FEDERAL COURT OF AUSTRALIA Wood v Astra Resources Ltd (UK Company No 07620218) [2016] FCA 1192 File number: SAD 207 of 2016 Judge: WHITE J Date of judgment: 7 October 2016 Catchwords: BANKRUPTCY AND INSOLVENCY – application for recognition of proceedings for winding up of the defendant in the High Court of Justice of England and Wales under the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law given force by s 6 of the Cross-Border Insolvency Act 2008 (Cth) – presumption as to the defendant's centre of main interests (COMI) not displaced in circumstances where its COMI was difficult to ascertain due to an absence of evidence as to its actual business and activities – orders made as to recognition and conferring upon the liquidator's powers to administer, realise and distribute the assets of the defendant in Australia. Legislation: Corporations Act 2001 (Cth) s 583(c) Cross-Border Insolvency Act 2008 (Cth) ss 6, 8, 10(b)(i) Federal Court (Corporations) Rules 2010 (Cth) r 15A.3 Insolvency Act 1986 (UK) s 117 Cases cited: Ackers v Saad Investments Company Limited (in official liquidation) [2010] FCA 1221; (2010) 190 FCR 285 Australian Securities and Investments Commission v Astra Resources Plc [2015] FCA 759 Australian Securities and Investments Commission v Astra Resources (No 2) [2016] FCA 560 Kapila, in the matter of Edelsten [2014] FCA 1112; (2014) 320 ALR 506 Legend International Holdings Inc (as debtor in possession of the assets of Legend International Holdings Inc) v Legend International Holdings Inc [2016] VSC 308 Moore, as Debtor-in-Possession of Australian Equity Investors v Australian Equity Investors [2012] FCA 1002 Re Eurofood IFSC Ltd (2006) Ch 508 Young Jr, in the matter of Buccaneer Energy Ltd v Buccaneer Energy Ltd [2014] FCA 711 Date of hearing: 19 August 2016 Registry: South Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 33 Counsel for the Applicant: Mr I Thomas Solicitor for the Applicant: Maddocks Lawyers Counsel for the Respondent: The Respondent did not appear ORDERS SAD 207 of 2016 BETWEEN: NICHOLAS STEWART WOOD First Plaintiff MICHAEL LEEDS Second Plaintiff AND: ASTRA RESOURCES LTD (UK COMPANY NO 07620218) Defendant JUDGE: WHITE J DATE OF ORDER: 19 AUGUST 2016 THE COURT ORDERS THAT: 1. Pursuant to Art 15.1 of United Nations Commission on International Trade Law Model Law on Cross-Border Insolvency (Model Law) (as given force in Australia by s 6 of the Cross-Border Insolvency Act 2008 (Cth) (CBI Act)) Petition No 4386 of 2015 in the High Court of Justice of England and Wales, In the matter of Astra Resources Plc, by which the Defendant was ordered to be wound up on 2 November 2015, be recognised as a foreign main proceeding. 2. Pursuant to Art 21(1)(e) and Art 21(2) of the Model Law, the administration, realisation and distribution of all of the Defendant's assets in Australia be entrusted to the Plaintiffs. 3. Pursuant to Art 21(1)(g) of the Model Law and subject to such exceptions, if any, as may be applicable under s 8 of the CBI Act, all powers available to liquidators under the provisions of the Corporations Act 2001 (Cth) (Corporations Act) be available to the Plaintiffs as if they were liquidators appointed jointly and severally under the Corporations Act. 4. Pursuant to r 15A.7(1) of the Federal Court (Corporations) Rules 2000 (Cth): (a) The Plaintiffs are by 26 August 2016: (i) to send notice of orders 1 to 3 above in accordance with Form 21 to each person whose claim to be a creditor of the defendant is known to them; and (ii) to publish a notice of the making of those orders in accordance with Form 21 in The Australian newspaper; and (b) service of notice of orders 1 and 2 above on the Defendant be dispensed with. 5. There be liberty to apply. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT WHITE J: 1 On 2 November 2015, an order was made by the High Court of Justice of England and Wales for the winding up of Astra Resources Plc, a company incorporated in the United Kingdom. The order of the High Court of Justice was made under s 117 of the Insolvency Act 1986 (UK). Astra Resources Plc is the same entity as the defendant to these proceedings. 2 The liquidators have brought an application under Art 15 of the United Nations Commission on International Trade Law Model Law on Cross-Border Insolvency (Model Law), which is given force in Australia by s 6 of the Cross-Border Insolvency Act 2008 (Cth) (the CBI Act), for recognition in this country of the proceedings in the High Court of Justice in which the winding up order was made. In the alternative, the liquidators sought an order for the winding up of Astra Resources in Australia, pursuant to s 583(c) of the Corporations Act 2001 (Cth). 3 This Court has previously delivered judgments concerning aspects of the conduct of Astra Resources. See Australian Securities and Investments Commission v Astra Resources Plc [2015] FCA 759 (Astra Resources (No 1)); Australian Securities and Investments Commission v Astra Resources (No 2) [2016] FCA 560 (Astra Resources (No 2)). 4 On 28 July 2016, the Court made directions for the service of the liquidators' application on various persons who are, or who have previously been, associated with Astra Resources. These included its sole current named director, former directors (Dr Biswas, Ms De Cianni and Mr Raj), and its former solicitors. The Court also ordered that notice of the application be provided to each known creditor of Astra Resources and be published in the Australian Newspaper and on an internet site. I am satisfied that the liquidators have complied with those orders, using the means identified by the Court by which service was to be effected and, in some cases, by alternative means. 