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Cite as: [2012] IEHC 97
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Judgment Title: Mount Capital Fund Limited (In Liquidation) & Ors -v- Companies Act Neutral Citation: [2012] IEHC 97 High Court Record Number: 2012 70MCA Date of Delivery: 05/03/2012 Court: High Court Composition of Court: Judgment by: Mary Laffoy J. Status of Judgment: Approved |
Neutral Citation Number: [2012] IEHC 97 THE HIGH COURT [2012 No. 70 MCA] IN THE MATTER OF AN APPLICATION BY MOUNT CAPITAL FUND LIMITED (IN LIQUIDATION) AND IN THE MATTER OF AN APPLICATION BY MOUNT CAPITAL ASSET SUBSIDIARY LIMITED (IN LIQUIDATION) AND IN THE MATTER OF AN APPLICATION BY JOHN GREENWOOD AND HADLEY J. CHILTON, JOINT OFFICIAL LIQUIDATORS OF MOUNT CAPITAL FUND LIMITED (IN LIQUIDATION) AND MOUNT CAPITAL ASSET SUBSIDIARY LIMITED (IN LIQUIDATION) JUDGMENT of Miss Justice Laffoy delivered on 5th day of March, 2012. 1. The application 1.1 The application to which this judgment relates was made ex parte on behalf of Hadley J. Chilton and John J. Greenwood (the Liquidators) of Mount Capital Fund Limited and Mount Capital Asset Subsidiary Limited (the Companies). The Liquidators were appointed joint liquidators of each of the Companies by orders of the Eastern Caribbean Supreme Court in the High Court of Justice of the British Virgin Islands on 22nd September, 2009. By orders made on 26th January, 2012 in the High Court of Justice Virgin Islands Commercial Division in relation to each of the Companies, it was ordered that the Liquidators, in their capacity as joint liquidators, should have leave to apply to the High Court of Ireland for recognition of the liquidation of each of the Companies. 1.2 In the ex parte docket which initiated the application it was recited that the Liquidators desire the aid of this Court for the purpose of recovering or getting in:
(ii) all of the assets and property of the Companies,
(b) that this Court and the officers of this Court act in aid and be auxiliary to the Eastern Caribbean Supreme Court in the High Court of Justice in the British Virgin Islands and in particular assist and act in aid of the said Court in the following matters: - (i) authorising the Liquidators to exercise in relation to the Companies and each of them the powers afforded to an official liquidator under s. 245 of the Companies Act 1963 (the Act of 1963); (ii) granting to the Liquidators liberty to apply for such orders under s. 245 of the Act of 1963 in relation to the Companies and each of them; (iii) giving the Liquidators liberty to apply for such further and other reliefs as shall appear appropriate to them in exercise of their functions as Liquidators of the Companies and which the Court shall see fit to grant. 2. The factual basis of the application 2.1 The application is grounded on the affidavit of Hadley J. Chilton, one of the Liquidators, who has outlined therein, in broad terms, the circumstances which led to the liquidation of the Companies, the course of the liquidation and the current financial status of the Companies which is that “the scale of financial loss that the Companies have encountered is in excess of USD200 million”. Mr. Chilton has also averred as to the purpose of this application, again in broad terms, as –
(b) Deloitte & Touche LLP Ireland (Deloitte): and (c) Citi Hedge Fund Services (Ireland) Ltd. (Citi). 2.4 As neither PwC nor Deloitte has had an opportunity to reply on affidavit to the averments contained in Mr. Chilton’s affidavit, I consider it appropriate to exercise caution in recording the facts deposed to by Mr. Chilton. For present purposes it is sufficient to record that, while in their most recent letter to the Liquidators, which is exhibited by Mr. Chilton, the letter dated 22nd December, 2011, PwC, subject to certain issues being clarified by the Liquidators, have indicated a willingness to furnish certain categories of documents to the Liquidators, on certain terms, the position of the Liquidators is that the PwC response is not sufficient. The Liquidators maintain the position that they are entitled to possession of the Companies’ documents and records held by PwC. As regards Deloitte, the most recent item of correspondence on behalf of that firm exhibited by Mr. Chilton is a letter dated 8th September, 2011 from Deloitte’s solicitors, Arthur Cox, reiterating that Deloitte does not hold any books or records of either of the Companies. Further, they state that the documents in the possession of Deloitte are “working papers” and Deloitte does not provide any copy of its working papers to any client or third party unless ordered to do so by the Irish courts. That response is also regarded as inadequate by the Liquidators. 