Official Assignee in Bankruptcy of the Property of Hanna, in the matter of Hanna v Hanna

Federal Court of Australia|2018-02-27|Before: Mr P, Gleeson J

UPON THE UNDERTAKING BY THE APPLICANT ("OFFICIAL ASSIGNEE") TO THE COURT BY HIS LEGAL REPRESENTATIVE:

(a) That he will inform the Court of any changes in the status of the matter, or notify the Court of any foreign proceedings involving the respondent ("Mr Hanna") of which he becomes aware; (b) That all money or other property received by him in connection with the bankruptcy of Mr Hanna shall be applied in the due course of administration of the bankruptcy; (c) That any matters of controversy in connection with the bankruptcy between the Official Assignee and any party resident in Australia shall be determined by this Court; (d) That the Official Assignee submits to the jurisdiction of this Court in all matters in connection with (a) to (c) above and agrees to abide by any order the Court may make subject to appeal; and (e) That the Official Assignee appoints Matthews Folbigg Pty Ltd to accept service on his behalf of any proceedings brought against him in relation to any matters of controversy as referred to in (c) above.

GLEESON J: 1 The applicant ("Official Assignee"), Leslie Graeme Alexander Currie, is the official assignee in bankruptcy of the property of the respondent, James Adair Hanna, appointed pursuant to the Insolvency Act 2006 (NZ) ("NZ Insolvency Act"). Section 399 of that Act provides for the appointment of officers including Official Assignees and, as required, Deputy Assignees to help in the administration of estates. In the case of Mr Hanna's estate, Annemarie Foidl, a Deputy Assignee and Senior Insolvency Officer of the New Zealand Insolvency and Trustee Service, assists the Official Assignee. 2 Mr Hanna is a New Zealand citizen. On 24 July 2009, he was adjudicated bankrupt in the High Court of New Zealand, Blenheim Registry ("NZ High Court"), on the application of Marco Romagnoli, the judgment creditor, and the Te Ruahine Trust, the supporting creditor ("bankruptcy order"). 3 The NZ Insolvency Act provides for an automatic discharge from bankruptcy three years after the bankrupt files his or her statement of affairs. However, that right is subject to the power of the relevant assignee to make an objection to automatic discharge. On 29 November 2011, Ms Foidl objected to Mr Hanna's discharge from bankruptcy which had the effect of preventing Mr Hanna from being automatically discharged. As a result, Mr Hanna remains a bankrupt. 4 By s 101 of the NZ Insolvency Act, on adjudication: (a) all property (whether in or outside New Zealand) belonging to the bankrupt or vested in the bankrupt vested in the Official Assignee and any rights of the bankrupt in the property were extinguished; and (b) the powers that the bankrupt could have exercised in, over, or in respect of any property (whether in or outside New Zealand) for the bankrupt's own benefit vested in the Official Assignee. 5 By s 102 of the NZ Insolvency Act, after acquired property (whether in or outside New Zealand) of the bankrupt vests, on acquisition, in the Official Assignee, subject to the terms of that section. By s 147 of the NZ Insolvency Act, a bankrupt may be required to contribute to the payment of the bankrupt's debts.

Relief sought 6 By an application filed on 6 September 2017, the Official Assignee sought recognition of the New Zealand bankruptcy as a "foreign proceeding" and a "foreign main proceeding" pursuant to the Cross-Border Insolvency Act 2008 (Cth) ("CBI Act"), as well as consequential relief under Art 21 of the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law ("Model Law"). By s 6 of the CBI Act, subject to the Act, the Model Law has the force of law in Australia. A claim for recognition of the bankruptcy as a "foreign non-main proceeding" was not pressed. 7 By an amended application filed on 13 October 2017, the Official Assignee sought relief pursuant to s 29 of the Bankruptcy Act 1966 (Cth) for orders in aid of the NZ High Court. In support of the application, the Official Assignee tendered a letter of request from the NZ High Court dated 12 October 2017. 8 The matter was initially listed for hearing on 14 September 2017 but was adjourned to 21 September 2017, principally as a result of uncertainty about whether the New Zealand bankruptcy was a "foreign main proceeding" or a "foreign non-main proceeding" within the meaning of the Model Law and to enable the Official Trustee to obtain a letter of request from the NZ High Court. On 21 September 2017, the matter was again adjourned. On 13 October 2017, the matter was listed for hearing on 20 October 2017. 9 Mr Hanna was represented in Court on 14 September 2017 by Mr Crane, solicitor. On 15 September 2017, Mr Hanna filed a notice of appearance, giving as his address for service Pryor Tzannes & Wallis, solicitors. On 13 October 2017, the solicitors filed a notice of ceasing to act. Mr Hanna appeared at the 20 October 2017 hearing by telephone and subsequently sent written submissions to the Court.

