England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION (Companies Court)

		Royal Courts of Justice Strand London WC2A 2LL
		26th September 2005

Crown Copyright ©

Lewison J.:

1. There are before the court 18 schemes of arrangement for approval under the terms of s.425 of the Companies Act 1985. One of the schemes relates to a company called DAP Holding NV, and the remaining 17 relate to other Dutch companies.
2. DAP Holding NV is a reinsurer and consequently falls outside the European definition of a company carrying on insurance business for the purposes of certain regulations to which I will come in due course. The remaining 17 companies are insurers for those purposes. It is accepted that none of the companies have their centre of main interest in England and Wales, and none of them have an establishment in England and Wales.
3. I am satisfied that the formalities applicable to each of the schemes have been complied with in terms of what has been ordered by the court for the purpose of convening creditors' meetings. I am satisfied that the statutory majority of creditors, both in number and in value, have voted in favour of the schemes. I am also satisfied that the terms of the schemes are fair in the sense that an honest and reasonable creditor acting in his own interest could properly vote in favour of the schemes.
4. The only question that has troubled me is whether I have jurisdiction to sanction the scheme as a result of the fact that each of the scheme companies is a Dutch company with neither its centre of main interest nor an establishment in this country. 5 Mr Trower Q.C. has carefully taken me through the various statutory and other legislative instruments and also referred me to the decision of Lawrence Collins J. in Re Drax Holdings Ltd [2004] 1 WLR 1049; [2004] B.C.C. 334 . As a result of that tour I am satisfied that I do have jurisdiction to sanction the schemes, but I should very shortly explain why.
5. Section 425 enables the court to sanction a compromise or arrangement between a company and its creditors, or any class of them, or between the company and its members or any class of them. Section 425(6)(a) provides that " company" " means any company liable to be wound up under this Act" . The expression " this Act" is extended by s.735A to include certain parts of the Insolvency Act 1986 . Section 221(1) of the Insolvency Act 1986 provides:

" Subject to the provisions of this Part, any unregistered company may be wound up under this Act; and all the provisions of this Act and the Companies Act about winding up apply to an unregistered company with the exceptions and additions mentioned in the following subsections."

6. Section 221(5) deals with circumstances in which a company may be wound up. Section 225 provides for the winding up of a company incorporated outside Great Britain and provides expressly that it is subject to the EC Regulations. The words of s.221(1) , that is to say " any unregistered company" , do not on the face of them carry any restriction on the theoretical jurisdiction of the court to wind up a company on territorial grounds. Mr Trower Q.C. submits, in my view rightly, that whatever it is that is sought to be wound up must fall within the juridical concept of a company and it would not therefore extend to natural persons or to entities governed by international treaty such as, for example, the International Tin Council. But there is nothing in the words of the Act themselves which inhibit the court's territorial jurisdiction.
7. This question was considered by Lawrence Collins J. in Re Drax Holdings Ltd ( supra ). He came to the conclusion in para.26 of his judgment that the various judge-made conditions which had been formulated in earlier cases for the exercise of powers to wind up foreign corporations went to the discretionary exercise of the power rather than to the existence of the power itself. I am content to follow that decision. Lawrence Collins J. did, however, leave open the question whether the impact of European legislation might affect the result in a case in which the company in question fell within the scope of those regulations.
8. The first of the regulations to be considered is the Regulation on Insolvency Proceedings 1346/2000 ( [2000] O.J. L160/1 ). Article 1(1) provides that the Regulation shall apply to collective insolvency proceedings which entail the partial or total divestment of a debtor and the appointment of a liquidator. Article 1(2) says that the regulation does not apply to insolvency proceedings concerning insurance undertakings.
9. As I have mentioned, 17 of the 18 scheme companies are insurance undertakings and therefore this Regulation has no impact on the jurisdiction of the court to wind up any such entity. It does, however, potentially affect the first named company, DAP Holding NV.
10. Article 3(1) provides that the courts of the Member State within a territory of which the centre of a debtor's main interest is situated shall have jurisdiction to open insolvency proceedings. Article 3(2) carries on by saying that where the centre of a debtor's main interest is situated within the territory of a Member State, the courts of another Member State shall have jurisdiction to open insolvency proceedings against that debtor only if he possesses an establishment within the territory of that other Member State.
11. The argument runs as follows. It is clear from the words of the Insolvency Act itself and the approach taken by Lawrence Collins J. in the Drax Holdings case that some circumstances such as the existence of insolvency itself must be ignored for the purpose of considering whether a corporation is liable to be wound up under the Act in the context of a sanction under ss.425 and 426 . It follows, therefore, logically that circumstances which may or may not exist and are transient in the sense of the company's financial position must be ignored in considering whether a company is liable to be wound up. The location of a debtor's centre of main interests or the location of a debtor's establishments are matters which may change from time to time because the debtor may perfectly properly choose to relocate his business or open an establishment in the territory of another Member State. There is logically no warrant for distinguishing between transient matters of that kind and transient matters such as the day-today financial position of the corporation. Consequently, there is nothing in the Insolvency Proceedings Regulation which precludes the court from concluding that a foreign corporation like DAP Holding NV, with neither its centre of main interest in this Member State nor an establishment in this Member State, is liable to be wound up. Of course there must be a sufficient connection with England and Wales in order for this court to exercise jurisdiction, but that is a matter of discretionary exercise of jurisdiction rather than the existence of the jurisdiction itself. I accept that argument.
12. So far as the remaining 17 companies are concerned, the relevant regulations are the Insurers (Reorganisation and Winding Up) Regulations 2004 (SI 2004/353). Regulation 4 prohibits the court from making a winding-up order in relation to an European Economic Area (" EEA" ) insurer or any branch of an EEA insurer on or after the relevant date. However, reg.5 provides that for the purposes of s.425(6)(a) of the Companies Act 1985 an EEA insurer is to be treated as a company liable to be wound up under the 1986 Act if it would be liable to be wound up under that Act but for the prohibition in reg.4(1)(a) .
13. Since I have concluded that a foreign corporation is liable to be wound up as a matter of jurisdiction under s.221 of the Insolvency Act , notwithstanding the absence of a centre of main interest or an establishment in this country, it follows in my judgment that the 17 solvent insurers are prima facie liable to be wound up by reason of the operation of reg.5 .
14. That leaves lastly for consideration Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters ( [2001] O.J. L12/1 ). Article 1(2)(b) of that regulation excludes from its scope " bankruptcy proceedings relating to the winding-up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings" . Since judicial arrangements are expressly excluded from the scope of that Regulation, it seems to me to be clear that the court should not, through arguments based on the hypothesis that a company may be liable to be wound up when solvent, permit that clear exclusion to be displaced by some sort of implied exclusion. I consider, therefore, that the sanction of a scheme under ss.425 and 426 of the Companies Act is expressly excluded from the scope of the Judgments Regulation.
15. My conclusion in this regard seems to conform to the conclusion of Pumfrey J. in Re La Mutuelles du Mans Assurances IARD [2005] EWHC 1599 (Ch); [2006] B.C.C. 11 to which Mr Trower drew my attention. Accordingly, being satisfied both that I have jurisdiction and that I ought to exercise it, I will sanction the schemes.