Sharp, as Trustee in Bankruptcy of SK Foods LP [2012] FCA 737

FEDERAL COURT OF AUSTRALIA

Sharp, as Trustee in Bankruptcy of SK Foods LP [2012] FCA 737 Citation: Sharp, as Trustee in Bankruptcy of SK Foods LP [2012] FCA 737

Parties: BRADLEY D. SHARP AS TRUSTEE IN BANKRUPTCY OF SK FOODS LP, A CALIFORNIA LIMITED PARTNERSHIP (UNDER CHAPTER 11) and ROBERT C. GREELEY AS RECEIVER APPOINTED BY THE UNITED STATES BANKRUPTCY COURT

File number: NSD 542 of 2012

Judge: EMMETT J

Date of judgment: 6 June 2012

Legislation: Corporations Act 2001 (Cth) ss 580, 581 Corporations Regulations 2001 (Cth) reg 5.6.74 California Corporations Code ss 15901.04, 15901.05

Cases cited: Salyer v Sheahan and Lock, in the matter of SK Foods Australia Pty Ltd (in liquidation) [2012] FCA 734

Date of hearing: 4 and 6 June 2012

Place: Sydney

Division: GENERAL DIVISION

Category: No catchwords

Number of paragraphs: 17

Counsel for the plaintiffs: G Lucarelli

Solicitor for the plaintiffs: Duncan Cotterill

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 542 of 2012

BRADLEY D. SHARP AS TRUSTEE IN BANKRUPTCY OF SK FOODS LP, A CALIFORNIA LIMITED PARTNERSHIP (UNDER CHAPTER 11)

First Plaintiff

ROBERT C. GREELEY AS RECEIVER APPOINTED BY THE UNITED STATES BANKRUPTCY COURT

Second Plaintiff

JUDGE: EMMETT J DATE OF ORDER: 6 JUNE 2012 WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