2.5 As regards Citi, its predecessors entered into Administration Agreements with the first named of the Companies at the following times and under the following names: on 12th December, 2001 as Hemisphere Management (Ireland) Limited; and on 1st January, 2003 as BISYS Hedge Fund Services (Ireland) Limited. Mr. Chilton has averred that the Liquidators have engaged in voluminous correspondence with Citi regarding the books and records of the Companies held by Citi since their appointment. While they were provided with documents, which had been promised over a year earlier, the Liquidators require access to two named employees, who remain in the employment of Citi, who have detailed knowledge of the administration of the Companies. The Liquidators have not received a substantive response to a request for a meeting with those employees. Mr. Chilton has averred that there would be a significant saving to the Companies if the Liquidators did not have to spend time and incur costs in writing to and placing telephone calls to Citi seeking documents and information which are necessary for the performance of their functions. 2.6 It would be wholly inappropriate for the Court to express, or indeed form, any view as to whether there has been an adequate response to the Liquidators’ requests from those parties. That issue is for another day. However, for present purposes, the affidavit of Mr. Chilton does establish that there is an issue as to whether the responses of those parties were adequate. 3. Equivalent provisions of British Virgin Island companies’ legislation 3.1 The Liquidators’ application is also grounded on the affidavit of Meriel Louse Steadman, a solicitor who has been admitted to practise as a solicitor of the Eastern Caribbean Supreme Court (Virgin Islands), who specialises in corporate contentious insolvency and litigation. Ms. Steadman has averred that, while the British Virgin Islands is a British Overseas Territory of the United Kingdom, it has its own legislature and court system, both of which are independent from the United Kingdom. It is a common law jurisdiction and the courts recognise judicial precedent both in its own jurisdiction and in other common law countries. 3.2 Ms. Steadman has exhibited the Insolvency Act 2003 of the British Virgin Islands (the BVI Act 2003), which she has averred is based on the Insolvency Act 1986 of England and Wales (the UK Act 1986), although modified in a number of respects. Specifically, she has referred to Part VI of the BVI Act which deals with the liquidation of companies. The sections of the BVI Act to which she refers clearly demonstrate an equivalence of approach to the winding up of companies to the approach adopted in this jurisdiction under the Act of 1963 and amending legislation. 3.3 Of particular relevance for present purposes is s. 284 of the BVI Act 2003 under which an application may be made by a liquidator for an order that a person specified appear before the Court “for examination concerning the company or a connected company, including the promotion, formation, business, dealings, accounts, assets, liabilities or affairs of the company or connected company”. The persons specified include an officer or former officer of the company and a person who has been an accountant or auditor of the company, in addition to any other person whom the liquidator considers is capable of giving information concerning the company or a connected company. Further, reference is made to s. 285 of the BVI Act 2003 which empowers the Court to require a person who is to be examined before the Court “to produce at the examination any books, records or other documents in his possession or control” relating to the company. 3.4 On the basis of what she has been told by an Irish solicitor in the firm acting for the Liquidators on this application, Ms. Steadman has averred that from the perspective of the law of the British Virgin Islands, the power of the Court under s. 245 of the Act of 1963 is closely analogous to ss. 284 and 285 of the BVI Act 2003. 3.5 Counsel for the Liquidators referred the Court to a recent decision of the House of Lords on the section of the UK Insolvency Act 1986 – B & C Holdings Plc v. Spicer & Oppenheim [1993] BCLC 168. I do not consider it necessary to comment on that authority at this juncture. For present purposes it is sufficient to record that I consider that the Liquidators have shown a prima facie case for the conclusion of equivalence between s. 245 of the Act of 1963, which they propose to invoke if given recognition, and the corresponding provisions of the BVI Act 2003. The scope of s. 245 is for another day, when the parties against whom an order under that section is sought will be heard by the Court. 4. The relevant authorities on recognition 4.1 Of the authorities to which the Court was referred by counsel for the Liquidators on the entitlement of a court to give recognition to insolvency proceedings in another jurisdiction, the earliest in time is a decision of the Privy Council on an appeal from the Court of Appeal of the Isle of Man in Cambridge Gas Transportation Corpn v. Unsecured Creditors [2007] 1 AC 508. That case arose from proceedings in a federal court in New York under Chapter 11 of the United States Bankruptcy Code in which the Federal Court had confirmed a plan providing for the assets of the insolvent companies to be taken over by the creditors and had ordered that the plan be carried into effect. The element of the plan which gave rise to a request for assistance in giving effect to the plan by the Federal Bankruptcy Court to the High Court of Justice of the Isle of Man was a clause which provided that shares in a company incorporated in the Isle of Man should be vested in the creditors’ representatives. The issues which were ultimately before the Privy Council arose from a petition by the Unsecured Creditors (the respondents) to the Manx High Court for an order vesting the shares in their representatives and a cross petition by Cambridge Gas Transportation Corporation (Cambridge Gas), a company registered in the Cayman Islands, which owned, directly or indirectly, 70% of the issued share capital of the Isle of Man company, that the Manx Court should not recognise or enforce the terms of the plan. 4.2 An issue addressed by Lord Hoffmann, delivering the judgment of the Privy Council, was an argument put forward for Cambridge Gas that the New York order was a judgment in rem and, consequently, was only binding upon persons over whom the New York court had jurisdiction. Lord Hoffmann rejected that argument stating (at paras. 13 and 14) that bankruptcy proceedings do not fall into either the judgment in rem category or the judgment in personam category, stating:
The purpose of bankruptcy proceedings, on the other hand, is not to determine or establish the existence of rights, but to provide a mechanism of collective execution against the property of the debtor by creditors whose rights are admitted or established.”
(i) there is power to use the common law to recognise and assist an administrator appointed overseas, (ii) assistance includes doing whatever the English court could have done in the case of a domestic insolvency, (iii) bankruptcy proceedings are collective proceedings for the enforcement (not establishment) of rights for the benefit of all creditors, even when those proceedings include proceedings to set aside antecedent transactions, (iv) proceedings to set aside antecedent transactions are central to the purpose of the insolvency.” 4.6 The decision in the Cambridge Gas case has been followed in this jurisdiction both in relation to personal bankruptcy and corporate insolvency. 4.7 In the matter of David K. Drumm, a Bankrupt (High Court, 13th December, 2010), the High Court (Dunne J.) made an order that the High Court and its officers do act in aid and be auxiliary to the United States Federal Bankruptcy Court for the district of Massachusetts and, in particular, do assist and act in aid of the Court in –
(ii) providing that a Certificate of Vesting be registered in the Property Registration Authority or the Registry of Deeds insofar as the bankrupt had title to landed property, and (iii) assisting in the determination and realisation of the interest of the bankrupt in landed property or other assets of the bankrupt situate in Ireland. 4.8 In her judgment in the Drumm case, Dunne J. addressed the question of whether there was an inherent jurisdiction in the Court to make the order sought by the Trustee. Having considered, inter alia, the judgment of Lord Hoffmann in the Cambridge Gas case, and having pointed to the paucity of authority in this jurisdiction, she stated:
4.9 The issue of the recognition of a foreign corporate insolvency process in this jurisdiction was considered by Finlay Geoghegan J. in Fairfield Sentry Limited (in liquidation) & Anor. v. Citco Bank Nederland NV & Ors. (High Court, 28th February, 2012). That judgment was delivered following a full hearing of the plaintiffs’ claim against the defendants. The first plaintiff (Fairfield) was a company incorporated in the British Virgin Islands which had been ordered to be wound up by the High Court of Justice of the Eastern Caribbean Supreme Court pursuant to the insolvency laws of the British Virgin Islands. The second named plaintiff was one of two joint liquidators appointed by that court. The first defendant (Citco) was a Dutch bank incorporated under the laws of the Netherlands, domiciled there, and with a branch in Ireland and registered under Part X1 of the Companies Act 1963 (as amended). Fairfield had maintained a USD denominated bank account at the Dublin branch of Citco. Each of the two other defendants, a Dutch corporation and a Panamanian company, had obtained from the Dutch courts conservatory garnishment orders in relation to the monies in the name of Fairfield in the Dublin account. That is the context in which the plaintiff sought, as substantive relief, declarations recognising the decisions and orders of the court in the British Virgin Islands winding up Fairfield and appointing the liquidator. The plaintiffs also sought a declaration that the monies in the Dublin account were held by Citco to the order of the liquidator and declarations that each of the orders of conservatory garnishment made by the Dutch courts were not entitled to recognition in this jurisdiction. 