Gainsford v Tannenbaum  FCA 904
The recent decision of Gainsford v Tannenbaum provides a useful discussion and explanation of the presumption pursuant to Article 16(3) of the Model Law that an individual’s centre of main interests will be their “habitual residence”. Although a company’s centre of main interests was addressed in Australia for the first time in the decision of Ackers v Saad Investments Company Limited (in liquidation) in 2010, the Gainsford decision is the first in Australia to deal in detail with what is required to establish an individual’s centre of main interests. The decision demonstrates the difficulties of “habitual residence” being established (and therefore obtaining a recognition order) in circumstances where an individual debtor has left or fled the original jurisdiction. Of further interest is that in the absence of the Cross-Border Insolvency Act (CBIA) having effect, the Court will continue to exercise its jurisdiction pursuant to section 29 of the Bankruptcy Act (Courts acting in aid of and auxiliary to each other) in assisting a foreign court in Australia.
Mr Tannenbaum became a bankrupt on 18 August 2009 by the High Court in South Africa. Trustees in bankruptcy were appointed to Mr Tannenbaum’s estate by the South African Court (South African Trustees). Mr Tannenbaum was involved in a number of businesses prior to his bankruptcy and left South Africa for Australia in mid 2007. Mr Tannenbaum initially lived in New South Wales but at the time of the application lived in Queensland where he was an “insurance advisor”. As it was alleged that Mr Tannenbaum had, amongst other things, been unco-operative with the South African Trustees, the South African Trustees made an application for recognition of the South African bankruptcy pursuant to the CBIA.
For an Australian Court to recognise an insolvency estate in South Africa (South African Insolvency), the Australian Court has to determine, amongst other things, whether the South African Insolvency is a foreign main proceedings or a foreign non-main proceedings. The South African Insolvency may be recognised as a foreign main proceedings if it is taking place where Mr Tannebaum has his centre of main interests. If not, then the South African Insolvency may be recognised as a foreign non main proceedings if it is taking place where Mr Tannebaum has an establishment in South Africa. If not, then the CBIA is unlikely to apply and relief must be sort in another manner.
Pursuant to the CBIA, there is a presumption that in the absence of proof to the contrary, Mr Tannanbaum’s centre of main interests will be his habitual residence. Mr Justice Logan relied on the New Zealand decision of Williams v Simpson which in turn considered the well established meaning used in the Hague Convention on the Civil Aspects of Child Abduction (which does not equate to concept of domicile). Accordingly, Mr Justice Logan found that Mr Tannanbaum was not habitually resident in South Africa and had not been since before the commencement of the South African Insolvency. His wife and family had lived in Australia since that time.
If the South African Insolvency could not be characterised as a foreign main proceedings Mr Justice Logan had to consider whether Mr Tannanbaum had an establishment in South Africa. For an establishment to exist Mr Tannanbaum had to had a place of operations in South Africa, carry out a non-transitory economic activity and did so with human means or goods or services. Mr Justice Logan found that although Mr Tannanbaum may well have previously had an establishment in South Africa he did not do so presently. This was despite the fact that assets the subject of the South African Insolvency were in South Africa, he held life insurance and endowment policies in South Africa and he had South African based legal advisors dealing with winding up his former activities (and not concerned with any continuing business conduct in South Africa). In other words, Mr Justice Logan found that Mr Tannanbaum no longer had a place of operations in South Africa.
As Mr Justice Logan found that Mr Tannanbaum had no centre of interests or establishment in South Africa he considered whether he should grant assistance and the relief sought pursuant to the Bankruptcy Act (Courts acting in aid of and auxiliary to each other). As South Africa is not a prescribed country for the purposes of the Bankruptcy Act, Mr Justice Logan had the discretion to grant assistance. He stated that “in turn, section 29 and its cognates have, in part, a declaratory quality in that, at common law, there is an ideal of universality of application with respect to bankruptcy proceedings” and following the New Zealand decision of Williams v Simpson which in turn applied the English decision of Cambridge Gas dealing with universality Mr Justice Logan exercised his discretion to grant assistance to the South African Trustees. As a result Mr Justice Logan ordered that Mr Tannanbaum provide a statement of affairs and that leave be granted for the Registrar to summon Mr Tannanbuam (and others) to attend examinations in Australia and to produce certain books and records.
This decision highlights that the CBIA will not necessarily be of assistance where the bankrupt has no centre of main interests in the foreign proceeding and has left the foreign jurisdiction such that it leads to a termination of any establishment with the foreign land. This conclusion by the Australian Court in relation to the CBIA is not unusual as similar results have occurred, amongst others, in both New Zealand and the United States when interpreting similar provisions. Fortunately whether the bankrupt relocates to Australia, the cross-border assistance provisions of the Bankruptcy Act will, in the most part, likely pick up where the CBIA does not stray. However, given that we live in a globalised world where travel and the transfer of funds is relatively quick, financial institutions and practitioners may continue to be left with little options where a bankrupt flees to a jurisdiction that does not encourage or allow for co-operation with the principal insolvent estate.