FEDERAL COURT OF AUSTRALIA Lawrence v Northern Crest Investments Limited (In Liq) [2011] FCA 672 Citation: Lawrence v Northern Crest Investments Limited (In Liq) [2011] FCA 672 Parties: STEPHEN MARK LAWRENCE IN HIS CAPACITY AS LIQUIDATOR AND FOREIGN REPRESENTATIVE OF NORTHERN CREST INVESTMENTS LIMITED (IN LIQ) ARBN 117 103 376 and ANTHONY JOHN MCCULLAGH IN HIS CAPACITY AS LIQUIDATOR AND FOREIGN REPRESENTATIVE OF NORTHERN CREST INVESTMENTS LIMITED (IN LIQ) ARBN 117 103 376 v NORTHERN CREST INVESTMENTS LIMITED (IN LIQ) ARBN 111 103 376 File number(s): NSD 885 of 2011 Judge: JAGOT J Date of judgment: 9 June 2011 Catchwords: BANKRUPTCY AND INSOLVENCY – application for interim relief under Cross-Border Insolvency Act – where originating process sought recognition of proceeding in New Zealand as "foreign main proceeding" Legislation: Cross-Border Insolvency Act 2008 (Cth) Date of hearing: 9 June 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 16 Counsel for the Plaintiffs: Mr D L Cook Solicitor for the Plaintiffs: Norton Rose Australia Counsel for the Defendant: The defendant did not appear 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 LIQ) ARBN 117 103 376 First Plaintiff ANTHONY JOHN MCCULLAGH IN HIS CAPACITY AS LIQUIDATOR AND FOREIGN REPRESENTATIVE OF NORTHERN CREST INVESTMENTS LIMITED (IN LIQ) ARBN 117 103 376 Second Plaintiff AND: NORTHERN CREST INVESTMENTS LIMITED (IN LIQ) ARBN 111 103 376 Defendant JUDGE: JAGOT J DATE OF ORDER: 9 JUNE 2011 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The interlocutory process filed by the plaintiffs in these proceedings be returnable instanter and ex parte. 2. Until the date set out in order 6 below or earlier further order, pursuant to Article 19 of Schedule 1 to the Cross-Border Insolvency Act 2008 (Cth): (a) enforcement or execution against the defendant's assets be stayed; (b) the administration or realisation of all the defendant's assets in Australia be entrusted to the plaintiffs; (c) any person within the jurisdiction of the Court be restrained from transferring, encumbering or otherwise disposing of any assets of the defendant; (d) the plaintiffs, in their capacities as foreign representatives of the defendant, may, as they deem appropriate but subject to any further order of the Court, examine witnesses, take evidence and obtain delivery of information concerning the defendant's assets, affairs, rights, obligations or liabilities; (e) subject to the provisions of the Corporations Act 2001 (Cth) (the Corporations Act), all powers normally available to liquidators appointed under the provisions of the Corporations Act be made available to the plaintiffs; and (f) any proceeding against the defendant be stayed. 3. Pursuant to r 15A.3(3) of the Federal Court (Corporations) Rules 2000 (the Rules), on or before 10 June 2011, the plaintiffs serve on the defendant: (a) the originating process; and (b) the supporting affidavits. 4. For the purposes of orders 3(a) and 3(b) above, such service may be effected by the service on the defendant's registered office in Australia located at Suite 2, Level 2, 50 Pitt Street, Sydney NSW 2000 of the affidavit of Stephen Mark Lawrence sworn on 9 June 2011. 5. Pursuant to rr 2.11 and 15A.6 of the Rules: (a) on or before 16 June 2011, the plaintiffs send a notice of the filing of the originating process in these proceedings in accordance with Form 20 to each person in Australia whose claim to be a creditor of the defendant is known to the plaintiffs; and (b) on or before 16 June 2011, the plaintiffs cause to be published a notice of the filing of the originating process in this proceeding in accordance with Form 20 in The Australian newspaper. 6. The matter be listed for directions before the Corporations Duty Judge at 9.30 a.m. on 24 June 2011. 7. Each party and each creditor or person claiming to be a creditor of the defendant have liberty to apply on 3 days' notice. 8. These orders be entered in Court under O 36 r 5 and have immediate effect. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. 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 LIQ) ARBN 117 103 376 First Plaintiff ANTHONY JOHN MCCULLAGH IN HIS CAPACITY AS LIQUIDATOR AND FOREIGN REPRESENTATIVE OF NORTHERN CREST INVESTMENTS LIMITED (IN LIQ) ARBN 117 103 376 Second Plaintiff AND: NORTHERN CREST INVESTMENTS LIMITED (IN LIQ) ARBN 111 103 376 Defendant JUDGE: JAGOT J DATE: 9 JUNE 2011 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This proceeding involves an originating process, filed in Court this morning, which seeks relief under the Cross-Border Insolvency Act 2008 (Cth) (the Act) and associated provisions of the Federal Court (Corporations) Rules 2000. By the originating process, the plaintiffs seek the recognition of a foreign proceeding as a "foreign main proceeding" under the provisions of the Act and consequential orders. 2 The hearing today related to an interlocutory application, also made under the provisions of the Act and the Federal Court (Corporations) Rules, seeking interim relief pursuant to Art 19 of Sch 1 to the Act. The application has been made ex parte. 3 The application was accompanied by an affidavit of Stephen Mark Lawrence, sworn 9 June 2011. Mr Lawrence is an insolvency practitioner and a director of PKF Corporate Recovery and Insolvency (Auckland) Limited. According to Mr Lawrence's affidavit, he was appointed by the High Court of New Zealand to act as joint and several liquidator of the defendant, Northern Crest Investments Limited (Northern Crest), together with the second plaintiff, Anthony John McCullagh. Mr Lawrence's affidavit states, amongst other things, that Northern Crest was placed into liquidation following an order of the High Court of New Zealand on 2 June 2011. According to Mr Lawrence, the directors of Northern Crest are resident in Australia. Since being appointed liquidator, Mr Lawrence has travelled to Sydney to meet with them, with a view to interviewing them and obtaining Northern Crest's records. However, it has been communicated to Mr Lawrence that the directors' position is that, as a New Zealand liquidator, Mr Lawrence has no powers in Australia, and that the directors are not therefore required to provide to him with any information or documents or otherwise to cooperate with the New Zealand liquidation. 