Evidence 10 The Official Assignee relied on the following evidence: (1) an affidavit of Ms Foidl sworn 6 September 2017 and accompanying exhibits marked "AF-1", "AF-2" and "AF-3"; (2) a further affidavit of Ms Foidl sworn on 13 September 2017; (3) three affidavits of Ms Bonnie McMahon, a solicitor at Matthews Folbigg Lawyers, sworn on 13 September 2017, 20 September 2017 and 18 October 2017; (4) two affidavits of service of Perry Gamsby sworn on 11 September 2017; and (5) a third affidavit of service of Perry Gamsby sworn on 12 September 2017. 11 Mr Hanna did not file any evidence. 12 The evidence relied upon by the Official Assignee discloses the following matters. 13 After the bankruptcy, Mr Foidl discovered that Mr Hanna had been living in New Zealand but had recently left the country and may have flown to the United States of America before he was adjudicated bankrupt. After making contact with Mr Hanna, Ms Foidl received a statement of affairs from him giving a residential address in Pennsylvania in the United States of America and a correspondence address in Christchurch in New Zealand. 14 The Official Assignee's application was made as a result of the discovery in about August 2017 that Mr Hanna was a director of and shareholder in an Australian company called Multi Resources Development Pty Ltd. The company is the registered proprietor of property in Nelson Bay on the mid-north coast of New South Wales, apparently purchased in early 2015. 15 A company search dated 30 August 2017 shows that Mr Hanna is the sole director and secretary of the company, and that a liquidator, Alan Hayes, was appointed to the company on 21 July 2017. The search also shows that Mr Hanna is the sole shareholder of the company, holding 1,150,000 shares non-beneficially. Ms Foidl noted that the company search states that Mr Hanna formerly held 299,000 shares in the company beneficially. 16 The evidence includes a copy letter from Mr Hanna to Adam Watson dated 9 August 2017, and obtained by Ms Foidl, which states: … I am happy to give you authority to discuss my bankruptcy matters with the NZ Bankruptcy Trustee. I would like your assistance in this matter and hereby give you authority to discuss a resolution to this matter. 17 There is a document entitled "Terms of Settlement" dated 16 August 2017, which refers to proceeding no. 2017/75208 in the Supreme Court of New South Wales. Mr Hanna is the first defendant in the proceeding. The claim in proceeding no. 2017/75208 appears to involve allegations that Mr Hanna: (a) removed Mr Ng and Mrs Ng as directors of the company without their knowledge; and (b) transferred their shares and shares of Mrs Yi to himself without their knowledge. 18 The "Terms of Settlement", which is signed by Mr Hanna contains the following notation: Note the admission of [Mr Hanna] that he has recently become aware that he is an undischarged bankrupt … 19 On 16 August 2017, Mr Hayes commenced Supreme Court proceeding no. 2017/250034 seeking relief in connection with the orders pursuant to which he was appointed as liquidator of the company. 20 On 17 August 2017, Robert Macaulay, solicitor acting for Mr Hanna in proceeding no. 2017/00075208, wrote to Stephen Mullette, a lawyer acting for the Official Assignee, setting out matters concerning the proceeding and stating that the central argument between the shareholders of the company had been resolved. 21 On 18 August 2017, Ms Foidl sent Mr Hanna a letter attaching a list of "notified/potential creditors" in his bankruptcy and setting out the total funds required to meet the claims and the costs of the bankruptcy. 