Laverty v Greensill Capital

A. Introduction 1 The plaintiffs, Ms Christine Mary Laverty, Mr William George Edward Stagg and Mr Russell Edward Simpson (Administrators) are the administrators of the defendant, Greensill Capital (UK) Limited (in administration) (GCUK). 2 By an originating process filed on 6 June 2023, the Administrators seek the recognition of the English law administration of GCUK as a foreign main proceeding under the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (Model Law), being Sch 1 to the Cross-Border Insolvency Act 2008 (Cth) (Act), and s 6 of the Act. 3 The Administrators rely on affidavits from: (a) Ms Christine Mary Laverty affirmed on 5 June 2023; (b) Ms Katrina Mary Buckley affirmed on 1 June 2023; (c) Ms Christine Mary Laverty affirmed on 21 June 2023; and (d) Ms Leanne Gay Meyer affirmed on 26 June 2023.

B. Background 4 GCUK is a private limited company incorporated and registered under the laws of England and Wales, with its registered office located in Manchester, England. GCUK is a wholly-owned subsidiary of Greensill Capital Pty Limited (GCPL), an Australian corporation that is now in liquidation. 5 GCUK was principally in the business of arranging supply chain and other working capital finance for its customers. Generally, it would do so by acquiring payment obligations and related rights and on-selling such assets to investors, either directly or in the form of receivables-backed notes issued by special purpose vehicles. 6 The Australian assets of GCUK are primarily outstanding claims against Australian-based obligors. 7 The administration of GCUK commenced on 8 March 2021 (English Proceeding). By an order on that date of the High Court of Justice, Business and Property Courts of England and Wales, Insolvency and Companies List (English Court), Ms Laverty, Mr Stagg and Mr Trevor Patrick O'Sullivan (Original Administrators) were appointed as administrators of GCUK (Appointment Order). Mr O'Sullivan has since been replaced as one of the administrators by Mr Simpson by an order of the English Court (Replacement Order). 8 The English Proceeding has been extended on two occasions, and is currently due to end on 7 March 2025. The question of whether or not, prior to that time, the Administrators will seek to further extend the administration, or whether GCUK will transition to a creditors' voluntary liquidation, has not yet been resolved and will depend upon developments in the interim. 9 Since being appointed, the Administrators have sought to manage the affairs, business, and property of GCUK in order to achieve an orderly wind-down and facilitate the recovery of assets for the benefit of creditors. In addition to realising the assets of GCUK, the Administrators are maintaining relevant operations and systems for asset recovery to facilitate recoveries from obligors and under trade credit insurance policies for the benefit of investors. 10 Ms Buckley, an English solicitor and partner of Allen & Overy, gives evidence of English law and the administration regime created by Sch B1 to the Insolvency Act 1986 (UK) (Insolvency Act). Ms Buckley has considerable experience in corporate restructuring and insolvency. She gives evidence of: (a) the manner of commencement (including by the English Court) and termination of an English administration; (b) the effect of an administration, including the commencement of a statutory moratorium on enforcement against the company and its property, and on the commencement or continuation of legal proceedings against the Company, which Ms Buckley equates with the statutory moratoria which arise under s 440B, s 440D and s 440F in Pt 5.3A of the Corporations Act 2001 (Cth) (Corporations Act); (c) the nature of the administrator's duties, including that administrators are officers of the Court and their duties are owed to creditors as a whole; (d) the purpose of an administration, namely; (i) to rescue the company as a going concern; (ii) achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration); or (iii) realising property in order to make distributions to one or more preferential creditors, and the way in which an administrator's functions must be performed in order to achieve the various objectives; and (e) that the conduct of administrators is subject to the supervision of the English Court.

C.1. Overview 11 The Administrators seek orders under Art 17 of the Model Law recognizing the English Proceeding as a "foreign proceeding" and a "foreign main proceeding" and ancillary relief. 12 The English Proceeding was recognised as a "foreign main proceeding" in the United States on 10 September 2021 by the United States Bankruptcy Court Southern District of New York. 13 In order to obtain recognition of a foreign proceeding, an applicant must satisfy the criteria set out in the Act, the Model Law and in Div 15A of the Federal Court (Corporations) Rules 2000 (Cth) (Corporations Rules). The criteria are "procedural" and "status-based": Kellow, in the matter of Advanced Building & Construction Limited (in liq) v Advanced Building & Construction Limited (in liq) (No 2) [2022] FCA 781 at [9]-[22] (Derrington J). 14 If the procedural and status-based criteria are established, then the foreign proceeding must be recognised unless recognition would be manifestly contrary to the public policy of Australia: Kapila, in the matter of Edelsten [2014] FCA 1112 at [22] (Beach J); Abate, in his capacity as Liquidator of Onix Capital SA [2017] FCA 751 at [19] (Gleeson J). 15 As is addressed below, I am satisfied that all of those criteria are satisfied.

