Lee v Korea Line Corporation HC Auckland CIV 2011-404-001315

[2011] NZHC 75

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2011-404-001315

UNDER  the Insolvency (Cross-Border) Act 2006

IN THE MATTER OF     recognition of an Order dated 15 February

2011 of the Seoul Central District Court as a foreign main proceeding

BETWEENJIN BANG LEE AND BYUNG NAM CHOI

Applicants

ANDKOREA LINE CORPORATION Respondent

Hearing:         on papers

Counsel:         O Collette-Moxon/N Beadle for applicants and respondent

Judgment:      14 March 2011 on 14 March 2011 at 5:00pm

JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on 14 March 2011 at 5:00pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:
DLA Phillips Fox, PO Box 160, Auckland 1140 for applicants and respondent

JIN BANG LEE & ANOR V KOREA LINE CORPORATION HC AK CIV 2011-404-001315 [14 March 2011]

[1]      The  applicants  are  the  joint  receivers  of  the  respondent,  Korea  Line Corporation (the debtor).   They have applied by originating application without notice, for orders under the Insolvency (Cross Border) Act 2006.

[2]      The debtor is incorporated in Korea, which is the centre of its main interests. It is engaged in the business of marine shipping, and transportation and various related activities.   It has encountered financial difficulties, which resulted in it applying to the Seoul Central District Court for rehabilitation in Korea under that country’s Debtor Rehabilitation & Bankruptcy Act (the Korean proceeding).   The Seoul Central District Court, Fourth Bankruptcy Division (the Bankruptcy Court), has between 26 January 2011 and 15 February 2011 issued three decisions in that proceeding.    In  the  last  of  them,  the  applicants  were  appointed  to  act  as  joint receivers in the proceeding, with power to conduct all of the company’s business and manage all of its property, subject to the Bankruptcy Court’s supervision.

[3]      The applicants apply under Article 9, Schedule 1 of the Insolvency (Cross

Border) Act 2006 (the Act) for orders that:

(a)       the application proceed without formal service on the debtor or a New

Zealand agent or representative of the debtor;

(b)the  Korean  proceeding  be  recognised  as  a  foreign  proceeding  (in terms of Article 17, Schedule 1 of the Act); and

(c)the Korean proceeding be recognised as a foreign main proceeding (with the consequences set out in Article 20(1), Schedule 1 of the Act) subject to the applicants’ right to continue to conduct the debtor’s business under the supervision of the Bankruptcy Court; and

(d)leave be reserved to creditors to apply to set aside or vary the orders sought.

[4]      The  applicants  and  the  respondent  are  jointly  represented  by  solicitors, DLA Phillips Fox.  Although the application is expressed as one by the applicants, the respondent debtor also requests that the application proceed without any requirement for formal service on it.

[5]      The  application  is  supported  by  a  notarised  declaration  of  an  attorney practising in bankruptcy and corporate restructuring in Korea, Tae Soo Jung.  He has produced copies   of the three decisions of the Bankruptcy Court, and notarised translations of those decisions.  His evidence establishes that:

(a)	The applicants are foreign representatives in terms of Article 2(d) Schedule 1 of the Act (being persons authorised in the Korean proceeding to administer the reorganisation of the debtor’s assets or affairs);
(b)	The Korean proceeding has been duly commenced, and the applicants have been duly appointed in that proceeding to administer the reorganisation of the debtor’s assets or affairs;
(c)	The Korean proceeding is taking place in the Republic of Korea, where the debtor has its centre of main interest.
[6]	The	attorney,  Mr  Jung,  has  also  stated  the  reasons  for  the  debtor’s

rehabilitation filing and the consequences of the Korean proceeding under Korean law, and has identified all foreign proceedings relating to the debtor that are known to  the  applicants.   He  has  commented  on the  significance  of  the  New  Zealand proceeding. The salient points of this evidence are:

(a)The Bankruptcy Court made a stay order on 26 January 2011, pending commencement of the rehabilitation proceeding on 15 February 2011;

(b)      The  effect  of  the  commencement  order  issued  by  the  Bankruptcy

Court on 15 February 2011 is to grant the same relief which follows

automatically from recognition of the Korean proceeding as a “foreign main proceeding” under Article 2(1), Schedule 1 of the Act, namely:

(i)       commencement   or   continuation   of   individual   actions   or individual proceedings concerning the debtor’s assets, rights, obligations, or liabilities is stayed;

(ii)      execution against the debtor’s assets is stayed; and

(iii)the right to transfer, encumber or otherwise dispose of any asset of the debtor is suspended;

although these effects are subject to the applicants’ right to conduct all of the debtor’s business and manage all of its property under supervision of the Bankruptcy Court;

(c)There are currently no claims against the debtor in New Zealand, but both the applicants and the debtor wish to ensure that no proceedings are commenced against the debtor now that the Korean proceeding has commenced;

(d)There are a number of disputes involving the debtor that are subject to arbitrations in London and the United States, and although none of the claimants is based in New Zealand it is conceivable that proceedings in rem could be issued in New Zealand if a vessel in which the respondent has a qualifying interest was to visit this jurisdiction (the likely  purpose  of  such  in  rem  action  being  to  obtain  security  for claims in arbitration); and

(e)Quite apart from the merits of a particular proceeding, under Korean Insolvency  Law  commencement  of  any  new  proceeding  in  rem against a ship, which is founded upon a rehabilitation claim or rehabilitation security right, is prohibited.

[7]      The  applicants  have  anticipated  the  possibility  of  creditor  interest  in  the debtor in New Zealand, by seeking leave to be reserved to any creditor to set aside or vary the orders sought, within a limited time frame.

Decision

[8]      I am satisfied on the evidence before the court that:

(a)It is appropriate to dispense with formal service on the debtor given its consent to this application;

(b)The applicants are foreign representatives in terms of Article 2(d), Schedule  1  of  the Act,  and  are  entitled  to  bring  this  application pursuant to Article 15(1), Schedule 1 of the Act;

(c)The application is accompanied by a certified copy of the decision commencing the foreign proceeding and appointing the applicants as foreign  representative  (in  terms  of  Article  15(2)(a)),  and  by  a statement identifying all foreign proceedings in respect of the debtor known  to  the  foreign  representatives  (in  accordance  with  Article

15(3);

(d)The interests of creditors are protected appropriately, having regard to Article 22(1), Schedule 1 of the Act by the leave reserved to apply to set aside or vary these orders within a limited period.   There is no evidence that there could be any other interested persons.

[9]      I make orders as sought, being:

(a)The application may in all the circumstances proceed without service on the debtor or a New Zealand agent or representative of the debtor.

(b)The   proceeding   in   the   Seoul   Central   District   Court,   Fourth Bankruptcy Division, Case 2011 Hoe-Hap 14 Rehabilitation is recognised as a foreign proceeding.

(c)The Korean Proceeding is recognised as a foreign main proceeding such that:

(i)commencement  or  continuation  of  individual  actions  or individual proceedings concerning the debtor’s assets, rights, obligations, or liabilities is stayed;

(ii)      execution against the debtor’s assets is stayed;

(iii)the right to transfer, encumber, or otherwise dispose of any assets of the debtor is suspended;

subject to the Applicants’ right to conduct all of the debtor’s business and manage all of its property under the supervision of the Seoul Central District Court.

(d)Leave is reserved to any creditors to set aside or vary or modify or terminate the orders sought, provided that such application is made within three working days of the date of the sealed orders being served on the creditor.

Associate Judge Abbott