22 On 21 August 2017, Mr Hanna swore an affidavit in proceeding 2017/250034 which refers to his bankruptcy. Specifically, Mr Hanna said: 9. Mr Lim and Mr Hayes were each aware from the first time this matter was before the court that I was bankrupt in New Zealand … [W]e had a conversation to the following effect: Mr Lim: "George Hanna says that you are a bankrupt. Is that right?" Me: "I was bankrupt in New Zealand seven or eight years ago, but I am not bankrupt in Australia." … Solvency … 25. I have been in direct contact with the New Zealand Bankruptcy Trustee, and I will resolve that simple matter directly. To the best of my knowledge, there has been no application to register the New Zealand bankruptcy in Australia. I have offered to the Trustee an undertaking to preserve my interests in the Company with a view to resolving the bankruptcy in toto. 23 By letter dated 23 August 2017 from Gillis Delaney, new solicitors acting for the liquidator, wrote to Mr Mullette, referring to an affidavit sworn by Mr Hanna on 21 August 2017 and saying: We note that in paragraph 25 of his affidavit sworn 21 August 2017 Mr James Hanna states that he has been in direct contact with his trustee and will resolve "that simple matter directly" and additionally that he has offered to his trustee an undertaking to preserve his assets in the company with a view to resolving his bankruptcy in "Toto". 24 Gillis Delaney sought information from the Official Assignee concerning Mr Hanna's dealings with the Official Trustee and Mr Hanna's bankrupt administration generally. 25 On 24 August 2017, Mr Macaulay wrote to Mr Mullette saying, relevantly: The shareholders, as a unified group, are prepared to make whatever arrangements are necessary with your client to satisfy her obligations, whilst also seeing off the unnecessary liquidator. 26 On 28 August 2017, Mr Hanna sent an email to Ms Foidl saying: Please find attached my best effort to estimate Multi Resources settlement numbers as promised. This assumes the liquidator is removed and I can get reinstated the sale contract with Rod Salmon of Maycott. Clearly if the liquidator stays then there will be nothing. 27 The attached "settlement numbers" appear to show that, on a sale of the Nelson Bay property at a price of $3 million, there would be no distribution to Mr Hanna and a shortfall taking into account various debts. 28 According to submissions filed on behalf of the Official Assignee, on 13 September 2017, Brereton J in the Supreme Court granted the Official Assignee relief from the implied undertaking so as to permit use of the documents from the Supreme Court proceedings to be used in this proceeding and in the administration of the bankruptcy. 29 Through further inquiries, Ms Foidl has obtained documents which suggest the following: (1) Mr Hanna holds an Australian passport issued on 10 October 2012; (2) the company was formed on 15 July 2013 with a registered office at Kogarah in New South Wales; (3) Mr Ng has known Mr Hanna since about 2005; (4) Mr Hanna became a shareholder and director of the company on 17 December 2014; (5) at some point, Mr Hanna obtained a NSW driver's license and gave his address as "Unit 106, 220 Goulburn Street, Darlinghurst"; (6) at some later time, Mr Hanna effected a change to the address on his licence to "6 Danalene Parade Corlette 2315"; (7) in about May 2015 the company leased a small commercial office which was occupied by Mr Hanna whilst he was working on the redevelopment of the company's land; (8) in August 2015, the ASIC documents which confirmed Mr Hanna's appointment as director recorded his address as "86 Sandy Point Road Nelson Bay NSW 2315"; (9) on 23 December 2016, Mr Hanna swore a statutory declaration (in relation to the issue of a new certificate of title) in which he gave his current address as "86 Sandy Point Road Corlette NSW 2315"; (10) on 10 March 2017, Steven Ng and two others commenced proceeding no. 2017/75208 against Mr Hanna and others and gave his address as "83 Sandy Point Road, Nelson Bay"; and (11) on 8 May 2017, Mr Hanna wrote to the solicitor acting for Mr Ng giving as an address "3 Danalene Parade Corlette". 30 The present status of proceedings no. 2017/75208 and 2017/250034 is not clear.

