1 . 5 . A U S T R A L IA

Australian cross-border insolvency law closely follows the approach ol the United

Kingdom, both in common law concerning recognition and ancillary winding-up,

and in its statutory framework/" This is not surprising as they share a common origin.

Until the Statute of Westminster 1931'"'section 122 United Kingdom Bankruptcy Act

1914 directed the courts to provide mutual assistance in matters of bankruptcy.''

Nevertheless, some observations as to the specifics of Australian law are appropriate.'

According to section 583 Corporations Law 1992 (CL) Australian courts have

jurisdiction to wind up foreign companies'' if they are registered'1 or conduct business

in Australia.'1 The circumstances in which such a winding-up order may be made

include the foreign company being unable to pay its debts, having ceased to conduct

business in Australia, or if the court is of t he opinion that it is just and equitable that

the foreign company should be wound up."" There is some authority suggesting that

the actual exercise of jurisdiction requires there to be a proper commercial connection with Australia, such as the presence of assets and some reasonable opportunity of

benefit accruing to creditors from the winding-up order."

The jurisdiction ot the Australian courts is not affected by the commencement of

insolvency proceedings in a foreign jurisdiction. In accordance with common law principles,

where the insolvency proceedings take place in the company's place of incorporation

the Australian winding-up will normally be considered of an ancillary nature.""

Conversely, as the power to wind up foreign companies is discretionary, the

court may also refuse to wind up a toreign company if in its view a local winding-up

is not necessary, for instance because there are only a few assets in Australia and these

can be adequately administered by the foreign liquidator."

In addition to the jurisdiction to wind up toreign companies and the common law

regarding ancillary winding-up, the Corporations Law contains two specific instruments

to co-ordinate Australian proceedings with proceedings taking place in another

jurisdiction which are of specific relevance in the present context. On the one hand,

the Corporations Law provides for a specific, codified form of the 'ancillary windingup'

with respect to foreign registered companies. On the other hand, the Corporations

Law confers broad discretionary powers on the courts to act in aid ol foreign courts

and proceedings.

A'codified' ancillary winding-up i s provided forby section 6()1CL( 14) and ( 1 5 ) CI..1""

According to section 601 CL( 14) ( X , where a foreign registered company commences

to be wound up in its place of origin the Court shall, on application by the toreign

liquidator, appoint a liquidator of the foreign company in Australia. In such a case,

specific duties are placed on the Australian liquidator. Lor instance, s/he must obtain

a court order before paying out to any creditor of the foreign company to the exclusion

of another creditor. Furthermore, s/he is required, unless the court orders otherwise,

to recover and realise the property of t he foreign company in Australia and to pay the

I From Struggle to Co-operation

net amount to the liquidator ot the foreign company in its place of origin.1 1" Distribution

among creditors is therefore to take place on a global rather than local basis.'":

The scope of the procedure envisaged by section 601 CI. i s however somewhat limited.

It only applies to foreign companies which are in fact registered as such. Moreover,

the foreign company must be wound up in its place of origin.

More important are the powers conferred by section 5 8 1 ( 2 ) C I . . " ; This section

provides that

(2) In all external administration matters, the Court:

(a) shall act in aid of and be auxiliary to, the courts of ( . . . ) prescribed

countries, that have jurisdiction in external administration matters; and

(b) may act in aid of, and be auxiliary to, the courts of o t h e r countries that

have jurisdiction in external administration matters.1 0 1

In contrast to the parallel provision under section 4 2 6 of the Insolvency Act 19X6 of

the United Kingdom, the Australian Act contains no restrictions in terms of countries

eligible lor assistance under the statutory framework and authorisation for crossborder

insolvency co-operation. Instead it draws a distinction: co-operation is framed

in mandatory terms for 'prescribed countries' and left to the discretion of the court

for others."1 ' However, the implications of the use of the terms 'shall' and 'may' is not

entirely clear.