C.2. Procedural criteria 16 The procedural criteria are those specified in Art 15(2), Art 15(3) and Art 17(4) of the Model Law and s 13 of the Act: Kellow at [10]. 17 Art 17(1)(c) of the Model Law provides that a foreign proceeding will be recognised if, inter alia, the application meets the requirements of Art 15(2). 18 Art 15(2) of the Model Law relevantly requires an application for recognition to 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 appointing 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. 19 The Originating Process is accompanied by certified copies of the Appointment Order (being the orders made in the English Court commencing the foreign proceeding and appointing the Original Administrators) and the Replacement Order (being the orders made by the English Court replacing Mr O'Sullivan with Mr Simpson as an administrator). The Court is entitled to presume that documents submitted in support of the application for recognition are authentic, whether or not they have been legalised, pursuant to Art 16(2). Ms Laverty's affidavit constitutes further evidence of the existence of the English Proceeding and the Administrators' appointment. 20 It follows that Art 17(1)(c) has been satisfied. 21 Art 15(3) of the Model Law 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. That requirement is satisfied by Ms Laverty's evidence at [12]-[14] of her affidavit. 22 Relatedly and additionally, s 13 of the Act requires that the application also be accompanied by a statement identifying, relevantly, any appointment of a receiver, controller or managing controller in relation to the debtor's property and all proceedings under Chapter 5 of the Corporations Act, s 601L of the Corporations Act and Sch 2 to the Corporations Act, in respect of the debtor that is known to the foreign representative. That requirement is satisfied by Ms Laverty's evidence at [17]-[18] of her affidavit. 23 For the foregoing reasons, I am satisfied that the procedural criteria are established.

C.3. Status-based criteria 24 The status-based criteria are specified in Art 17(a), Art 17(b) and Art 17(d) of the Model Law. Those paragraphs require: (a) the foreign proceeding to be a proceeding within the meaning of Art 2(a) (Art 17(a)); (b) the foreign representative applying for recognition to be a person or body within the meaning of Art 2(d) (Art 17(b)); and (c) the application to be submitted to a Court referred to in Art 4 (Art 17(d)). 25 Art 2(a) of the Model Law defines "foreign proceeding" to mean: 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; 26 Art 2(d) of the Model Law defines "foreign representative" to mean: 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; 27 I am satisfied that the English Proceeding is a "foreign proceeding" within the meaning of Art 2(a) of the Model Law for the following reasons. 28 First, the English Proceeding is a collective judicial or administrative proceeding in a foreign State. It was opened in England by the English Court and the collective nature of the proceeding can be ascertained from the face of the Appointment Order and the provisions of Sch B1 of the Insolvency Act. English law administrations have previously been recognised as such: see Tucker, in the matter of Aero Inventory (UK) Limited v Aero Inventory (UK) Limited (No 2) [2009] FCA 1481 at [13]-[24] (Lindgren J); Pink v MF Global UK Limited (In Special Administration) [2012] FCA 260 at [13]-[14] (Emmett J); Wild (Foreign Representative) v Coin Co International PLC (Administrators Appointed); In the Matter of Coin Co International PLC (Administrators Appointed) [2015] FCA 354 at [63] (Foster J). In light of the evidence of Ms Buckley as to continuity in the functions, purpose and general powers of administrators under Sch B1, these authorities are of particular significance. 29 Second, the English Proceeding is governed by the Insolvency Act, which is, by its nature, a law relating to insolvency: see Aero Inventory at [23]; MF Global at [12]-[13]; Coin Co at [62]. 30 Third, the Administrators are subject to the supervision of the English Court. For example, paragraph 5 of Sch B1 of the Insolvency Act provides that an administrator is an officer of the court (whether or not he or she is appointed by the court). Further, paragraphs 74 and 75 of Schedule B1 of the Insolvency Act provides for circumstances in which the English Court may review the conduct of the Administrators. 31 Fourth, the proceeding is for the purpose of reorganisation or liquidation. The objectives of the English Proceeding are to rescue the company as a going concern or achieve a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration) or realise property in order to make distributions to one or more secured or preference creditors: paragraph 3(1) of Schedule B1 of the Insolvency Act. It is, therefore, in the nature of a reorganisation of an insolvent company: see Aero Inventory at [23]; Coin Co at [62]. 32 Further, the Administrators also satisfy the definition of "foreign representative" in Art 2(d) of the Model Law. They have been authorised by the English Court in the English Proceeding to administer the reorganisation or liquidation of the assets and affairs of the defendant. 33 Finally, the Federal Court of Australia is a Court referred to in Art 4 of the Model Law by operation of s 10(b)(i) of the Act. 34 For the foregoing reasons, I am satisfied that the status-based criteria are established because each of Art 17(1)(a), Art 17(1)(b) and Art 17(1)(d) are satisfied.

