Independent Insurance Company Ltd - [2005] NSWSC 587

No judgment structure available for this case.

Reported Decision:
(2005) 23 ACLC 1337

New South Wales

Supreme Court

CITATION:
Independent Insurance Company Ltd [2005] NSWSC 587

HEARING DATE(S): 23/05/05

JUDGMENT DATE :

22 June 2005

JURISDICTION:
Equity Division
Corporations List

JUDGMENT OF:
Barrett J

DECISION:
Originating process dismissed

CATCHWORDS:
CORPORATIONS - cross-border insolvency - letter of request directed by High Court of Justice of England and Wales to Supreme Court of New South Wales - application by English company and its provisional liquidators for orders in aid of English court - auxiliary jurisdiction under Corporations Act, s.581, considered - recognition, as a matter of comity, of English order appointing provisional liquidators - whether "external administration matter" shown to exist - availability of general equitable remedies in aid of English court - whether declaratory relief appropriate where no lis inter partes - whether declaratory relief of any utility - whether final injunctive relief should be granted ex parte against persons generally - whether comity requires making of orders of a kind made by English court in generally reciprocal circumstances - whether auxiliary jurisdiction extends to replication of orders made by courts in the United States and Ireland

LEGISLATION CITED:
Bankruptcy Act 1966 (Cth), s.29(2)
Bankruptcy Code (US), s.304(b)
Companies Act 1963 (Ireland), ss.222, 250
Corporations Act 2001 (Cth), ss.471B, 580, 581
Corporations Regulations 2001 (Cth), reg. 5.6.74
Insolvency Act 1986 (UK), ss.130(2), 426

CASES CITED:
Ainsworth v Criminal Justice Commission (1992) 175 CLR 564
Al Sabah v Grupo Torras SA [2005] 2 WLR 904
Antonarkis v Delly (1976) 51 ALJR 21
Australian Securities Commission v Ampolex Ltd (1995) 38 NSWLR 504
Ayres v Evans (1981) 39 ALR 129
Belan v Casey [2002] NSWSC 58
BP Australia Ltd v Brown (2003) 58 NSWLR 322
Carr v News Group Newspapers Ltd [2005] EWHC 971 (QB)
Dick v McIntosh [2001] FCA 1008
Electricity Commission of New South Wales v Arrow (unreported, NSWSC, Hodgson J, 7 December 1990)
England v Smith [2001] 1 Ch 419
Epic Energy (WA) Nominees Pty Ltd v Michael (2003) 27 WAR 515
Forster v Jododex Mines Pty Ltd (1972) 72 CLR 421
Fourie v Le Roux [2005] EWCA Civ 204
H (a Healthcare Worker) v Associated Newspapers Ltd [2002] EWCA Civ 195
Hall v Woolf (1908) 7 CLR 207
Harrison v Goodland (1944) 69 CLR 509
Hughes v Hannover Ruckversicherungs AG [1997] 1 BCLC 497
Iveson v Harris (1802) 7 Ves Jun 251; 32 ER 102
Jagger v Darling [2005] EWHC 683 (Ch)
Macaulay v Guaranty Trust Company of New York (1927) 44 TLR 99
Maritime Union of Australia v Patrick Stevedores Operations Pty Ltd [1998] 4 VR 143
McPhail v Persons Names Unknown [1973] 1 Ch 447
Mills v News Group Newspapers Ltd [2001] EWHC 412 Ch
Re a Debtor [1981] Ch 384
Re AFG Insurances Ltd (2002) 20 ACLC 1588
Re AFG Insurances Ltd (2002) 43 ACSR 60
Re Culmer 25 BR 621 (1982)
Re IIT (1975) 58 DLR (3d) 55
Re Macks; Ex parte Saint (2000) 204 CLR 158
Re S (a child) [2003] EWCA Civ 963
Re Singer 205 BR 355 (SDNY 1997)
Re Vocalion (Foreign) Ltd [1932] 2 Ch 196
Re X (a Minor) [1984] 1 WLR 1422
Tony Blain Pty Ltd v Splain [1993] 32 NZLR 185
Venables v News Group Newspapers Ltd [2001] 2 WLR 1038
X (a Woman Formerly Known as Mary Bell) v O'Brien [2003] EWHC 1101 (QB)

PARTIES:
Independent Insurance Company Limited - First Plaintiff
Dan Yoram Schwarzmann in his capacity as joint provisional liquidator of Independent Insurance Company Limited - Second Plaintiff
Mark Charles Batten in his capacity as joint provisional liquidator of Independent Insurance Company Limited - Third Plaintiff

FILE NUMBER(S):
SC 6305/04

COUNSEL:
Dr S.R. Derham - Plaintiffs

SOLICITORS:
Henry Davis York - Plaintiffs

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

WEDNESDAY, 22 JUNE 2005

6305/04 – INDEPENDENT INSURANCE COMPANY LIMITED & 2 ORS

JUDGMENT

The application and its context

1 In this proceeding, the plaintiffs are Independent Insurance Company Limited, a company incorporated in England and Wales (which I shall call “Independent Insurance”), and its provisional liquidators, Mr Schwarzmann and Mr Batten, who are in office by virtue of an order made by the High Court of Justice of England and Wales under the Insolvency Act 1986 (UK). The plaintiffs apply ex parte for the following substantive relief:

Insolvency Act

2. A declaration that this Court recognises that, on 17 June 2001, the second and third plaintiffs were appointed by the High Court of Justice as joint provisional liquidators and of the Company with such powers and functions as are conferred on them by Part IV, Chapter VI of the Insolvency Act.

3. Orders that, unless the leave of the High Court of Justice is granted, and subject to such terms as the High Court of Justice may impose, the continuation or commencement of any action or proceeding against the Company or its property within Australia shall be restrained while the joint provisional liquidators are appointed to the Company or after a winding up order has been made in relation to the Company.”

2 The three remaining claims are advanced by reference to s.581 of the Corporations Act 2001 (Cth):

“ Courts to act in aid of each other
(1) All courts having jurisdiction in matters arising under this Act, the Judges of those courts and the officers of, or under the control of, those courts must severally act in aid of, and be auxiliary to, each other in all external administration matters.