SKPM Receiver Order

1. Pursuant to a letter of request issued by the United States Bankruptcy Court, Eastern District of California dated 30 March 2012, the Order of the United States Bankruptcy Court, Eastern District of California, made on 6 March 2012 in Adversary Proceedings No 11-2337-D pending in Chapter 11 proceedings case number 09-29162-D-11 appointing the second plaintiff (Receiver) as receiver of certain property (SKPM Receiver Order), is hereby recognised. 2. The appointment of the Receiver over the Receivership Estate (as defined in Schedule 1 below) for the purpose of holding and safeguarding the Receivership Estate and, in particular, any Distribution (as defined in Schedule 1 below) that may be determined to be payable to any Defendant(s) (as defined in Schedule 1 below) and/or any of their alleged assignees from or by SK Foods Australia Pty Ltd ACN 009 245 735 (in liquidation) or Cedenco JV Australia Pty Ltd ACN 075 836 010 (in liquidation) pending the entry of a final order or judgment resolving the first plaintiff's claims against Defendants in Adversary Proceedings pending before the US Bankruptcy Court (as defined in Schedule 1) or further order of the United States Bankruptcy Court, is hereby recognised. 3. The Receivership Estate (as defined in Schedule 1) together with possession and control thereof be vested in the Receiver. 4. The Receiver shall have the powers set out in Schedule 2. 5. Upon presentation of a sealed copy of this Order, any person or entity over whom this Court has jurisdiction owing any payment or performance to the Defendants or their assignees on account of the Distribution or any part thereof, which, as a result of the SKPM Receiver Order or this Order, has been made a part of the Receivership Estate, shall attorn to the Receiver and shall render such payment or performance directly to the Receiver and not the Defendants. 6. The Receiver, after payment of any costs, charges and expenses that may be incurred in the exercise of any of the powers in realising property vested in him within Australia, is authorised to remit such surplus to the United States of America. 7. The plaintiffs (and either of them) be granted leave to apply for such further or other orders as may be necessary. Fast Falcon Receiver Order 8. Pursuant to a letter of request issued by the United States Bankruptcy Court, Eastern District of California dated 17 May 2012, the Order of the United States Bankruptcy Court, Eastern District of California made on 7 May 2012 in Adversary Proceedings case number 12-2169 pending in Chapter 11 proceedings case number 09-29162-D-11 appointing the second plaintiff (Receiver) as receiver of certain property (Fast Falcon Receiver Order), is hereby recognised. 9. The appointment of the Receiver over the Receivership Estate (as defined in Schedule 1 below) pending the entry of a final order or judgment resolving the first plaintiff's claims against Fast Falcon LLC in Adversary Proceedings pending before the United States Bankruptcy Court (as defined in Schedule 3), or further order of the United States Bankruptcy Court, is hereby recognised. 10. The Receivership Estate (as defined in Schedule 3) together with possession and control thereof be vested in the Receiver. 11. The Receiver shall have the powers set out in Schedule 4, subject to the restriction set out in paragraph 2 of Schedule 4. 12. Upon presentation of a sealed copy of this Order, any person or entity over whom this Court has jurisdiction owing any payment or performance to Fast Falcon LLC or its assignees which, as a result of the Fast Falcon Receiver Order or this Order, has been made a part of the Receivership Estate, shall attorn to the Receiver and shall render such payment or performance directly to the Receiver and not Fast Falcon LLC. 13. The Receiver, after payment of any costs, charges and expenses that may be incurred in the exercise of any of the powers in realising property vested in him within Australia, is authorised to remit such surplus to the United States of America. 14. The plaintiffs (and either of them) be granted leave to apply for such further or other orders as may be necessary. SS Farms Receiver Order 15. Pursuant to a letter of request issued by the United States Bankruptcy Court, Eastern District of California dated 17 May 2012, the Order of the United States Bankruptcy Court, Eastern District of California, made on 10 May 2012 in Adversary Proceedings case numbers 09-2692, 10-2014 and 10-2016 pending in Chapter 11 proceedings case number 09-29162-D-11 appointing the second plaintiff (Receiver) as receiver of certain property (SS Farms Receiver Order), is hereby recognised. 16. The appointment of the Receiver over the Receivership Estate (as defined in Schedule 1 below) pending the entry of a final order or judgment resolving the first plaintiff's claims against the Defendants (as defined in Schedule 5) in Adversary Proceedings pending before the United States Bankruptcy Court (as defined in Schedule 1) or further order of the United States Bankruptcy Court, is hereby recognised. 17. The Receivership Estate (as defined in Schedule 5) together with possession and control thereof be vested in the Receiver. 18. The Receiver shall have the powers set out in Schedule 6, subject to the restriction set out in paragraph 2 of Schedule 6. 19. Upon presentation of a sealed copy of this Order, any person or entity over whom this Court has jurisdiction owing any payment or performance to any Defendant or any of their assignees which, as a result of the SS Farms Receiver Order or this Order, has been made a part of the Receivership Estate, shall attorn to the Receiver and shall render such payment or performance directly to the Receiver and not the Defendants. 20. The Receiver, after payment of any costs, charges and expenses that may be incurred in the exercise of any of the powers in realising property vested in him within Australia, is authorised to remit such surplus to the United States of America. 