4.10 When addressing the issue of recognition of the foreign winding up order, Finlay Geoghegan J. stated that, in her judgment, it was correct that, pursuant to common law in Ireland, the Court has an inherent jurisdiction to recognise orders of foreign courts (in the sense of non-EU courts) for the winding up of companies and the appointment of liquidators. She referred to the judgment of Dunne J. in the Drumm case and also the judgment of the Privy Council in the Cambridge Gas case. She stated that, notwithstanding the paucity of authority, she was satisfied that, at common law, the inherent jurisdiction exists, “deriving as it does from the underlying principle of universality of insolvency proceedings”. While recognising that the common law requires a different approach in the exercise of its inherent jurisdiction in relation to giving assistance to foreign personal insolvencies, i.e., bankruptcies, and corporate insolvencies, Finlay Geoghegan J. stated (at para. 25):
‘20 . . . but the underlying principle of universality is of equal application and this is given effect by recognising the person who is empowered under the foreign bankruptcy law to act on behalf of the insolvent company as entitled to do so in England.’” 4.12 Counsel for the Liquidators also referred the Court to the recent decision of the Supreme Court in In the matter of Flightlease (Ireland) Ltd. in Voluntary Liquidation [2012] IESC 12, in which judgment was delivered on 23rd February, 2012 and in which there was discussion of the decision of the Privy Council in the Cambridge Gas case. In that case, the factual elements of which arose in what Finnegan J. referred to as a “complex corporate structure”, Flightlease (Ireland) Ltd.(Flightlease), a company incorporated in this jurisdiction, was the subject of a voluntary winding up in this jurisdiction. An associated (not using that expression in any technical sense) company, which I will refer to as Swissair, which was in debt restructuring liquidation in Switzerland, sought to prove in the Irish liquidation of Flightlease for the sum of CHF 8m, but the claim was rejected. Swissair instituted proceedings in the Swiss courts seeking return of certain monies paid by Swissair to Flightlease. When the Swiss proceedings were served on the joint liquidators of Flightlease, they brought a motion under s. 280 of the Act of 1963. In the High Court it was directed that a preliminary issue be tried as to whether, in the event that the order sought by Swissair against Flightlease in the Swiss proceedings was granted, that order would be enforceable in this jurisdiction. That preliminary issue was addressed in the High Court by reference to a number of questions, one of which was whether the order sought by Swissair in the Swiss courts would be excluded from enforcement in this jurisdiction under the common law as arising from a proceeding in bankruptcy or insolvency. In his discussion of that question in the Supreme Court, Finnegan J. considered the relevance of the Cambridge Gas decision, which he referred to as “a significant development in the common law of the United Kingdom”. 4.13 Before considering the commentary on the Cambridge Gas case, I think it is appropriate to consider the manner in which the Supreme Court answered that question. Finnegan J. identified the effect of an order made in the Swiss proceedings in the following passage of his judgment:
4.15 Finnegan J. in his judgment quoted from the judgment of Brightman L.J. in the Lines Bros. case, which judgment is referred to by Lord Hoffmann (at para. 15). The passage quoted in the Flightlease case is in the following terms:
4.17 Two post-Cambridge Gas decisions of the Courts of England and Wales are also subject to criticism in the judgment of the Supreme Court and it is appropriate to refer to them because they are among the other authorities, which Proudman J. read together with Cambridge Gas in extrapolating the propositions which I have quoted at para. 4.5 above. It was pointed out by the Supreme Court that the Court of Appeal in Rubin & Anor. v. EuroFinance SA [2010] EWCA Civ 895 considered whether the principle of universality enabled the Court to enforce a judgment in personam, which had been given in New York against the defendants in, and for the purposes of, bankruptcy proceedings in New York, notwithstanding that the defendants had not submitted to the jurisdiction of the New York court. The Court of Appeal held that the principle had that effect. It was observed by Finnegan J. that “[a]cademic comment on the decision is not entirely favourable” and that the decision is under appeal to the Supreme Court. The decision of the House of Lords in Re H.I.H. Casualty and General Insurance Ltd. [2008] 1 WLR 852 was cited as demonstrating “uncertainty in the law as it is developing in the United Kingdom”. It is true that in that case the House of Lords decided that it was a statutory provision (s. 426 of the Insolvency Act 1986) which gave the Court jurisdiction to accede to a request by a relevant country to direct liquidators in England and Wales in an ancillary liquidation to pay over to the main liquidators in the relevant country all sums collected or to be collected by them, after paying or providing for all their proper costs, charges and expenses. It is also true that there was disagreement among the Law Lords as to whether such an order could have been made at common law. 4.18 In was noted by the Supreme Court in the Flightlease case that Cambridge Gas and Rubin “all draw on the provisions of the Insolvency Act 1986, the Cross Border Insolvency Regulations 2006 and the UNCITRAL Model Law for their decisions”. However, counsel for the Liquidators on this application pointed out that in the Cambridge Gas case those provisions did not apply and, indeed, Lord Hoffmann stated at para. 18 that the Privy Council was “concerned solely with the common law”. In winding up his commentary on the Cambridge Gas decision, Finnegan J. stated:
5.1 The dilemma with which this Court is faced is whether the decision of the Supreme Court precludes this Court from following the approach adopted by Finlay Geoghegan J. in the Fairfield case in finding that this Court has inherent jurisdiction to recognise orders of a court outside the European Union ordering the winding up of a company, the appointment of a liquidator and giving liberty to the liquidator to apply for assistance in aid of the court making the order. Having carefully considered the matter, I am satisfied that this Court is not so precluded. I am satisfied that the ratio decidendi of the decision in the Flightlease case, which I have analysed extensively above, is limited to the situation in which it is sought to enforce at common law “liability to pay a sum” on foot of a judgment made by a foreign court in liquidation proceedings being conducted in this jurisdiction in accordance with Irish law. I am of the view that it does not preclude this Court from giving recognition to orders of the type made by the High Court of Justice of the British Virgin Islands in relation to the Companies. 5.2 On this application, relief in the nature of enforcement, as distinct from recognition, is not sought. In any event, it would be wholly inappropriate to consider an application for relief in the nature of enforcement on an ex parte application. 5.3 I consider that the Court does have an inherent jurisdiction to give recognition to insolvency proceedings in jurisdictions outside the European Union. However, I consider that, in the exercise of that jurisdiction, the Court should be satisfied that recognition is being sought for a legitimate purpose. I believe that a legitimate purpose has been demonstrated in this case, in that the objective of the Liquidators is to seek to obtain relief of the nature provided for in s. 245 of the Act of 1963, having demonstrated that, there is equivalence between the law of the British Virgin Islands and the law in this jurisdiction in relation to corporate insolvency generally and, in particular, in relation to disclosure, production of documentation and suchlike for the purpose of performance by a liquidator of his principal duties of taking possession, protecting and realising the assets of the company and distributing the assets, or the proceeds of realisation, in accordance with law. 5.4 While I do not discern any prejudice to any creditor in this jurisdiction or the infringement of any local law in affording recognition, so that, to use Lord Hoffmann’s terminology, there is “no discretionary reason for withholding recognition”, I have to take into account that this application is made ex parte and parties likely to be affected have not been heard. I propose to address that circumstance in the form of order which I intend making. 5.5 There is provision in the Act of 1963 for the enforcement of orders made in winding up of courts outside the State. Section 250(1) provides:
6. Form of order 6.1 The order of the Court will provide that –
(b) the High Court of Ireland and its officers do act in aid and auxiliary to the High Court of Justice Virgin Islands Commercial Division and in particular do assist and act in aid of the said Court in giving the Liquidators liberty to apply for – (i) orders under s. 245 of the Act of 1963 in relation to the Companies and each of them, and (ii) such further and other reliefs as shall appear appropriate to them in the exercise of their functions as liquidators of the Companies. |