4 Mr Lawrence's affidavit – as noted in the written submissions provided by Mr Cook who appeared as Counsel for the plaintiffs – also deposes to the fact that the plaintiffs are concerned that Northern Crest has disposed of assets in circumstances where: (a) a former director of Northern Crest, Mr Mark Bryers, is said to have been criminally charged in New Zealand for a failure to keep proper records in respect of Northern Crest and associated companies; (b) Mr Bryers is believed to be conducting in Australia a similar operation to that conducted by Northern Crest in New Zealand, which resulted in several-million-dollar losses for investors in New Zealand; (c) despite requests being made by Mr Lawrence to other directors of Northern Crest resident in Australia, the plaintiffs have been refused access to the books and records of Northern Crest; (d) Mr Lawrence has been advised that the intellectual property of Northern Crest has been transferred to sub-licensees for no value; and (e) Northern Crest appears to have entered into what Mr Lawrence describes as "voidable transactions" in relation to its assets. 5 Mr Cook has helpfully taken me through the relevant provisions of the Act. Article 2 of Sch 1 provides definitions, relevantly, of the terms "foreign proceeding" and "foreign main proceeding" (as opposed to "foreign non-main proceeding"). As noted above, the declaration of the New Zealand proceeding as a "foreign main proceeding" is the substantive relief which is sought in the originating process; what is before me today on an ex parte basis is the plaintiffs' application for interim relief pending that determination. 6 Mr Cook has also drawn my attention to Art 6, which provides that "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" – namely, Australia. Suffice it to say I am satisfied that none of the orders sought by the plaintiffs today would be contrary to the public policy of Australia. 7 Article 8 of Sch 1 concerns the interpretation of the provisions in Sch 1, and I need not linger upon it. 8 Article 15 of Sch 1 is the substantive provision governing recognition of a "foreign proceeding". It provides, relevantly, that: 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 […] 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. 9 I note that Art 15(3) is modified by s 13 of the Act, which requires that an application for recognition also 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, or section 601CL, of the Corporations Act 2001 in respect of the debtor; that are known to the foreign representative. 10 The affidavit of Mr Lawrence attaches a certified copy of the decision of Associate Judge Christiansen, dated 2 June 2011, which ordered the liquidation of Northern Crest. The affidavit also attaches a copy of the document appointing Mr Lawrence and Mr McCullagh as liquidators. The affidavit also states, as required by Art 15(3) of Sch 1 (as modified by s 13), that Mr Lawrence is not aware of any other foreign proceedings with respect to Northern Crest, or of any proceedings or appointments of the types mentioned in s 13 above. 11 Article 17 of Sch 1 concerns the decision to recognise a foreign proceeding – a decision which, as noted above, is not before me today. 12 Article 19 of Sch 1 is critical to the present application. It provides (in Art 19(1)) that: From the time of filing an application for recognition until the application is decided upon, the court may, at the request of the foreign representative, where relief is urgently needed to protect the assets of the debtor or the interests of the creditors, grant relief of a provisional nature, including: (a) Staying execution against the debtor's assets; (b) 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, in order to protect and preserve the value of assets that, by their nature or because of other circumstances, are perishable, susceptible to devaluation or otherwise in jeopardy; and (c) Any relief mentioned in paragraph 1(c), (d) and (g) of article 21 below. 13 By Art 19(3), any relief granted under Art 19(1) terminates when the application for recognition is decided upon. In this case, the application for recognition will not be decided upon until sometime after a proposed directions hearing to be held in approximately two weeks' time. 14 By Art 19(4), the Court may refuse to grant relief under Art 19 "if such relief would interfere with the administration of a foreign main proceeding." There is no suggestion in this case that granting the relief sought would do so. 15 The interlocutory relief sought by the plaintiffs is not only supported by Art 19(1)(a) and (b), but also by the provisions of Art 21 mentioned in Art 19(1)(c). Article 21(1) relevantly mentions relief in the form of: (c) Suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor to the extent the right has not been suspended under paragraph 1(c) of article 20; (d) Providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor's assets, affairs, rights, obligations or liabilities; […] (g) Granting any additional relief that may be available to [the liquidator] under the laws of this State. 16 Based on the material which is before me, I am satisfied that ex parte orders should be made in substantially the form sought. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate: Dated: 14 June 2011