21. The plaintiffs (and either of them) be granted leave to apply for such further or other orders as may be necessary. Schedule 1 (SKPM Receiver Order) (Definitions) "Adversary Proceedings" means the Adversary Proceeding No 11-2337-D pending before the United States Bankruptcy Court, Eastern District of California, filed in the Chapter 11 proceedings case No 09-29162-D-11. "Defendants" means: 1. SKPM Corporation Inc, 2. SSC&L 2007 Trust; 3. Frederick Scott Salyer (aka Scott Salyer) as trustee of the SSC&L 2007 Trust; 4. Scott Salyer Revocable Trust; 5. Frederick Scott Salyer (aka Scott Salyer) as trustee of the Scott Salyer Revocable Trust; 6. Monterey Peninsula Farms LLC; and 7. Fast Falcon LLC; "Distribution" means: 1. any distribution that may be determined to be payable to any Defendant (s) and/or any of their alleged assignees by or from SK Foods Australia Pty Ltd A.C.N. 009 245 735 (in liquidation) (SKFA) or Cedenco JV Australia Pty Ltd A.C.N 075 836 010 (in liquidation) (CJV); 2. any distribution made on account of the right to payment asserted by Fast Falcon LLC in the proof of debt (in the approximate amount of AU$18,452,631.00) it filed on or about 27 March 2011 with John Sheahan and Russell Lock (Liquidators), as liquidators of SKFA (hereinafter, the Intercompany Debt), 3. any distribution that may be determined to be payable to any Defendant (s) and/or any of their alleged assignees made on account of the surplus funds which may be paid to shareholders/members of SKFA (hereinafter, the Cedenco Stock), 4. any distribution made on account of any other proof of debt that a Defendant and/or any assignee has or may assert against SKFA or CJV in connection with the Intercompany Debt or Cedenco Stock. "Receivership Estate" means any Distribution. Schedule 2 (SKPM Receiver Order) (Receiver's powers) 1. The Receiver shall have the following powers: a. The power to demand, collect, receive and preserve all or any portion of the Distribution determined to be payable to one or more of the Defendants or any of their respective alleged assignees; b. The power to endorse all instruments and undertake whatever actions reasonably necessary to take possession and control of the Distribution or part thereof, and to prevent the Defendants or their alleged assignees from obtaining possession or control of same; c. The power to open and maintain bank accounts, in the name of the Receivership Estate, in a United States federally insured lending institution, or in an Australian Bank and to transfer cash assets of the Receivership Estate when received to such accounts, if the Receiver deems it prudent or efficient to do so. If such accounts are created, the Receiver shall provide to all parties to the Adversary Proceedings copies of the monthly bank statements (including all cancelled cheques) for any such accounts and for any existing accounts over which he takes control. Such copies of bank monthly bank statements shall be provided within seven (7) days of their receipt by the Receiver; d. The power to employ other professionals, including attorneys, to assist in carrying out the Receiver's rights and duties set forth in the SKPM Receiver Order or this Order; e. The power to apply to this Court for such further or other orders as may be necessary. Schedule 3 (Fast Falcon Receiver Order) (Definitions) "Adversary Proceedings" means the Adversary Proceeding No 12-2169 pending before the United States Bankruptcy Court, Eastern District of California, filed in the Chapter 11 proceedings case No 09-29162-D-11. "Receivership Estate" means: 1. any legal or equitable right, title or interest Fast Falcon LLC (Fast Falcon) holds in the shares in SS Farms Australia Pty Ltd. ACN 107 746 716 (receivers and managers appointed and in liquidation) (SS Farms Australia) (the shares issued by SS Farms Australia being the SSFA Stock) acquired directly or indirectly from SS Farms LLC (SS Farms) including but not limited to all right of Fast Falcon to require SS Farms (whether as trustee, equitable transferor or otherwise) to do all things necessary to convey legal title to the SSFA Stock or to require SS Farms to exercise or refrain from exercising any right arising out of or related to the SSFA Stock, 2. any rights Fast Falcon holds arising out of or in relation to the SSFA Stock, including but not limited to: a. any rights Fast Falcon may have to appoint or remove the officers or directors of SS Farms Australia under the corporate Constitution of SS Farms Australia, the laws of Australia or the United States of America; b. any rights Fast Falcon may have to receive a distribution payable on account of the SSFA Stock or the proceeds thereof, and c. any other rights Fast Falcon may have as a shareholder of SS Farms Australia under the corporate Constitution of SS Farms Australia, the laws of Australia or the United States of America, d. any instruments or other documents Fast Falcon acquired or has the right to acquire or possess directly or indirectly from SS Farms related to the SSFA Stock, e. any proofs of debt and proofs of equity interest asserted or that may be asserted by Fast Falcon or on Fast Falcon's behalf in the liquidation of SS Farms Australia ("SSFA Liquidation") including but not limited to distributions made on account of such proofs of debt or proofs of equity interest by John Sheahan and Iain Russell Lock the joint liquidators appointed in the SSFA Liquidation; and f. any proceeds, product, or offspring of any of the foregoing. Schedule 4 (Fast Falcon Receiver Order) (Receiver's powers) 1. Subject to the next paragraph, the Receiver shall have the following powers: a. To demand, collect, receive and preserve all or any portion of the Receivership Estate or any distribution payable to Fast Falcon or its respective alleged assignees; b. To endorse all instruments and undertake whatever actions reasonably necessary to take possession and control of the Receivership Estate, or part thereof, and to prevent Fast Falcon or its alleged assignees from obtaining possession or control of same; c. To open and maintain bank accounts, in the name of the Receivership Estate, in a US federally insured lending institution, or in an Australian Bank, and to transfer cash assets of the Receivership Estate when received to such accounts, if the Receiver deems it prudent or efficient to do so. If such accounts are created, the Receiver shall provide to all parties copies of the monthly bank statements (including all cancelled cheques) for any such accounts and for any existing accounts over which he takes control. Such copies of bank monthly bank statements shall be provided within seven (7) days of their receipt by the Receiver; d. To employ other professionals, including attorneys, to assist in carrying out the Receiver's rights and duties set forth in the Fast Falcon Receiver Order or this Order; e. To exercise all rights of Fast Falcon to require SS Farms to do all things necessary to convey legal title to the SSFA Stock or to require SS Farms (whether as trustee, equitable transferor or otherwise) to exercise or refrain from exercising any rights arising out of or related to the SSFA Stock; f. To exercise all rights Fast Falcon has to appoint or remove the officers or directors of SS Farms Australia or to require SS Farms (whether as trustee, equitable transferor or otherwise) to appoint or remove the officers or directors of SS Farms Australia; g. The power to apply to this Court for such further or other orders as may be necessary. 