Kellow, in the matter of Advanced Building & Construction Limited (in liq) v Advanced Building & Construction Limited

DERRINGTON J: 1 By an Originating Application filed on 16 February 2022, the liquidators, Ms Jessica Jane Kellow and Mr Iain Bruce Shephard, sought recognition of a foreign insolvency proceeding under Articles 15 and 17 of the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (the Model Law) as it is incorporated into Australian law by the Cross-Border Insolvency Act 2008 (Cth) (Cross-Border Insolvency Act). Also filed on that day was an interlocutory application seeking orders in relation to the service of and publication of the Originating Application. A further interlocutory application was filed seeking relief under Article 21 of the Model Law (Article 21 interlocutory application) should an order be made on the Originating Application recognising the foreign insolvency proceeding. In support of those applications, reliance was placed on the affidavit of Mr Shephard, sworn on 15 February 2022, which contained the substance of the evidence relevant to the orders which were sought. 2 On 22 February 2022, orders were made on the liquidators' first interlocutory application as to the steps to be undertaken by the liquidators to serve the Originating Application and the Article 21 interlocutory application, together with Mr Shephard's affidavit, on the respondent company, Advanced Building and Construction Limited (in liq) (Advanced Building & Construction), and its creditors. Orders were also made requiring the advertising of the hearing of both applications. 3 When the matter came on for hearing the liquidators sought orders in both applications, although consideration of the Article 21 interlocutory application would occur only if recognition orders were made on the Originating Application.

Background 4 The background to this matter is set out in my reasons of 22 February 2022 in Kellow, in the matter of Advanced Building & Construction Limited (in liq) v Advanced Building & Construction Limited (in liq) [2022] FCA 219 at [1] to [4]. In summary, it is as follows: (a) The plaintiffs are the liquidators of Advanced Building & Construction, a New Zealand registered company and are licensed insolvency practitioners under the Insolvency Practitioners Regulation Act 2019 (NZ), which enables them to undertake corporate liquidations. (b) The business of Advanced Building & Construction was generally concerned with the arrangement of social housing and teaching buildings for Kainga Ora and the New Zealand Ministry for Education in the North Island of New Zealand. (c) On 31 January 2019, it granted a charge over all of its property to GAMOS Services Limited (GAMOS) by way of a general security agreement. (d) By 31 March 2021, GAMOS's charge had become enforceable in respect of the indebtedness of Advanced Building & Construction to it, thereby enabling it to appoint administrators. In that respect, s 239K of the Companies Act 1993 (NZ) (Companies Act) is in substantially similar form to s 36C of the Corporations Act 2001 (Cth) (Corporations Act). (e) On 31 March 2021, Ms Kellow and Mr Shephard of BDO Wellington were appointed administrators by GAMOS pursuant to s 239K of the Companies Act. (f) On 5 August 2021, Ms Kellow and Mr Shephard were appointed as the liquidators of Advanced Building & Construction following a resolution passed by a meeting of creditors on that date. (g) The directors of Advanced Building & Construction are Mr Darryn William Harmer and Mr Patrick Wayne O'Brien, each of whom reside in Brisbane, Australia. (h) In order to conduct proper investigations into the affairs of Advanced Building & Construction, the liquidators wish to publicly examine those directors.

Compliance with service orders 5 On the evidence adduced on the current applications, the liquidators have established compliance with the orders of 22 February 2022 relating to the service of both the Originating Application and the Article 21 interlocutory application. There is no need to set out in these reasons the steps taken in compliance of those orders as are set out in the affidavits of Mr Richard Butler and Mr Bradley Burness, both filed on 18 March 2022. It is sufficient to note that the prescribed steps have been undertaken.