In Ayres v Evans Fox 1 held that section 2 9 ( 2 ) ( a ) Bankruptcy Act 1 9 6 6 a t least

requires the court to entertain an application for aid in a case to which it applies. It

has jurisdiction to give aid. However, the nature, extent and terms of the aid remain

a matter for discretion of the Court'.1 1 1 And Northrop I in the same case observed that

'the use of the word 'shall' is to be contrasted with the use of the word 'may". Citing

Farwell ) in Re Osborne'"'' he continued that section ' 2 9 ( 2 ) ( a ) of the Bankruptcy Act

(Australia) confers upon the Federal Court a jurisdiction which it is bound to exercise

when the two requirements referred to therein are satisfied. Under section 2 9 ( 2 ) ( b)

the Federal Court may have a discretion whether to exercise jurisdiction where the

two requirements referred to in that paragraph are satisfied". However, he reserved

a final opinion on the matter. In lames Geoffrey Rolje v Transworhi Marine Agency

Company NV it was held that '[u]nder section 3 8 1 ( 2 ) ( b ) the Court, in considering

a letter of request, has a discretion, not only as to the nature and extent or terms of

the aid which should be provided, but also as to whether the request should be acceded

to at all'."1 '1 Perhaps the best suggestion has been put forward by Lockhart J in Re Ayres.

Although he t o o reserved final opinion on the matter, he observed that 'there is no

initial assumption that, once the Australian court is satisfied that the case falls within

the scope of section 29 it is bound to give all the assistance it c a n ' . ' 1"

Although the statutory authorisation for the Australian courts is wider with respect

to the countries eligible for assistance, as far as the nature of assistance available is

concerned, the Australian framework appears more restrictive. Section 5 8 1 ( 3 ) CL

provides:

( 3 ) Where a letter of request from a court of an excluded Territory, or of a country

other than Australia, requesting aid in an external administration matter is filed

in the Court, the Court may exercise such powers with respect to the matter as it

could exercise if the matter had arisen within its own jurisdiction.1 1

Unlike section 4 2 6 ( 5 ) Insolvency Act 1986, powers under the foreign insolvency law

would not be available. The goal of assistance is to enable the foreign trustee to exercise

the rights and powers s/he enjoys under the lex fori concursiis. The statutory authorisation

of assistance 'does not create any new rights in the foreign trustee ( . . . ) ; it creates

only new remedies for the enforcement of t he rights which that trustee already has'.

For instance, although a trustee's title in Australian real estate may not as such be

to make such orders and grant such relief as it considers appropriate to facilitate,

approve or implement arrangements that will result in a co-ordination of proceedings

under this Act (IMA) with any foreign proceeding.1 '*

Section 2 6 8 ( 4 ) adds that the court may subject such relief to such terms and conditions

i t considers appropriate in the circumstances of the case.1 ' " The approach of the Act

i s thus generally based on the concept of co-ordinating concurrent proceedings. In

addition to its general discretionary powers, the court is provided with specific instruments.

The court may limit the authority of the Canadian trustee to property located

in Canada and to such property located outside Canada as the court considers can be

effectively administered by the trustee.1 1 This allows the court to avoid the otherwiseensuing

struggle over jurisdiction with the foreign insolvency forum and representative.

Furthermore, section 271 authorises the Canadian court to actively seek the aid

and assistance of courts in a foreign proceeding. They may do so by order, written

request, or 'otherwise as the court considers appropriate'. Canadian courts have made

innovative use of this statutory authorisation in assuring the effective co-ordination

of proceedings, by seeking direct communication links with foreign courts by the most

modern of means. This includes the setting up of j o i n t (simultaneous) hearings

through video conferencing.1"

With respect to the types of proceedings which may qualify for relief, section 267

provides that a 'foreign proceeding' means a judicial or administrative proceeding

commenced outside Canada in respect of a debtor, under a law relating to bankruptcy

or insolvency and dealing with the collective interests of creditors generally.1 ' The

definition of 'debtor' in turn makes clear that for these purposes the debtor must have

at least some property located in Canada.

recognised, the Australian court may give the trustee effective control over that

property.

Finally, co-operation is sought between courts, foreign liquidators have no direct ' a c cess'

to the court's powers under section 582 CL. This not only applies to incoming

requests but also to outgoing requests tor aid and assistance from foreign courts. Subsection

(4) provides that 'the Court may request a court ot a country other than

Australia'.