D L Williams SC and C D Wood (Wollongong Coal Limited & Wongawilli Coal Pty Limited)
G McDonald (Gujarat NRE Coke Limited, on application to vacate hearing)
HIS HONOUR: There are two matters listed for hearing today. In one, Wollongong Coal Ltd and Wongawilli Coal Pty Ltd sue Gujarat NRE Coke Limited to recover approximately US$55.4 million said to be due for coal sold and delivered but not paid for. In the other proceeding, Gujarat Coke (as I shall call it) sues Wollongong Coal and Wongawilli Coal (the coal companies, as I shall call them) for what is said to be commission payable on guarantees of debt given by Gujarat Coke to the lenders to the coal companies.
Gujarat Coke was at the relevant times the parent company of a group of companies including the coal companies. Gujarat Coke required large and guaranteed supplies of coal for its coke and steel activities in India. Effectively, it tied up the coal companies' output for that purpose.
In the claim for unpaid coal, the sale and delivery of the coal and other relevant matters (including non payment) are effectively admitted on the pleadings. Gujarat Coke raises a number of issues. One is whether, either as a term of the master agreement that it made with each of the coal companies or as an implied term of various sale contracts, it is entitled to make any further adjustment to the agreed price on the ground that the coal sold and delivered was unwashed, that is to say not free of earth and other impurities. Other issues are whether that is established by some form of estoppel, and as to whether the "yield" or other characteristics of the coal have any bearing on the unwashed coal adjustment. Clearly enough they are all issues in respect of which Gujarat Coke bears the burden of proof.
In relation to the guarantee proceeding, it is common ground that the coal companies were obliged to pay a guarantee fee. They say that it was payable at the rate of 1% of the amounts guaranteed and that the appropriate amounts have been paid or allowed for. Gujarat Coke says that the amount of the guarantee was increased first to 2% and later to 3%, it would appear in each case with some retrospective effect. Clearly enough, that is a matter on which Gujarat Coke would bear the onus of proof.
The matters have been fixed for hearing for ten days commencing today. The parties complied with the usual order for hearing in that the Court Book was prepared and delivered and each party delivered, more or less on time, their opening submissions, statements of issues and other documents required to be provided. Thus, until the events I am about to mention, it was proper to assume that the matter would proceed to hearing.
However, on Thursday last, 23 March 2017, Mr Gillard, solicitor, notified the other parties and my Associate that the solicitor who hitherto had been appointed to represent Gujarat Coke had had his instructions withdrawn (and with that the instructions of senior and junior counsel who had been briefed). Mr Gillard said that he was instructed for the limited basis of seeking vacation of the hearing date. He provided a notice of motion (which may be taken as filed) and his own affidavit of 23 March 2017 (which likewise may be taken as filed).
In essence, the basis of the application is that on Tuesday 21 March 2017, the directors of Gujarat Coke passed resolutions relating to the future of that company. In terms, the directors resolved that Gujarat Coke should file an "application for initiating corporate insolvency resolution process" with an "Adjudicating Authority" appointed under a law of India. The law of India in question is the Insolvency and Bankruptcy Code 2016. The procedure under that Code appears to bear some resemblance to proceedings in this country by way of voluntary administration.
The evidence on the application for vacation of the date suggests that Gujarat Coke has very substantial debts outstanding. It would appear to owe of the order of $80 million under judgments or arbitral awards, and a further amount of more than $20 million claimed by the coal companies' parent company, Jindal Steel and Power Limited. Jindal (as I shall call it), has served a demand for payment of amounts due under various awards, and it is at least likely that in reality Gujarat Coke will have very little defence.
In addition, according to Mr Gillard's affidavit, Gujarat Coke has debts to its lenders of the order of $640 million.
As I have indicated, the amounts claimed by the coal companies are substantial. Certainly, if judgments are recovered (with interest), the effect will be to go close to doubling the amount apparently owing already under judgments of other courts and under arbitral awards.
The principal witness for Gujarat Coke, in relation to the issues that I have indicated, is its chairman and managing director, Mr Arun Jagatramka. He appears to have been the person on behalf of Gujarat who had very substantial responsibility for dealing with its relationship with its suppliers, the coal companies. His affidavits are extensive and it is expected that his cross examination could take two days.
In brief, Mr Gillard's affidavit in support of the motion to vacate the date asserts, on information and belief, that the process under the Insolvency and Bankruptcy Code will require the personal intervention of Mr Jagatramka for a number of reasons, including dealing with the National Company Law Tribunal, and the Interim Resolution Professional who may be appointed under the Insolvency and Bankruptcy Code, the stock exchanges and the external lenders. That affidavit asserts, further, that Mr Jagatramka has already had meetings with a number of those bodies. If I may say so, it is hardly surprising that he would be required to deal with bodies such as those I have mentioned, having regard to the actions that Gujarat Coke has taken.
The affidavit then says, in a conclusory way, that as "a consequence" of those matters, the deponent "does not anticipate it will be possible for Mr Jagatramka to be available as a witness ... on the dates for which [the proceedings] are set down for hearing".
The process under the Insolvency and Bankruptcy Code needs some consideration. The starting point is found in s 10(1). Where a corporate debtor has committed a default (and there is no doubt that Gujarat Coke is a corporate debtor that has committed a default), a corporate applicant (which may be the corporate debtor itself), may file an application to initiate corporate insolvency resolution process. That application is to be filed with the Adjudicating Authority. The Adjudicating Authority has some 14 days to admit or reject the application, but appears to be obliged to admit the application if it is complete (see s 10(4)). The corporate insolvency resolution process commences from the date of admission of the application (s 10(5)).
There is then a process whereby an Interim Resolution Professional is appointed. That person convenes a meeting of creditors. If the meeting of creditors agrees, the person becomes the Resolution Professional. If it does not agree, then as I understand it a process akin to liquidation follows. Both in the interim period and after appointment, the Interim Resolution Professional (or Resolution Professional if he or she becomes such), has in effect the full management and control of the company, and the ability to require reports from its officers and managers.
The Insolvency and Bankruptcy Code also provides (s 13(1)), that the Adjudicating Authority shall declare a moratorium if it admits the application. Again, that would appear to be compulsory. By s 14(1), one of the effects of the proclamation of the moratorium is that it prohibits the institution or constitution of proceedings, including the execution of any judgment decree or order of any court of law etc. The obvious intention is that the administration of the company's debts and other obligations is to be managed by the Resolution Professional under the provisions of the Insolvency and Bankruptcy Code.
It is also necessary to note s 19, which provides that the personnel of the corporate debtor are to provide assistance to the Interim Resolution Professional, and if they do not do so, may be ordered to do so by the adjudicating authority. Presumably (although I was not taken to it, and do not intend to read over 100 or so pages of print to find it), there is a provision to enforce that order if the personnel do not cooperate.
There are therefore two competing considerations. One is that the coal companies have prepared their case for hearing, and have (I may safely infer) incurred very substantial expense in doing so. If the matter does not proceed to hearing, that expense will effectively be wasted. Even if a costs order is made, it is unlikely in the extreme that it will be productive of any actual monetary recompense, having regard to the scale of Gujarat Coke's liabilities that the evidence discloses.
On the other hand, if I do not vacate the date, I would be running the risk of interfering with the orderly administration of the affairs of Gujarat Coke under the Insolvency and Bankruptcy Code.
The solution is not easy to find. There is no doubt that I could proceed with the hearing. UCPR r 29.7 expressly deals with the procedure to be followed if a party is absent. In this case, if I decide to proceed, Mr McDonald of Counsel (who appeared on the instructions of Mr Gillard for the limited purpose of seeking vacation of the date) would withdraw, and the hearing of both matters would proceed in the absence of Gujarat Coke.
That rule provides as follows:
29.7 Procedure to be followed if party is absent
(cf SCR Part 5, rule 9, Part 13, rule 5A, Part 34, rule 5; DCR Part 26, rule 5A; LCR Part 21, rule 2)
(1) This rule applies when a trial is called on.
(2) If any party is absent, the court:
(a) may proceed with the trial generally or so far as concerns any claim for relief in the proceedings, or
(b) may adjourn the trial.
(3) If, in relation to a liquidated claim, the plaintiff appears, but a defendant does not appear, the court may, without proceeding to trial, give judgment against that defendant on evidence of:
(a) the amount then due to the plaintiff in respect of the cause of action for which the proceedings were commenced, and
(b) any payments made or credits accrued since the commencement of the proceedings in reduction of the amount of the plaintiff's claim or costs.
(4) If, in relation to any proceedings, the defendant appears, but the plaintiff does not appear, the court may dismiss the proceedings.
(5) Subrules (3) and (4) do not limit the court's powers under subrule (2).
It is at least likely, bearing in mind the admissions on the pleadings and the fact that the defensive issues are in substance those on which Gujarat Coke bears the onus of proof (on the coal companies' claims) that there would be a judgment given in favour of the coal companies. It is also likely, in respect of the action by Gujarat Coke, that the guarantee proceedings would be dismissed.
Of course, that would not be the end of the matter. In the circumstances hypothetically under consideration, it would be open to Gujarat Coke to make an application under r 36.16(2)(b). Rule 36.16(2) provides:
36.16 Further power to set aside or vary judgment or order
(cf SCR Part 40, rule 9)
(2) The court may set aside or vary a judgment or order after it has been entered if:
(a) it is a default judgment (other than a default judgment given in open court), or
(b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or
(c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order.
Whether or not Gujarat Coke would make such an application, and what might happen to the application bearing in mind the particular circumstances in which it would (hypothetically) be made, are questions on which I neither can nor should venture an opinion.
Mr Williams of Senior Counsel, who appeared with Mr Wood of Counsel for the coal companies, submitted that there was real utility in proceeding with the hearing of his clients' actions. First, he submitted, they would get the benefit (assuming of course they were to succeed) of the very substantial legal costs that they have incurred. Next, he submitted, on the assumption that they did succeed, they would have the benefit of a judgment of a court of competent jurisdiction which they could submit to the Interim Resolution Professional (or to the Resolution Professional, if such becomes the case) in support of their proof of debt.