D. Recognition as a foreign main proceeding 35 The Administrators seek an order that the English Proceeding be recognised as a "foreign main proceeding" pursuant to Art 17(2)(a). A "foreign main proceeding" is defined in Art 2(b) as a foreign proceeding taking place in the State where the debtor has its "centre of main interests" (COMI). 36 Art 16(3) provides that in the absence of proof to the contrary, the debtor's registered office is presumed to be a company's COMI. 37 I am satisfied that the English Proceeding should be recognised as a foreign main proceeding. 38 First, GCUK is a private limited company incorporated and registered under the laws of England and Wales, with its current registered office located in Manchester, England. Its previous registered offices were also located in England. In those circumstances, GCUK's COMI is presumed to be located in England. 39 Second, there is no evidence of any matter which would rebut the presumption. Rather, the following matters reinforce the correctness of the presumption, namely that: (a) GCUK principally operated out of England and Wales; (b) GCUK was and still is registered for Value Added Tax in the United Kingdom; and (c) GCUK primarily paid tax in the United Kingdom. 40 Art 6 provides that the Court may refuse to take any action governed by the Model Law if the action would be manifestly contrary to the public policy of Australia. There is no reason to think that any step would be contrary, let alone manifestly contrary, to the public policy of Australia. Accordingly, the English Proceeding must be recognised.

E. Effect of recognition as a foreign main proceeding 41 The effect of recognition of the English Proceeding as a foreign main proceeding is to impose a stay on any legal proceedings against the Defendant: Art 20(1) of the Model Law. The content and scope of the stay which arises under Art 20(1) of the Model Law is determined by s 16 of the Act, which provides: 16 Effects of recognition of a foreign main proceeding For the purposes of paragraph 2 of Article 20 of the Model Law (as it has the force of law in Australia), the scope and the modification or termination of the stay or suspension referred to in paragraph 1 of that Article, are the same as would apply if the stay or suspension arose under: (a) the Bankruptcy Act 1966; or (b) Chapter 5 (other than Parts 5.2 and 5.4A) of the Corporations Act 2001; as the case requires. 42 I am satisfied that the voluntary administration regime under Pt 5.3A of the Corporations Act is the closest analogy to an English law administration given the evidence of Ms Buckley summarised at [10] above. Further, in Aero Inventory at [16], Lindgren J recognised that there was a similarity between an administrat[ion] under Sch B1 and an administration pursuant to Pt 5.3A of the Corporations Act, noting that his Honour then went on to identify some differences between the two regimes. 43 I am satisfied that the scope, and the modification and termination, of the stay and suspension referred to in Art 20(2) of the Model Law is substantially the same as that which applies to an Australian corporation under Pt 5.3A of the Corporations Act. Section 440D of the Corporations Act provides that during an administration a proceeding against a company cannot be begun or proceeded with except with leave of the Court or the administrators' written consent. 44 Whilst the effect of s 16 of the Act is that upon recognition the stay of proceedings operates as if the stay arose under s 440D of the Corporations Act (that is, automatically by force of law), consistently with previous decisions, it is appropriate for the Court to make an order giving explicit effect to Art 20 of the Model Law and s 16 of the Act. For the avoidance of doubt, that stay extends to the cross-claims that have been brought against GCUK in the following proceedings, being: (a) White Oak Commercial Finance Europe (Non-Levered) Limited v Insurance Australia Limited & Ors (NSD 1039 of 2021); (b) Greensill Bank AG v Insurance Australia Limited & Ors (NSD 1216 of 2021); (c) Credit Suisse Virtuoso SICAV-SIF - Credit Suisse (Lux) Supply Chain Finance Fund v Insurance Australia Limited & Ors (NSD 106 of 2022); and (d) Credit Suisse Virtuoso SICAV-SIF - Credit Suisse (Lux) Supply Chain Finance Fund v Insurance Australia Limited & Ors (NSD 110 of 2022).

F. Notice to interested parties 45 On 15 June 2023, the Court made orders as to the means by which the present application was to be publicised and notice given to interested persons and creditors of GCUK. Ms Laverty and Ms Meyer have confirmed in their affidavits that those orders have been complied with. 46 There was no appearance by any interested person or creditor today. 47 The Administrators also seek an order that the requirements of r 15A.7 of the Corporations Rules should be dispensed with and have proposed an alternative regime for publication and notification to creditors. I am satisfied that the alternative regime proposed by the Administrators is appropriate.

G. Disposition 48 Orders will be made to recognise the English law administration of GCUK as a foreign main proceeding under the Model Law, recognising the Administrators as foreign representatives of the proceeding and providing for an alternative regime to the notification requirements in r 15A.7 of the Corporations Rules. 49 The Administrators' costs are to be the costs in the administration of the defendant. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley.