Wong (Trustee), in the matter of Mackellar (Bankrupt) v Mackellar (No 2)
[2020] FCA 1583
•26 October 2020
FEDERAL COURT OF AUSTRALIA
Wong (Trustee), in the matter of Mackellar (Bankrupt) v Mackellar (No 2) [2020] FCA 1583
File number: QUD 186 of 2020 Judgment of: DERRINGTON J Date of judgment: 26 October 2020 Catchwords: PRACTICE AND PROCEDURE – request for adjournment – no prejudice to trustees in bankruptcy – adjournment granted
INSOLVENCY – personal insolvency – cross-border insolvency – adjournment of application pending proposed Individual Voluntary Arrangement in Hong Kong
Legislation: Bankruptcy Act 1966 (Cth)
Cross-Border Insolvency Act 2008 (Cth)
Model Law on Cross-Border Insolvency of the United Nation Commission on International Trade
Division: General Division Registry: Queensland National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 14 Date of hearing: 26 October 2020 Solicitor for the Applicant: Mr D Jardine of HopgoodGanim Lawyers Solicitor for the Respondent: Mr J Elliot of Cornwalls ORDERS
QUD 186 of 2020 BETWEEN: WONG TECK MENG AND MAK HAU YIN AS JOINT AND SEVERAL TRUSTEES OF THE PROPERTY OF WOLFGANG FRANK WILLIAM MACKELLAR (A BANKRUPT)
Applicant
AND: WOLFGANG FRANK WILLIAM MACKELLAR (A BANKRUPT)
Respondent
ORDER MADE BY:
DERRINGTON J
DATE OF ORDER:
26 OCTOBER 2020
THE COURT ORDERS THAT:
1.The matter is adjourned to 9.30 am AEST on 18 December 2020.
2.Costs are reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
DERRINGTON J:
Background
On 31 January 2018, Mr Mackellar was made bankrupt by an order of the High Court of the Hong Kong Special Administrative Region, Court of First Instance (the Hong Kong Proceedings). On 24 May 2019, a resolution of Mr Mackellar’s creditors appointed Mr Wong Teck Meng (Mr Wong) and Ms Mak Hau Yin (Ms Mak) as trustees in bankruptcy.
On 12 August 2020, this Court made orders on the application of the trustees that the Hong Kong proceedings be recognised as a “foreign main proceeding” pursuant to the Cross-Border Insolvency Act 2008 (Cth) and the Model Law on Cross-Border Insolvency of the United Nation Commission on International Trade. Other orders were made preserving the property of Mr Mackellar in Australia and giving Mr Wong and Ms Mak the powers available to trustees in bankruptcy in Australia under the Bankruptcy Act 1966 (Cth). A further order was made requiring Mr Mackellar to be examined as to his affairs.
Part of the relief claimed in the application, namely that a summons be issued to Mr Mackellar for a public examination, was adjourned until 12 October 2020. The reason for that was that Mr Mackellar had commenced the process of applying for an Individual Voluntary Arrangement (IVA) under Hong Kong insolvency law. In his affidavit of 20 October 2020, Mr Wong deposed that the procedure to implement an IVA in Hong Kong is as follows:
6.1As a debtor in Hong Kong, the Respondent must find a party willing to act as his nominee in relation to the IVA. I verily believe the Respondent’s proposed nominee in this case to be FTI Consulting;
6.2The Respondent must apply for an Interim Order pursuant to ss 20 and 20A of the Bankruptcy Ordinary (Cap 6) in the Hong Kong Court;
6.3Three (3) days before the expiry of the Interim Order, the Respondent’s Intended Nominee must submit a report to the Hong Kong Court whether, in the Intended Nominees [(sic.)] opinion, a meeting of creditors should be held to consider the Respondent’s IVA proposal;
6.4If the intended nominee approves the debtor’s proposal, the debtor must then apply to the Court for an extension of the Interim Order for a creditor’s meeting to be held to consider the Respondent’s IVA proposal;
6.5For the IVA to be successful, the approval requires at least 75% in value of the creditors present at the meeting of creditors or by proxy.
