Supreme Court New South Wales Medium Neutral Citation: In the matter of Vietnam Industrial Investments Pty Ltd [2022] NSWSC 1411 Hearing dates: 30 September 2022 Date of orders: 30 September 2022 Decision date: 30 September 2022 Jurisdiction: Equity - Corporations List Before: Black J Decision: Adjournment refused. The defendant be wound up in insolvency, with associated orders. Catchwords: CORPORATIONS — Winding up — Court ordered winding up — Application to adjourn a winding up application — Where a winding up application is brought against an Australian company which holds shares in entities incorporated in Singapore, which in turn hold shares in other companies incorporated in Vietnam — Where the Australian company seeks an adjournment of the winding up application on the basis that it hopes to access restructuring relief in Singapore. CORPORATIONS — Winding up — Statutory demand — Failure to comply with statutory demand — Whether Australian company should be wound up under s 459A of the Corporations Act 2001 (Cth). Legislation Cited: - Corporations Act 2001 (Cth), s 201A, s 459A, s 470, s 440A(2). Cases Cited: - Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) (2011) 244 CLR 1; [2011] HCA 18 - Legend International Holdings Inc (in liq) v Indian Farmers Fertilizer Cooperative Ltd (2016) 52 VR 40; [2016] VSCA 151 - Re ENA Developments Pty Ltd [2022] NSWSC 54 - Re Hydrodec Group Plc [2021] NSWSC 755 - Re Offshore & Ocean Engineering Pty Ltd [2012] NSWSC 1296 - Re Trinity Constructions (Aust) Pty Ltd (Admin Apptd) [2021] NSWSC 1277 Category: Principal judgment Parties: Malayan Banking Berhad (a licenced bank incorporated in Malaysia with Company No 196001000142) (Plaintiff) Vietnam Industrial Investments Pty Ltd (Defendant) Representation: Counsel: N M Bender (Plaintiff) J Giles SC (Defendant) Solicitors: Squire Patton Boggs (Plaintiff) Lavan (Defendant) File Number(s): 2022/251844 Judgment – ex tempore (Revised 6 October 2022) Application to adjourn the winding up 1. The Defendant, Vietnam Industrial Investments Ltd ("VII"), seeks an adjournment of a winding up application brought by Malayan Banking Berhad-Hanoi Bank Branch ("MBB"). VII is a company incorporated in Australia and was, apparently, at one point an Australian listed company. A supporting creditor, Maybank International Labuan Branch also appears, but it is not necessary to address its position, where it appears to be associated with MBB and, in the ordinary course, the Court would only address the application of a supporting creditor if the creditor that initially sought a winding up did not proceed with the application. 2. It is apparent that there have been issues as to the financial position of VII for a considerable period. I have been taken to the independent auditor's report to the members of VII dated 2 November 2020, which recorded a material uncertainty as to the VII Group's ability to continue as a going concern. I pause to emphasise that matter because VII now relies on a proposal (or possible proposal) to restructure the VII Group which, it is suggested, should lead the Court to adjourn the winding up for a longer or a shorter period in order to allow that proposal to be developed. The lateness of the proposal (or possibility of a proposal) is relevant to the exercise of the Court's discretion whether to adjourn the winding up. Even putting that aside, the proposal (or possibility of a proposal) which is now raised, at a very late stage, must be approached in the context that the potential insolvency of VII has been recognised at least since 2 November 2020, when the independent auditor's report was delivered to the members of VII. Plainly, an assessment of the prospects of that proposal (or possibility of a proposal) must take into account, as one relevant matter, the fact that it has not progressed in the period of nearly two years since that report was delivered to the members of VII. 3. Returning to the chronology of events, MBB demanded repayment of a substantial debt owed to it by VII on 24 December 2021, and that debt was not repaid. The last Australian resident director of VII resigned on 1 July 2022, so that VII is currently in contravention of s 201A of the Corporations Act 2001 (Cth) ("Act"), although the Act identifies no consequences of such a contravention. MBB issued a creditor's statutory demand on 28 July 2022 and no application to set it aside was brought by VII, which did not pay the amount claimed within 21 days and is therefore presumed to be insolvent. 4. MBB, relying on the presumption of insolvency arising from an unsatisfied creditor's statutory demand, then brought a winding up application on 24 August 2022, which was referred to me by the Registrar for hearing on 26 September 2022. I adjourned that hearing to 29 September 2022, when the solicitors for VII indicated that the winding up might be opposed, implicitly on the usual basis available to oppose a winding up in Australian law, that VII was solvent. That submission is not now put and, unless the winding up is adjourned, VII accepts that it cannot resist a winding up order. It was not suggested, when the matter was listed on 26 September 2022, that there was a proposed restructuring of VII, or that shortly after the adjournment of the matter for hearing on 29 September 2022, VII or associated companies would take steps to bring an application in connection with such a restructuring in Singapore. I therefore did not have to determine any question as to whether the winding up application should be adjourned to allow such an application to be brought, because that possibility was not raised. 