England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		31/07/2012

The Chancellor :

Introduction
1. Kaupthing HF ("KHF") was incorporated in Iceland, a state member of the European Economic Area ("EEA"). It is the holding company of Kaupthing Singer and Friedlander Ltd ("KSF"), a company incorporated in England. Both KHF and KSF carried on the business of banking. Both are credit institutions for the purposes of Directive 2001/24/EC of the European Parliament and Council on the reorganisation and winding up of credit institutions made on 4th April 2001 ("RWR"). Article 34 thereof required Member States to bring their laws into conformity therewith on 5th May 2004.
2. In 2004 KHF issued €4,000m. bonds ("the Bonds") under its European Medium Note Programme maturing on 30th June 2014. The conditions under which they were issued provided for their early redemption or purchase and cancellation at the option of KHF and that English law should apply. In May 2008 KHF and KSF entered into the two transactions with which I am concerned. They were:

(a) the purchase on 13th May 2008 by KHF from KFS of €5m bonds for €4,409,369 paid by KHF to KFS on 16th May 2008, and

(b) the purchase on 29th May 2008 by KHF from KFS of €5m bonds for €4,313,316 paid by KHF to KFS on 30th May 2008.

3. On 8th October 2008 Floyd J made an administration order in relation to KSF on the application of the Financial Services Authority under s.359 Financial Services and Markets Act 2000. The consequences of that order included the application to KSF of the provisions of Schedule B1 Insolvency Act 1986 and Part 4 of the Credit Institutions (Reorganisation and Winding-up) Regulations 2004 (2004/1045) ("CIR"). CIR was made under European Communities Act 1972 s.2(2) for the purpose of implementing RWR in the UK. The administration of KSF was extended to 7th October 2012 by order of the court made on 24th April 2009. An application for its further extension to 2015 is due for hearing on 10th August 2012.
4. Following the processes in Iceland described in some detail by Burton J in Rawlinson & Hunter Trustees SA v Kaupthing Bank HF [2011] 2 BCLC 682 paras 10 to 19, KHF was put into liquidation in Iceland by order of the District Court of Reykjavik made on 22nd November 2010 with a reference date for the purposes of Icelandic law of 15th November 2008. The consequences of the winding up of KHF included the application of the Icelandic Bankruptcy Act No.21/1991 ("IBA") and the Financial Undertakings Act No. 161/2002 ("FUA"). FUA was enacted in order to give effect to RWR in Iceland. Article 99 of FUA was amended in a material respect to which I shall refer later in 2011 by Act 78/2011.
5. By a letter dated 8th December 2011 the solicitors for KHF notified the administrators of KSF that KHF considered that the two payments made by KHF to KSF specified in paragraph 2 above should be 'rescinded' and repaid by the latter to the former pursuant to ss.134 and 142 of IBA. KHF considered that the effect of FUA was to extend to Iceland the provisions of paragraph 43(6)(b) Schedule B1 Insolvency Act 1986 so that proceedings to rescind such payments taken in Iceland or in England required the permission of the court in England. Accordingly, by an application notice dated 1st June 2012 ("the Permission Application") KHF sought such permission from this court. The application was urgent in that it was considered that the relevant periods of limitation would expire on 30th June 2012. Indeed proceedings were commenced in the District Court in Reykjavik on 10th June 2012 seeking 'rescission of [KHF]'s payment to [KSF]'. There was some doubt whether KSF was accountable for those payments to those from whom it had acquired the bonds in question. Accordingly those persons, UBS AG, Tradition London Clearing Ltd and Deutsche Bank, were joined as 'reserve' defendants. By his order made on 15th June 2012 Arnold J gave permission for the commencement of the claim in Iceland and a parallel claim in England limited, in each case, to the commencement of proceedings. He adjourned the application with directions as to the evidence to be filed in the meantime. The claim form in the parallel English proceedings was issued on 28th June 2012 and both have been served on KSF.
6. On 29th June 2012 the administrators of KSF issued a further application ("the Provable Debt Application") seeking the directions of the court under paragraph 63 of Schedule B1 to the Insolvency Act 1986 in order to ascertain whether the obligations KHF sought to enforce in the proceedings authorised by Arnold J would, if valid, give rise to a provable debt within Rule 13.12(1) Insolvency Rules 1986.
7. Expert evidence on the law of Iceland has been filed by both sides. The expert for the administrators of KSF is Mr Einarsson. He has made two reports dated respectively 29th June and 13th July 2012. The expert witness for KHF is Mr Thorlaksson. His report is dated 6th July 2012. I shall refer to all three reports later. There was no cross-examination of either of them. I was invited to resolve any differences between them as best as I could. Accordingly the issues before me are:

(1) whether to give to KHF permission to continue either or both of the proceedings commenced by KHF in Iceland and England to recover the payments made by KHF to KSF summarised in paragraph 2; and

(2) whether, if either is successful, KHF is entitled to prove in the administration of KSF for the amount of those payments.