Letter of request 31 The letter of request sets out the terms of the application by the Official Assignee to the NZ High Court, identifying the Official Assignee's purpose of enabling him to seek orders listed in the letter. 32 The letter further states: 3. Having heard the Official Assignee's application and reviewed the evidence tendered in support thereof this Court has granted the Orders in terms and requests that the Federal Court of Australia provides the Official Assignee with such assistance as is described in this letter and such further or other assistance as the Federal Court of Australia sees fit. 4. I confirm that this Court is authorised by Section 8 of the Insolvency (Cross-border) Act 2006 (NZ) to extend similar assistance to the Federal Court of Australia.

Reasons for seeking relief 33 In his December 2009 statement of affairs, Mr Hanna told the Official Assignee that he had retired. The Official Assignee was not able to identify any property in New Zealand to realise for the benefit of creditors. 34 Ms Foidl's evidence is that, on the basis of the objection to discharge of the bankrupt from bankruptcy, if he was to return to New Zealand, the Official Assignee would be required to summon Mr Hanna to be publically examined by the court concerning his discharge under s 295(1)(a) of the NZ Insolvency Act. The Official Assignee's grounds for objection to the bankrupt's automatic discharge would be set out in the summons to attend for public examination. 35 Section 295(1) provides relevantly: (1) The Assignee must summon the bankrupt to be publicly examined by the court concerning his or her discharge, and the court must conduct the examination, if - (a) the Assignee or a creditor has objected to the bankrupt's automatic discharge and the objection has not been withdrawn; or (b) the bankrupt is due for automatic discharge but is still undischarged from an earlier bankruptcy; or (c) the bankrupt has been required to be publicly examined under section 173 and has not completed that examination. 36 On behalf of the Official Assignee, it was submitted that the material recently obtained indicates that Mr Hanna has been working with the company in the prosecution of a development in Nelson Bay since at least 2015 and that his business relationship with Mr Ng may extend back a further decade. The Official Assignee considers that the interest that Mr Hanna may have in the company or its shares has vested in the Official Assignee. The Official Assignee submitted that there is a period of years in which Mr Hanna has been bankrupt and potentially earning income and/or acquiring assets, seemingly without any communication between him and the Official Assignee. 37 Further, it was submitted that, in the light of his bankruptcy, it is in the interest of all parties to proceedings no. 2017/75208 that Mr Hanna's role in the proceedings and any property concerned be administered by a local representative of the Official Assignee. 38 Finally, it was noted that both the Bankruptcy Act and the NZ Insolvency Act contain provisions for the purpose of gathering information about the bankrupt's affairs prior to the sequestration order and thereafter for the purpose of identifying assets to be recovered and/or income that may permit contributions to pay the bankrupt's creditors. Counsel for the Official Receiver in turn submitted that the known facts suggest that there are distinct possibilities that the collection of that information may be of utility.