5. VII's application for an adjournment is now based on the events which took place after the winding up hearing was adjourned from 26 September 2022 to 29 September 2022 and then further deferred to today. During that three day period, VII and other companies associated with it filed an application in the High Court of Singapore which seeks to invoke a moratorium available in respect to a scheme of arrangement under the Insolvency, Restructuring and Dissolution Act 2018 (Singapore). That application is supported by an unaffirmed affidavit of a Mr Paccioco, who is the founding partner of a corporate advisory firm in Vietnam, where subsidiaries of VII conduct business. In that unaffirmed affidavit, Mr Paccioco says that he is also the recently appointed chief restructuring officer of VII. There is at least a suggestion that the filing of the application has a defensive character, in respect of the Australian winding up application, since Mr Paccioco's evidence in the Singaporean application is that: "In light of the Winding Up Application and in an effort to ensure the Winding Up Application does not derail the VII Group's holistic restructuring efforts, the VII Group has taken a defensive action of making the Singapore moratorium application." The reference to the winding up "derail[ing]" the VII Group's restructuring efforts here is likely inaccurate, since it appears those efforts had not been substantially progressed before the winding up was listed for hearing, and there was then nothing to be decided. 1. The Singapore Court has itself made no substantive order in the Singapore proceedings, and expressed no view, one way or the other, as to whether its jurisdiction has been properly invoked by VII in the Singaporean proceedings or whether the basis of any orders that are sought from it has been established. No question of this Court giving effect to any decision reached by the Singapore Court arises because it has made no such decision. Affidavit evidence 1. A significant amount of affidavit evidence is led in the winding up and adjournment applications. In support of the adjournment application, VII relies on the affidavit dated 29 September 2022 of its Australian solicitor, Mr Abberton, which refers to Mr Abberton's review of the application filed in Singapore on 28 September 2022. Mr Abberton also sets out the structure of VII and the VII Group and notes, in particular, that VII is incorporated in Australia, and, through another entity, holds shares in three entities which are incorporated in Singapore, which in turn hold shares in other companies incorporated in Vietnam, which are the operating businesses which manufacture steel products for the construction industry in Vietnam. Mr Abberton's evidence is that the VII Group's primary commercial operations comprises two steel rolling mills and a steel roofing factory in Hanoi, Vietnam, and VII Group currently employs some 633 employees. I would give great weight to the welfare of those employees, in dealing with a winding up application or a restructuring application, but nothing that I am asked to do impacts upon those employees. I am here dealing with an application in respect of an Australian company, which holds shares in Singapore companies, which in turn holds shares in companies in Vietnam, at least some of which presumably employ the relevant employees. There is no obvious impact, one way or the other, upon the employees of the appointment of a liquidator to the holding company in Australia, who would assume management of that holding company to the exclusion of its current Vietnamese resident directors, would necessarily affect the operation (as distinct from the control) of the operating companies in Vietnam. Mr Abberton, also refers to the structure of the Singaporean legislation to which I will return below. The exhibit to his affidavit in turn addresses the unaffirmed copy of the affidavit of Mr Pacaccio to which I have referred above. 2. By a second affidavit dated 30 September 2022, Mr Abberton addresses the question of the commencement of the restructuring proceedings, at least to the extent that he and Singaporean advisors of VII have been involved in them. Mr Abberton frankly acknowledges that the involvement of those advisers is a very recent development. Mr Abberton was first contacted on 21 September 2022, a little over a week ago, by a legal practitioner within a Singaporean firm, who referred to a then possible engagement of that firm by VII to provide restructuring advice to the VII Group. It appears that practitioner was then engaged about a week ago, on the last business day before the winding up application was due to be heard in this Court, and Mr Abberton was only then engaged to appear in the winding up application. Mr Abberton also refers to instructions given, apparently on the day of the winding up application, and very likely after the winding up application had already been adjourned at VII's request for hearing on 29 September 2022, to prepare and file the restructuring application in Singapore. Mr Giles, who appears for VII, has rightly not sought to hide from the proposition that the restructuring proposal (or possibility of a proposal) on which VII relies has been prepared very late. That evidence is consistent, as a matter of chronology, with the inference that the restructuring proposal, and the application in Singapore, has the defensive purpose to which I referred above. 