FEDERAL COURT OF AUSTRALIA
Kapila, in the matter of Edelsten [2014] FCA 1112
Citation: Kapila, in the matter of Edelsten [2014] FCA 1112 Parties: IN THE MATTER OF GEOFFREY EDELSTEN; SONEET R KAPILA IN HIS CAPACITY AS TRUSTEE IN BANKRUPTCY FOR THE ESTATE OF GEOFFREY EDELSTEN APPOINTED UNDER CHAPTER 11 OF THE BANKRUPTCY CODE (US) v GEOFFREY EDELSTEN File number: VID 519 of 2014 Judge: BEACH J Date of judgment: 10 October 2014 Catchwords: BANKRUPTCY AND INSOLVENCY – cross-border insolvency – US bankruptcy proceeding – application for recognition of foreign proceeding as either a foreign main proceeding or foreign non-main proceeding pursuant to the Cross-Border Insolvency Act 2008 (Cth) and the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (UNCITRAL) – individual debtor’s centre of main interest – presumption of “habitual residence” – recognition of US bankruptcy proceeding as foreign non-main proceeding under the Model Law – moratoria orders made under art 21 of the Model Law Legislation: Bankruptcy Act 1966 (Cth)
Bankruptcy Regulations1996 (Cth)
Corporations Act 2001 (Cth)
Cross-Border Insolvency Act 2008 (Cth)
Family Law Act 1975 (Cth)
Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade LawCases cited: Akers (As Joint Foreign Representative) v Saad Investments Co Ltd [2013] FCA 738
Akers v Deputy Commissioner of Taxation (2014) 311 ALR 167
Akers v Saad Investments Company Ltd (in official liquidation) (2010) 190 FCR 285
Ayres v Evans (1981) 56 FLR 235
Gainsford v Tannenbaum (2012) 216 FCR 543
LK v Director-General, Department of Community Services (2009) 237 CLR 582
Moore as Debtor-in-Possession of Australian Equity Investors v Australian Equity Investors [2012] FCA 1002
Radich v Bank of New Zealand (1993) 45 FCR 101
Williams v Simpson (No 5) [2011] 2 NZLR 380Date of hearing: 10 October 2014 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 77 Counsel for the Applicant: Dr O Bigos Solicitors for the Applicant: Arnold Bloch Leibler Counsel for the Respondent: Ms G Berlic Solicitors for the Respondent: Webb Korfiatis Commercial Counsel for Ms Brynne Gordon (Interested Party): Mr P Fary with Mr B Devanny Solicitors for Ms Brynne Gordon (Interested Party): Acquaro & Co. Counsel for Deputy Commissioner of Taxation (Supporting Creditor): Mr G J Davies QC with Mr E F Wheelahan Solicitors for Deputy Commissioner of Taxation (Supporting Creditor): Australian Taxation Office, Review and Dispute Resolution Counsel for National Australia Bank
(ABN 12 004 044 937) (Supporting Creditor):Mr S J Maiden Solicitors for National Australia Bank(ABN 12 004 044 937) (Supporting Creditor): Norton Rose Fulbright Australia Solicitors for Owners Corporation 328892E2 (Supporting Creditor): Mr C Moloney of Davies Moloney
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 519 of 2014
IN THE MATTER OF GEOFFREY EDELSTEN
BETWEEN: SONEET R KAPILA IN HIS CAPACITY AS TRUSTEE IN BANKRUPTCY FOR THE ESTATE OF GEOFFREY EDELSTEN APPOINTED UNDER CHAPTER 11 OF THE BANKRUPTCY CODE (US)
ApplicantAND: GEOFFREY EDELSTEN
Respondent
JUDGE:
BEACH J
DATE OF ORDER:
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- Kapila, Re Edelsten [2014] FCA 1112
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- [2014] FCA 1112
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CaseChat Overview and Summary
The court found that the debtor's centre of main interest (COMI) was in the United States, thereby satisfying the criteria for the US proceeding to be recognised as a foreign non-main proceeding. The court noted that the presumption of "habitual residence" as the COMI was applicable and was not rebutted by the evidence presented. Given the recognition of the US proceeding as a foreign non-main proceeding, the court made several orders under the Act and the Model Law. These included recognising the US proceeding, appointing an Australian representative, imposing moratoria on actions against the debtor's Australian assets, and granting the Australian representative powers akin to those of a trustee in bankruptcy.
The court also made orders for the distribution of assets to the Australian tax authorities, provided them with liberty to apply, and determined that the costs of the proceeding would be treated as costs of the bankruptcy. These orders aimed to ensure that the administration of the debtor's assets in Australia was consistent with the objectives of the Model Law and the Cross-Border Insolvency Act.
Orders
Orders of the court
1. The Deputy Commissioner of Taxation be joined as the Second Respondent.
2. Pursuant to section 6 of the Cross Border Insolvency Act 2008 (Cth) (the Act), Article 15 and clause 1 of Article 17 of the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (Model Law) and Rule 14.03 of the Federal Court (Bankruptcy) Rules 2005 (Cth) (the Rules), the proceeding of the United States Bankruptcy Court, Southern District of Florida, Fort Lauderdale Division, Case No 14-19613-JKO, Re: Geoffrey Edelsten, relating to the First Respondent (the Foreign Proceeding), in which the Applicant was appointed as trustee in bankruptcy for the estate of the First Respondent, be recognised as a foreign proceeding, within the meaning of Article 2(a) of the Model Law.
3. Pursuant to section 6 of the Act and clause 2(b) of Article 17 of the Model Law, the Foreign Proceeding be recognised as a foreign non-main proceeding, within the meaning of Article 2(c) of the Model Law.
4. Pursuant to section 6 and Article 21(1)(e) of the Model Law, the administration and realisation of all of the First Respondent’s assets located in Australia be entrusted to Mark Robinson of PPB Advisory, Level 46, MLC Centre, 19 Martin Place, Sydney NSW 2000 (the Australian Representative).
5 Pursuant to section 6 and Article 21 of the Model Law:
(a) except with the leave of the Court or with the Applicant’s or the Australian Representative’s written consent:
(i) the commencement, continuation or enforcement of any individual action or legal proceeding (including without limitation any arbitration, mediation, or any judicial, quasi judicial, administrative action, proceeding or process whatsoever) against the First Respondent or any of his assets, rights and obligations, be stayed;
(ii) the enforcement or execution of any judgment, order, or award against the First Respondent or his assets be stayed;
(iii) the right to transfer, encumber or otherwise dispose of any of the First Respondent’s property be suspended;
to the same extent as would apply if each such stay or suspension arose under the Bankruptcy Act 1966 (Cth) (Bankruptcy Act);
For the avoidance of doubt:
(iv) where no stay or suspension would arise under the Bankruptcy Act (either by operation of it or by Court order if made), no stay or suspension applies under this paragraph;
(v) subject to the undertaking of the Commissioner of Taxation recorded above, order 5(a)(i) does not preclude or prevent the Commissioner of Taxation or the Deputy Commissioner of Taxation, their servants or agents, from exercising any power or taking any step which he or they may otherwise lawfully exercise or take under the laws of which the Commissioner of Taxation has the general administration, except for the powers and functions under Subdivision 255-A of Schedule 1 to the Taxation Administration Act 1953, unless the exercise of power or the taking of such a step is precluded by automatic operation of any provision of the Bankruptcy Act;
(b) the Australian Representative may, as he deems appropriate, examine witnesses, take evidence and obtain delivery of information concerning the First Respondent’s assets, affairs, rights, obligations or liabilities.
6. Pursuant to section 6 of the Act and Article 21(1)(g) of the Model Law, subject to the provisions of the Bankruptcy Act, all powers normally available to a trustee in bankruptcy appointed under the provisions of the Bankruptcy Act, be made available to the Australian Representative.
7. The Second Respondent shall be entitled to a distribution from the First Respondent’s assets in Australia equal to the pari passu amount that he would receive if he was entitled to prove for the debts owed by the First Respondent to the Commonwealth of Australia as an unsecured creditor in the Foreign Proceeding.
8. Each party and each creditor or person claiming to be a creditor of the First Respondent, and any other person affected by these orders, has liberty to apply on 3 business days’ notice.
9. The costs of this proceeding be costs of the bankruptcy of the First Respondent, and accorded the same priority as costs of proceedings incurred by a trustee in bankruptcy appointed under the Bankruptcy Act.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
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