Lawrence v Northern Crest Investments Limited

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 885 of 2011

BETWEEN: STEPHEN MARK LAWRENCE IN HIS CAPACITY AS LIQUIDATOR AND FOREIGN REPRESENTATIVE OF NORTHERN CREST INVESTMENTS LIMITED (IN LIQUIDATION) ARBN 117 103 376

ANTHONY JOHN MCCULLAGH IN HIS CAPACITY AS LIQUIDATOR AND FOREIGN REPRESENTATIVE OF NORTHERN CREST INVESTMENTS LIMITED (IN LIQUIDATION) ARBN 117 103 376

AND: NORTHERN CREST INVESTMENTS LIMITED (IN LIQUIDATION) ARBN 117 103 376

JUDGE: EMMETT J DATE: 8 JULY 2011 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 This proceeding is an application under the Cross-Border Insolvency Act 2008 (Cth) (the Act) brought by way of originating process. By the proceeding, Messrs Stephen Lawrence and Anthony McCullagh (the Liquidators) seek to have a proceeding in the High Court of New Zealand (the New Zealand Proceeding) recognised as a foreign main proceeding pursuant to Article 17(2)(a) of the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (the Model Law). The Model Law, with the modifications set out in Part 2 of the Act, has the force of law in Australia by reason of s 6 of the Act. 2 On 2 June 2011, the Liquidators were appointed as joint and several liquidators of the defendant, Northern Crest Investments Limited (the Company), by a winding up order in insolvency made in the New Zealand Proceeding. The New Zealand Proceeding constitutes a foreign proceeding as contemplated by Article 2(a) of the Model Law, in that it constitutes a collective judicial proceeding in a foreign state pursuant to a law relating to insolvency, in which proceeding the assets and affairs of the Company are subject to control and supervision by a foreign court for the purpose of liquidation. 3 The Liquidators contend that the New Zealand Proceeding is a foreign main proceeding because the Company has the centre of its main interests in New Zealand (as envisaged by Article 2(b) of the Model Law), and relies upon a presumption under Article 16(3) of the Model Law, which provides that, in the absence of proof to the contrary, the Company's registered office (which is in New Zealand) is presumed to be the centre of the Company's main interests. By reason of Article 15(1) of the Model Law, the Liquidators have the necessary standing to apply for the relief claimed, in that they are foreign representatives, as contemplated by Article 2(d) of the Model Law, by reason of their appointment as joint and several liquidators in the New Zealand Proceeding. 4 Pending the determination of the originating process, the Liquidators, ex parte, sought and obtained on 8 June 2011 an order for a stay of all proceedings against the Company and all execution against the Company's Australian assets. They also obtained an order that the administration of the Company's Australian assets be entrusted to them, an order restraining the transfer or disposal of the Company's Australian assets, and an order that the Liquidators have the powers of an Australian liquidator appointed under the Corporations Act 2001 (Cth) (the Corporations Act), and, specifically, have the power to conduct examinations. The Liquidators' entitlement to seek interlocutory relief arose under Article 19(1) of the Model Law, read with paragraphs 1(c), (d) and (g) of Article 21. 5 The originating process was made returnable on 24 June 2011 before Stone J. On that occasion, Manifest Capital Management Pty Ltd (MCM), which was said to be the largest creditor of the Company, appeared by its counsel to oppose that relief. Directions were made for MCM to file and serve evidence in opposition to the relief sought by 1 July 2011. No evidence was filed. However, on 5 July 2011, MCM's solicitors indicated that no evidence would be filed and that MCM no longer opposed the relief. 6 On 24 June 2011, the Liquidators, ex parte, sought and obtained a warrant under s 530C of the Corporations Act to search for and seize the books and records of the Company. That warrant was made effective for a period of 21 days from 24 June 2011. 7 The originating process and supporting affidavit was served on the Company on 10 June 2011 in accordance with the orders of 9 June 2011. The notice of filing in Form 20 was served on all known creditors of the Company. It was also published in The Australian newspaper on 16 June 2011. Apart from MCM, no creditors have contacted the Liquidators or their solicitors. 8 The Liquidators are concerned that the Company has disposed of its assets in circumstances where a former director of the Company, Mr Mark Bryers, was criminally charged in New Zealand for a failure to keep proper records in respect of the Company and associated companies. Mr Bryers is believed to be conducting in Australia an operation similar to that conducted by the Company in New Zealand, which business operation resulted in investor losses of several million dollars. 9 Despite requests made on behalf of the Liquidators to other directors of the Company resident in Australia to provide books and records of the Company, the Liquidators have been refused access to such books and records. The Liquidators have been informed that the intellectual property of the Company has been transferred to sub-licensees for no value. The Company appears to have entered into voidable transactions in relation to its assets. Without the grant of the relief sought, the Liquidators are unable to discharge their duties as liquidators of the Company, resulting in prejudice to the numerous creditors of the Company. 10 I am satisfied that the formal requirements for the grant of the relief claimed have been satisfied and that a proper basis has been made out for the granting of the relief sought in the originating process. I therefore propose to make orders in the terms sought by the Liquidators. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.