The decision Akers as a joint foreign representative of Saad Investments Company Limited (in Official Liquidation) v Deputy Commissioner of Taxation [2014] FCAFC 57 demonstrates that Australian Courts may be willing to depart from the philosophical basis for cross border insolvency in order to protect the interests of Australian based creditors.


Saad Investments Company Limited (Saad) is a company registered in the Cayman Islands.  It was a private investment company with investments all over the world, including in Australia.

In August 2008, Saad sold some of its Australian assets, triggering a capital gains tax liability of around $83 million.  Saad was subsequently placed into liquidation on order of the Grand Court of the Cayman Islands.

The Cayman Islands liquidation was recognised in Australia as the foreign main proceeding under the UNICITRAL Model Law on Cross-Border Insolvency (Model Law)and under the Cross-Border Insolvency Act 2008 (Cth) (CBI Act) as its centre of main interests was in the Cayman Islands.  One of the consequences of recognition was that any enforcement action or execution against Saad’s Australian assets was stayed pursuant to Article 20(1) of the Model Law.

In September 2012, the liquidators of Saad sought to remit its Australian assets to the Cayman Islands to be pooled with the other assets realised in the liquidation with a view to ultimately making a distribution to creditors.

The issue for the ATO was that under Cayman Islands law, a liquidator may not admit a proof for a foreign tax debt.  To do so would be unlawful because it would amount to enforcement of a foreign revenue law.  Against this background, it is easy to understand why the ATO would be dissatisfied if the Australian assets of Saad were remitted to the Cayman Islands as it would mean that the ATO would be unable to recover any of the capital gains liability of $83 million.

The Deputy Commissioner of Taxation sought orders preventing the removal of assets from Australia and at first instance, Rares J made orders allowing the ATO a reasonable period of time to recover the taxation debt owed by Saad.

The liquidators appealed the first instance decision on the basis that the operation of the Model Law could not be altered in the manner sought by the ATO.  And even if it could, the liquidators contended that the Court should not have exercised its discretion to do so.

The appeal

The Court of Appeal was satisfied that the operation of the Model Law could be altered in the manner sought by the ATO pursuant to Article 20.2.  In essence, Article 20.2 imports the operation of s471B of the Corporations Act 2001 (Cth), which means that the stay on commencing proceedings could be lifted with leave of the Court.

The Court of Appeal was also satisfied that it was appropriate for the Court to exercise its discretion in favour of protecting the position of the ATO.  In delivering the leading judgment, his Honour Chief Justice Allsop held that:

  • The Model Law reflects a universalist approach to insolvency law.  The underlying philosophy is that it is in the interests of all stakeholders that all of the assets of an insolvent company be dealt with in a single administration and all creditors submit their claims in that administration.
  • The alternative to the universalist approach is a territorialism, which leads to a multiplicity of insolvency administrations in whatever jurisdictions the insolvent debtor has assets.
  • Universalism, as promoted under the Model Law is intended to promote the objectives of the creditors as a whole but not to the extent that the interests of local creditors are sacrificed, which are expressly protected.
  • In light of the fact that the ATO could not prove in the Cayman Islands liquidation, it was appropriate to grant the relief sought in order to protect the interests of the ATO and to promote fair and equal treatment of all creditors.


The principle of universalism in cross border insolvency promotes the efficiency in insolvency administrations and greater cooperation across jurisdictions.  An efficient administration will usually lead to better outcomes to creditors. 

This case highlights that in some situations, the application of the Model Law may lead to unfair outcomes and that the Court is willing to exercise its discretion to minimise any unfairness.

When dealing with the insolvency of a transnational debtor, insolvency practitioners should consider how the application of the Model Law will impact on the rights of all creditors, whether in their home jurisdiction or abroad.