In depth

Thai Airways and the Thai proceeding

Thai Airways is Thailand’s national airline.

On 26 May 2020, pursuant to the Thai Bankruptcy Act (Thai Business Reorganisation Law), Thai Airways filed a petition for a business reorganisation (Thai Reorganisation Proceeding) at the Central Bankruptcy Court of Thailand (the Thai Bankruptcy Court).

On 27 May 2020, the Thai Bankruptcy Court formally accepted the petition and an automatic stay order came into effect.

Australian recognition

The Foreign Representatives obtained interim relief from the Federal Court of Australia on 23 June 2020 pursuant to Article 19(1)(1) of the Model Law, effectively preserving the status quo in respect of the Australian assets of Thai Airways pending the substantive determination of the recognition application on 3 August 2020. Orders were made for notification of creditors.

At the final hearing on 3 August 2020 before Justice Markovic, the Foreign Representatives successfully submitted to the Court that the Business Reorganisation Proceeding was a foreign proceeding for the purposes of the Model Law as:

• it is a collective judicial or administrative proceeding in a foreign state;
• it is conducted pursuant to a law relating to insolvency;
• the assets and affairs of the debtor during the proceeding are subject to control or supervision by a foreign court; and
• the proceeding is for the purpose of reorganisation or liquidation.

Orders were made by Justice Markovic on 3 August 2020 recognising the Thai Reorganisation Proceeding as a foreign main proceeding.

Scope of the stay

Pursuant to the Model Law, upon the grant of recognition of a foreign proceeding as a foreign main proceeding, the commencement or continuation of proceedings concerning the debtor’s assets, rights, obligations or liabilities is stayed automatically.¹

The Foreign Representatives submitted that although the Thai Business Reorganisation Law has no precise equivalent in Australian law, the proceeding is most closely analogous to a voluntary administration. 

This is because, pursuant to the Thai Business Reorganisation Law:

• a petition is filed with the Thai Bankruptcy Court, and if accepted, an automatic stay arises pursuant to which:
  • creditors are prohibited from, amongst other things, commencing litigation, revoking licences, commencing a civil case or arbitration regarding the debtor’s assets, enforcing a judgment against the debtor’s assets, enforcing security without the Thai Bankruptcy Court’s approval, or suspending utility services;
  • owners of property which is essential for the operation of the debtor’s business under a contract of hire are not permitted to exercise the right to recover the property in the possession of the debtor; and
  • the debtor may not dispose of or encumber its property except as necessary for conducting the ordinary business of the debtor or as otherwise provided by court order. The stay is similar to the Australian voluntary administration stay, in that it affects both unsecured and secured creditors;
• the Thai Bankruptcy Court schedules a hearing to examine a petition following which it may make an order granting permission to reorganise the debtor’s business operations (with or without the appointment at that time of a “plan preparer” or Planner), or it may dismiss the petition. If appointed, the Planner assumes control of the management powers of the debtor. Creditors are required to submit their applications for the repayment of debts to the Official Receiver;
• the Planner is obliged to prepare a plan (the Plan) for the debtor company’s reorganisation, to be implemented by a Plan Administrator, and submit it to the Official Receiver after which the Official Receiver will convene and hold a creditors’ meeting to consider the Plan, at which creditors may vote to either approve or reject the Plan;
• if the creditors’ meeting approves the Plan, the Thai Bankruptcy Court will then schedule a hearing to consider the Plan at which the Court can approve or reject the Plan.

Following the appointment of the Planner, the operation of a Thai business reorganisation proceeding is similar to that of an Australian voluntary administration, with a Planner (similar to a voluntary administrator) working to determine a Plan (similar to a deed of company arrangement) to be sanctioned by the creditors under the supervision of a Plan Administrator (similar to a deed of company administrator). 

Given this, in the Thai Airways application, the Court ordered for the purposes of Article 20(2) of the Model Law that the stay applicable would be the same as would apply if it arose under Part 5.3A of the Corporations Act and as if:

1. Part 5.3A of the Corporations Act applied to Thai Airways (as a company subject to administration under that Part); and
2. references in Part 5.3A of the Corporations Act to the consent of the company's administrators are taken to be references to the consent of Thai Airways.

Counsel for the Foreign Representatives of Thai Airways were Stewart Maiden QC and Emma Beechey.

1 see Re Senvion GmbH (No 2) [2019] FCA 1732 at [24] to [29]; Tai-Soo Suk v Hanjin Shipping Co Ltd [2016] FCA 1404 at [45]; Akers v Deputy Commission of Taxation [2014] FCAFC 57; 223 FCR 8 at [55].