receiver reporting that the plan implementation is complete and requesting the court to issue an order terminating the business reorganisation. 36 As set out above (see [19]) Art 18 of the Model Law requires a foreign representative to inform the Court promptly of any substantial change in the status of the recognised foreign proceeding or the status of the foreign representative's appointment. The UNCITRAL Model Law on Cross Border Insolvency with Guide to Enactment and Interpretation explains at [168]: The purpose of the obligation is to allow the court to modify or terminate the consequences of recognition. As noted above, it is possible that, after the application for recognition or after recognition, changes occur in the foreign proceeding that would have affected the decision on recognition or the relief granted on the basis of recognition, such as termination of the foreign proceeding or conversion from one type of proceeding to another. Subparagraph (a) takes into account the fact that technical modifications in the status of the proceedings or the foreign representative's appointment are frequent, but that only some of those modifications would affect the decision granting relief or the decision recognizing the proceeding; therefore, the provision only calls for information of "substantial" changes. 37 The question that arose for consideration was whether the change that occurred in the Thai Reorganisation Proceeding by reason of the approval of the Reorganisation Plan would cause this Court to modify or terminate the consequences of recognition. In particular, whether there should be a modification or termination of the operation of the stay granted under Art 20(1)(a) of the Model Law upon the recognition of the Thai Reorganisation Proceeding as a foreign main proceeding. 38 Pursuant to Art 20(1)(a) of the Model Law, upon the recognition of a foreign proceeding as a foreign main proceeding, the commencement or continuation of individual actions or individual proceedings against the debtor's assets, rights, obligations or liabilities is stayed. The Court has no discretion in relation to the imposition and scope of the automatic stay which comes into effect pursuant to Art 20 of the Model Law: see Akers v Deputy Commissioner of Taxation (2014) 223 FCR 8 at [55]; Tai-Soo Suk v Hanjin Shipping Co Ltd [2016] FCA 1404 at [45]. As identified at [20] above, pursuant to s 16 of the CBI Act, the scope and modification or termination of the stay under Art 20.1(a) is the same as if the stay arose under Ch 5 (other than Pts 5.2 and 5.4A) of the Corporations Act. 39 Ms Techajongjintana explains that the Thai Bankruptcy Court retains the power to terminate a business reorganisation and the Official Receiver must report to the Thai Bankruptcy Court on the outcome once the Reorganisation Plan is successfully completed or the time limited for implementing the plan expires. I accepted the Current Foreign Representatives' submission that it follows that the Thai Reorganisation Proceeding remains on foot. Accordingly, the stay under Art 20(1)(a) of the Model Law continues in effect following the approval by the Thai Bankruptcy Court of the Reorganisation Plan. 40 Further, for the following reasons, the stay ordered by this Court on 3 August 2020 (being the stay applicable to an Australian voluntary administration) remains the appropriate form of stay and it was not necessary for this Court to alter it: (1) the Thai Reorganisation Proceeding continues to be a "foreign proceeding" within the meaning of Art 2(a) of the Model Law. That is, it is "a collective judicial or administrative proceeding in a foreign State … 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": see also In re Oversight Control Com. of Avánzit 385 B.R. 525 (Bankr. S.D.N.Y. 2008) at 533-535; (2) the Automatic Stay under the Thai Bankruptcy Act continues to apply to Thai Airways; (3) there are additional forms of stay under the Reorganisation Plan that affect both secured and unsecured creditors; (4) the effect of the Automatic Stay and the stay under the Reorganisation Plan are similar to the stay imposed by the Corporations Act in the case of a voluntary administration. They affect both secured and unsecured creditors; (5) the CBI Act and the Model Law do not contemplate the duplication in Australia of the exact terms of the stay in effect in Thailand. Rather, the CBI Act and Model Law mandate the application of the most appropriate equivalent stay known to Australian Law, with the scope and modification or termination of the stay to be subject to the provisions of Ch 5 (other than Pts 5.2 and 5.4A) of the Corporations Act: see Hanjin Shipping at [45]; (6) pursuant to s 90/13 of the Thai Bankruptcy Act a creditor may apply to the Thai Bankruptcy Court for an order amending, varying or cancelling the restriction of their rights under the stay if the restriction of rights of the applicant is not necessary for the business reorganisation or fails to afford sufficient protection to rights of secured creditors. This is similar to s 440D(1) of the Corporations Act which provides: (1) During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except: (a) with the administrator's written consent; or (b) with the leave of the Court and in accordance with such terms (if any) as the Court imposes. (7) given the terms of the Order made on 3 August 2020 an Australian creditor who seeks to bring proceedings in Australia against Thai Airways or its property can seek the consent of the Plan Administrators under s 440D(1)(a) of the Corporations Act such that, if the consent is obtained, proceedings can be brought despite the stay. In addition, creditors can apply to the Court pursuant to s 440(1)(b) of the Corporations Act in respect of any proceedings they wish to bring in Australia; and (8) given the obligation imposed on the Plan Administrator by Art 18 of the Model Law, this Court will remain appraised of the status of the Reorganisation Plan such that it can revisit the form of the stay at a later date if appropriate. 41 Further, it was clear that once the Reorganisation Plan is complete, even if the Plan Administrators are no longer empowered under Thai Law to administer the reorganisation (and hence are no longer the foreign representatives), Thai Airways will be the proper applicant to apply for a discharge of the stay at that time: see Yakushaiji v Kaisha (No 2) [2016] FCA 1277 at [12]-[14].

CONCLUSION 42 For those reasons I made the orders sought by the Current Foreign Representatives. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Markovic.