Foreign proceeding
28 I am satisfied that the creditors' voluntary winding up in respect of each defendant is a foreign proceeding within the meaning of Art 2(a) of the Model Law.
29 First, I am satisfied that it is a collective proceeding in a foreign State (namely, the United Kingdom). The proceeding is collective in the sense that it affects the creditors of each defendant collectively. Section 107 of the Insolvency Act UK provides for each defendant's property to be applied in satisfaction of its liabilities pari passu and, subject to that application, to be distributed among its members according to their rights and interests in the company.
30 Secondly, I am satisfied, for the following reasons, that each winding up is a judicial or administrative proceeding. Little assistance is provided in the available case law on this subject, particularly in relation to a creditors' voluntary winding up. The question is not, however, devoid of authority.
31 In In re ABC Learning Centres Limited n/k/a ZYX Learning Centres Limited & A.B.C. USA Holdings Pty Limited, Debtors in Foreign Proceedings 445 BR 318 (Bkrtcy.D.Del. 2010), Gross J sitting in the United States Bankruptcy Court held (at 328) that an Australian creditors' voluntary winding up under the Corporations Act 2001 (Cth) (the Corporations Act) was "primarily administrative in character, and at times judicial in character" and therefore satisfied the relevant requirement of the Model Law as it exists under United States law.
32 A creditors' voluntary winding up under the Insolvency Act UK has broadly similar characteristics. The evidence shows that the plaintiff was appointed as the liquidator of each of the defendants by administrative arrangements put in place by the Insolvency Act UK: see [12] and [13] above. The plaintiff's functions and duties, as the liquidator of each of the defendants, were regulated by the Insolvency Act UK and subject, ultimately, to the supervision of the High Court which, as I have noted, has the power to remove a liquidator and to appoint another in that person's place under s 108. The High Court's supervision over each creditors' voluntary winding up is also manifested by the fact that, at certain times during the winding up, the powers conferred on a liquidator under certain provisions of the Insolvency Act UK can only be exercised with the sanction of the court: s 166. As I have also noted, the High Court has the power to determine questions arising in the winding up or to exercise the powers it might exercise if the winding up were by the High Court, should it think that the determination of the question or the exercise of the powers will be just and beneficial: s 112. In those circumstances, the High Court has a plenary power to make such order as it thinks just: s 112(2).
33 The requirement that the proceeding be a judicial or administrative proceeding cannot be divorced from the additional requirement that the proceeding be "pursuant to a law relating to insolvency". That particular requirement is satisfied here. The evidence establishes that insolvency is the particular reason why the administration of each defendant proceeded to a creditors' voluntary winding up. Each proceeding is a creditors' voluntary winding up precisely because a declaration of solvency has not been made: s 90 of the Insolvency Act UK.
34 Article 8 of the Model Law provides:
In the interpretation of this Law, regard is to be had to its international origin and to the need to promote uniformity in its application and the observance of good faith.
35 UNCITRAL has published a Guide to the enactment of the Model Law (the Guide). The purpose of the Guide is expressed in the following terms:
UNCITRAL considered that the Model Law would be a more effective tool for legislators if it were accompanied by background and explanatory information. While such information would primarily be directed to executive branches of Governments and legislators preparing the necessary legislative revisions, it would also provide useful insight to other users of the text such as judges, practitioners and academics. Such information might also assist States in considering which, if any, of the provisions should be varied in order to be adapted to the particular national circumstances.
36 In dealing with the types of foreign proceedings that are intended to be covered by the Model Law, the Guide states (at [23] to [25]):
To fall within the scope of the Model Law, a foreign insolvency proceeding needs to possess certain attributes. These include the following: basis in insolvency-related law of the originating State; involvement of creditors collectively; control or supervision of the assets and affairs of the debtor by a court or another official body; and reorganization or liquidation of the debtor as the purpose of the proceeding (see article 2, subparagraph (a)).
Within those parameters, a variety of collective proceedings would be eligible for recognition, be they compulsory or voluntary, corporate or individual, winding-up or reorganization. It also includes those in which the debtor retains some measure of control over its assets, albeit under court supervision (e.g. suspension of payments, "debtor in possession").