3. MBB in turn relies on several affidavits, the first being an affidavit dated 23 September 2022 of Mr Mohammed, the general manager of a branch of MBB, who refers to VII's debt owed to MBB. A second affidavit dated 21 September 2022 of Mr Botsis, a process server, deals with service of the winding up application and associated documents upon VII. A third affidavit dated 27 September 2022 of Mr Zaki, a solicitor acting for MBB, refers to conversations in respect of the matter, and a further affidavit dated 30 September 2022 of Mr Zaki responds to aspects of VII's evidence and, in particular, takes issue with the suggestion that there has been engagement with VII's creditors in respect of any restructuring proposal, at least so far as VII's evidence may be taken to suggest that there had been any engagement with MBB in respect of such a proposal. Submissions and determination 1. Mr Giles draws attention to the provisions of the Singaporean restructuring legislation, although he frankly accepts that VII cannot, on the evidence as it now stands, establish that Singapore is the centre of main interests of VII, or the VII Group, for the purposes of the UNCITRAL Model Law on Cross Border Insolvency ("Model Law") which applies in Australia by reason of the Cross Border Insolvency Act 2008 (Cth). Mr Giles fairly accepts that no question arises here of any automatic stay arising under Article 20 of the Model Law, since the Singaporean proceedings would not be a foreign main proceeding for the purposes of the Model Law, and VII would ultimately need to rely on any discretionary relief that may be granted so far as Singaporean proceedings constitute foreign non-main proceedings for the purposes of Article 21 of the Model Law. 2. Mr Giles puts VII's application, first, on the basis that the Court should adjourn the proceedings, whether for a longer period or a shorter period, in order to allow the development of VII's restructuring proposal. However, that adjournment is directed to allowing VII to develop a restructuring proposal which does not now exist in any developed form. Mr Giles submits that adjournment is also sought, second, to allow VII to progress its application in respect of that proposal (I interpolate, once it has developed such a proposal) in Singapore; third, for it to take any necessary steps to obtain recognition of that proposal in Vietnam, in respect of subsidiaries of the Singaporean entities, which are the operating companies, which would not be available in Vietnam under the Model Law because Vietnam is not a party to the Model Law; and, fourth, depending upon the way in which those matters develop, for VII to bring a possible application for discretionary relief under Article 21 of the Model Law in Australia. That application would invite an Australian Court to stay or defer a winding up of VII as the Australian holding company of the VII Group, because foreign non-main proceedings then existed in Singapore and, on that hypothesis, had possibly been recognised in Vietnam in respect of the operating entities. It will be apparent that there is a substantial degree of contingency in that position, with the most fundamental contingency arising from the fact that a restructuring proposal for VII does not presently exist in any developed form. Mr Giles also draws attention to the moratorium provisions available under Singapore law, and also refers to VII's claim, at least in the evidence, to have made "significant headway" with supportive creditors. One difficulty with that proposition is that, as I have noted above, the evidence indicates that MBB, which is a substantial creditor of VII, has not been consulted in respect of any such proposal. 3. Mr Giles also contends that MBB is, or may be, in breach of a prohibition under the Singapore legislation in proceeding with the winding up. Plainly, that was not the case when the winding up application was filed, and it was not the case when that application was referred to me on 26 September 2022, because the Singapore proceedings did not then exist. It is unclear whether that is now the case as a matter of Singapore law, because that depends on whether there is a substantial connection between VII, or the VII Group, and Singapore, for the purposes of the Singaporean legislation. Whether that is the case may depend on whether a Singaporean Court would treat the existence of intermediate holding companies in Singapore as a "substantial connection", where the operating companies are in Vietnam and the holding company is in Australia, and there is no evidence that the shares in the intermediate Singaporean companies, or those companies' shares in the operating companies, have any value, because of the present financial difficulties of the VII Group; there is no suggestion that the Singapore subsidiaries conduct business in Singapore, at least in any operating capacity. Mr Bender, who appears for MBB, also points out that MBB is incorporated in Malaysia and apparently does itself conduct business in Singapore, although it has subsidiaries in Singapore. I am not satisfied, on the balance of probabilities, that such a contravention presently exists. I therefore need not deal with the difficult question of what weight an Australian court should give to that matter, where any contravention of the Singaporean legislation would exist only by reason of MBB pursuing the rights which Australian law plainly gives to it to proceed to wind up an Australian company under the Act. 4. I have also given careful consideration to Mr Giles' strongest point, which is that the adjournment sought by VII is short. However, it is important to recognise that this is not a case where VII needs further time to lead evidence of an existing restructuring proposal, because it has already led evidence which demonstrates that no such proposal presently exists in any developed form. Instead it needs time to develop a proposal which has not been developed in the two years since VII's potential insolvency was first identified by its auditors. It is by no means apparent that two weeks, four weeks or two months would be sufficient for that purpose. 