I will deal with those issues in due course. Common, and essential, to both is an understanding of RWR and CIR, IBA and FUA and their respective effects.

Directive 2001/24/EC of the European Parliament and Council on the reorganisation and winding up of credit institutions made on 4th April 2001.
8. Article 1.2 Council Regulation on Insolvency Proceedings 1346/2000/EC specifically excludes credit institutions. They and their branches are covered by RWR (Art.1.1). It is not disputed that both KHF and KSF were credit institutions at the material times, their respective home member states were Iceland and UK and references to winding up proceedings include administration proceedings (Art.2). The relevant provisions are contained in Articles 9, 10 and 30.
9. Article 9, so far as relevant, provides:

"1. The administrative or judicial authorities of the home Member State which are responsible for winding up shall alone be empowered to decide on the opening of winding-up proceedings concerning a credit institution, including branches established in other Member States.

A decision to open winding-up proceedings taken by the administrative or judicial authority of the home Member State shall be recognised, without further formality, within the territory of all other Member States and shall be effective there when the decision is effective in the Member State in which the proceedings are opened."

10. The relevant provisions of Article 10 are:

"1. A credit institution shall be wound up in accordance with the laws, regulations and procedures applicable in its home Member State insofar as this Directive does not provide otherwise.

2. The law of the home Member State shall determine in particular:

[(a)-(d)]

(e) the effects of winding-up proceedings on proceedings brought by individual creditors, with the exception of lawsuits pending, as provided for in Article 32;

[(f)-(k)]

(l) the rules relating to the voidness, voidability or unenforceability of legal acts detrimental to all the creditors."

11. Article 30 is in the following form:

"Detrimental acts

1. Article 10 shall not apply as regards the rules relating to the voidness, voidability or unenforceability of legal acts detrimental to the creditors as a whole, where the beneficiary of these acts provides proof that:

- the act detrimental to the creditors as a whole is subject to the law of a Member State other than the home Member State, and

- that law does not allow any means of challenging that act in the case in point.

2. Where a reorganisation measure decided on by a judicial authority provides for rules relating to the voidness, voidability or unenforceability of legal acts detrimental to the creditors as a whole performed before adoption of the measure, Article 3(2) shall not apply in the cases provided for in paragraph 1 of this Article."

12. As I have already indicated Article 34 required Member States to give effect to the provisions of RWR in their domestic law. This was achieved in the UK by CIR and in Iceland by FUA. In summary:

(1) The administration of KSF in England and the winding up of KHF in Iceland is to be recognised in the respective home states of the other;

(2) Subject to the exceptions recognised by Art.30, the law of those respective home states is to be applied in the administration KSF and the winding up of KHF.

Credit Institutions (Reorganisation and Winding Up) Regulations 2004 SI 2004/1045
13. CIR was made to give effect to the obligations of the UK under RWR in the European Economic Area which includes Iceland. Regulation 2 contains a large number of definitions to which I shall refer as and when necessary. Regulation 3 precludes a court in the UK from winding up a credit institution (or any of its branches) established in any state, other than the UK, forming part of the EEA. Regulation 5 provides:

"(1) An EEA insolvency measure has effect in the United Kingdom in relation to -

(a) any branch of an EEA credit institution,

(b) any property or other assets of that credit institution,
(c) any debt or liability of that credit institution,

as if it were part of the general law of insolvency of the United Kingdom."

EEA insolvency measure is defined in sub-regulation (6) as:

"EEA insolvency measure" means, as the case may be, a directive reorganisation measure or directive winding-up proceedings which have effect in relation to an EEA credit institution by virtue of the law of the relevant EEA State; "relevant EEA State", in relation to an EEA credit institution, means the EEA State in which that credit institution has been authorised in accordance with Article 4 of the banking consolidation directive."

It is not disputed that these provisions relate to the winding up of KHF so as to give effect in England to the relevant Icelandic laws.

14. Regulation 7 provides that the general law of insolvency has effect in relation to UK credit institutions subject to the provisions of that part (part 3). Although I was referred to this regulation and submissions were made as to its effect neither side relied on any regulation contained in part 3.
15. Part 4 is entitled "Reorganisation or winding up of UK Credit Institutions: Recognition of EEA Rights". It applies to a credit institution subject to a winding up order made on or after 5th May 2004 (Regulation 19(1)(c)), which, by virtue of Regulation 21(1)(b), includes administration. Accordingly, and it was not disputed, Part 4 applies to KSF. The relevant provisions of Part 4 are regulations 22 and 30. They provide as follows:

"22.(1) This regulation is subject to the provisions of regulations 23 to 35.

(2) In a relevant winding up, the matters mentioned in paragraph (3) are to be determined in accordance with the general law of insolvency of the United Kingdom.


(3) Those matters are -

(a) the assets which form part of the estate of the affected credit institution;

[(b)-(e)]

(f) the effects of the relevant winding up on proceedings brought by creditors;

[(g)-(l)]


(m) the rules relating to the voidness, voidability or unenforceability of legal acts detrimental to all the creditors.

…

30.(1) In a relevant reorganisation or a relevant winding up, the rules relating to detrimental transactions shall not apply where a person who has benefited from a legal act detrimental to all the creditors provides proof that -

(a) the said act is subject to the law of an EEA State; and

(b) that law does not allow any means of challenging that act in the relevant case.

(2) For the purposes of paragraph (1), "the rules relating to detrimental transactions" means any provision of the general law of insolvency relating to the voidness, voidability or unenforceability of legal acts detrimental to all the creditors."

Thus Regulations 22 and 30 enact in the UK the provisions of Articles 10 and 30 of RWR so as to apply them to the administration of KSF.

Icelandic Law of Bankruptcy.
16. The relevant provisions of the Icelandic Law of Bankruptcy are helpfully set out in a translation into English made by the Icelandic Ministry of the Interior. They are contained in Part XVI Bankruptcy Act No.21/1991. They apply to a company registered in Iceland with a registered venue there, see Art.4. Mr Einarrson has drawn my attention to the following:

"100. Any person indebted to a bankruptcy estate may subtract from his debt what the estate may owe him, whatever the nature of the debt or the counterclaim, provided that the creditor acquired the claim before three months remained to the reference date, that he neither knew nor should have known that the bankrupt was insolvent, that he did not acquire the claim in order to set it off against another claim, and provided that the bankruptcy estate's claim against him came into being before the reference date.

The claims referred to in Article 114 shall not be set off against debt except to the extent that the bankruptcy estate's assets are sufficient to cover their payment upon distribution.

In order to protect the right of set-off, negotiable instruments owned by the bankruptcy estate shall not be assigned to others before the period for stating claims against the estate has expired; nor shall this be done later if a counterclaim has been stated. If this is done, the estate shall be liable for compensation, the ranking of which shall be governed by Article 110, subparagraph".

Chapter XX

Rescission of measures taken by a bankrupt etc

"134. Rescission may be claimed of the payment of a debt in the six months preceding the reference date, if the payment was made in unusual form, made unreasonably early or made in an amount that significantly impaired the bankrupt's payment ability, unless the payment appeared ordinary in the circumstances. Rescission may be claimed of such payment to the bankrupt's relatives in the six to twenty-four months before the reference date, unless it is established that the bankrupt was solvent at that time, despite the payment".

"141. Rescission may be claimed of any measures which improperly benefit a creditor at the expense of other creditors, measures that thwart the possibilities of creditors for obtaining satisfaction from the bankrupt's assets, and measures that increase the bankrupt's liabilities to the detriment of his creditors, if the bankrupt was at that time insolvent or became insolvent as a result of the measure, and provided that the party benefiting from the measure knew or should have known of the bankrupt's insolvency or the conditions that rendered the measure improper".

"142. If rescission is granted by reference to the provisions of Articles 131-138, the party benefiting from the rescinded measure or enforcement action shall pay the bankruptcy estate an amount corresponding to his benefit from the bankrupt's payment, however not exceeding the loss sustained by the bankruptcy estate".

