The recent Federal Court of Australia (the Federal Court) decision of Ackers v Saad Investments Company Limited [2013] FCA 738 considered whether the Australian Commissioner of Taxation (the Commissioner) could collect part of an AUD $83,271,545.70 debt owed by Saad Investments Company Limited (in official liquidation) (Saad) from Saad’s Australian assets, before those assets were remitted to the Cayman Islands for distribution in Saad’s ‘foreign main proceeding’.


Saad is a Cayman Islands company that entered into transactions in Australia and subsequently incurred Australian tax liabilities.  On 18 September 2009 the Grand Court of the Cayman Islands (Grand Court) made orders that Saad be wound up.

In October 2010 the Federal Court made orders pursuant to the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (the UNCITRALModel Law), that the proceedings in the Grand Court be recognised as a ‘foreign main proceeding’ and the liquidators of Saad be appointed ‘foreign representatives’ for the purposes of the UNCITRAL Model Law.  Under Article 21 of the UNCITRAL Model Law, the Federal Court ordered that no legal or administrative proceedings could be taken against Saad or its assets, except with leave of the Court or the written consent of the foreign representatives.  The Federal Court also ordered that the foreign representatives were responsible for the administration, realisation and distribution of all of Saad’s assets located in Australia (the 2010 orders).

Under Cayman Island’s law, the Commissioner would not be entitled to prove for its debts in the ‘foreign main proceeding’ in the Cayman Islands  as the Cayman Islands legislation reflects the rule of public international law that claims by or on behalf of a foreign state to recover taxes are unenforceable.

Accordingly the Commissioner applied to the Federal Court under Article 22(3) of the UNCITRAL Model Law for the 2010 orders to be modified so that the Commissioner could receive a distribution from Saad’s Australian assets before they were remitted to the Cayman Islands for distribution in the ‘foreign main proceeding’.


Despite the submissions of the foreign representatives that the Commissioner had no right to a distribution of Saad’s Australian assets, the Federal Court considered the operation of Article 22 of the UNCITRAL Model Law and held that the 2010 orders did not adequately protect the interests of the Commissioner as a creditor of Saad and that the Commissioner should receive from Saad’s Australian assets the amount that the Commissioner would be entitled to receive as a dividend if the Commissioner was admitted to prove for the debt as an unsecured creditor in the ‘foreign main proceeding’ in the Cayman Islands.

Justice Rares held that if Saad’s Australian assets were remitted to the Cayman Islands the Commissioner could not prove for any distribution, and even if the Commissioner was paid the whole of Saad’s assets in Australia (approximately USD$7 million) it would be less than half of the foreign representatives’ estimated distribution to Saad Investments’ unsecured creditors of between 20 and 24 cents in the dollar.  And Rares J held that if Saad’s Australian assets were remitted without the Commissioner being paid an entitlement, the other unsecured creditors would receive a windfall to the extent that the Commissioner’s “bona fide claim” is irrecoverable outside Australia.  Justice Rares held that such a result would be “contrary to the fair or efficient administration” of Saad’s insolvency because Saad would effectively be freed from its Australian taxation and insolvency obligations by reason of its insolvency.


This case is an important reminder that under Article 22 of the UNCITRAL Model Law, the Court must be satisfied when granting, denying or modifying relief under Articles 19 or 21, that the interests of the creditors and other interested persons are adequately protected.

Importantly in this case, the 2010 orders removed the rights of the Commissioner under Australian taxation laws to obtain a distribution from Saad’s Australian assets.  The Federal Court emphasised the importance of the Commissioner obtaining a distribution when it stated that “[i]t is fundamental to any society that its government be able to require its citizens and others who operate a business or reside within that society, to pay taxation so as to maintain the State.”

Whilst it is clear that this decision may result in foreign taxation authorities taking action to vary relief granted in foreign main insolvency proceedings, it may also open the door for other unsecured creditors who can show that they are materially disadvantaged in a foreign main proceeding, to recover in their local jurisdiction.