(3) Where a letter of request from a court of an external Territory, or of a country other than Australia, requesting aid in an external administration matter is filed in the Court, the Court may exercise such powers with respect to the matter as it could exercise if the matter had arisen in its own jurisdiction.

3 Two orders of the High Court of Justice are in evidence. The first is an order of appointment of joint provisional liquidators made on 17 June 2001 and entered on 18 June 2001. By that order, Mr Schwarzmann and Mr Batten were appointed provisional liquidators of Independent Insurance until final determination of a winding up petition presented on 25 July 2001. The petition was presented by the directors of Independent Insurance. They sought winding up under the Insolvency Act 1986 (UK) and declared that Independent Insurance “is insolvent and unable to pay its debts within the meaning of section 123 of the Insolvency Act 1986”.

4 The second order of the High Court of Justice that is in evidence is an order made and entered on 17 July 2004:

“THAT the aid of the Supreme Court of New South Wales be sought and that this Court requests the said Court to assist this Court in the manner more particularly described in the Letter of Request annexed to the application …”

5 The High Court further ordered that the letter of request be transmitted by the provisional liquidators’ legal advisers to the competent judicial authority in Australia. The letter is addressed to the Supreme Court of New South Wales and, after recitals (including one in which the “Order” is defined as the High Court’s order of 17 June 2001 appointing the provisional liquidators of Independent Insurance), continues:

“THIS COURT HEREBY REQUESTS the Supreme Court of New South Wales, pursuant to the provisions of section 581 of the Australian Corporations Act 2001 (the ‘ Corporations Act ’), to act in aid of this Court by making orders, as follows:

1) Orders recognising and giving effect to the Order as follows:

(a) a declaration that on 17 June 2001 a petition to wind up the Company was presented to the High Court of England and Wales (the ‘ High Court ’) pursuant to Part IV Chapter VI of the Insolvency Act 1986 (the ‘ Insolvency Act ’) and

(b) a declaration that on 17 June 2001 the Joint Provisional Liquidators were appointed to the Company with such powers and functions as are conferred on them by Part IV Chapter VI of the Insolvency Act.

2) Orders giving effect to section 130(2) of the Insolvency Act so that, while provisional liquidators are appointed to the Company or after a winding up order has been made in relation to the Company, no action or proceeding shall be proceeded with or commenced against the Company or its property in Australia, except by leave of the High Court and subject to such terms as the High Court may impose.

3) Such orders as would be open to the High Court to make within its jurisdiction applying and giving effect to the statutory protections set out in section 126 of the Insolvency Act, or orders applying and giving effect to such comparable Australian statutory provisions in respect of such protections, including section 467(7) of the Corporations Act, as would have had application to the Company had the Joint Provisional Liquidators been appointed under Part 5.4B of the Corporations Act.

4) Orders, if the Supreme Court of New South Wales thinks fit, that any application for leave to proceed against the Company in Australia be made to the High Court.

5) Such orders as would be open to the High Court to make within its jurisdiction to assist the Joint Provisional Liquidators in the exercise of their powers and the discharge of their functions as provisional liquidators appointed pursuant to Chapter Part IV Chapter VI of the Insolvency Act; and

6) Such further and other orders as the Supreme Court of New South Wales may consider just.

7) The Joint Provisional Liquidators have liberty to apply to the Supreme Court of New South Wales to seek orders in accordance with this letter of request.”

6 It is by reference to the requests contained in the letter of request that the plaintiffs advance their claim to Orders 1 to 3 set out at paragraph [1] above. They do so on the basis of evidence showing a tangible and substantial connection with Australia. Independent Insurance carried on insurance business in the United Kingdom but, in the course of doing so, wrote policies in favour of Australian residents. Some 317 policies issued to policyholders in Australia remain current. There are 666 claims outstanding with an aggregate potential liability exceeding 41 million pounds. There are also assets in Australia in the form of reinsurance receivables and a 20% shareholding in an Australian company which is indebted to Independent Insurance in a sum of some 1.6 million pounds. The provisional liquidators apprehend that policyholders in Australia may seek to bring claims in Australian courts. As I have mentioned, one such claim was in fact prosecuted in this court but has been compromised.

The scope and effect of ss.581(2)(a) and 581(3) of the Corporations Act

7 Because of the letter of request and the circumstance that the provisional liquidators are in office by virtue of an order made under a law of a “prescribed country” (as the United Kingdom is, for these purposes, by reason of reg. 5.6.74 of the Corporations Regulations 2001 (Cth)), both s.581(2)(a) and s.581(3) of the Corporations Act arise for consideration. In each case, there is a threshold question as to the existence of an “external administration matter”. That expressions is defined by s.580 as follows:

8 Because there has been no winding up order in respect of Independent Insurance, the focus must be upon paragraph (c) of the definition, in so far as it refers to “the insolvency of a body corporate”. The evidence shows that Independent Insurance was, on 12 April 1904, incorporated by registration under the Companies Act 1862 of the United Kingdom. That is sufficient to establish its character as a “body corporate”: see s.18 of the Act of 1862. The opinion of the directors, as stated in the winding up petition, was that Independent Insurance “is insolvent and unable to pay its debts within the meaning of the Insolvency Act 1986”. That is an opinion shared by the provisional liquidators. I am satisfied, therefore, as to the existence of “insolvency” of Independent Insurance, with the result that I proceed on the footing that there exists “the insolvency of a body corporate” and, accordingly, that each matter in respect of which this court’s aid is sought, being a matter “in relation to” the insolvent administration presided over by the provisional liquidators in England, is an “external administration matter” for the purposes of s.581.