5. I am not satisfied that I should adjourn the winding up, for two reasons. First, I accept MBB's submission that Australian courts have not adjourned applications to wind up foreign companies registered in Australia, in circumstances which have a degree of analogy with this matter: Legend International Holdings Inc (in liq) v Indian Farmers Fertilizer Cooperative Ltd (2016) 52 VR 40; [2016] VSCA 151 ("Legend"), considered at some length by Williams J in Re Hydrodec Group Plc [2021] NSWSC 755 ("Hydrodec"). Mr Bender rightly submits that there will generally be no better reason to adjourn a winding up proceeding relating to a company that is incorporated in Australia, than a winding up proceeding relating to a registered foreign company, by reason of a foreign restructuring proceedings. Several matters to which the Court of Appeal referred in Legend, and which Williams J noted in Hydrodec, also appear to me to have significant weight here. The winding up application was here filed prior to the commencement of the Singapore proceedings; there is here no presently developed reorganisation plan, at best there is a hope that such a plan might be developed in the future; the application was brought in Singapore at a very late stage; and, importantly, there is no evidence that the implementation of such a plan, if it is ultimately developed, would have the consequence that Australian creditors of VII, or indeed Singaporean creditors of the Singaporean subsidiaries, would be better off than in a liquidation of VII. I also bear in mind that, as the Court of Appeal similarly noted in Legend in respect of a US restructuring, the fact of the appointment of a liquidator in Australia does not prevent a restructuring taking place in Singapore, at least in respect of the Singaporean subsidiaries, although an Australian liquidator would then have control of VII. A liquidator of VII could, in an appropriate circumstance, transition to a voluntary administration of VII, or could give his consent to the steps necessary to implement a restructuring, and the winding up could be terminated if a sufficiently attractive proposal developed. 6. I also bear in mind that that result is consistent with the result which an Australian court would reach if, rather than VII invoking the Singaporean restructuring regime, it had appointed a voluntary administrator in Australia. Mr Giles draws attention to some of the cases in that regard, and seeks to rely on them in VII's favour, but it seems to me that those cases do not assist VII here. The circumstances in which a Court should adjourn a winding up, by reason of the appointment of a voluntary administrator in Australia, are well recognised in the case law, and I summarised them, for example, in Re Trinity Constructions (Aust) Pty Ltd (Admin Apptd) [2021] NSWSC 1277. The ultimate question, reflecting the terms of s 440A(2) of the Act, is whether the Court is satisfied that it is in the interests of the company's creditors for the company to continue under administration rather than be wound up. The Court may be more readily satisfied of that matter where an adjournment is sought at an early stage and for a short time, but will be less willing to adjourn a winding up where, as here, a voluntary administrator is appointed at a very late stage, immediately prior to the hearing of a winding up application: Re Offshore & Ocean Engineering Pty Ltd [2012] NSWSC 1296. It seems to me that it would be perverse for the Court to adjourn a winding up, where a Singaporean restructuring application was brought in respect of Singaporean subsidiaries of VII, where it would not adjourn the winding up in respect of the appointment of a voluntary administrator to VII in Australia. 7. Applying the approach adopted in those cases, the fundamental difficulty with VII's attempt to adjourn the winding up, for a longer or shorter period, is that the prospects of any restructuring proposal being developed, still less the prospects of it being developed in a way that may be advantageous to the creditors of VII, are wholly speculative. The fact that they are wholly speculative is the product of VII's delay in developing a restructuring proposal, notwithstanding that its potential insolvency has been identified for two years, a creditor's statutory demand was then served, a winding up application was then brought, and the steps to develop a serious restructuring proposal have only now been initiated after the date on which the winding up application was first listed for hearing. This is not a question of, in any way, punishing VII for its lateness in taking those steps. Rather, the lateness in VII taking those steps leaves the Court in a position where it has nothing better than speculation as the basis for VII seeking to adjourn the winding up application. The mere speculation