An inclusive approach is used also as regards the possible types of debtors covered by the Model Law. Nevertheless, the Model Law refers to the possibility of excluding from its scope of application certain types of entities, such as banks or insurance companies specially regulated with regard to insolvency under the laws of the enacting State (article 1, paragraph 2).
37 The Explanatory Memorandum to the Cross-Border Insolvency Bill 2008 (Cth) provides (at [12]):
The Bill applies the Model law to both personal and corporate debtors. As the mobility of labour across jurisdictions increases, and as advances in communications and information technology make it easier to invest in other jurisdictions, it is more likely that individuals will have personal assets in several jurisdictions. Cooperation between jurisdictions is equally important in cases of complex personal insolvencies as it is in corporate insolvencies.
38 The Corporate Law Economic Reform Program's Proposals for Reform: Paper No. 8 headed "Cross-Border Insolvency - Promoting international cooperation and coordination" states (at page 23):
In summary, the Model Law covers the following procedural issues:
• inbound requests for recognition of a foreign insolvency proceeding;
• outbound requests for assistance from a foreign State in connection with a proceeding in the enacting State under its laws relating to insolvency;
• requests for coordination of insolvency proceedings taking place concurrently in a foreign State and the enacting State in respect of the same debtor; and
• participation by foreign creditors or other interested parties in proceedings occurring in the enacting State.
To constitute a 'foreign proceeding' in a foreign State, the proceeding must be a 'collective judicial or administrative proceeding', it must be 'pursuant to a law relating to insolvency', it must entail control or supervision of the assets and affairs of the debtor by a foreign court or other authority, and it must be for a 'purpose of reorganisation or liquidation'.
In the Australian Corporations Act context, that means the scope of the Model Law would extend to liquidations arising from insolvency, reconstructions and reorganisations under Part 5.1 and voluntary administrations under Part 5.3A. It would not extend to receiverships involving the private appointment of a controller. It would also not extend to a members' voluntary winding up or a winding up by a court on just and equitable grounds as such proceedings may not be insolvency related.
39 In my view, the Court is entitled to look to these sources in construing the meaning of "foreign proceeding" as defined in Art 2(a): see s 15AB of the Acts Interpretation Act 1901 (Cth). In Tucker and Others v Aero Inventory (UK) Ltd (No 2) (2009) 181 FCR 374, Lindgren J at [22] expressed the view that the Explanatory Memorandum and CLERP 8 were extrinsic materials that informed the scope and content of the definition.
40 The terms of s 8 of the Act are also of some assistance on this question. Section 8 specifically identifies that, wherever the Model Law provides that the laws of the enacting State relating to insolvency are to be identified, the Model Law has the force of law in Australia as if the Model Law referred to (amongst other things) Ch 5 of the Corporations Act (other than Pts 5.2 and 5.4A). Part 5.5 of the Corporations Act deals with voluntary winding up. The specific identification of Ch 5 of the Corporations Act (other than Pts 5.2 and 5.4A) provides support for the position that a voluntary winding up - and, specifically in the present case, the creditors' voluntary winding up of each defendant - is to be regarded as a proceeding "relating to insolvency" for the purpose of the definition in Art 2(a).
41 Indeed, in Re Chow Cho Poon (Private) Ltd (2011) 80 NSWLR 507, Barrett J (at [34]-[52]) surveyed a number of overseas authorities which support the contention that, for the purpose of the definition in Art 2(a), a law might be one "relating to insolvency" where it deals with winding up on bases that include insolvency, even though, in a particular case, the winding up proceeds on a ground that is not itself apparently concerned with the insolvency of the company.
42 It is not necessary for me to consider this wider basis in the present case because I am satisfied that, by reason of each of the defendants being subject to a creditors' voluntary winding up under the Insolvency Act UK, each defendant is subject to a judicial or administrative proceeding that is obviously pursuant to a law relating to insolvency.
43 Thirdly, I am satisfied that, in each case, the proceeding is one in which the assets and affairs of the relevant defendant are subject to control or supervision by a foreign court (in this case, the High Court), for the purpose of liquidation.