Submissions made by Mr Hanna 39 At the 20 October 2017 hearing, Mr Hanna made the following submissions: (1) His wife was bringing an action to have the bankruptcy in New Zealand annulled. The grounds of the action concern whether the judgment debt relied upon by the petitioning creditor did not provide a proper basis for the bankruptcy because the petitioning creditor was a foreigner in New Zealand on a business visa and was not entitled to be treated as an employee of Mr Hanna. The action was expected to be made the following week. (2) Mr Hanna also disputed the debt of the supporting creditor on the bankruptcy application. Mr Hanna did not take steps to have the bankruptcy overturned because he did not have any money to do that, and he was told that the bankruptcy would be discharged after three years. Mr Hanna was unaware until recently that he was actually still bankrupt in New Zealand. (3) Mr Hanna's interest in the Nelson Bay property will be zero and he has no other assets. Mr Hanna is happy to have an examination of his financial affairs, which, he considers, would help him to get a discharge from the bankruptcy if he cannot get it annulled. (4) The activities proposed to be undertaken by the Official Assignee will be enormously costly and not useful where he has no assets at all. (5) Mr Hanna expressed concern that it would be "morally wrong" that his creditors in Australia might be disadvantaged by payment to creditors of the New Zealand bankruptcy. 40 As noted above, Mr Hanna submitted a statement of affairs pursuant to the NZ Insolvency Act, which, at least on its face, is inconsistent with a dispute about the validity of the bankruptcy. Nor does either the 9 August 2017 letter from Mr Hanna to Mr Watson, or the 28 August 2017 email from Mr Hanna to Ms Foidl, both set out above, or the email from Mr Macaulay to Mr Mullette dated 17 August 2017, refer to any proposed challenge to the bankruptcy. 41 Subsequently, Mr Hanna wrote letters to the Court dated 23 and 31 October 2017. Having regard to the fact that Mr Hanna was self-represented, I read the letters with a view to determining whether they raised any matter of potential relevance to the two applications. 42 The letters include serious allegations concerning the conduct of Ms Foidl. 43 In the first letter, Mr Hanna states that he wishes to challenge "false and incorrect" statements made in Ms Foidl's affidavits. Mr Hanna also states that the Court has not been provided with documentation "representing my opposition to her claim to charge my estate in Australia". He also states that "the premise that my bankruptcy is valid is under challenge in NZ" and submits that the appropriate course of action would be to wait and see the outcomes of that challenge and a challenge to Ms Foidl's evidence. Ms Hanna also expressed concern about the costs "being incurred by Ms Foidl" and concern that a public examination in an open court would be of considerable damage to him if his bankruptcy were overturned. 44 In the first letter, Mr Hanna did not identify any particular falsity or inaccuracy in Ms Foidl's affidavits. The matter of the application to challenge the bankruptcy was raised by him at the 20 October 2017 hearing. The matter of cost is a matter that is relevant to the exercise of the Court's discretion, as discussed below. 45 In the second letter, Mr Hanna questioned the identity of the Official Assignee (which, as explained above, is Mr Currie and not Ms Foidl). Further to his earlier allegation as to the truthfulness of Ms Foidl's evidence, Mr Hanna referred in particular to statements said to have been made to Ms Foidl by Adam Watson and the company's accountant, Helen Pretekes. To the extent that Ms Foidl's affidavit contains statements attributed to third parties, including Mr Watson and Mrs Pretekes, those statements are hearsay. I have not relied upon any of that material as evidence of the truth of what was said. In particular, I have disregarded the evidence set out in Ms Foidl's affidavit under the heading "Correspondence with Mr Watson" which, I note, was not referred to in the submissions made on behalf of the Official Assignee. 46 Accordingly, having considered Mr Hanna's letters, I was satisfied that they did not contain any additional material that needed to be addressed by the Official Assignee or by the Court on this application.

Legal framework 47 Section 29 of the Bankruptcy Act provides relevantly: Courts to help each other (1) All Courts having jurisdiction under this Act, the Judges of those Courts and the officers of or under the control of those Courts shall severally act in aid of and be auxiliary to each other in all matters of bankruptcy. (2) In all matters of bankruptcy, the Court: (a) shall act in aid of and be auxiliary to the courts of the external Territories, and of prescribed countries, that have jurisdiction in bankruptcy; and (b) may act in aid of and be auxiliary to the courts of other countries that have jurisdiction in bankruptcy. (3) Where a letter of request from a court of an external Territory, or of a country other than Australia, requesting aid in a matter of bankruptcy is filed in the Court, the Court may exercise such powers with respect to the matter as it could exercise if the matter had arisen within its own jurisdiction. … (5) In this section, prescribed country means: (a) the United Kingdom, Canada and New Zealand; … 48 Section 21 of the CBI Act provides: If the Model Law (as it has the force of law in Australia) or a provision of this Act is inconsistent with section 29 of the Bankruptcy Act 1966, the Model Law or the provision of this Act prevails, and that section has no effect to the extent of the inconsistency. 49 Article 7 of the Model Law provides relevantly that nothing in the Model Law limits the power of a court to provide additional assistance to a foreign representative under other laws of Australia. 50 Prior to the commencement of the CBI Act, in In Re Ayres; Ex parte Evans (1981) 34 ALR 582, Lockhart J at 591 (quoting Farwell J in Re Osborn [1931-32] B & CR 189 at 194) held that the use of "shall" in s 29(2)(a) meant that in the absence of a conflict with a domestic bankruptcy, the court was "bound to give all the assistance that it can" to the court of a prescribed country. That view was upheld on appeal in Ayres v Evans (1981) 39 ALR 129 ( at 138 per Northrop J and at 144 per McGregor J, Fox J expressing no final view). 51 The Court's jurisdiction extends to a power to appoint a receiver without security over both moveable and immovable assets of the bankrupt (Radich v Bank of New Zealand (1993) 45 FCR 101), to order the examination of the bankrupt (Dick v McIntosh [2002] FCA 1135) and others (Gainsford v Tannenbaum [2012] FCA 904; (2012) 216 FCR 543 ("Gainsford")) and to ordering the bankrupt to complete a Statement of Affairs (Gainsford). 52 The NZ High Court is a court of that country which has jurisdiction in bankruptcy: s 411(1) of the NZ Insolvency Act, and I am therefore satisfied that s 29(2)(a) of the Bankruptcy Act is engaged.

