|Focus:||In the matter of Coin Co International plc (Administrators Appointed)  FCA 354|
|Services:||Commercial, Dispute resolution & litigation, Financial services|
|Industry Focus:||Financial services|
The Cross-Border Insolvency Act 2008 (Cth) which adopts and enacts the principles of the UNCITRAL Model Law on Cross-Border Insolvency (Model Law) was designed to provide a framework to address insolvency proceedings across numerous jurisdictions, to facilitate cooperation and coordination across state borders. However, there remain complexities in the interplay between local insolvency laws and the Model Law, as demonstrated in the recent hearing of a matter in the Federal Court of Australia in which DibbsBarker acted.
In In the matter of Coin Co International plc (Administrators Appointed)  FCA 354, the court was asked to consider whether, when a foreign main proceeding is recognised and the foreign representative has standing to initiate recovery actions against creditors and other third parties under Div 2 of Part 5B.2 of the Corporations Act 2001 (Cth) (Corporations Act), such actions are to relate back to:
- the date of the commencement of the foreign proceeding, or
- the date that the foreign proceeding is recognised in Australia.
That is, how are creditors and other parties in Australia affected by the recognition of an earlier foreign main proceeding: retroactively, or only with effect from such recognition? The UK administrators involved in this case, who sought to facilitate the efficient administration of the assets located in Australia, asked the court to provide clarity on this question in light of the absence of a clear position expressed in either the Model Law or the Corporations Act.
While the court declined (at this point in time) to determine the issue, the decision demonstrates the desirability of moving quickly to seek recognition in jurisdictions where a company trades in order to avoid such potential cross-border issues. It also highlights the lengths to which the court will go (or not, in this case) to provide administrators with ancillary relief to assist in the administration of a foreign company's assets located in Australia.
On 27 November 2014, administrators were appointed by the UK court to Coin Co International plc (Coin Co). Coin Co is a company registered in the UK and it operated the business of foreign coin exchange across a number of jurisdictions. Coin Co operated its business in Australia via a registrable foreign body, registered under Div 2 of Part 5B.2 of the Corporations Act.
By application filed in the Federal Court of Australia on 3 March 2015, the UK administrators sought orders for the UK administration of Coin Co to be recognised in Australia as a foreign main proceeding pursuant to the Model Law. That recognition was not contested and was comfortably evidenced on the facts. In that regard, there was nothing particularly novel in the Federal Court's decision delivered on 16 April 2015.
The novel aspect of this case was the further order sought by the UK administrators, on the assumption that the court would recognise the UK administration as the foreign main proceeding. Namely, pursuant to Article 21(g) of the Model Law and for the purpose of actions which may be initiated under Article 23 (which includes actions available under Div 2 of Part 5.7B of the Corporations Act, voidable transactions), the administrators asked the court to declare the date on which the administration of Coin Co was taken to have begun for the purposes of the Corporations Act. Two alternative dates were proposed, being 27 November 2014 (when the foreign administration began in the UK) and 16 April 2015 (the date on which the Australian Federal Court recognised the foreign proceeding).
While the live issue in the proceeding related to determining the appropriate date of commencement of the administration for the purpose of local insolvency laws, the court raised the concern that in the absence of any Article 23 proceedings being initiated, it may not have the power to order the relief sought by the administrators at all.
The court was prepared to make the usual orders for recognition, the appointment of a local representative to deal with Coin Co's assets located in Australia, and an order that the local representative have all the powers normally available to liquidators under the Corporations Act. In doing so, the court noted that nothing in those orders operated retrospectively, so that no party was prejudiced by the making of them.
However, the court was not prepared to order the further relief sought by the administrators, holding that it was not authorised by Article 21(g) or Article 23 of the Model Law to do so, at this point in time. The court considered that the making of such an order would not be relief of the kind contemplated by those articles. To make the order would have pre-empted the proper consideration of the relevant question for the purpose of each such action as may be instigated by the local representative, and would have constituted a determination affecting the rights of parties who had not had any opportunity to be heard.
This finding was made despite the contention that such an order would provide practical assistance and clarity for the UK administrators, as well as their local representative and creditors, to progress to an efficient and cost-effective resolution of the Australian affairs of Coin Co. Irrespective of any actions which may or may not be brought, recognition under the Model Law does not on its face operate retroactively. If creditors in jurisdictions foreign to the main proceeding are to be affected at a time prior to recognition, this ought to be plain on the face of the legislation and in the absence of express language, judicial guidance would be welcome.
This case provides a timely reminder of the benefits and desirability of making an application for the recognition of foreign main proceedings at the earliest possible time. Where valuable assets are situated in off shore jurisdictions, insolvency administrators and creditors alike benefit from the clarity and notification of recognition applications made simultaneously with, or as soon as practicable after, the commencement of the foreign main proceeding.
This decision also highlights the lengths to which the court will go (or not, in this case) to provide administrators with ancillary relief to assist in the administration of a foreign company's assets located in Australia.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.