5 Despite the widespread notice, no person attended at the hearing to oppose the liquidators' application. On the basis of the affidavit material and the detailed submissions of counsel, I was satisfied at the conclusion of the hearing that it was appropriate to make the order for recognition and associated orders sought by the liquidators and made orders to that effect. I said that I would publish my reasons later. What follows are those reasons. 6 Article 15 of the Model Law provides: Article 15 Application for recognition of a foreign proceeding 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. 4. The court may require a translation of documents supplied in support of the application for recognition into an official language of this State. 7 This Court has jurisdiction to make an order for recognition of a foreign proceeding by virtue of s 10(b)(i) of the CBI Act. The liquidators are a "foreign representative" and the petition in the High Court of Justice is a "foreign proceeding" as defined in Art 2 of the Model Law. 8 Article 17 of the Model Law requires a foreign proceeding to be recognised if certain conditions are satisfied. However, despite Art 17, the Court may refuse to recognise a foreign proceeding if to do so would be manifestly contrary to the public policy of Australia (Art 6). 9 Article 17 provides (relevantly): Article 17 Decision to recognize a foreign proceeding 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; (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. 10 Article 17(2) distinguishes between "a foreign main proceeding", on the one hand, and a "foreign non-main proceeding", on the other. The term "foreign main proceeding" is defined in Art 2(b) to mean: [A] foreign proceeding taking place in the State where the debtor has the centre of its main interests[.] The term "foreign non-main proceeding" is defined in Art 2(c) to mean: [A] foreign proceeding, other than a foreign main proceeding, taking place in a state where the debtor has an establishment within the meaning of subpara (f) of the present article[.] The term "establishment" used in the definition of a "foreign non-main proceeding" is defined in Art 2(f) to mean: [A]ny place of operations where the debtor carries out a non-transitory economic activity with human means or goods and services[.] 11 The expression, "centre of its main interest" (COMI) is not defined in the Model Law. However, Art 16(3) of the Model Law provides that the Court is entitled to presume, in the absence of proof to the contrary, that the debtor's registered office is its COMI. I respectfully agree with the statement of Rares J in Ackers v Saad Investments Company Limited (in official liquidation) [2010] FCA 1221; (2010) 190 FCR 285 at [50] (Ackers) that the purpose of the presumption in Art 16(3) is the facilitation of a decision on an application for recognition at the earliest possible time in accordance with Art 17(3) when the variety of places at which the debtor carried on activities before the insolvency raises the possibility that more than one might be the debtor's COMI. 12 The COMI of a debtor is to be determined in the light of the facts known at the time of the determination, but regard may be had to historical facts which led to the position at the time: Moore, as Debtor-in-Possession of Australian Equity Investors v Australian Equity Investors [2012] FCA 1002 at [18]-[20]; Legend International Holdings Inc (as debtor in possession of the assets of Legend International Holdings Inc) v Legend International Holdings Inc [2016] VSC 308 at [96] (Legend). 13 The liquidators submitted, correctly in my opinion, that Australian Courts have adopted the approach taken by the European Court of Justice in Re Eurofood IFSC Ltd (2006) Ch 508 at [33]-[34] in the determination of a debtor's COMI. Thus, in Ackers Rares J said: [42] The European Court of Justice in Eurofood [[2006] Ch 541-542] at [29]-[37] considered the formulation of the test for ascertaining the COMI. The presumption in Art 16(3) of the Model Law is the same as had been in Art 3(1) of the European Regulation. The Court referred to a recital to the regulation that stated: The "centre of main interests" should correspond to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties. The Court continued (Eurofood [[2006] Ch at 541-542] at [33]-[34]): 33 That definition shows that the centre of main interests must be identified by reference to criteria that are both objective and ascertainable by third parties. That objectivity and that possibility of ascertainment by third parties are necessary in order to ensure legal certainty and foreseeability concerning the determination of the court with jurisdiction to open main insolvency proceedings. That legal certainty and that foreseeability are all the more important in that, in accordance with article 4(1) of the Regulation, determination of the court with jurisdiction entails determination of the law which is to apply. 34 It follows that, in determining the centre of the main interests of a debtor company, the simple presumption laid down by the Community legislature in favour of the registered office of that company can be rebutted only if factors which are both objective and ascertainable by third parties enable it to be established that an actual situation exists which is different from that which locating it at that registered office is deemed to reflect. (emphasis added) [43] The European Court of Justice's approach was distilled by Lewison J who said that, for the presumption to be displaced, the Court had to be satisfied that the COMI is not in the State in which its registered office is located. His distillation was not contested in the appeal: In Re Stanford International Bank Limited [2010] 3 WLR 941 at 958 [30] per Sir Andrew Morritt C. The Chancellor (with whom on these points Arden LJ and Hughes LJ agreed at [107], [152] and [159]), did not try to reconcile the United States decisions with that of the European Court of Justice in Eurofood [2006] Ch 508. Morritt C said that, in any event, if there were a difference, the England and Wales Court of Appeal would follow the European Court of Justice: Stanford [2010] 3 WLR at 967 [54]. [44] The Chancellor accepted that the derivation of the concept of the COMI in the Model Law had come from the definition in the preamble to the European Regulation quoted above and had been correctly elucidated in the Virgos/Schmidt report: Stanford [2010] 3 WLR at 966 [53]. He held that it had been conclusively established that the factors relevant to a rebuttal of the presumption must be both objective and ascertainable by third parties, being matters already in the public domain. Such matters would be what a typical third party would learn as a result of dealing with the debtor company, but would exclude matters that might only be ascertained on enquiry: Stanford [2010] 3 WLR 968-969 [56]. See also, Young Jr, in the matter of Buccaneer Energy Ltd v Buccaneer Energy Ltd [2014] FCA 711 at [6]. 14 As can be seen, rebuttal of the presumption for which Art 16(3) provides requires factors which are both "objective and ascertainable by third parties" warranting a conclusion that "an actual situation exists which is different from that which locating it at [the] registered office is deemed to reflect". Thus, in Kapila, in the matter of Edelsten [2014] FCA 1112; (2014) 320 ALR 506 at [53], Beach J said: In making a determination, the court must have regard to the need for the centre of main interests to be ascertainable by third parties, creditors and potential creditors. It is important, therefore, to have regard not only to what the debtor is doing but also to what the debtor will be perceived to be doing by an objective observer. It is important also to have regard to the need, if the centre of main interests is to be ascertainable via third parties, for an element of permanency. Beach J then went on to list a number of matters which may, in a given case, inform the identification of a debtor's COMI. It is not necessary to list those presently. 15 The registered office of Astra Resources is, and has always been, in the United Kingdom. Its current registered office is the office of the liquidators. The liquidators pointed to a number of objective factors as indicating that the Art 16(3) presumption that the registered office of Astra Resources is its COMI should not be displaced. These included: (a) Astra Resources' corporate secretary was and is located in London; (b) Astra Resources had engaged solicitors and consultants in England in relation to the winding up proceedings in the High Court of Justice; (c) Astra Resources had retained auditors in England; and (d) from December 2012 until June 2014, Astra Resources had been listed on the GXG Market Exchange operating in London. 16 The liquidators acknowledged, however, that there were some objective factors linking Astra Resources with jurisdictions other than the United Kingdom and Australia. These included: (a) Astra Resources engaged a share registry service provider in Canada; (b) the address of the only current director of Astra Resources is in Macedonia; (c) indications that Astra Resources may have pursued at least some form of activity in 11 different countries (see the summary set out in Astra Resources (No 2) at [169]; and (d) the creditors known to the liquidators are located in a number of different jurisdictions, with the largest known creditor being a company in the United States of America (although that company has sought to enforce its debt through insolvency proceedings in England and Wales and supports the liquidators' application). 17 The liquidators also acknowledged that Astra Resources has a number of connections with Australia. These include: (a) Astra Resources was a resident in Australia for tax purposes; (b) Astra Resources distributed share application forms and made offers of shares to several persons in Australia, that conduct being the subject of this Court's decision in Astra Resources (No 1); (c) Astra Resources' information brochure dated March 2015 provides contact details in Australia; (d) several of Astra Resources' previous directors were located in Australia; (e) Astra Resources retained, or at least seem to have retained, Australian accountants with respect to the preparation of its accounts; (f) Astra Resources retained Australian brokers with respect to the issue of its shares; (g) Astra Resources had business premises at 46 Tynte Street, North Adelaide, South Australia; and (h) Astra Resources is related to numerous companies incorporated in Australia, several of which are, or at least were, its subsidiaries. 18 The location of Astra Resources' shareholders was the subject of submissions. The shareholding records available to the liquidators maintained by Integral Transfer Agency Shareholder Services (ITASS), a Canadian based share registry service, indicate that Astra Resources has 2457 shareholders holding a total of 1,148,063,035 shares. The great majority of these shareholders are shown as having addresses in Australia, and many appear to be "small investors". Counsel for the liquidators noted that in Legend at [117] it was held that the position of Legend's shareholders was irrelevant. This was apparently on the basis that the identity and location of shareholders had to be a matter ascertainable by third parties such as creditors and potential creditors in order to be relevant to the ascertainment of a debtor's COMI. For my part, I would not regard the identity and location of the company's shareholders as being necessarily irrelevant as much may depend of course upon the circumstances of a given case. The identity and location of shareholders will not always be unascertainable by third parties, and their participation in the affairs of the company may have been more than passive. 19 However, in the case of Astra Resources it does not seem appropriate to attach much weight to the circumstance that the majority of its shareholders seem to be located in Australia. This is not a case in which the shareholders can be regarded as being the alter ego of the corporate entity. There is little indication that the shareholders have been other than passive investors. Further, many of the shareholders must have invested in the knowledge that Astra Resources was incorporated in the United Kingdom for the purpose of engaging in operations of some kind outside Australia. 20 The liquidators submitted that the objective facts pointing towards the COMI being in Australia are largely historical. That is because Astra Resources does not have any current directors or employees in Australia, does not have any current business premises in Australia, is said to have transferred its assets to one or more companies in Hong Kong, and has not carried on a business in Australia for some time. On this basis, the liquidators submitted that the cessation of activities in Australia is more than temporary or transitory. 21 The same, however, may be said of Astra Resources' connections to the United Kingdom. Many of the connections upon which the liquidators rely in that respect are also largely historical. 22 One of the difficulties in identifying the COMI, by reference to the actual factual circumstances of Astra Resources, is the absence of evidence as to the activities in which it did actually engage. As I noted in Astra Resources (No 2) at [180], Dr Biswas and Ms De Cianni provided very little by way of hard evidence about the projects in which Astra Resources was said to be involved. Their description of the projects seemed to be more in the nature of "grand plans". In particular, they did not provide hard evidence about the projects, the ownership of them, their current status, financial statements and the like. There is a real possibility that some and perhaps many of the projects to which Dr Biswas and Ms De Cianni referred are embryonic, have not progressed beyond a preliminary documentary stage or are, in reality, illusory. 23 As I have said, the absence of evidence of an actual business or businesses being conducted by Astra Resources makes the identification of its COMI, in a conventional sense, difficult. In these circumstances, the presumption for which Art 16(3) provides is important. 24 In my opinion, these factors which indicate that there is some connection of Astra Resources with Australia, and with countries other than Australia, are not sufficient to displace the presumption for which Art 16(3) provides. 25 Accordingly, I am satisfied that the present case is one to which Art 17(2)(a) applies. 26 The application and the supporting affidavits comply with the matters required by Rule 15A.3 of the Federal Court (Corporations) Rules 2010 (Cth). 27 I have not identified any matters suggesting that it would be contrary to the public policy of Australia for the order for recognition to be made. 28 The Liquidators also sought orders pursuant to Art 21. That Article provides, relevantly: 1. 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 realisation 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 [liquidators] under the laws of this State. 2. Upon recognition of a foreign proceeding, whether main or non-main, the Court may, at the request of the foreign representative, entrust the distribution of all or part of the debtor's assets located in this State to the foreign representative or another person designated by the court, provided that the court is satisfied that the interests of creditors in this State are adequately protected. … 29 The liquidators sought orders pursuant to Art 21(1)(e), (g) and (2) of the Model Law that the administration, realisation and distribution of all of the assets of Astra Resources in Australia be entrusted to them and that, subject to any exceptions which may be applicable under s 8 of the CBI Act, all powers available to liquidators appointed under the Corporations Act be available to them as if they were liquidators appointed jointly and severally under the Corporations Act. 30 Orders may be made pursuant to Art 21(1) when it is "necessary to protect the assets of the debtor or the interests of the creditors". I am satisfied that an order to that effect is appropriate in the present case. The evidence which the Court received in Astra Resources (No 1) and in Astra Resources (No 2) indicates that action is necessary to protect the assets of Astra Resources as well as the interests of creditors. 31 I consider that it would be in the interests of Astra Resources and of its creditors for there to be a single winding up rather than separate winding up proceedings in the United Kingdom and Australia. The interests of efficiency favour a single liquidation. All creditors, including non-English creditors will be able to prove in the winding up proceeding in England and participate pari passu with creditors of the same class. 32 Having reached the view that the orders sought by the liquidators were appropriate, I also decided that it was unnecessary to determine the liquidators' claim for alternative relief, namely, that Astra Resources be wound up in Australia. 33 These are my reasons for the orders made on 19 August 2016. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice White. Associate: Dated: 7 October 2016