Recognition as a foreign proceeding 6 Turning then to the recognition of the foreign proceeding, it is undoubted that the Model Law has force in Australia pursuant to s 6 of the Cross-Border Insolvency Act. 7 By the Originating Application the liquidators seek recognition of the current liquidation of Advanced Building & Construction which is currently occurring in New Zealand as a "foreign proceeding" pursuant to Article 15(1) and Article 17(1) of the Model Law. By Article 15(1), a foreign representative may apply to an Australian court for such an order in relation to a proceeding in which they have been appointed. 8 Article 17 provides that subject to Article 6, a foreign proceeding shall be recognised if the following are satisfied: (a) The foreign proceeding is one 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 of the Model Law. 9 These elements are regarded as falling into two categories; being procedural criteria and status-based criteria.

Procedural criteria 10 In relation to the procedural criteria, the liquidators must satisfy the procedural requirements of paragraphs 2 and 3 of Article 15 of the Model Law and s 13 of the Cross-Border Insolvency Act as well as paragraph 4 of Article 17 of the Model Law. 11 In relation to paragraph 2 of Article 15, the affidavit of Mr Shephard evidences that the New Zealand liquidation was commenced by resolution passed by the creditors of Advanced Building & Construction. Under s 241(d) of the Companies Act, a liquidator may be appointed by a company, which is under administration in New Zealand by resolution of the company's creditors held under s 239AT of the Companies Act. This is analogous to s 446A(2) of the Corporations Act. 12 It is undoubted that liquidators are licensed insolvency practitioners under the Insolvency Practitioners Regulation Act 2019 (NZ) which enables them to undertake corporate liquidations. 13 In satisfaction of the requirements of paragraph 3 of Article 15 of the Model Law and s 13 of the Cross-Border Insolvency Act, the affidavit of Mr Shephard deposes to the fact that the liquidators are not aware of any of the following: (a) Other "foreign proceedings", as that term is defined in Article 2 of the Model Law, in respect of Advanced Building & Construction. (b) The appointment of any receiver within the meaning of s 416 of the Corporations Act or a controller or managing controller both within the meaning of s 9 of the Corporations Act in relation to the property of Advanced Building & Construction. (c) Any proceedings under Chapter 5 of the Corporations Act, s 601CL of the Corporations Act or Schedule 2 of the Corporations Act in respect of Advanced Building & Construction. 14 It is undoubted that pursuant to s 10 of the Cross-Border Insolvency Act the Federal Court of Australia is the appropriate Court in which this application must be made. This meets the requirement in subparagraph (1)(d) of Article 17.

