Re Senvion GmbH (No 2)

Case [2019] FCA 1732

FEDERAL COURT OF AUSTRALIA

Senvion GmbH, in the matter of Senvion GmbH (No 2) [2019] FCA 1732

File number: VID 725 of 2019
Judge: ANASTASSIOU  J
Date of judgment: 22 October 2019
Catchwords:

BANKRUPTCY AND INSOLVENCY – recognition of Formal Self-Administration proceeding ordered by the Amtsgericht Hamburg as “foreign main proceedings” under the Cross-Border Insolvency Act 2008 (Cth) (CBI Act) and Model Law on Cross-Border Insolvency as empowered by the CBI Act – recognition of the insolvent company as the “foreign representative” under the CBI Act and Model Law – nature of stay arising under Article 20 of the Model Law – which local law stay best effects Formal Self-Administration proceeding stay – Corporations Act 2001 (Cth) Part 5.3A applied – recognition granted

BANKRUPTCY AND INSOLVENCY – whether Court has power to modify scope of stay under the CBI Act and Model Law – application of stay evaluative not discretionary – Court does not have power to modify stay at recognition stage

BANKRUPTCY AND INSOLVENCY – whether leave to proceed with proceedings in the Supreme Court of Victoria under s 440D of the Corporations Act should be granted – whether nature of relief proprietary – whether disadvantage suffered by applicant outweighed by purposes of insolvency – leave to proceed granted  
Legislation:

Corporations Act 2001 (Cth), s 440D and Chapter 5.3A

Cross-Border Insolvency Act 2008 (Cth), ss 6, 13 and 16

Federal Court (Corporations) Rules 2000 (Cth), r 15A.3(2)(b)

UNCITRAL Model Law on Cross-Border Insolvency, arts 2, 6, 15, 17 and 20

Cases cited:

Akers v Deputy Commission of Taxation [2014] FCAFC 57; 223 FCR 8; 311 ALR 167; 32 ACLC 14-028; 100 ACSR 287; 142 ALD 451; 9 BFRA 276, [55], and [60]

Attard v James Legal Pty Ltd [2010] NSWCA 311; 80 ACSR 585, [146]-[147]

Beconwood Securities Pty Ltd v Australia and New Zealand Banking Group Limited [2009] FCA 131, [7]

Board of Directors of Rizzo-Bottiglieri-De Carlini Armatori SpA as Debtor-in-Possession of Rizzo-Bottiglieri-De Carlini Armatori SpA v Rizzo-Bottiglieri-De Carlini Armatori SpA [2013] FCA 157,[5]-[7]

Hur v Samsun Logix Corporation [2015] FCA 1154; (2015) 238 FCR 483, [21]

Hopkins v AECOM Australia Pty Ltd & Ors [2012] FCA 1204; 91 ACSR 391, [20]

Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd [2011] NSWSC 1305; 285 ALR 207, [37]-[39]

Moore, as Debtor-in-Possession of Australian Equity Investors v Australian Equity Investors [2012] FCA 1002; 11 ABC(NS) 20, [7] and [12]

Re 19 Entertainment Ltd [2016] EWHC 1545 (Ch), [17]

Re Pacific Northstar Property Group LLC [2009] NZHC

Re Videology Ltd [2018] EWHC 2186 (Ch), [7], [17], and [21]

Tai-Soo Suk v Hanjin Shipping Co Ltd [2016] FCA 1404, [45]

Wallabah Pty Ltd v Navillo Pty Ltd [1997] FCA 142; 15 ACLC 396; 23 ACSR 444, 446

Date of hearing: 5 July, 2, 6, 23 August, 7 to 9 October 2019 
Date of last submissions: 9 October 2019
Registry: Victoria
Division:

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Details
AGLC
Re Senvion GmbH (No 2) [2019] FCA 1732
Case
[2019] FCA 1732
Decision Date

CaseChat Overview and Summary

This case involved the application by Senvion GmbH for the recognition of a Formal Self-Administration proceeding, commenced in Germany, as the "foreign main proceedings" under the Cross-Border Insolvency Act 2008 (Cth) and the Model Law on Cross-Border Insolvency. The application was made in the Federal Court of Australia, and the primary issue was whether the German Formal Self-Administration proceeding could be recognised as a "foreign main proceeding" and Senvion as the "foreign representative." Additionally, the Court had to determine the nature of the stay arising under Article 20 of the Model Law and the best local law stay to effect the Formal Self-Administration proceeding stay. The Court was also required to decide whether it had the power to modify the scope of the stay under the Cross-Border Insolvency Act and the Model Law, and whether leave should be granted to the Pacific Hydro Entities to proceed with their proceedings in the Supreme Court of Victoria under section 440D of the Corporations Act 2001 (Cth).

The Court held that the definition of "foreign representatives" under Article 2(d) of the Model Law is broad enough to allow for the recognition of the debtor company as the foreign representative. Given that the German insolvency statute permits self-administration, the Court recognised the Formal Self-Administration proceeding as a foreign main proceeding and Senvion as the foreign representative. The Court also held that the application of stay is evaluative, not discretionary, and therefore, the Court did not have the power to modify the stay at the recognition stage. Furthermore, the Court found that the nature of the claim by the Pacific Hydro Entities in the Supreme Court Proceeding and the peculiar vulnerability of the Pacific Hydro Entities to Senvion in the day-to-day operations of their wind farms were factors of particular weight to the exercise of the discretion under section 440D of the Corporations Act 2001 (Cth). Consequently, the Court granted leave to the Pacific Hydro Entities to continue their proceeding against Senvion.

In summary, the Federal Court of Australia recognised the Formal Self-Administration proceeding as a foreign main proceeding and Senvion as the foreign representative. The Court held that it did not have the power to modify the scope of the stay under the Cross-Border Insolvency Act and the Model Law. However, the Court granted leave to the Pacific Hydro Entities to proceed with their proceedings in the Supreme Court of Victoria under section 440D of the Corporations Act 2001 (Cth).

Orders

Orders of the court

1. Pursuant to Article 17(1) of the United Nations Commission on International Trade Model Law on Cross-border Insolvency (the Model Law) which is sch 1 to the Cross-Border Insolvency Act 2008 (Cth) (the Act), the eröffnetes Insolvenzverfahren which was commenced in respect of the defendant in the Amtsgericht Hamburg, Germany on 1 July 2019 (the Proceeding) is recognised as a foreign proceeding within the meaning of Article 2(a) of the Model Law.

2. Pursuant to Article 17(2) of the Model Law the Proceeding is recognised as a foreign main proceeding within the meaning of Article 2(b) of the Model Law.

3. The plaintiff is recognised as foreign representative of the Proceeding within the meaning of Article 2(d) of the Model Law.

4. For the purposes of Article 20(2) of the Model Law and s 16 of the Act, the scope, and the modification or termination, of the stay and suspension referred to in Article 20(1) of the Model Law with respect to the defendant be the same as would apply if the stay or suspension arose under Part 5.3A in Chapter 5 of the Corporations Act 2001 (Cth) (Corporations Act), and as if:

(a) Part 5.3A of the Corporations Act applied to the defendant (as a company subject to administration under that Part); and

(b) References in Part 5.3A of the Corporations Act to the consent of the company's administrators are taken to be references to the consent of the company.

5. The Pacific Hydro Entities have leave pursuant to s 440D(1) of the Corporations Act 2001 (Cth) to continue their proceeding No. S ECI 2019 02905 in the Supreme Court of Victoria against the defendant.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

In Wallabah Pty Ltd v Navillo Pty Ltd [1997] FCA 142; 15 ACLC 396; 23 ACSR 444 Olney J at 446 said: Each of ss 440D and 440J gives the Court a discretion which it is required to exercise judicially and upon the merits of each individual case. In so doing the Court must have regard to the general legislative policy of the statute and to the specific provisions of the sections under consideration. Each case will of course have to be determined upon its own facts. (emphasis added) While the identification from earlier authorities of factors that are relevant to the discretion is of assistance when considering the exercise of the discretion in a particular case, I respectfully agree with what was said by Olney J referred to above, namely that each case will have to be determined on its own facts. I should add that I do not regard what was said by Tobias JA in Attard as suggesting the contrary. Judges and lawyers alike benefit from the industry of judges, like Tobias JA, who make the effort to distil from the normal distribution of myriad facts and circumstances some common or recurring themes and factors relevant to the exercise of a discretionary power. But it would be wrong to seize upon a particular verbal formulation used by the judge as if it were intended, much less had the effect, of constraining the proper judicial exercise of the discretion in a later case. Senvion submitted that the consideration of disadvantage to the applicant must be shown by the applicant (whatever disadvantage it might be) to be disadvantage it will suffer. I disagree. Although Tobias JA expressed this factor literally in terms that the applicant “will” suffer a disadvantage, his Honour’s discussion of commonly accepted criteria should not in my opinion be construed as suggesting that the applicant must establish such disadvantage to any particular degree of likelihood. Indeed, such a construction would be contrary to the first factor identified in Attard, namely that the proceeding has a “solid foundation”. The extent to which the litigation in question will disrupt, cause inconvenience, cost or delay to the work of the administrator or liquidator, or in this case the process of reconstruction pursuant to the debtor-in-possession regime applicable under German Insolvency Code, will necessarily be an important factor having regard to the object of Part 5.3A referred to above. In many cases, several of the established factors identified in Attard will assist in informing the exercise of the discretion. But depending upon the facts of the particular case, some will be demonstrably more significant than others and some may not apply at all. In the present case there are two factors of particular weight to the exercise of the discretion under s 440D. The first is the nature of the claim by the Pacific Hydro Entities in the Supreme Court Proceeding. The second is the peculiar vulnerability of the Pacific Hydro Entities to Senvion in the day to day operations of their wind farms.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The registered office of Senvion is in Hamburg. Its business headquarters is in Hamburg. It has offices located in other cities in German, including Bremerhaven, Osterrönfeld and Osnabrück. The Senvion Group's product development, design and manufacturing centre is located in Osterrönfeld, and the global wind turbine fleet remote monitoring team, technical support and service department is also located at its centre in Osterrönfeld. Although Senvion has business operations and assets spread all over the world, its business is managed from Germany, principally from Hamburg. Its books and records are kept in Hamburg, board meetings of the directors of Senvion are held in Hamburg, the principal accountants, auditors and solicitors are primarily located in Hamburg and its principal bankers are primarily located in Frankfurt and Munich. Each of the Senvion directors resides in Germany, save for the chief executive officer who resides in Paris, France.Recognition of the Formal Self-Administration Proceeding The German insolvency statute permits self-administration, with the effect that the insolvent company remains in control of its own assets subject to the supervision of the monitor. The definition of “foreign representatives” under Article 2(d) of the Model Law is: …a person or body, including one appointed on an interim basis, authorized [sic] in a foreign proceeding to administer the reorganisation of the liquidation of the debtor’s assets or affairs or to act as a representative of the foreign proceeding. This definition is sufficiently broad in the case of a self-administration to allow for the recognition of the debtor company to be recognised as the foreign representative. See Moore, as Debtor-in-Possession of Australian Equity Investors v Australian Equity Investors [2012] FCA 1002; 11 ABC(NS) 20 at [7] and [12]; Board of Directors of Rizzo-Bottiglieri-De Carlini Armatori SpA as Debtor-in-Possession of Rizzo-Bottiglieri-De Carlini Armatori SpA v Rizzo-Bottiglieri-De Carlini Armatori SpA [2013] FCA 157 at [5]-[7]; Re Pacific Northstar Property Group LLC [2009] NZHC 965 at [7]; Re 19 Entertainment Ltd [2016] EWHC 1545 (Ch), [17]; and, Re Videology Ltd [2018] EWHC 2186 (Ch) at [17] and [21]. On 1 July 2019 the Local Court at Hamburg ordered that the debtor (Senvion) is entitled, under the supervision of the custodian, to administer the insolvency assets and dispose of them pursuant to ss 270 to 285 of the German Insolvency Code. Those sections constitute Part VII of the German Insolvency Code which is headed “Debtor-in-Possession Management”. Section 270(1) states: The debtor may manage and dispose of the assets involved in insolvency proceedings under the supervision of an insolvency monitor if the insolvency court orders such debtor-in-possession management. Accordingly, Senvion as the debtor in possession is the proper plaintiff in this application for recognition. Paradoxically, it is also the proper defendant as r 15A.3(2)(b) of the Federal Court (Corporations) Rules 2000 (Cth) Div 15A requires the debtor to be the defendant.