The recent case of Young, Jr, in the matter of Buccaneer Energy Limited v Buccaneer Energy Limited  FCA 711 considered the concept of “the centre of main interests”, described in the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law (United Nations General Assembly Resolution A/RES/52/158 (1997)). Senior Associate, Sarah Drinkwater and Associate, Tim Logan discuss.
The Plaintiffs, being the Chief Restructuring Officer and Board of directors of Buccaneer Energy Limited v Buccaneer Energy Limited (Buccaneer) sought an order that proceedings commenced in the United States Bankruptcy Court southern district of Texas in respect of Buccaneer be recognised as a foreign main proceeding pursuant to the Model Law and its subsequent Australian enactments.
Chyrstal Capital Partners LLP (Chrystal) was an unsecured creditor who opposed the Plaintiffs’ application.
Buccaneer is an Australian public company listed on the ASX with a number of wholly owned subsidiaries incorporated in the United States. Buccaneer’s state of registration is Queensland, and its registered office and principal place of business is listed at a Sydney address. Buccaneer’s current and recent former company officers are predominantly (but not exclusively) Australian.
Relevance of “centre of main interests”
Article 17(2) of the Model Law provides (relevantly) that a foreign proceeding shall be recognised as a foreign main proceeding if it is taking place in the State where the debtor has the centre of its main interests… (underlining added).
Article 16(3) provides that, in the absence of proof to the contrary, the debtor’s registered office is presumed to be the centre of the debtor’s main interest.
The Court considered numerous authorities considering the concept of “centre of main interest” and surmised that the key proposition arising from those cases is that the centre of main interest must be identified by reference to criteria that are objective and ascertainable by third parties.
The Plaintiffs contended that the information available to third parties showed that the operation aspects of the group of companies and Buccaneer as parent company were based in the United States, whereas Chrystal characterised that evidence as showing the main centre of interest in Sydney.
In support of its position, Chrystal referred to an ASIC extract (showing registered office etc.) together with an annual report of Buccaneer which described Buccaneer as “An Australian listed company focused on developing its 100% owned oil and gas assets in Alaska”.
The Plaintiffs adduced substantial material, which the Court considered to be objectively ascertainable, that confirmed the centre of main activity of Buccaneer to be in Houston, Texas. That evidence included (but not limited to):
- The Australian office was very small and appeared to be nothing more than a “letterbox” premises.
- Business cards for many of Buccaneer’s key executives show Buccaneer’s address being in Houston.
- Buccaneer held itself out as having various offices in the United States.
- Chrystal, when it was engaged by Buccaneer, addressed its letter of appointment, as well as invoices, to Buccaneer’s Houston office.
- Buccaneer completed US tax returns.
This evidence, together with additional material, established to the Court that Buccaneer’s head office was in Houston, and that it was objectively ascertainable for a third party to determine this, notwithstanding that Buccaneer was a company registered in Australia and listed on the ASX.
Accordingly, the Court was satisfied that Buccaneer’s centre of main interests was the United States. The other aspects required pursuant to the Model Law were satisfied, and orders were made recognising the United States proceeding as the foreign main proceeding.
The principle of recognising a foreign main proceeding is, we suggest a good one, in that, in theory, it reduces costs by attempting to ensure that there are not multiple jurisdictions handling one particular liquidation / bankruptcy. It is not always possible for the principles to be applied effectively – for example, a case we have been working on which has a receiver appointed in the United States and a liquidator appointed in Australia – the constituents represented by each of those parties are too different for one proceeding to take precedence.
This is an interesting decision, albeit appropriately reasoned. It is a reminder that the location of a registered office, whilst seemingly a starting point in determining the centre of main interests, is not the only matter to be considered.
It would seem appropriate that, in circumstances such as this, the administration of the insolvency is conducted in the jurisdiction in which the main trading of the company occurs. Otherwise issues concerning the appropriate jurisdiction creditors to make claims in the liquidation arise – for example, a creditor who has a claim against an Australian insolvent company for acts done in Australia pursuant to the Australian Consumer Law may not have such a remedy available if the company was being wound up in another jurisdiction.
Accordingly, liquidators ought be cautious when conducting liquidations of companies trading internationally, to ensure that the assets of the companies are recovered, and claims by creditors are determined, in the correct jurisdiction and subject to the correct laws.