On 16 September 2020, Mr Mackellar’s Hong Kong lawyers sent a timetable to the solicitors for the trustees in bankruptcy outlining the proposed timetable for preparing the IVA proposal. It provided that:
(a)By 23 September 2020, Mr Mackellar would give a written notice of his IVA proposal to his nominee, trustee and official receiver;
(b)By the week commencing 28 September 2020, he would make an application for an interim order in the Hong Kong Court; and
(c)By mid to late October 2020, his nominee would submit a report to the creditors stating whether a meeting should take place to consider the IVA proposal.
As a result of that indication, the parties agreed to adjourn the application to 26 October 2020.
Request for adjournment
When the matter came on for hearing, Mr Jardine for Mr Mackellar sought a further adjournment to a date after 8 December 2020. In his affidavit of 22 October 2020, Mr Jardine explained the reasons for that request. First, although Mr Mackellar’s Hong Kong solicitors had progressed the IVA application, there had been some delay in the giving of a written notice of Mr Mackellar’s proposal to the nominee, the trustees and the official receiver due to difficulties in obtaining financial information from third parties. That delay was adequately explained and it was not significant, being only five days. Second, there were also delays in the swearing and notarising of an affidavit of Mr Mackellar for the purposes of applying for an interim order in the Hong Kong Court. Third and most significantly, the Hong Kong Court had limited availability to hear Mr Mackellar’s application, with the consequence that it has been set down for hearing on the papers on 30 November 2020. Mr Jardine did however inform the Court that the matter may be determined earlier than this date. None of this evidence was contested.
Consequence of the delay
There is no suggestion that the delay in progressing the IVA was either deliberate or designed to forestall the trustees or was in any way clandestine. It appears that the Hong Kong solicitors informed the trustees in bankruptcy of the difficulties experienced in adhering to the proposed timetable, and there did not appear to be any issue taken with the delay by the trustees.
Indeed, Mr Mackellar’s decision to apply for an IVA, and the consequent requirement to prepare an IVA proposal, has furnished the trustees in bankruptcy with information as to his financial affairs which he was previously reticent to provide. Further, the Court was informed that Mr Mackellar’s nominee has already indicated that he will recommend that a meeting of creditors be held to consider this IVA proposal. In summary, the proposal appears to be that Mr Mackellar will arrange for substantial funds to be provided by a third party, resulting in his creditors receiving around 12 cents in the dollar, as opposed to 7 cents in the dollar. Whether that is sufficient for the creditors will be a matter for them.
Detriment caused by adjournment
The main issue in determining whether the application should be further adjourned is whether any detriment might be suffered by the trustees in bankruptcy as a consequence. Mr Elliot for the trustees quite properly acknowledged that, other than the usual concern as to the delay in the administration of an estate, there was no identifiable prejudice to the trustees if the matter were delayed for a period of approximately six or seven weeks. Although delay is a serious issue in the administration of any estate, the administration of Mr Mackellar’s estate has been ongoing since May 2019, and a further delay of the type envisaged is not significant. On the material before the Court I cannot identify any real prejudice to the trustees in the further delay.
On the other hand, if an order is made for the issuing of a summons, additional costs would be incurred by the trustees in preparing for any proceedings. Mr Mackellar would also incur additional costs in relation to the collection and collation of information. If a public examination occurred before Mr Mackellar’s creditors had the opportunity to meet, no doubt they would be better informed as to the state of Mr Mackellar’s affairs, however there may be a diminished pool of funds to be distributed as a result of the costs expended by Mr Mackellar and the trustees.
If a creditors’ meeting is able to be conducted before any further step in these proceedings, the creditors will be able to decide whether to accept the IVA proposal or, after considering the proposal and determining that they are not satisfied they have sufficient material on which to make a decision, allow the trustees to proceed to undertake public examinations.
Further, if the matter is adjourned until mid-December, the timetable for the further progression of the IVA will have crystallised to a state of greater certainty, allowing the Court to make an order that the summons for the holding of a public examination issue but subject to the completion of the creditors’ meeting or the expiry of the date for the creditors’ meeting.
Conclusion
In all the circumstances, the matter should be adjourned until 18 December at 9.30 am.
Costs are to be reserved.
I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington. Associate:
Dated: 26 October 2020
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