17. In the proceedings in both Iceland and England in respect of which the Permission Application has been made KHF seeks to rescind the payments specified in paragraph 2 above under s.134 and obtain payment of the amounts thereof under s.142.
Financial Undertakings Act
18. Mr Einarrson explains in his first statement that FUA relates to credit institutions with their head offices in Iceland and, in some respects, modifies the general bankruptcy provisions in their application to such institutions. He has drawn my attention specifically to the following:

"99.2. If a court of law in Iceland grants to a credit institution permission for suspension of payment or composition with creditors such permission shall automatically extend to all branches operated by the credit institution in another member state. Icelandic law shall apply concerning the legal effect, procedure and implementation of the decision, with the following exceptions:

[a)-m)]

n) Notwithstanding the provisions of sub-paragraphs d and e, the provisions of Chapter III of the Act on conclusion of contracts, power of attorney and invalid legal instruments, No. 7/1936, on invalid legal instruments, may be applied unless the law of the host state does not allow this."

19. Sub-paragraph n) was, as indicated by Mr Einarsson, amended in 2011 by the addition of the following:

"A legal instrument may not, however, be invalidated if the party benefiting from the continuing validity of such a legal instrument provides satisfactory evidence that the law of another state should apply to the legal instrument and that the respective law does not include an invalidating rule which applies to the instance in question".

20. Mr Einarsson also referred to parts of Arts.100, 104 and 105 which cover cases where the credit institution and its branches are split between Iceland and EEA State or abroad. No party relied on them and I do not consider that it is necessary to refer to them in any detail.
The Provable Debt Application
21. It is appropriate to consider this application first as its outcome may affect, at least to some extent, my consideration of the Permission Application. Whether or not a debt is provable in the administration of KSF depends upon the application of the definitions contained in Insolvency Rules 12.3 and 13.12. Rule 12.3, so far as relevant, provides:

"12.3.— Provable debts

(1)Subject as follows, in administration, winding up and bankruptcy, all claims by creditors are provable as debts against the company or, as the case may be, the bankrupt, whether they are present or future, certain or contingent, ascertained or sounding only in damages."

Sub-paragraphs 2 and 2A provide for exceptions not material in this case.

22. Insolvency Rule 13 contains a number of provisions dealing with the interpretation and application of other rules. So far as relevant Insolvency Rule 13.12 provided at the time KSF went into administration on 8^th October 2008:

"Debt", "liability" (winding up)

(1) "Debt", in relation to the winding up of a company, means (subject to the next paragraph) any of the following

(a) any debt or liability to which the company is subject at the date on which it goes into liquidation

(b) any debt or liability to which the company may become subject after that date by reason of any obligation incurred before that date; and

(c) any interest provable as mentioned in Rule 4.93(1).

…

(3) For the purposes of references in any provision of the Act or the Rules about winding up to a debt or liability, it is immaterial whether the debt or liability is present or future, whether it is certain or contingent, or whether its amount is fixed or liquidated, or is capable of being ascertained by fixed rules or as a matter of opinion; and references in any such provision to owing a debt are to be read accordingly.

(4) In any provision of the Act or the Rules about winding up, except in so far as the context otherwise requires, "liability" means (subject to paragraph (3) above) a liability to pay money or money's worth, including any liability under an enactment, any liability for breach of trust, any liability in contract, tort or bailment, and any liability arising out of an obligation to make restitution.

(5) This Rule shall apply where a company is in administration and shall be read as if references to winding up were a reference to administration."

23. Rule 13.12(1)(a) and (5) were amended with effect from 6^th April 2010 by The Insolvency (Amendment) Rules 2010 (SI 2010/686) so as to read:

"(a) any debt or liability to which the company is subject –

(i) in the case of a winding up which was not immediately preceded by an administration, at the date on which the company went into liquidation;

(ii) in the case of a winding up which was immediately preceded by an administration, at the date on which the company entered administration;

....

(5) (a) references to winding up were references to administration,

(b) references to administration were references to winding up,

(c) references to going into liquidation were references to entering administration, and

(d) references to entering administration were references to going into liquidation."

The transitional provisions contained in Reg.6 and Schedule 4 para 1(3)(a) and (7)(a) make it clear that as KSF went into administration before 6^th April 2010 the amendments to IR 13.12 thereby made would not apply to KSF even if it went into liquidation after that date. It follows that the opening words of IR 13.12 must be read as ""Debt", in relation to the administration of a company...". Accordingly, the date relevant to this issue is 8^th October 2008.

24. Counsel for KHF accepts that the "claim" referred to in the definition of provable debt in IR 12.3 must be for a debt or other liability as defined in IR 13.12. It is common ground that there is no such debt or liability within IR 13.12(1)(a). The issue is whether there is a debt within IR 13.12(1)(b) when KSF went into administration on 8^th October 2008. That depends on whether at that time KSF had incurred an obligation in relation to the amount of the payments referred to in paragraph 2 above. To answer this question it is necessary (1) to ascertain the nature of the rights relied on by KHF in its proposed proceedings in Iceland and England and (2) the authorities in England on the meaning of IR 13.12(1)(b).
25. The first of those considerations depends on the Law of Iceland, in particular the effect of Articles 134 and 142 of the Icelandic Bankruptcy Act set out in paragraph 16 above, as explained by the expert reports of Mr Einarsson and Mr Thorlaksson. The claim is summarised in the Subpoena issued by KHF before the District Court of Reykjavik on 10th June 2012. Having set out the material facts relating to the payments, it continues in these terms:

"[KHF] recorded the payment[s] as a reduction of outstanding debts…the maturity date for the bond was not until 30th June 2014. KHF therefore believes that the payment[s] for the bond[s] took place earlier than is usual, in addition to that the payment disrupted the equality among [KHF]'s creditors. [KHF] thus believes that the debt was paid earlier than is usual pursuant to the rescission rule of Art.134 of Act no.21/1991…The payment therefore is rescindable as the other conditions of the provision are satisfied as well."

The Subpoena continues by stating that KHF's claim is for rescission of the payments under Article 134 and for repayment of the amounts thereof under Article 142.

26. In section 6 of his first report Mr Einarsson deals with the question put to him:

"whether – as a matter of Icelandic legal theory – the obligation to repay the money arises (a) on receipt of the money (i.e. prior to the commencement of the insolvency proceedings), (b) upon the commencement of the insolvency proceedings, (c) upon rescission of the payment or (d) at some other point in time."

Mr Einarsson notes that the obligation to repay can be tracked back to or attributed to the receipt of the money but that enforceability is tied to the order of the Icelandic District Court. He derives some comfort from the fact that under Icelandic law the right to interest on a debt runs from one month after a claim for rescission has been made. He concludes in paragraph 6.6:

"It is our opinion that the law does not define a specific date when the claim formally arises. Still, we can confirm that the claim for repayment becomes enforceable at the time of a ruling of the District Court confirming rescission. Furthermore the obligation to pay interest on overdue payments arises one month after rescission has been made against the benefitting party. No such effects seem to be connected to the receipt of the money by the benefitting party."

27. Mr Thorlaksson disagreed. The question put to him as recorded in paragraph 2.4.1 of his report was

"Did the buy-backs by [KHF] of bonds from [KSF] in May 2008 create an obligation to [KHF] incurred by [KSF] prior to 8^th October 2008 contingent on [KHF]'s later entrance into bankruptcy?"

In paragraph 4.1.2 Mr Thorlaksson notes that the claim of KHF "is on Article 142 of the Icelandic Bankruptcy Act no.21/1991". In paragraph 4.1.3 he states:

"A claim is established under Icelandic law when a certain event takes place that gives rise to the establishment. Such a claim may however not necessarily be active on that stage. In this case there was no legal reason for [KHF] to claim reimbursement on the grounds of the [payments] until after [KHF] went into winding-up. The claim was nevertheless established at the time when the [payments] occurred in May 2008. The alleged event giving rise to the right of rescission here, under IBA, is when the money was transferred from [KHF] to [KSF]. The Icelandic court would in my opinion rule on that basis that the obligation to repay was incurred on receipt of money but that the money would only become repayable in the event that KHF became insolvent."

28. In paragraph 4.1.4 Mr Thorlaksson indicated that a judge who had ruled on the claim for rescission would be bound to order repayment. He agreed with Mr Einarsson that Icelandic law did not specify any date when a claim formally arises, but considered that the general rule is clear and based on the main principles of Icelandic law he had previously set out. He did not consider that the date from which interest runs had any relevance to the question.
29. In his second report Mr Einarsson referred to these passages in the report of Mr Thorlaksson. He continued:

"3.2 It is in my opinion clear that when the money was received in May 2008 no obligation to repay arose at that point in time since the payment was legal and in accordance with the provisions of the agreement of the parties (given that this is undisputed in this case).