that a restructuring might be able to be developed and then implemented in Singapore is not enough to warrant the Court declining to exercise the winding up jurisdiction which the Act confers upon it in favour of a creditor which relies on the presumption of insolvency arising from the unsatisfied creditor's statutory demand issued to VII. 8. For these reasons, I decline to adjourn the winding up application. I note that Mr Giles has, fairly, made clear that VII could not oppose the winding up application, where it was not adjourned. I will now turn to that application. Winding up application and evidence 1. As I noted above, MBB applied for the winding up of VII under s 459A of the Act on the basis of insolvency. I declined to adjourn the winding up application, and Mr Giles who appeared for VII in respect of the adjournment application, has now withdrawn by leave. VII does not seek to establish its solvency or be heard in opposition to the winding up application, having not succeeded in its adjournment application. 2. MBB relies on the affidavit dated 24 August 2022 of Mr Bakar, who is its general manager, in respect of the winding up application, which confirms the debt owed on 18 July 2022 in an amount exceeding USD$3.447 million, and also refers to service of a creditor's statutory demand, which was not set aside. MBB also relies on a second affidavit dated 23 September 2022 of Mr Bakar, which reconfirms that the amount of the debt claimed remained due and payable as at 23 September 2022. While the determination of the winding up application has been delayed until 30 September 2022, there has been no suggestion raised that the amount has been paid since that date. 3. By an affidavit dated 12 August 2022, Mr Botsis in turn gives evidence of service of the creditor's statutory demand and affidavit accompanying the statutory demand, which gives rise to the presumption of insolvency. MBB relies on the second affidavit of service dated 21 September of Mr Botsis, which refers to service of the winding up application and supporting evidence and liquidator's consent on VII. In any event, as I have noted above, VII is plainly on notice of the application, so far as it appeared on the date on which the matter was first listed, and appeared in the adjournment application, although it has now withdrawn and does not oppose and does not seek to be heard in opposition to the application. 4. By an affidavit dated 23 September 2022, Mr Zaki, a partner in the firm of solicitors acting for MBB, refers to lodgement of ASIC Form 519 "Notification of court action relating to winding up" ("Form 519") and publication of a notice of the winding up application. Mr Bender draws attention to the fact that the Form 519, was lodged shortly after the time prescribed by s 470 of the Act. I would extend the time for compliance with s 470 under r 1.10 of the Supreme Court (Corporations) Rules 1999 (NSW) or s 1322 of the Act, to the extent necessary. By a further affidavit dated 27 September 2022, Mr Zaki gives evidence, inter alia, of service of a consent of liquidator, and that consent of liquidator is in evidence. Applicable principles 1. The principles that apply in an application of this kind well-established. A presumption of insolvency arises from a creditor's statutory demand that is unsatisfied. In Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (recs and mgrs apptd) (2011) 244 CLR 1; [2011] HCA 18 at [28], the High Court described the effect of that presumption as follows: "Where a demand has not been complied with, the statutory presumption of insolvency applies unless the demand is set aside in proceedings brought for that purpose prior to the hearing of the application for an order to wind up. Unless the demand is rendered ineffective, by an order setting it aside, the company is required to prove to the contrary of the presumption." 1. That presumption has been frequently applied to found the winding up order in decisions in this Court, and I reviewed the relevant authorities in Re ENA Developments Pty Ltd [2022] NSWSC 54 at [18]. Here, no evidence of solvency was led, and the presumption of insolvency that arises from the unsatisfied prejudiced statutory demand is not rebutted. The winding up application will be determined within the six month period contemplated by s 459R of the Act. Costs 1. The Courts have frequently made orders by way of lump sum costs orders in applications of this kind, and there is good reason to do so, where there will always be uncertainty as to whether costs will be recovered in respect of a company which is in winding up. MBB is not in a position currently to quantify those costs, which will have increased as a result of the adjournment application today, so I will reserve the ability to apply, by application to chambers, for a lump sum costs order if MBB wishes to do so. Orders 1. In these circumstances, I make the following orders: 1. Order that the Defendant, Vietnam Industrial investments Pty Ltd, be wound up in insolvency. 2. Order that David Mansfield and Matthew Donnelly be appointed joint and several liquidators of the Defendant. 3. Costs (including reserved costs, if any) be assessed and reimbursed out of the Defendant's property in accordance with s 466(2) of the Corporations Act 2001 (Cth). 4. Reserve liberty for the Plaintiff to apply, in chambers, for a lump sum assessment for a lump sum costs order in respect of the costs of the application. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 October 2022