Suk v Hanjin Shipping Co Ltd

1. Pursuant to Art 18 and Art 22(3) of the Model Law, paragraphs 4 and 5 of the orders made on 11 November 2016 be vacated, with effect from 2 February 2017.
2. The interim orders set out in paragraph 3 of the orders date 28 March 2017 be continued, pending further or other order.
3. Liberty to apply be granted to any creditor affected by paragraphs 7, 8, 9, or 10 of the orders of 11 November 2016.
4. The proceeding otherwise be dismissed.
5. The Registrar be directed to communicate with the Seoul Central District Court Bankruptcy Court (6th Division) and the Supreme Courts of the States and Territories of Australia, notifying the Courts of: (a) the orders of this Court of 11 November 2016; (b) the orders of this Court of 28 March 2017; (c) the reasons for judgment given on 12 April 2017; and (d) these orders. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

JAGOT J: 1 On 11 November 2016 I made orders: (1) recognising a rehabilitation proceeding in the Republic of Korea in relation to the defendant company, Hanjin Shipping Co Ltd (Hanjin), as a "foreign main proceeding" pursuant to Arts 2(b) and 17(2)(a) of Sch 1 to the Cross-Border Insolvency Act 2008 (Cth) (the Model Law); (2) recognising the plaintiff, Mr Tai-Soo Suk, as a "foreign representative" within the meaning of article 2(d) of the Model Law; and (3) granting further consequential relief, including a declaration that the scope of the stay and suspension of enforcement and insolvency proceedings consequential upon recognition is the same as would apply as if arising under Pt 5.3A of the Corporations Act 2001 (Cth) (Corporations Act). 2 Subsequently, I gave reasons for these orders in Tai-soo Suk v Hanjin Shipping Co Ltd [2016] FCA 1404. 3 The Cross-Border Insolvency Act gives effect to the Model Law. According to the Preamble to the Model Law, the scheme is intended to promote the objectives of: (a) Cooperation between the courts and other competent authorities of this State and foreign States involved in cases of cross-border insolvency; (b) Greater legal certainty for trade and investment; (c) Fair and efficient administration of cross-border insolvencies that protects the interests of all creditors and other interested persons, including the debtor; (d) Protection and maximization of the value of the debtor's assets; (e) Facilitation of the rescue of financially troubled businesses, thereby protecting investment and preserving employment. 4 Apart from the provisions of the Model Law which require or enable orders to be made recognising a foreign proceeding and protecting the assets of a debtor from claims to enable orderly asset management in that proceeding, an important element of the statutory scheme is the obligation imposed by article 18 of the Model Law which requires a foreign representative to "inform the court promptly of": (a) Any substantial change in the status of the recognized foreign proceeding or the status of the foreign representative's appointment; (b) Any other foreign proceeding regarding the same debtor that becomes known to the foreign representative. 5 This obligation is important because it ensures that a court which has recognised a foreign proceeding and a foreign representative, and made consequential orders protecting the assets of a debtor, when notified of any substantial change in the status of the foreign proceeding or foreign representative's appointment, is able to revisit its orders or make new orders as appropriate based on the current circumstances. 6 In the present case, it is apparent that the plaintiff, having obtained orders under the Model Law on 11 November 2016, failed to comply with article 18 by not notifying the Court of a substantial change in the status of the foreign proceeding and his own status as a foreign representative. If not for the Court re-listing the proceedings of its own motion and the assistance of the plaintiff's solicitor who remained on the record and thus subject to independent obligations to the Court, the orders I made on 11 November 2016 would have continued despite the substantial change in circumstances. 7 On 2 February 2017 (confirmed on 17 February 2017) the relevant foreign court, the Seoul Central District Court, decided to terminate the rehabilitation proceedings which had been recognised as a foreign main proceeding, to declare Hanjin bankrupt, to appoint Jin Han Kim (11th Floor, 317, Teheran-ro, Gangnam-gu, Seoul, Republic of Korea) as Hanjin's trustee for a term ending on 30 June 2019, to establish the period for creditor's claims as one ending on 1 May 2017, and to require the first creditor's meeting to be held on 1 June 2017 at the Seoul Central District Court. 8 These circumstances triggered the obligation in article 18 for Mr Suk to notify this (and every other court which had made orders under the Model Law as sought by Mr Suk) of the substantial change in the status of the foreign proceeding and his own status. It is apparent that despite repeated attempts by the plaintiff's solicitor to obtain instructions to do so from both Mr Suk and the trustee of Hanjin, Mr Jin Han Kim, no instructions were received. As a result of these circumstances coming to my attention, on 28 March 2017 I vacated the orders of 11 May 2016 which protected Hanjin's assets in Australia from creditor's claims and empowered Mr Suk to deal with those assets. I also made interim orders restraining Mr Suk, the trustee, Hanjin, and a wholly owned subsidiary of Hanjin, Hanjin Shipping Australia Pty Ltd, from removing, remitting or transferring from Australia, or disposing or otherwise dealing with, any asset or property of Hanjin or Hanjin Shipping Australia Pty Ltd. I also made orders requiring Mr Suk, the trustee, Hanjin and Hanjin Shipping Australia Pty Ltd to be notified of these orders and a further return date on 12 April 2017. 9 Despite having been notified of these orders and the further return date, Mr Suk, the defendant, the trustee, and Hanjin Shipping Australia Pty Ltd did not appear on 12 April 2017 and Mr Suk gave no instructions to the solicitor who remained on the record. In these circumstances, which disclosed both that the plaintiff did not intend to comply with article 18 of the Model Law and the trustee did not intend to ensure that this Court was aware of the substantial change in circumstances, I vacated the orders recognising the rehabilitation proceeding as a foreign main proceeding and Mr Suk as a foreign representative with effect from 2 February 2017. I also continued the interim orders on the basis that the position of Australian creditors ought not to be prejudiced by the contravention of the Model Law. This approach, I note, is consistent with the discussion of analogous circumstances in Board of Directors of Rizzo-Bottiglieri-De Carlini Armatori SpA v Rizzo-Bottiglieri-De Carlini Armatori SpA [2017] FCA 331. 10 Given objective (a) in the Preamble to the Model Law I also made this order: 5. The Registrar be directed to communicate with the Seoul Central District Court Bankruptcy Court (6th Division) and the Supreme Courts of the States and Territories of Australia, notifying the Courts of: (a) the orders of this Court of 11 November 2016; (b) the orders of this Court of 28 March 2017; (c) the reasons for judgment given on 11 April 2017; and (d) these orders. 11 I consider it necessary that the vacation of the recognition orders and stays on the actions of creditors with effect from 2 February 2017 be brought to the attention of Australian courts and appropriate that the contravention of The Model Law and the orders I have made as a consequence of that contravention be brought to the attention of the Korean Court supervising the bankruptcy of Hanjin. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.