9 As I have said, both s.581(2)(a) and s.581(3) are relevant in this case. Section 581(2)(a) says that this court “must act in aid of, and be auxiliary to” among others, the courts of the United Kingdom that have jurisdiction in external administration matters. The word “must” connotes obligation. This has been acknowledged in cases arising under corresponding provisions of bankruptcy legislation. The Bankruptcy Act 1966 (Cth) provides, in s.29(2)(a), that the “Court” (as defined by that Act) “shall act in aid of and be auxiliary to the courts of the external Territories, and of prescribed countries, that have jurisdiction in bankruptcy”. This reflects provisions found in the Imperial Bankruptcy Acts of 1882 and 1914. An analogous provision (s.29(2)(b) of the present Act) using the word “may” applies to courts other than those of external Territories and prescribed countries. The distinction between ss.29(2)(a) and 29(2)(b) of the Bankruptcy Act is of the same kind as the distinction between ss.581(2)(a) and 581(2)(b) of the Corporations Act. The significance of the distinction was referred to by Northrop J in Ayres v Evans (1981) 39 ALR 129 (at p.138):

Re Osborn

Re Jackson

Re a Debtor

10 Fox J expressed a more cautious opinion, saying (at p.133) that s.29(2)(a) “at least requires the court to entertain an application for aid in a case to which it applies”. The third member of the court, McGregor J, saw s.29(2)(a) as imposing an obligation to assist in the particular cases which it applied, they being cases in which Parliament had regarded reciprocity with the Australian system as having been achieved.

11 A significant aspect of s.581(2)(a) is that it not only requires the court to act in aid but confers a specific jurisdiction to act in aid. I quote again from the judgment of Northrop J in Ayres v Evans (at p.138):

“In my opinion, s 29(2)(a) of the Bankruptcy Act (Cth) confers upon the Federal Court a jurisdiction which it is bound to exercise when the two requirements referred to therein are satisfied.”

12 Fox J said (at p.133) that the effect of s.29(2)(a) is that the Federal Court “has jurisdiction to give aid”. The corresponding provision of the Imperial Act of 1883 was described by Griffith CJ in Hall v Woolf (1908) 7 CLR 207 at p.212 in this way:

“Sec. 118 of the English Bankruptcy Act 1883 does not create any new rights, but only creates new remedies for enforcing existing rights.”

13 Section 581(3) applies where a letter of request is received from a court of an external Territory or a court of a country other than Australia. It pays no attention to whether the other country is a “prescribed country”. The effect of s.581(3) is to confer a discretion upon the court rather than directing it to act. The discretion is a discretion for the court to “exercise such powers with respect to the matter as it could exercise if the matter had arisen in its own jurisdiction”.

14 Sections 581(2)(a) and 581(3) are thus quite different in purpose and effect. Section 581(3), which is activated only by receipt of a letter of request, allows the court, in effect, to treat the foreign matter as if it were a matter that had arisen within the court’s own jurisdiction and to make any order within its own armoury of orders relevant to such a domestic matter. Section 581(2)(a), on the other hand, imposes a requirement to act. It is not triggered by a letter of request (in the sense that the court may act under it in the absence of a letter of request), although absence of any request from the court of the external Territory or prescribed country is likely to mean that the Australian court does not know what action by it is (or might be thought to be) “in aid of” or “auxiliary to” the other court. A letter of request is thus, in that way, a means of giving content to the s.581(2)(a) requirement, as well as bringing s.581(3) into play.

15 The effect of analogous United Kingdom provisions in s.426 of the Insolvency Act 1986 (UK), from the perspective of a court receiving a letter of request, was considered by the English Court of Appeal in England v Smith [2001] 1 Ch 419. It was there observed, following Hughes v Hannover Ruckversicherungs AG [1997] 1 BCLC 497, that the task of the receiving court is to apply either its own insolvency law or the insolvency law of the requesting country and, in either case, its own general jurisdiction and powers. Under s.581, the position is somewhat different. Section 581(3) enables an Australian court having jurisdiction under the Corporations Act 2001 (Cth) which receives a letter of request issued by an English court invested with jurisdiction in respect of companies under the Insolvency Act 1986 (UK) to exercise, in respect of matters relating to the United Kingdom insolvency, powers that the Australian court could have exercised if the matters had arisen in Australia. Section 581(2)(a) requires the Australian court, by exercise of those powers or other aspects of its own jurisdiction, to act in aid of the English court. But the Australian court is not expressly permitted or required by the Australian legislation to exercise the statutory powers that the English court itself may exercise; nor, of course, can the United Kingdom legislation be the source of any direct power of the Australian court to do so.

The nature of the relief now sought

16 In the present case, this court is asked to award remedies that are general equitable remedies. This is in line with cases in which the equitable remedy of appointment of a receiver has been granted by a court exercising auxiliary jurisdiction in support of a foreign insolvent administration: see, for example, Re a Debtor [1981] Ch 384; Dick v McIntosh [2001] FCA 1008. The Privy Council has recently confirmed in Al Sabah v Grupo Torras SA [2005] 2 WLR 904 that the aim of provisions like ss.581(2)(a) and 581(3) is to provide a basis for the exercise of the domestic court’s jurisdiction where such a basis does not already exist. Such provisions do not augment the jurisdiction except in a geographic sense. It is in that light that the reference by Griffith CJ in Hall v Woolf to the creation of “new remedies for enforcing existing rights” is to be understood.

17 By their originating process filed on 24 November 2004 but not brought by them before the court for hearing until 23 May 2005, Independent Insurance and its provisional liquidators seek the particular orders set out at paragraph [1] above. Orders 1 and 2 are obviously sought by reference to the request in paragraph 1 of the letter of request. Order 3 is sought by reference to paragraph 2 of the letter of request. Viewed alone and in the abstract, however, all the proposed orders are unusual. The claims for declaratory relief (Orders 1 and 2) are made outside the confines of any demonstrated justiciable controversy. The claim cast as a claim for injunctive relief (that is, the claim for Order 3) is also advanced apart from any lis inter partes and seeks what I described in the first AFG Insurances case (Re AFG Insurances Ltd (2002) 20 ACLC 1588 (at [20])) as “an order expressed to be binding on the whole world in the manner of legislation”. I must therefore address the question whether the obligation cast upon this court by s.581(2)(a) requires, or the power conferred by a combination of that provision and s.581(3) permits, the making of the particular orders sought.