Status-based criteria 15 Turning to the status-based criteria, a foreign proceeding is defined in Article 2(a) of the Model Law 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 the control or supervision by a foreign Court for the purpose of reorganisation or liquidation. 16 The process by which Advanced Building & Construction was placed in liquidation is analogous to that provided for in the Corporations Act where creditors of a company in voluntary liquidation vote that the company be wound up under s 439C of the Corporations Act. Such a liquidation is referred to in Australia as a "creditors' voluntary winding up". 17 On this application the manner in which Advanced Building & Construction commenced its insolvency and the manner in which it is continuing causes some concern. The issue is whether the voluntary winding up in New Zealand amounts to a foreign proceeding within the meaning of Article 2 of the Model Law. Article 2(a) provides: "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; 18 Despite some slight reservation it should be accepted that a voluntary winding up falls within that definition. It is an administrative proceeding for the purposes of liquidation. Moreover, liquidators conducting such windings up are subject to the control or supervision of the courts. This view is supported by the observations of Judge Gross of the United States Bankruptcy Court in Delaware in Re ABC Learning Centres Limited (2010) 445 BR 381. That case concerned an attempt under the Model Law to have the voluntary winding up of ABC Learning Centres Ltd in Australia recognised as a "foreign proceeding" in the United States of America. His Honour accepted that the process was appropriately categorised as a foreign proceeding under the Model Law as incorporated into Chapter 15 of the US Bankruptcy Code. He held that it was a collective judicial or administrative proceeding in which the assets and affairs of the debtor are subject to the control or supervision by a foreign Court. His Honour's reasoning included the following at [7]: The Australian Court's control and supervisory role continues in the Liquidation Proceedings, as provided for by numerous sections of the Corporations Act. Martin Decl. at 12-14; Tr. 6/24 at 77-80 (Hedge). Sections 482-489 provide that a court may terminate the liquidation, require property to be delivered to the liquidator, appoint a special manager on request of the liquidator, fix a claims bar date, and issue arrest warrants. An Australian court can remove a liquidator from his or her position for cause and appoint another liquidator. Id. at s 503. Under s 536 of the Corporations Act, if it appears to a court that the actions of a liquidator are in derogation of the Act, the court "may take such action as it thinks fit." In re Betcorp, 400 B.R. at 284 (quoting Cresvale Far East (in liq) v. Cresvale Sec. Ltd, (2001) 39 A.C.S.R. 622, ¶ 63, 2001 WL 1353240 (Austl.) ("In a voluntary winding up, the appointment of the liquidator is consensual but a liquidator's duties and powers are prescribed by the Corporations Act, and there are elements of supervision by the Court.")). Furthermore, numerous provisions allow interested parties to seek relief from the court. Section 1321 of the Corporations Act provides that "a person aggrieved by any act, omission or decision of ... a liquidator" may appeal to an Australian court and the court "may confirm, reverse or modify the act or decision, or remedy the omission, as the case may be, and make such orders and give such directions as it thinks fit." Section 511 of the Corporations Act allows both liquidators and creditors to request a court to determine "any question arising in the winding up of a company." A creditor can file an application with the Australian court to review the decisions of a liquidator. Corporations Act s 536. A creditor can also require the liquidator to hold a creditor formation meeting and, in the event that the liquidator refuses to hold such a meeting, the liquidator's decision is immediately reviewable by an Australian court. Id. at ss 548-52. 19 That decision was upheld on appeal in Re ABC Learning Centres Limited 728 F (3d) 301 (3rd Circuit, 27 August 2013). 20 On this application the liquidators submitted that the liquidation of Advanced Building & Construction following a voluntary administration in New Zealand, even if treated as a voluntary winding up, is similarly a foreign proceeding because the process is ultimately subject to the supervision and control of the courts. This should be accepted. As was identified by Associate Judge Osbourne in Adams Plumbing and Drainage (2010) Ltd v Hartland Construction Ltd [2012] NZHC 1095 at [8]-[12], s 239ADO of the Companies Act, which is similar to s 447A of the Corporations Act, gave the New Zealand Courts broad and expansive power over the conduct of windings up including voluntary windings up. That view was approved of by Katz J in Re Gourmet Food Holdings New Zealand Ltd [2012] NZHC 3606 [11]. For that reason the voluntary winding up in New Zealand was sufficiently subject to the control or supervision by the Courts in that jurisdiction. 21 It follows that the New Zealand voluntary winding up satisfies the definition of a "foreign proceeding" within the meaning of Article 2 of the Model Law. Such an approach is consistent with giving the Model Law and the Cross-Border Insolvency Act a construction by which it might achieve its objects. 22 Turning then to the nature of foreign representatives. That expression is defined in Article 2(d) of the Model Law as a personal 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. In this case it is undoubted that the liquidators of Advanced Building & Construction are foreign representatives of the foreign proceeding.

Recognition of the voluntary winding up in New Zealand as a foreign proceeding 23 From the foregoing, it is apparent that the liquidators have satisfied the requirements of the Model Law for recognition of the winding up which they are conducting as a "foreign proceeding" within the meaning of Article 2. 24 It should be noted that under Article 17 of the Model Law, the recognition of a foreign proceeding is always subject to the Court's discretion to refuse it if it would be manifestly contrary to public policy. There is, however, in this case no public policy reason which would prevent the Court from recognising the liquidation of Advanced Building & Construction as a foreign proceeding, and it is appropriate to make an order to that effect.

Recognition of the foreign proceeding as a "foreign main proceeding" 25 It is now appropriate to turn to the question of whether the New Zealand voluntary winding up should be recognised as a "foreign main proceeding" pursuant to paragraph 2(a) of Article 17. That subparagraph provides: 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; 26 That coincides with the definition of a "foreign main proceeding" in Article 2(b) which provides that it means, "a foreign proceeding taking place in the State where the debtor has the centre of its main interests". 27 Paragraph 3 of Article 16 provides that, in the absence of proof to the contrary, the debtor's registered office or habitual residence in the case of an individual is presumed to be the centre of the debtor's main interest. The concept of a centre of main interest, or "COMI" as it is sometimes known, is not defined in the Model Law, but it has been judicially considered on numerous occasions. Those authorities emphasise that a "centre of main interests" must be identified by reference to criteria that are both objective and ascertainable by third parties, and, further, that it is to be undertaken by reference to the state of affairs at the time that the court is considering the application for recognition. Whilst that latter proposition should be accepted, I have previously expressed concern about whether it fully reflects the state of the law. Nevertheless, for present purposes, it is sufficient to proceed on that basis. 28 In the present proceedings, Mr Shephard has deposed to a number of matters which identify that the centre of main interest of Advanced Building & Construction is in Wellington, New Zealand. They are, as follows: (a) Its registered office is in Wellington, New Zealand. That of itself might satisfy paragraph 3 of Article 16; (b) Its operations were conducted in the North Island of New Zealand. Its two main customers were government departments being Kainga Ora, formerly known as Housing New Zealand, for which it constructed social housing, and the New Zealand Ministry of Education, for which it constructed teaching buildings; and (c) Its principal last known place of business at the time it went into voluntary administration was in Lower Hutt in the North Island of New Zealand. 29 Further, as is evidenced by the material presented on these applications, the email addresses of the creditors of Advanced Building & Construction indicate that they are generally located in New Zealand, or have a presence there. Although the directors of Advanced Building & Construction reside in Australia, since the appointment of the liquidators in their capacity as administrators on 1 September 2020, it is they who have been in control of the company with the result that its controlling mind has remained located in New Zealand. 30 The applicants have established that the centre of main interests of Advanced Building & Construction is in New Zealand, with the consequence that it is appropriate to order that proceedings be recognised as a "foreign main proceeding" within Article 2(b) of the Model Law.

Service and publication of order for recognition 31 It is now necessary to consider the appropriate orders to make in relation to the service and publication of the order recognising the winding up in New Zealand as a foreign main proceeding. 32 By r 15A.7 of the Federal Court (Corporations) Rules 2000 (Cth) (Rules), it is provided that if a Court makes an order for the recognition of a company's liquidation under Article 17 of the Model Law, the insolvency practitioners who have control of it must, as soon as practical after the order the order is made: (a) have the order entered; (b) serve a copy of the entered order on the defendant; (c) send a notice of the making of the order in accordance with Form 21 to each person whose claim to be a creditor of the defendant is known to those in control; and (d) publish a notice of the making of an order in accordance with Form 21 in a daily newspaper circulating generally in the State or Territory where the defendant has its principal or last known place of business. 33 The liquidators submitted that there would be no utility in serving a copy of the order on Advanced Building & Construction because, as they are in control of it, it would effectively mean serving the document on themselves. That should be accepted and an order should be made excusing them from compliance with the requirements of r 15A.7 in this respect. 34 The liquidators also sought specific directions as to the service of the orders made on the current applications on the directors of Advanced Building & Construction which was, in broad terms, to stand in lieu of service on the company and give notice to those most affected by them. In the circumstances of this case it is appropriate that the directors be served and, further, that they be served in accordance with the orders previously made concerning the service of these proceedings on them. That is, by pre-paid post and by electronic mail. 35 In relation to paragraph (d) above an issue arose as to the identity of the newspaper in which the notice of the orders made should be published. Mr Shephard has deposed that the newspaper circulating generally where Advanced Building & Construction had its principal or last known place of business, being Lower Hutt, is the Dominion Post, which is distributed throughout the lower North Island of New Zealand. He also deposed that the required notifications could also be made in the New Zealand Herald, which is distributed nationally. On that evidence, r 15A.7 would be satisfied if notification of the making of the order was made in each of those publications.

