Australia: Cross-border insolvency and ancillary relief - UNCITRAL Model Law on Cross-Border Insolvency

Last Updated: 15 March 2014
Article by Matthew Wilson

Key Points:

The UNCITRAL Model Law on Cross-Border Insolvency is designed to supplement States' insolvency laws with a framework to address cross-border insolvency proceedings.

This case demonstrates how cross-border insolvency rules can be used for obtaining ancillary relief (such as examination of witnesses and records), which extends beyond an automatic stay of enforcement proceedings, irrespective of whether the debtor carries on business or has any creditors in a particular jurisdiction (Crumpler (as liquidator and joint representative) of Global Tradewaves Ltd (a company registered in the British Virgin Islands) v Global Tradewaves (in liquidation), in the matter of Global Tradewaves Ltd (in liquidation) [2013] FCA 1127).


The UNCITRAL Model Law on Cross-Border Insolvency (Model Law), given force in Australia by the Cross-Border Insolvency Act 2008 (Cth) (CBIA), is designed to assist States by supplementing their insolvency laws with a framework to address cross-border insolvency proceedings.

The Facts

Crumpler and Lawson (Liquidators), together the liquidators of Global Tradewaves Limited (Global), were appointed by the British Virgin Islands Commercial Division of the Eastern Caribbean Supreme Court's High Court of Justice (BVI Court). As such, they were also considered to be "foreign representatives" for the purposes of the CBIA.

The Liquidators commenced the winding up of Global in the British Virgin Islands and subsequently applied to the Federal Court of Australia (FCA) to have those proceedings recognised in Australia as a "foreign main proceeding", notwithstanding that there was no evidence that Global had ever carried on business in Australia or had any creditors in Australia.

The Liquidators also sought interlocutory relief in the form of a summons for the examination of Mr Riaz, an Australian resident and a former director of Global and an order for production of certain related documents in his possession.

At or about the same time, the BVI Court made a similar written request to the FCA for the examination of Mr Riaz and the production of certain documents related to Global. Neither Global nor Mr Riaz appeared to defend the application.

The Decision

In determining whether the BVI proceedings could be considered a "foreign main proceeding" the FCA had to first consider whether such proceedings could be properly characterised within the relevant definitions of the Model Law.

A "foreign proceeding" as defined under the Model Law means "a collective judicial or administrative proceeding in a foreign State...pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganisation or liquidation."

To be recognised as a "foreign main proceeding" (a special subset of foreign proceedings) pursuant to the Model Law, it is also necessary to demonstrate that the foreign proceeding "is taking place in the State where the debtor has its centre of main interests."

The FCA held that, on the evidence, the BVI Court was controlling or supervising the insolvency of Global and that the winding up proceedings satisfied the "foreign proceedings" test. Based on the evidence establishing Global's registered office in the BVI, the FCA further found Global's "centre of main interests" to be the BVI, meaning the proceedings also met the "foreign main proceedings" test.

The FCA also needed to determine whether the Liquidators were "foreign representatives" – which, as a consequence of the presumption regarding a company's "centre of main interests" under Art 16 of the Model Law, followed on as a relatively quick conclusion.

The FCA finally considered whether it had the power to issue the examination summons and orders and if it did, the nature and source of that power and whether it should be exercised. The FCA found it could issue the examination summons and made an order for the issuing of such summons. The FCA described its powers as primarily being founded in Art 21(1) of the Model Law. Article 21(1)(d) provides that a court may provide for the examination of a witness on information concerning a company's "assets, affairs, rights, obligations or liabilities" and to produce to that court on such examination "information" concerning those subjects.

The FCA stated that Article 21(1)(g) enables a court to make an order for the examination pursuant to Division 1 of Part 5.9 of the Corporations Act 2001. Further, the FCA found that the letter from the BVI Court was an additional source of power because of section 581(3) of the Corporations Act (allowing a court which receives a letter from a court of another country to exercise all the powers under the Corporations Act that it could exercise if the insolvency had arisen in Australia).

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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