The claim for declaratory relief

18 I consider first the claims for declaratory relief. In doing so, I record at the outset that there can be no doubt on the central issue: this court does recognise the presentation of the English winding up petition on 17 June 2001, the pendency of the winding up application and the making and effect of the order of that date by which the provisional liquidators were appointed. It does so in accordance with principles of private international law referred to by Gummow J in Re Macks; Ex parte Saint (2000) 204 CLR 158:

The same result would obtain under the common law rules of private international law, Queensland being the place of incorporation and that law determining who is entitled to act on behalf of corporations incorporated there

19 In Macaulay v Guaranty Trust Company of New York (1927) 44 TLR 99, receivers appointed by the Delaware Court of Chancery by “a combination of a winding up order and an administration order” in respect of an insolvent corporation incorporated in Delaware were, by the comity of nations, recognised in an English court in the same way as foreign assignees in bankruptcy are recognised as having the title to sue that derives from the foreign law under which they are appointed. Likewise, in Re IIT (1975) 58 DLR (3d) 55, the Ontario High Court recognised the authority of a Luxembourg court to appoint liquidators of a Luxembourg juristic entity and the status given to those liquidators by Luxembourg law.

20 In the present case, the petition of 17 June 2001 is shown to have been presented under United Kingdom statute law in respect of a corporation owing its existence to that law. This court has no reason to question the jurisdiction of the English court to entertain the petition and to make the order appointing provisional liquidators. The authority of the provisional liquidators and the position they occupy, as well as the status of their appointment under English law, are accordingly recognised in this court as a matter of private international law and apart altogether from any order this court may make under s.581 of the Corporations Act 2001 (Cth) or otherwise.

21 Even so, does it follow that this court is either bound or empowered to grant the declaratory relief now sought on the ex parte application of Independent Insurance and its provisional liquidators? The application is made in circumstances where no one is seen to question the existence of the English proceedings or the making or effect of the order appointing the provisional liquidators. The only conceivably relevant jurisdiction of this court is the aspect of its inherent jurisdiction referred to in s.75 of the Supreme Court Act 1970 which speaks of the power to make “binding declarations of right”. That power is very wide. In Forster v Jododex Mines Pty Ltd (1972) 72 CLR 421 at p.435, Gibbs J said that:

“the power of the Court to make a declaration, where it is a question of defining the rights of two parties, is almost unlimited; I might say only limited by its own discretion.”

22 The nature of the power was described by Mason CJ, Dawson, Toohey and Gaudron JJ in Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at pp.581-2 in these terms:

“It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which ‘[i]t is neither possible nor desirable to fetter ... by laying down rules as to the manner of its exercise.’ However, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. The person seeking relief must have ‘a real interest’ and relief will not be granted if the question ‘is purely hypothetical’, if relief is ‘claimed in relation to circumstances that [have] not occurred and might never happen’ or if ‘the Court's declaration will produce no foreseeable consequences for the parties’.” [footnotes omitted]

23 In the present case, the plaintiffs have a clear interest in seeing the English proceedings and the order of 17 June 2001 recognised by and acted upon by this court. But the declaration sought is, to my mind, one that will have no consequence. As I have said, no one is shown to question the status of the English proceedings, the English order or the English appointment. No controversy about any of those matters has been brought before the court. The only conceivable recipient of the message embodied in the declarations claimed would be the court itself, since recognition by it of the matters with which the declarations are concerned will found such further orders as it sees fit to make in aid of the English court. But there is no need for the court to make a declaration directed, in effect, to itself. It is sufficient that it record, as I have already done, its recognition of the presentation of the winding up petition on 17 June 2001, the pendency of the winding up application and the making and effect of the order appointing the provisional liquidators. In my opinion, therefore, the declarations, if made, would be of no utility.

24 It was suggested by Dr S.R. Derham of counsel, who appeared for the plaintiffs, that my second decision in relation to AFG Insurances (Re AFG Insurances Ltd (2002) 43 ACSR 60) is an instance in which declaratory relief was granted in similar circumstances and that, by analogy, like relief is warranted here. The analogy is not valid. In that case, voluntary administrators appointed under Part 5.3A of the Corporations Act 2001 (Cth) wished to obtain from the English court certain orders calculated to assist the progress of their administration in the United Kingdom. Their appointment was, of course, non-curial, so that there was no order of any Australian court analogous with the English orders now before me and no judicial proceeding involving continuing administration of the insolvent estate. The making of declaratory orders as to the appointment and tenure of the administrators therefore served the purpose of providing a foundation for the issue by this court of a letter of request directed to the overseas court pursuant to s.581(4). There was utility in declaratory relief in that case for a reason akin to that stated by McKechnie J in Epic Energy (WA) Nominees Pty Ltd v Michael (2003) 27 WAR 515:

“If the regulations are to be construed in a particular way a binding declaration of right will give guidance to trial courts if particular charges are challenged.”

25 It is, of course, necessary that a declaration be more than an advisory opinion: see, in particular, the observations of Cole JA in Australian Securities Commission v Ampolex Ltd (1995) 38 NSWLR 504. The significance of the declarations in the second AFG Insurances case as a means of access by the administrators to the auxiliary jurisdiction of the English court meant that they were more than academic, even though the circumstances in which they were made were unusual in the context of mainstream thinking about the availability of that form of equitable relief.

The claim for injunctive relief

26 I turn now to the claim for injunctive relief, noting, as I do so, that the claim for Order 3 is, in effect, a claim for a permanent injunction by way of final relief. The order, if made, would be an indiscriminate command to unidentified persons not to commence or continue any proceeding against Independent Insurance or its property in Australia while the provisional liquidators remain in office (or after a winding up order is made), except with leave granted by the English court under the English legislation.

27 I am satisfied that such an order would be an order made in aid of the English court in the matter of the provisional liquidation ordered by it in respect of Independent Insurance. I say this because s.130(2) of the Insolvency Act 1986 (UK), a provision very similar to s.471B of the Corporations Act 2001 (Cth), provides that, where a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company or its property except with the leave of the English court and subject to such terms as it may impose. A like embargo applies after a winding up order has been made. The plaintiffs have put into evidence an opinion of an English solicitor, Mr Elliott of Herbert Smith, in which it is stated that, if a person sought to commence or maintain an action against Independent Insurance in a court in England, the question whether the High Court of Justice had jurisdiction to order that the action be stayed or that the person be restrained from pursuing it would not, in practice, arise. This is because the court before which the purported action came would recognise and give effect to the statutory stay. Mr Elliott says, however, that, in principle, the High Court would have jurisdiction to enjoin the commencement of the proceeding unless the plaintiff could make out a case for the grant of leave.

28 This, it seems to me, is indicated by the decision of Maugham J in Re Vocalion (Foreign) Ltd [1932] 2 Ch 196. In that case, Bank of New South Wales had brought a debt action in the Supreme Court of Victoria against an English company in respect of which a winding up order was made by the High Court of Justice in England. That court held that the then counterpart of s.130(2) of the Insolvency Act (s.177 of the Companies Act 1929 (UK)) did not apply to proceedings in the Victorian court. It was also held, however, that the Australian bank, which had a presence in England, could be subjected to an order in personam, made in exercise of the court’s general equitable jurisdiction, restraining it from continuing the Victorian proceeding. As a matter of discretion, no such anti-suit order was made in the particular case.

29 In a similar way, this court may, in a situation where it is required or empowered to act by s.581 of the Corporations Act, make an order restraining a person amenable to its jurisdiction from initiating or continuing, without the leave of the English court, a proceeding in relation to which s.130(2) of the Insolvency Act is operative. Section 581(2)(a) is a clear source of such jurisdiction. The order would be an order regulating the initiation or continuation of proceedings in a way that would have been open to the English court if the proceedings had been prosecuted within its jurisdiction. This, as I said in the second AFG Insurances case ((2002) 43 ACSR 60 at paragraph [8]), is an aspect of the “acting in aid” jurisdiction.

30 It follows that if any person subject to the in personam jurisdiction of this court were to threaten to institute or continue proceedings against Independent Insurance without the leave of the English court under s.130(2) of the Insolvency Act, this court would have jurisdiction to order that that person be restrained from doing so (although, if the relevant proceedings were proceedings in this court, s.61 of the Supreme Court Act 1970 would indicate that a stay should be ordered, rather than an injunction). This court would also have power to order that any such proceedings actually commenced in a court over which it exercises supervisory jurisdiction be stayed. Relief by way of injunction or a stay would, if granted, be relief in a proceeding to which the person desiring to pursue the proceedings was party and the claim for the relief would be assessed in the ordinary way and in accordance with the discretionary principles applicable to such matters.

Order directed to unidentified persons - submissions

31 Order 3, as sought, is, of course, quite different. Dr Derham acknowledged the difficulty referred to briefly at paragraph [20] of the judgment in the first AFG Insurances case that the order, if made, would be “an order expressed to be binding on the whole world in the manner of legislation”, although he preferred to characterise it as directed to all persons with claims against Independent Insurance rather than the world at large. He acknowledged that those persons are unidentified and, for present purposes, unidentifiable. He described the comment in the first AFG Insurances case as prima facie consistent with the decision of the Victorian Court of Appeal in Maritime Union of Australia v Patrick Stevedores Operations Pty Ltd [1998] 4 VR 143 but submitted that the principles there discussed nevertheless left room for the making of the general order sought.

32 In the Maritime Union case, the Court of Appeal had before it an appeal against orders of an injunctive kind expressed to bind not only the union and certain named officials but also:

“All persons who were on 8 April 1998 or are now or have at any time since 8 April 1998 participated in the picket line at or in the vicinity of the premises of the plaintiff … and all persons who participate in the picket line at or in the vicinity of the premises from the date of this order.”

33 The Court of Appeal (Winneke P, Brooking and Charles JJA) allowed the appeal and, in doing so, said (at pp.157-8):

“The present injunction is highly unusual, operating as it does to restrain not only the union and its four officials named as defendants but also the classes of person mentioned in para. 2 (ii) of the order, none of whom was a defendant, or named as a respondent to an application, or given any notice of the application for an injunction, or made the subject of a representative order.

Iveson v Harris

Subpoena

Seaward v Paterson

Brydges v Brydges

Ranson v Platt

Geddes v Australasian Meat Industry Employees’ Union

Marengo v Daily Sketch and Sunday Graphic Ltd.

Bentley v Nelson

Antonarkis v Delly

Fire Nymph Products Ltd. v Jalco Products (WA) Pty. Ltd.

Attorney-General v Newspaper Publishing Plc.

Hodson v Coppard

Metropolitan District Railway Co. Ltd. v Earl’s Court Ltd.

34 The court then proceeded to consider exceptions to the general rule. It is upon these exceptions that Dr Derham placed particular emphasis. He noted that the High Court of Australia, while subscribing to the rule enunciated by Lord Eldon in Iveson v Harris (1802) 7 Ves Jun 251; 32 ER 102 referred to by the Court of Appeal, has acknowledged that there are exceptions: see Harrison v Goodland (1944) 69 CLR 509, Antonarkis v Delly (1976) 51 ALJR 21. Other judicial statements to like effect were mentioned including that of Young J in Belan v Casey [2002] NSWSC 58 concerning the possibility that, in proceedings between A and B, X may be restrained from acting as B’s solicitor.

35 Counsel referred to Tony Blain Pty Ltd v Splain [1993] 32 NZLR 185 where an injunction was granted to restrain unknown persons from setting up stalls at concerts for the sale of unauthorised souvenir items; to Re X (a Minor) [1984] 1 WLR 1422 where an order binding on the world at large prohibited the publication of information about a ward of the court; and to Electricity Commission of New South Wales v Arrow (unreported, NSWSC, Hodgson J, 7 December 1990) where, on the application of a statutory authority, both named persons and persons unidentified were alike restrained from interfering with the authority’s exercise of its statutory powers. In the last-mentioned case, Hodgson J referred to McPhail v Persons Names Unknown [1973] 1 Ch 447 where the English Court of Appeal upheld orders for the possession of property against a number of squatters whose names were unknown.

36 I was also referred to two decisions of Dame Elizabeth Butler-Sloss P in which orders were made enjoining the publication of information that might identify certain persons (Venables v News Group Newspapers Ltd [2001] 2 WLR 1038; X (a Woman Formerly Known as Mary Bell) v O’Brien [2003] EWHC 1101 (QB)). The injunction in the Venables case was described in the English Court of Appeal as “remarkable” and “novel” but without any suggestion that it was wrong: see H (a Healthcare Worker) v Associated Newspapers Ltd [2002] EWCA Civ 195; Re S (a child) [2003] EWCA Civ 963. Venables was also referred to in Carr v News Group Newspapers Ltd [2005] EWHC 971 (QB) where the court made an apparently final order that it described as “an injunction, as it is called, contra mundum; that is to say, of general effect and binding upon anyone who knows of the order”. In Jagger v Darling [2005] EWHC 683 (Ch), there was an interlocutory injunction directed to a class of persons described but not named. In all these cases, however, there was reliance, to some extent, upon rights created by United Kingdom human rights legislation and the European Convention for the Protection of Human Rights and Fundamental Freedoms.

37 With the exception of those in the immediately preceding paragraph (all decided since 1998), the cases in which injunctions were ordered against persons generally or a class of unidentified persons were the subject of comment by the Victorian Court of Appeal in the Maritime Union case. The decision in Tony Blain was regarded as wrong (it was described as “a remarkable case”). The wardship case (Re X (a Minor)) was seen as involving an exception peculiar to that jurisdiction. The Electricity Commission decision was, it was noted, concerned with a class of unidentified persons and therefore apparently distinguishable.

38 Dr Derham submitted that, in the present case, the order sought is not an order against the world but an order against a class of persons not presently capable of being identified, that is, the class consisting of persons who have or may consider themselves to have claims against Independent Insurance. On that basis and referring in particular to the approach taken by Hodgson J in the Electricity Commission case, he submitted that the rule emphasised by the Victorian Court of Appeal does not apply, this being an exception.

Reciprocity - submissions

39 Dr Derham made another submission. He referred to an order made by the High Court of Justice on 26 September 2002 after receipt of the letter of request issued by this court in conformity with the orders I made in the second AFG Insurances case. The letter of request (as eventually framed having regard to the factors discussed in the first AFG Insurances case, including the concern about orders directed to persons at large) asked the English court to assist this court by making orders as follows:

“(1) Orders recognising and giving effect to the declarations made by the Supreme Court of New South Wales on 11 September 2002 as follows:

(a) a declaration that on 14 August 2002 the first plaintiff (the company) commenced under administration pursuant to Pt 5.3A of the Corporations Act 2001 (Cth) (the Act);

(b) a declaration that on 14 August 2002 Keiran Hutchison and John Raymond Gibbons were appointed voluntary administrators of the company pursuant to Pt 5.3A of the Act with such powers and functions as are conferred on them by Pt 5.3A of the Act.

(2) Such orders as it would be open to the Supreme Court of New South Wales to make within its jurisdiction applying and giving effect to:

(a) the statutory protections set out in ss 440D and 440F of the Corporations Act 2001 (Cth);

(b) the administrators’ statutory entitlements to the books of the company set out in s 438C of the Corporations Act 2001 (Cth);

(c) the operation of s 437D of the Corporations Act 2001 (Cth) to transactions or dealings affecting property of the company;

or orders applying and giving effect to such comparable English statutory provisions in respect of such protections, entitlements transactions or dealings as would have had application to the company had it been made subject to an administration order under s 8 of the Insolvency Act.

(3) Such orders as it would be open to the Supreme Court of New South Wales to make within its jurisdiction to assist the administrators in the exercise of their powers and the discharge of their functions as administrators appointed pursuant to Pt 5.3A of the Corporations Act 2001 (Cth).

(4) Such further and other orders as the High Court of Justice may consider just.”

40 I have received into evidence the orders made by the English court on 26 September 2002. They orders include the following:

“IT IS ORDERED pursuant to section 426 of the Insolvency Act 1986 that:

…

(a) unless the leave of the Supreme Court of New South Wales is granted or the consent of the Administrators is given in writing, the continuation or commencement of all actions and proceedings against the Company within the jurisdiction of this Court shall be restrained.

(b) unless the leave of the Supreme Court of New South Wales is granted the continuation or commencement of any enforcement process in relation to property of the Company within the jurisdiction of this Court shall be restrained.”

Similar auxiliary relief in other countries - submissions

41 I refer finally to a matter not so far mentioned, namely, that there are in force both in the United States and Republic of Ireland court orders generally similar in purpose and effect to Order 3 as now sought. On 26 February 2004, the United States Bankruptcy Court for the Southern District of New York made orders by which the commencement or continuation of all judicial, arbitral, administrative and regulatory actions against Independent Insurance or its property in the United States was enjoined. The operative words of the first order are: “that all persons and entities are enjoined from …”. The orders were made pursuant to s.304(b) of the Bankruptcy Code. On 30 July 2004, the High Court of Ireland ordered that the provisions of s.222 of the Companies Act 1963 apply to Independent Insurance “such that no action or proceedings shall be proceeded with or commenced against the Company except by leave of this Court [and subject to such terms as this Honourable Court may impose]”. Section 222 of the Companies Act 1963 is similar to s.130(2) of the Insolvency Act 1986 (UK) and s.471B of the Corporations Act 2001 (Cth).

42 The United States Bankruptcy Code contains, in s.304, mechanisms for ancillary administration in aid of foreign insolvency proceedings. Section 304(b) allows the court to make a preliminary order enjoining the commencement or continuation of any action against the foreign debtor or its United States property. The section does not appear to contemplate, in express terms, a blanket order affecting unidentified claimants but that is apparently the way in which courts approach it in accordance with what is regarded as a mandate “to broadly mold appropriate relief in near blank check fashion”: Re Culmer 25 BR 621 (1982) at p.624. The question whether an injunction affecting unidentified persons is permissible was addressed by the United States District Court for the Southern District of New York in Re Singer 205 BR 355 (SDNY 1997). It was there noted that the automatic stay imposed by law in domestic bankruptcy had been held not to violate due process because creditors could obtain relief from it by order of the Bankruptcy Court. That led on to a conclusion that there is jurisdiction to order a preliminary injunction against unidentified creditors as a body without depriving them of due process. The conclusion was reinforced by the fact that injunctive relief is authorised by s.304, a finding that comity was appropriate in the context and the feature of the order allowing creditors to obtain relief from it.

43 The order of the High Court of Ireland quoted above is the second of five orders made on 30 July 2004. The first order is an order that the order of the English Court of 17 June 2001 “be enforced in the same manner in all respects as if the Order had been made by this Court”. Section 250 of the Companies Act 1963 of Ireland provides that an order of a court of a recognised country (which the United Kingdom presumably is) made “for or in the course of winding up a company” (defined as a body corporate incorporated outside Ireland) “may be enforced by the High Court in the same manner in all respects as if the order had been made by the High Court”. I have nothing before me in relation to the Irish matter beyond the orders and the statutory provisions. I infer that an English order for the appointment of provisional liquidators is, in Ireland, regarded as an order “for or in the course of winding up a company” and that the second order was seen as ancillary to the first.

44 I mention the United States and Irish positions because it is suggested that, in a case of cross-border insolvency where Australia is one of several satellite jurisdictions, relief here should, to the extent possible, be framed so as to be compatible and consistent with relief already in place in comparable countries.

Assessment of submissions

45 The submissions in favour of making Order 3 thus emphasise six points, namely:

(a) that the general rule of equitable jurisdiction reinforced by the Victorian Court of Appeal in the Maritime Union case is acknowledged to operate subject to exceptions;

(b) that an exception apparently not rejected by the Victorian court is illustrated by the Electricity Commission case;

(c) that several English cases since 1998 have resulted in the grant of injunctive relief against unidentified persons;

(d) that, in the case of AFG Insurances, the English court made, in response to a letter of request issued by this court in generally similar circumstances, a restraining order directed to unidentified persons;

(e) that courts in the United States and Ireland have, in relation to Independent Insurance itself, made orders of the kind this court is now asked to make; and

(f) that, having regard, in particular, to (d) and (e), this court should, as a matter of comity in a situation of cross-border insolvency, make the order sought.

46 As to items (a) and (b), for reasons comprehensively explained by the Victorian Court of Appeal in the Maritime Union case, an injunction should not be made in terms which are indefinite as to the persons to be bound. Nor, of course, should any relief be granted ex parte except in circumstances of urgency. This is an important point. In most of the cases relied upon, the making of the order was opposed by someone with an interest to oppose it. In the Electricity Commission case, where the grant of injunctive relief was actively opposed by particular persons, those persons as well as unidentified persons were subjected to the order. Order 3, as sought in this case, is open to fundamental objection on these bases. The general rules about the making of orders without an opportunity for affected persons to be heard were stated by Spigelman CJ (with whom Mason P and Handley JA agreed) in BP Australia Ltd v Brown (2003) 58 NSWLR 322 at p.348:

“The obligation to comply with procedural fairness imports a higher level of content when imposed on a court than in decision-making processes conducted by administrators or tribunals. It requires, in my opinion, that a person likely to be adversely affected by the order of the court is given an opportunity of making submissions to the court before any such order is made or if, exceptionally, an order is made without such an opportunity being given that, upon application, the person must be put in the same position as he or she would have been prior to the order being made. It is the inherent difficulty of achieving the latter that makes an ex parte order a course to be followed only in the case of necessity or other strong reason. [original emphasis]

The creation of a situation in which a person must apply to vacate or vary an order after the order has been made is an exceptional situation. Nothing on the facts of the present case, as at the time of the first judgment, was such as to justify the exceptional course.

47 No circumstances of urgency warranting ex parte relief have been suggested here. The provisional liquidators were appointed in June 2001. The letter of request was issued in July 2004. An application based upon it was filed in this court in November 2004 but not pursued until May 2005. There is no suggestion that any person is threating to commence or continue relevant proceedings against Independent Insurance or in respect of its property.

48 The fact that the jurisdiction invoked is the particular auxiliary jurisdiction created by ss.581(2)(a) and 581(3) of the Corporations Act does not displace or dull the general principles with respect to grant of the particular form of relief sought. As is shown by the recent decision of the English Court of Appeal in Fourie v Le Roux [2005] EWCA Civ 204 (7 March 2005), principles governing the making of orders in the exercise of general equitable jurisdiction are to be observed even though that jurisdiction is resorted to in aid of a foreign court pursuant to statutory powers of the kind conferred by s.581 of the Corporations Act. The Court of Appeal there held that it was not permissible to grant a Mareva order of apparently indefinite duration and affecting persons not notified in advance, just because the order was made in response to a letter of request from the High Court of South Africa. The Vice-Chancellor, with whom Mance and Jonathan Parker LJJ agreed, said that, without the commencement of substantive proceedings in England or an undertaking to commence them, there was no jurisdiction to grant any form of interim relief in support of the relevant cause of action under English law.

49 In relation to item (c), it is, I think, significant that the English cases since 1998 were concerned with the protection of rights conferred or recognised by human rights measures. That introduced points of distinction not at work here. The relevant rights are, in a sense, rights against the world. There is the added point that the cases were, in the main, concerned with maintaining confidentiality the destruction of which would have nullified the purpose of the particular proceedings. There was thus a strong element of action by the court to protect the integrity and utility of its processes, a consideration that does not arise here.

50 In relation to item (d), it is important to emphasise, first, that the letter of request transmitted by this court to the English court in relation to AFG Insurances did not ask that an order addressed to unnamed persons generally be made and, second, that the letter of request before me does not, in terms, ask that such an order be made. What is requested by paragraph (2) is:

“Orders giving effect to section 130(2) of the Insolvency Act so that, while provisional liquidators are appointed to the Company or after a winding up order has been made in relation to the Company, no action or proceeding shall be proceeded with or commenced against the Company or its property in Australia, except by leave of the High Court and subject to such terms as the High Court may impose.”

51 The orders made by the English court on 26 September 2002 in response to this court’s letter of request concerning AFG Insurances appear to have been made without publication of reasons for judgment – or, at all events, counsel has not furnished me with a copy of any reasons or suggested that any exist. The judge by whom the order was made (Lawrence Collins J) had, some fifteen months earlier, declined to grant an injunction directed to the world: see Mills v News Group Newspapers Ltd [2001] EWHC 412 Ch. It would be dangerous to assume that the subsequent decision with respect to AFG Insurances proceeded upon a considered view of the matters that have been aired before me. The same comment applies to similar orders made by the High Court of Justice on 30 April 1999 in relation to New Cap Reinsurance Corporation Ltd, again apparently without publication of reasons.

52 As to item (e), I merely say that the statutory approaches in the United States and Ireland differ from those in Australia, so far as auxiliary jurisdiction in cross-border insolvency is concerned. Judicial attitudes are also different, at least as between the United States and Australia. While, in the United States, there is apparently acceptance of the notion that a prohibitory order against persons with no notice of it is unobjectionable because those persons may apply to be exempted from it, the clear emphasis in our courts is the other way. I refer again to what was said by the Chief Justice in BP Australia Ltd v Brown.

53 In respect of item (f), I observe that Australia has not, to this point, enacted laws adopting recognised international measures for the administration of cross-border insolvencies, although moves towards incorporation of the UNCITRAL Model Law on Cross-Border Insolvency into Australian law are well advanced. In the meantime, in a case such as the present involving a corporate insolvency in the United Kingdom, the only special jurisdiction this court has is that conferred by s.581 of the Corporations Act 2001 (Cth). And, insofar as that section empowers the court to deploy its general equitable jurisdiction in aid of a United Kingdom court in a way that territorial limitations would otherwise not allow, the jurisdiction is to be exercised in accordance with principles of general application.

54 Order 3, as sought, will not be made. I emphasise, however, that, in the circumstances affecting Independent Insurance, there is, by virtue of s.581, jurisdiction in this court to restrain the initiation or continuation of any particular proceeding against Independent insurance or affecting its property, as well as jurisdiction to order a stay of proceedings in some cases. The request in paragraph (2) of the letter of request may therefore be acted upon and satisfied, on a case-by-case basis, by means of an in personam order (or a stay order) against a particular party or particular parties sought and determined in the usual way if and when the need arises. There is ample scope for the requirement imposed by s.581(2)(a) to be met in that way.

Disposition

55 The originating process is dismissed but, of course, without prejudice to the ability of the plaintiffs to seek specific orders of the kind I have just mentioned.

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Citations

Independent Insurance Company Ltd [2005] NSWSC 587

Most Recent Citation

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CITATION:	Independent Insurance Company Ltd [2005] NSWSC 587
HEARING DATE(S):	23/05/05
JUDGMENT DATE :	22 June 2005
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Originating process dismissed

CATCHWORDS:	CORPORATIONS - cross-border insolvency - letter of request directed by High Court of Justice of England and Wales to Supreme Court of New South Wales - application by English company and its provisional liquidators for orders in aid of English court - auxiliary jurisdiction under Corporations Act, s.581, considered - recognition, as a matter of comity, of English order appointing provisional liquidators - whether "external administration matter" shown to exist - availability of general equitable remedies in aid of English court - whether declaratory relief appropriate where no lis inter partes - whether declaratory relief of any utility - whether final injunctive relief should be granted ex parte against persons generally - whether comity requires making of orders of a kind made by English court in generally reciprocal circumstances - whether auxiliary jurisdiction extends to replication of orders made by courts in the United States and Ireland
LEGISLATION CITED:	Bankruptcy Act 1966 (Cth), s.29(2) Bankruptcy Code (US), s.304(b) Companies Act 1963 (Ireland), ss.222, 250 Corporations Act 2001 (Cth), ss.471B, 580, 581 Corporations Regulations 2001 (Cth), reg. 5.6.74 Insolvency Act 1986 (UK), ss.130(2), 426
CASES CITED:	Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 Al Sabah v Grupo Torras SA [2005] 2 WLR 904 Antonarkis v Delly (1976) 51 ALJR 21 Australian Securities Commission v Ampolex Ltd (1995) 38 NSWLR 504 Ayres v Evans (1981) 39 ALR 129 Belan v Casey [2002] NSWSC 58 BP Australia Ltd v Brown (2003) 58 NSWLR 322 Carr v News Group Newspapers Ltd [2005] EWHC 971 (QB) Dick v McIntosh [2001] FCA 1008 Electricity Commission of New South Wales v Arrow (unreported, NSWSC, Hodgson J, 7 December 1990) England v Smith [2001] 1 Ch 419 Epic Energy (WA) Nominees Pty Ltd v Michael (2003) 27 WAR 515 Forster v Jododex Mines Pty Ltd (1972) 72 CLR 421 Fourie v Le Roux [2005] EWCA Civ 204 H (a Healthcare Worker) v Associated Newspapers Ltd [2002] EWCA Civ 195 Hall v Woolf (1908) 7 CLR 207 Harrison v Goodland (1944) 69 CLR 509 Hughes v Hannover Ruckversicherungs AG [1997] 1 BCLC 497 Iveson v Harris (1802) 7 Ves Jun 251; 32 ER 102 Jagger v Darling [2005] EWHC 683 (Ch) Macaulay v Guaranty Trust Company of New York (1927) 44 TLR 99 Maritime Union of Australia v Patrick Stevedores Operations Pty Ltd [1998] 4 VR 143 McPhail v Persons Names Unknown [1973] 1 Ch 447 Mills v News Group Newspapers Ltd [2001] EWHC 412 Ch Re a Debtor [1981] Ch 384 Re AFG Insurances Ltd (2002) 20 ACLC 1588 Re AFG Insurances Ltd (2002) 43 ACSR 60 Re Culmer 25 BR 621 (1982) Re IIT (1975) 58 DLR (3d) 55 Re Macks; Ex parte Saint (2000) 204 CLR 158 Re S (a child) [2003] EWCA Civ 963 Re Singer 205 BR 355 (SDNY 1997) Re Vocalion (Foreign) Ltd [1932] 2 Ch 196 Re X (a Minor) [1984] 1 WLR 1422 Tony Blain Pty Ltd v Splain [1993] 32 NZLR 185 Venables v News Group Newspapers Ltd [2001] 2 WLR 1038 X (a Woman Formerly Known as Mary Bell) v O'Brien [2003] EWHC 1101 (QB)
PARTIES:	Independent Insurance Company Limited - First Plaintiff Dan Yoram Schwarzmann in his capacity as joint provisional liquidator of Independent Insurance Company Limited - Second Plaintiff Mark Charles Batten in his capacity as joint provisional liquidator of Independent Insurance Company Limited - Third Plaintiff
FILE NUMBER(S):	SC 6305/04
COUNSEL:	Dr S.R. Derham - Plaintiffs
SOLICITORS:	Henry Davis York - Plaintiffs