The Article 21 interlocutory application 36 The liquidators also seek the relief in the Article 21 interlocutory application, consequent upon the proceedings being recognised as a foreign main proceeding. That application was ordered to be served and listed for hearing on the same date and time as the Originating Application. As mentioned above, as evidenced by the affidavit evidence filed by the liquidators, service of the Article 21 interlocutory application was effected in accordance with those orders. 37 By the Article 21 interlocutory application the orders sought are of a type which are regularly granted on interlocutory applications by foreign insolvency practitioners once recognition of the foreign proceedings has occurred. They include orders preventing the commencement, continuation or enforcement of actions or proceedings against Advanced Building & Construction, preventing the enforcement or execution of any judgment against it, and preventing the transferring, encumbering or otherwise disposition of the company's property to the same extent as if such a stay or suspension arose under a liquidation of the company under the Corporations Act. There is no reason why such orders should not be made in this case and they are to have effect save to the extent of any leave of the Court or the consent of the liquidators. 38 Other orders sought are that the administration, realisation and distribution of the defendant's assets located in Australia be entrusted to the liquidators. Again, they are appropriate in this case. The liquidators are authorised to conduct parallel proceedings in New Zealand and, in accordance with the proper approach of assisting foreign Courts and foreign liquidations, it is correct and convenient to make those orders as well. 39 Similarly, the Court should make orders under Article 21(1)(g) of the Model Law to the effect that all powers normally available to a liquidator appointed under the provisions of the Corporations Act be conferred on and exercisable by the liquidators in relation to Advanced Building & Construction. This will facilitate the conduct of the liquidation in Australia and reduce the costs involved in having agents undertake any required work. 40 Further and importantly, the liquidators seek orders pursuant to Article 21(1)(d) of the Model Law enabling them, as they deem appropriate, to examine witnesses, take evidence and obtain delivery of information concerning the defendant's assets, affairs, rights, obligations or liabilities. There is, with respect, no reason why these orders should not be made. They will equip the liquidators with appropriate powers to further the administration of the affairs of Advanced Building & Construction in this country. Although such orders are broad, they are reasonably necessary to cover the myriad of circumstances which the liquidators might encounter in the course of the administration. 41 The making of the foregoing orders will give effect to the intentions and purpose of the Model Laws to facilitate the efficient administration of the foreign insolvency. I note that in Wong (Trustee), in the matter of Mackellar (Bankrupt) v Mackellar [2020] FCA 1151, I made similar orders and considered their appropriateness as follows: 63 In the consideration of determining which additional powers ought to be granted to the trustees it is important to keep in mind that the general approach should be consistent with that identified in Re ABC Learning Centres Ltd 728 F (3d) 301 at 306 (3rd Circuit, 27 August 2013) (cited with approval by Allsop CJ in Akers v Deputy Commissioner of Taxation (2014) 223 FCR 8, 35 [112]): The Model Law reflects a universalism approach to transnational insolvency. It treats the multinational bankruptcy as a single process in the foreign main proceeding, with other courts assisting in that single proceeding. In contrast, under a territorialism approach a debtor must initiate insolvency actions in each country where its property is found. This approach is the so-called "grab rule" where each country seizes assets and distributes them according to each country's insolvency proceedings. 64 In essence, the Courts should avoid territorialism in favour of providing the maximum assistance to the foreign court conducting the main proceeding such that, in applications such as this the Court acts "as an adjunct or arm of the foreign bankruptcy court where the main proceeding is conducted": Re ABC Learning Centres Ltd at 306; Aquino v McGowan [64]. 42 I also note that the granting of relief under Article 21 at the same time as the hearing of the recognition order is not unusual and it has been allowed in a number of cases. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington.