Diamond Joe Gutnick’s Legend -Bankruptcy Proceedings Used to Circumvent Winding-Up Application???
WAS THE CHAPTER 11 FILING DONE TO CIRCUMVENT THE WINDING-UP APPLICATION?
The Court has a discretion under the Model Law to refuse recognition of a foreign proceeding if it would be manifestly contrary to public policy. For instance, if recognition were to undermine the protection given to creditors by Australian insolvency legislation.
However, the courts have been slow to invoke this overriding proviso as to do so in cases of mere difference of substantive law, would likely render the aspirational objectives of the Model Law otiose.
IFFCO and Kisan submitted that the Chapter 11 proceeding was effectively orchestrated by Legend to defeat the Australian proceeding.
His Honour rejected this argument on the basis that full and frank disclosure of the motive for the appointment had been made in the US court and that the wind-up application was brought before the Chapter 11 proceeding. His Honour also found that, in any event, the desire for protection under Chapter 11 was not of itself contrary to public policy.
Phosphate Co. Files For Ch. 11 After Losing Arbitration Row
The case is Legend International Holdings Ltd., case number 16-11131, in the U.S. Bankruptcy Court for the District of Delaware.
Law360, New York (May 9, 2016, 8:55 PM ET) — A phosphate company run by mining tycoon Joseph Gutnick filed for bankruptcy protection Sunday in Delaware after India’s largest fertilizer collective demanded payment of AU$25 million ($18.3 million) following a lengthy legal dispute over equity in his business.
Legend International Holdings Inc. filed a Chapter 11 petition listing $7,241,096 in assets and $13,206,921 in liabilities. The filing comes after Legend received a letter in March demanding payment from Indian Farmers Fertilizer Co-Operative, or IFFCO, and its Dubai subsidiary Kisan International Trading, Legend said in a filing with the U.S. Securities and Exchange Commission.
Legend, which has operations in North West Queensland, Australia, has been battling IFFCO over a share repurchase agreement. According to the SEC filing, IFFCO has applied under Australian law to wind up Legend and attempts by both parties to resolve the dispute have so far failed.
The fertilizer collective had entered into the share options agreement with Gutnick and Legend in July 2008 for the sole purpose of purchasing concentrated rock phosphate for use in its fertilizer plant in Paradeep, India, which the co-op says is the world’s largest grassroots diammonium phosphate plant.
The parties fell into dispute in 2013 and the collective referred the matter to arbitration in Singapore. There, Gutnick and Legend were found to have induced, by fraudulent misrepresentation, the stock purchase. The tribunal ordered that the shareholders and share options agreements be rescinded, and that Gutnick pay IFFCO $28.05 million and Legend pay it $12.35 million, with interest dating from 2008, in addition to costs.
In February, an Australian appeals court rejected a bid by Gutnick to overturn an arbitration award related to the dispute. Gutnick and Legend argued that enforcing the award would “would fundamentally offend principles of justice and morality” by allowing the cooperative to get its money back and keep the shares, but the panel disagreed, saying an order to return the shares wasn’t necessary.
THE WALL STREET JOURNAL REPORTS:
Legend International Files for U.S. Bankruptcy Protection
Filing made to deal with a $12.3 million loss in a legal fight with India’s largest fertilizer collective
May 9, 2016 7:31 a.m. ET
Legend International Holdings Inc., a company controlled by Australian businessman Joseph Gutnick, filed for chapter 11 bankruptcy protection in the U.S. on Sunday to deal with a $12.3 million loss in a legal fight with India’s largest fertilizer collective, Indian Farmers Fertiliser Cooperative Ltd.
The legal dispute grew out of a soured venture that would have had Legend supplying phosphate to Indian Farmers Fertiliser, or IFFCO. Legend International listed the arbitration award as a disputed debt on its bankruptcy petition.
Nicknamed “Diamond Joe” due to his diamond and gold investments, Mr. Gutnick has denied allegations Legend International made fraudulent misrepresentations in connection with the fertilizer deal. Legend International has interests in phosphate deposits in Queensland, Australia.
The U.S. bankruptcy filing follows the initiation of an insolvency proceeding in Australia by IFFCO and its affiliate, Kisan International Trading Fze. They are seeking the winding up of Legend International.
In a filing Monday with the U.S. Securities and Exchange Commission, Legend International said talks to resolve the Australian insolvency proceeding were “unsuccessful.”
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Business Wire – Oct 21, 2015
Reuters – May 9, 2016