Appropriate relief 53 In Re Cooksley [2017] FCA 1193 ("Re Cooksley") Logan J made orders by consent, including some orders similar to those sought in this case, pursuant to s 29 of the Bankruptcy Act and s 10 of the CBI Act. In that case, the main purpose of the Official Assignee appears to have been to secure income contributions from the bankrupt who was gainfully employed in Australia. At [8] to [10], his Honour considered the scope of the discretion as to the type of assistance to be granted under s 29 and concluded that he was bound by the view of the Full Court in Ayres v Evans that the Court was "bound to exercise the insolvency assistance jurisdiction … conferred but that the type of assistance which would be granted remained a matter for the exercise of a judicial discretion". At [11] and [12], Logan J noted as a relevant consideration the similarity of the Australian and New Zealand legislation relating to requests by the courts of one country for the aid of courts of the other country. 54 Following the approach in Re Cooksley, I am satisfied that it is appropriate to make orders in accordance with the letter of request for the reasons identified on behalf of the Official Assignee. Although Mr Hanna disputed it, the evidence indicates that there may well be assets of the bankrupt estate in Australia that are required to be administered or realised. Further, I am satisfied that the current proceedings in the Supreme Court are affected by Mr Hanna's bankruptcy. In particular, I am satisfied that it is appropriate to appoint a receiver without security on the terms proposed. A similar order was made by Beach J in Kapila, Re Edelsten [2014] FCA 1112; (2014) 320 ALR 506 ("Re Edelsten")f, albeit under Art 21(1)(e) of the Model Law. I note that Logan J declined to order the appointment of a receiver in the particular circumstances of Re Cooksley where the amounts in issue were relatively small and the Official Assignee was seeking only an income contribution from the bankrupt.

Relief sought pursuant to CBI Act and the Model Law

Legal framework 55 Relevantly, and subject to the CBI Act, the Model Law (which is contained in Sch 1 to the CBI Act) applies where assistance is sought in Australia by a foreign representative in connection with a foreign proceeding: Art 1(a). 56 Article 4 of the Model Law provides that the functions referred to in the Model Law relating to recognition of foreign proceedings and cooperation with foreign courts shall be performed by a specified court or courts or other authority. Section 10(a) of the CBI Act provides relevantly that, if the functions relate to a proceeding involving a debtor who is an individual, the Federal Court of Australia is taken to be specified in Art 4 as a court competent to perform the functions referred to in the Model Law relating to recognition of foreign proceedings. 57 Article 21(1) of the Model Law provides, relevantly that, 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: (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; … (g) Granting any additional relief that may be available to [a trustee in bankruptcy] under the [Bankruptcy Act]. 58 Article 2 of the Model Law contained the following relevant definitions: (1) "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. (2) "Foreign main proceeding" means a foreign proceeding taking place in the State where the debtor has the centre of its main interests. (3) "Foreign representative" means 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. 59 Article 6 provides: Nothing in the present Law prevents the court from refusing to take an action governed by the present Law if the action would be manifestly contrary to the public policy of this State. 60 Article 15 of the Model Law provides relevantly: 1. A foreign representative may apply to the court for recognition of the foreign proceeding in which the foreign representative has been appointed. 2. An application for recognition shall 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 of the appointment of 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. 3. An application for recognition shall also be accompanied by a statement identifying all foreign proceedings in respect of the debtor that are known to the foreign representative. 61 Section 13 of the CBI Act provides: In addition to the requirement in paragraph 3 of Article 15 of the Model Law (as it has the force of law in Australia) that an application for recognition be accompanied by a statement identifying all foreign proceedings in respect of the debtor that are known to the foreign representative, the application must be accompanied by a statement identifying: (a) all proceedings under the Bankruptcy Act 1966 in respect of the debtor; and (b) any appointment of a receiver (within the meaning of section 416 of the Corporations Act 2001), or a controller or a managing controller (both within the meaning of section 9 of that Act), in relation to the property of the debtor; and (c) all proceedings under Chapter 5 of the Corporations Act 2001, section 601CL of that Act or Schedule 2 to that Act, in respect of the debtor; that are known to the foreign representative. 62 Article 16 of the Model Law provides: 1. If the decision or certificate referred to in paragraph 2 of article 15 indicates that the foreign proceeding is a proceeding within the meaning of subparagraph (a) of article 2 and that the foreign representative is a person or body within the meaning of subparagraph (d) of article 2, the court is entitled to so presume. 2. The court is entitled to presume that documents submitted in support of the application for recognition are authentic, whether or not they have been legalized. 3. 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 interests. 63 Article 17 of the Model Law 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; and (d) The application has been submitted to the court referred to in article 4. 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; or (b) As a foreign non-main proceeding if the debtor has an establishment within the meaning of subparagraph (f) of article 2 in the foreign State. 3. An application for recognition of a foreign proceeding shall be decided upon at the earliest possible time. 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. 64 Thus, if certain matters are established, the foreign proceeding must be recognised, unless recognition would be manifestly contrary to the public policy of Australia: Re Edelsten at [22]. 65 Rule 14.03 of the Federal Court (Bankruptcy) Rules 2016 (Cth) ("Bankruptcy Rules") states relevantly: (1) An application by a foreign representative for recognition of a foreign proceeding under article 15 of the Model Law must be made by filing an application in accordance with Form B2. (2) The application must: (a) be accompanied by the statements mentioned in article 15 of the Model Law and in section 13 of the Cross‑Border Insolvency Act; and (b) name the foreign representative as the applicant and the debtor as the respondent; and (c) be accompanied by an affidavit verifying the matters mentioned in paragraphs 2 and 3 of article 15 of the Model Law and in section 13 of the Cross‑Border Insolvency Act. (3) When filing the application, the foreign representative must file, but need not serve, an interim application seeking directions as to service, and the Court may give any directions about service, and make any incidental orders, that it thinks just. … (5) A person who intends to appear before the Court at the hearing of an application for recognition must file and serve the documents mentioned in rule 2.04. 66 By Art 20 of the Model Law, and subject to s 16 of the CBI Act, upon recognition of 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; and (c) the right to transfer, encumber or otherwise dispose of any assets of the debtor is suspended.

Application of Model Law in this case 67 The proceeding for which recognition is sought is proceeding CIV-2009-406-57 in the NZ High Court ("NZ proceeding"). The bankruptcy order was made in the NZ proceeding.

Status-based requirements for recognition of "foreign proceeding" 68 These criteria are the conditions precedent specified by Art 17(1) of the Model Law, namely, that: (1) the NZ proceeding is a "foreign proceeding" within the meaning of Art 2(a); (2) the applicant is a "foreign representative" within the meaning of Art 2(d); and (3) the application has been submitted to the court referred to in Art 4. 69 As to (3), the application has been submitted to the court referred to in Art 4, being the Federal Court of Australia. 70 I am satisfied that the NZ proceeding is a judicial or administrative proceeding in New Zealand, being a proceeding commenced in the NZ High Court pursuant to the NZ Insolvency Act (which is a law relating to insolvency) and otherwise meeting the requirements of a "foreign proceeding". Ms Foidl deposes to the fact that, having read Art 2, she is satisfied that the New Zealand proceeding is a "foreign proceeding" within the meaning of the Model Law. I am satisfied on the basis of her evidence and a review of the NZ Insolvency Act that the NZ proceeding is a proceeding in which the assets and affairs of Mr Hanna are subject to control or supervision by the NZ High Court for the purpose of reorganisation or liquidation. 71 A similar conclusion was reached in relation to a bankruptcy pursuant to the NZ Insolvency Act in Re Cooksley. 72 Ms Foidl deposes that she has read Art 2 and is satisfied that the Official Assignee is a "foreign representative" within the meaning of the Model Law. Ms Foidl exhibited a document titled "Notification to Official Assignee of New Estate - Bankrupt" to her 6 September 2017 affidavit, which identified the estate of Mr Hanna as an estate to be administered by Official Assignee. 73 I am satisfied on the basis of her evidence and a review of the NZ Insolvency Act that the Official Assignee is authorised in the NZ proceeding, being a foreign proceeding, to administer the reorganisation or the liquidation of Mr Hanna's assets or affairs.

Procedural requirements for recognition 74 The procedural conditions precedent are set out in Art 17(1)(c) of the Model Law, s 13 of the CBI Act and r 14.03 of the Bankruptcy Rules. 75 Article 17(1)(c) requires that the application meet the requirements of Art 15(2). I am satisfied that a copy of an order dated 7 August 2009 and marked with the seal of the NZ High Court together with the letter of request provide sufficient evidence for the purposes of Art 15(2)(c). 76 The amended application contains the statements required by s 13 and complies with the requirements of rr 14.03(1) and (2)(a) and (b) of the Bankruptcy Rules. Ms Foidl's affidavit sworn 6 September 2017 satisfies the requirements of r 14.03(3) noting that, at para 86 of her affidavit, Ms Foidl refers to a sequestration order made against the estate of Mr Hanna's bankruptcy in Australia in 2002.

Recognition of the NZ proceeding as a foreign proceeding 77 There is nothing to suggest that the public policy exemption in Art 6 of the Model Law applies to this case. 78 Accordingly, I am required by Art 17 to recognise the NZ proceeding as a foreign proceeding.

Foreign main proceeding? 79 "Foreign main proceeding" means a foreign proceeding taking place in the State where the debtor has the centre of its main interests: Art 2(b) of the Model Law. 80 The Official Assignee accepted that the preponderance of the decisions of this Court favour a determination of the debtor's centre of main interests around the time of the application for recognition: see Moore [2012] FCA 1002; Gainsford and Re Edelsten at [35] to [39]. In Re Edelsten at [40], Beach J noted that there is no express definition in the Model Law of "centre of main interests" but Art 16 contains a rebuttable presumption based upon the debtor's habitual residence. 81 The Official Assignee conceded that Mr Hanna did not have New Zealand as his centre of main interests either at the time of the hearing or at the time the application was filed. Instead he contended, as a formal submission, that Mr Hanna's centre of main interests should be determined at the time of his bankruptcy in 2009, and that Mr Hanna's centre of main interests at that time was New Zealand. 82 Accordingly, I am not satisfied that the NZ proceeding is a "foreign main proceeding" within the meaning of the Model Law.

Article 21 relief 83 The Official Assignee sought orders pursuant to Arts 21(1)(e) and (g) of the Model Law. It is unnecessary to consider whether to make those orders in the light of my decision to grant the relief sought by the letter of request. Accordingly, it is unnecessary to consider whether the Court's powers under Art 21 extend to a foreign proceeding that is neither a foreign main proceeding nor a foreign non-proceeding. I note that no submissions were directed to this issue. I certify that the preceding eighty-three (83) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.

Bankruptcy Act 1966(Cth)ss 29, 54, 81

Cross-Border Insolvency Act 2008(Cth)ss 6, 10, 10(a), 13, 21

At a glance

Court

Decision date

Before

Source

Judgment (19 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (10)

Cited By (6)