I accept of course that the Resolution Professional might wish to go behind the judgment of the court, either in relation to the (hypothetical) judgment in favour of those companies or in relation to the (hypothetical) dismissal of Gujarat Coke's action. Whether or not that would happen (indeed, whether or not the laws of India permit it) is something again that should not be the topic of speculation on my part.
Mr Williams referred also to associated proceedings that are part heard before Robb J. They are proceedings in which Gujarat NRE India Pty Ltd is plaintiff and Wollongong Coal is defendant. One of the bases on which Wollongong Coal defends the claim brought by Gujarat India (as I shall call it) is that by virtue of the corporate relationship that had hitherto existed between Gujarat Coke and Gujarat India, Wollongong Coal is entitled to set off against any amount that may be found payable to Gujarat India any amount that may be owing to it by Gujarat Coke (as established by a judgment in these proceedings).
Mr McDonald said that although Gujarat India was no longer a subsidiary of Gujarat Coke, it was nonetheless prepared to undertake not to relist the part heard matter before the insolvency regime in India has been worked through. Whether or not Robb J would accept that is something on which, yet again, I should not venture an opinion.
It seems to me that what might be called balance of convenience considerations are very much in favour of proceeding with the hearing of the two actions. I say that because the coal companies have prepared their case for hearing and it is ready to run. If they do not have their case proceed to hearing and judgment, the costs that they have incurred to date will be wasted.
It may perhaps be open to doubt whether the result of any judgment in their favour would have the effect for which they contend in the insolvency process in India. Whether or not it does, it would be at least a starting point, and may avert the need (and expense) for them to press their claim in the insolvency under whatever proof of debt process may apply.
As against that, there is the fact that Mr Jagatramka undoubtedly will be required to deal with a large number of matters, following the institution of the corporate insolvency resolution process. I have no doubt that he will be a very busy man. Having said that it has not been explained why, in the course of the next ten days, he could not find time to make himself available in Sydney to give evidence. As I have said, the evidence, given on information and belief, is relatively scanty as to what he is required to do and conclusory in the extreme as to why it is that whatever he is required to do will make it impossible for him "to be available as a witness" over that timeframe.
Mr Williams assailed the evidence on the basis that it was given on information and belief. I am not sure that this has anything to do with the matter. Had the affidavit been prepared for Mr Jagatramka to swear (with appropriate amendments), but with more information in it, it would not be any more probative simply because he put his name to it.
Balancing the considerations as best I can, an important matter to take into account is that if I do decide to proceed with the hearing, Gujarat Coke will not be shut out forever. First, it would have the right to make an application under r 36.16(2). Second, and in any event, the consideration of any judgment that the coal companies may recover would fall to be considered by the Interim or final Resolution Professional on the basis of the proof of debt process that, as I understand it, applies under the Insolvency & Bankruptcy Code.
In those circumstances, it seems to me, there is utility in proceeding with the hearing. It may afford some assistance to the Interim or final Resolution Professional to know how a court of competent jurisdiction, administering the proper law of the contract, viewed the claims brought by the coal companies against Gujarat Coke. Of course, that professional will not have the benefit (such as it may be) of this court's view of the merits of the claim brought by Gujarat Coke against those companies. That however is a matter that Gujarat Coke can press, and the professional can decide as seems to him or her to be appropriate.
I do take into account the fact that the insolvency resolution process has not yet commenced, because the Adjudicating Authority has not (so far as the evidence goes) decided to admit the application. It has 14 days to do so and those 14 days will I think expire in about ten days' time, on 5 April 2017. Thus, in a sense, I am being asked to proceed on the basis that it is at least likely that the process will be initiated, not on the basis that it has been initiated.
I take into account, further, that if I proceed with the hearings and give judgment in favour of the coal companies, and assuming that the insolvency resolution process is initiated, the adjudicating authority will declare a moratorium under s 13 of the Insolvency & Bankruptcy Code which will have the effect, among other things, of staying execution of that judgment, having regard to the provisions of s 14 of that Code. In those circumstances, it seems to me, the protection of the Code can be assured, although not perhaps by a means as direct as might otherwise have been the case.
I take into account, also, that if the corporate insolvency resolution process had been initiated, the Cross-Border Insolvency Act 2008 (Cth) would have some significance, and the Interim or final Resolution Professional would be able to make application under Article 15 of the Model Law that has effect by virtue of s 6 of the Cross-Border Insolvency Act.
However, at present, because the process has not been initiated, there is no foreign representative (see the definition in Article 2), who is in a position to make that application. Conversely, once the insolvency resolution process is initiated, then as I understand it the Interim Resolution Professional would be able to make application under Article 15 of the Model Law for recognition of the process. What would follow from that is, yet again, something on which I should not speculate.
In all the circumstances, I conclude, taking into account the requirements of s 56 of the Civil Procedure Act 2005 (NSW), that the balancing exercise to which I have referred requires that I should dismiss the application for vacation of the date and that I should proceed with the hearing of the actions. I recognise that in the circumstances that will mean first, that only the actions by the coal companies are heard on their merits and second, that they will proceed effectively ex parte.
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Decision last updated: 10 April 2017