2. Notwithstanding any other provision of this order, Fast Falcon shall have the right without interference by the Receiver to prosecute in the courts of Australia or the United States of America any legal or equitable claims or defenses seeking to establish or vindicate Fast Falcon's rights to any asset made subject to the control of the Receiver, or defend any challenges to its claimed rights in those assets, provided however, that in the event any court enters an order or judgment directing or permitting payment on account of any asset forming part of the Receivership Estate any part thereof, to Fast Falcon or any entity claiming under it, the Receiver shall have the sole and exclusive right to receive and hold said payment until the conclusion of the Adversary Proceedings or further order of the United States Bankruptcy Court. Schedule 5 (SS Farms Receiver Order) (Definitions) "Adversary Proceedings" means the following Adversary Proceeding pending before the United States Bankruptcy Court, Eastern District of California, filed in the Chapter 11 proceedings case No 09-29162-D-11: 1. Adversary Proceedings No 09-2692; 2. Adversary Proceedings No 10-2014; and 3. Adversary Proceedings No 10-2016. "Defendants" means: 8. SKPM Corporation Inc, 9. SSC&L 2007 Trust; 10. Frederick Scott Salyer (aka Scott Salyer) as trustee of the SSC&L 2007 Trust; 11. Scott Salyer Revocable Trust; 12. Frederick Scott Salyer (aka Scott Salyer) as trustee of the Scott Salyer Revocable Trust; 13. Monterey Peninsula Farms LLC; 14. SS Farms LLC; 15. SSC Farms I LLC; and 16. SKF Aviation LLC "Receivership Estate" means: 3. Any and all assets held by or on behalf of Defendants as of March 20, 2010, which include but are not limited to any and all real or personal property, tangible or intangible, foreign or domestic, as well as any and all proceeds, products, offspring, rents, cash, stock, securities, accounts receivable, earnings, interest, trademarks, patents, copyrights, goodwill, actual or potential claims, and the like arising out of or resulting from any contracts, leases, agreements, and the like associated with or derived from any and all assets held by the Defendants as of March 20, 2010, including, but not limited to all rights, privileges and entitlements SS Farms LLC (SS Farms) holds that arise out of or relate to the shares in SS Farms Australia Pty Ltd. ACN 107 746 716 (receivers and managers appointed and in liquidation) (SS Farms Australia) (the shares issued by SS Farms Australia being the SSFA Stock) including, but not limited to: a. all rights SS Farms has or may have as a shareholder of SS Farms Australia under the corporate Constitution of SS Farms Australia, the laws of Australia or the United States of America to appoint or remove the officers or directors of SS Farms Australia; b. all rights SS Farms has or may have to receive a distribution payable on account of the SSFA Stock or the proceeds of the SSFA Stock or on account of any proofs of debt or proofs of equity interest asserted or that may be asserted by SS Farms in the liquidation of SS Farms Australia (SSFA Liquidation); c. any other rights SS Farms may have as a shareholder of SS Farms Australia under the corporate Constitution of SS Farms Australia, the laws of Australia or the United States of America; and d. any proceeds, product, or offspring of any of the foregoing. Schedule 6 (SS Farms Receiver Order) (Receiver's powers) 3. Subject to the next paragraph, the Receiver shall have the following powers: a. To demand, collect, receive and preserve all or any portion of the Receivership Estate or any distribution payable to one or more the Defendants or any of their respective alleged assignees; b. To endorse all instruments and undertake whatever actions reasonably necessary to take possession and control of the Receivership Estate, or part thereof, and to prevent the Defendants of their alleged assignees from obtaining possession or control of same; c. To open and maintain bank accounts, in the name of the Receivership Estate, in a United States federally insured lending institution, or in an Australian Bank, and to transfer cash assets of the Receivership Estate when received to such accounts, if the Receiver deems it prudent or efficient to do so. If such accounts are created, the Receiver shall provide to all parties copies of the monthly bank statements (including all cancelled cheques) for any such accounts and for any existing accounts over which he takes control. Such copies of bank monthly bank statements shall be provided within seven (7) days of their receipt by the Receiver; d. To employ other professionals, including attorneys, to assist in carrying out the Receiver's rights and duties set forth in the SS Farms Receiver Order or this Order; e. To exercise all rights SS Farms has to appoint or remove the officers or directors of SS Farms Australia; and f. The power to apply to this Court for such further or other orders as may be necessary. 4. Notwithstanding any other provision of this order, the Defendants shall have the right without interference by the Receiver to prosecute in the courts of Australia or the United States of America any legal or equitable claims or defenses seeking to establish or vindicate their rights to any asset made subject to the control of the Receiver, or defend any challenges to their claimed rights in those assets, provided however, that in the event any court enters an order or judgment directing or permitting payment on account of any asset forming part of the Receivership Estate any part thereof to the Defendants or any entity claiming under them, the Receiver shall have the sole and exclusive right to receive and hold said payment until the conclusion of the Adversary Proceedings or further order of the United States Bankruptcy Court. Without limiting the generality of the foregoing, SS Farms shall retain the sole right to prosecute its application filed on or about March 21, 2012 in the Supreme Court of Victoria, Australia in the proceeding entitled SS Farms, LLC v. SS. Farms Australia Pty, Ltd., et al, SCI 2012/01582 seeking termination of the liquidation of SS Farms Australia. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 542 of 2012