3.3 It is clear that in May 2008 after KSF received the payments, KHF could not have claimed repayment and such a claim would not have carried any legal effects, e.g. would not have been enforceable and would not have had any effect on the date the interest (general or penal) could have been claimed."

30. Both the experts assumed, naturally for otherwise they would not have been asked for their opinions, that IBA applied to the transactions concluded between KHF and KSF in May 2008. That was also the basis for the submissions of counsel for KHF. He submitted in terms that Articles 134 and 142 applied because KHF was wound up by order of the Reykjavik District Court on 22^nd November 2010. But the issue is whether KSF had incurred any obligation KHF on 8^th October 2008, over two years before. Arts 134 and 142 were not applicable to these transactions then. Further, it is clear from the words of the IBA that, in the absence of any expert evidence to the contrary and subject to the specific cases for which IBA provides (e.g. Art.32), the remedies for which Articles 134 and 142 provide are only available to a company in liquidation or an individual in bankruptcy. Accordingly, in addition to the considerations of Icelandic law to which the experts referred must be factored in the additional necessity for any claim to lie against KSF that KHF would go into liquidation.
31. There is no evidence before me that as at 8^th October 2008 the subsequent winding up of KHF was in prospect or objectively likely. No doubt it was a possibility; it must be for any trading company. Nevertheless I conclude, in relation to the first question I formulated in paragraph 24 above that as at 8^th October 2008 KHF had no rights under Articles 134 and 142 then capable of being exercised against KSF in relation to either of the payments summarised in paragraph 2 above.
32. I turn then to the second question there formulated. Counsel for KHF seemed to suggest that the claims available to KHF against KSF under Articles 134 and 142 IBA if and when KHF went into liquidation are sufficient to constitute an obligation incurred on or before 8th October 2008. In that connection, I have been referred to the decisions in Glenister v Rowe [2000] Ch 76; R(Steele) v Birmingham City Council [2006] 1 WLR 2380; Day v Haine [2008] BCC 845 and Unite the Union v Nortel Networks UK Ltd [2010] BCC 706.
33. In Day v Haine and Unite the Union v Nortel Networks UK Ltd the necessary obligation was found in the pre-existing contract of employment. In Glenister v Rowe and R(Steele) v Birmingham City Council there was no pre-existing obligation. In the first, the pre-existing obligation relied on was the costs of an appeal which had not been decided before the debtor's bankruptcy. In the second the obligation to refund the job-seeker's allowance depended on the exercise of the Minister's discretion. None of those cases indicates that I should recognise an obligation existing on 8^th October 2008 dependent on the future winding up of KHF in Iceland.
34. If KHF had been wound up before 8^th October 2008 then, looking at IBA alone, the necessary ingredients of a claim for rescission and repayment had by then occurred. The payments had been made in May 2008. The factual background against which they had been made then existed. Accepting the evidence of Mr Thorlaksson on this point, the remedy of repayment under Article 142 did not depend on the exercise of any judicial or other discretion. Accordingly, but subject to all the other objections advanced by counsel for KSF, it would not be hard to recognise an obligation in existence on 8^th October 2008. The essential, but missing, link between KHF and such an obligation on KSF is the winding up of KHF. I am unable to see how, in its absence, there could have been any obligation on KSF as at 8^th October 2008 capable of being a provable debt within the definition set out in IR 13.12(1).
35. Before concluding this part of the judgment I should note the additional point made by counsel for KHF in his written argument. This is to the effect that the amendment made to IR 13.12 by The Insolvency (Amendment) Rules 2010 (SI 2010/686) has the effect that if KSF goes into liquidation hereafter then the date on which to consider the existence of a provable debt will be the date of that liquidation. At that date KHF will also be in liquidation, the remedies provided by Articles 134 and 142 will be available against KSF will be available to it so that a provable debt will then exist. He relies on the consideration of this conundrum by Briggs J in Bloom v Pensions Regulator [2011] BusLR 766 paras 111-123. In those paragraphs Briggs J pointed out some of the possible problems which might arise. Whatever the issues before him they are not ones which arise before me. First, the provisions of The Insolvency (Amendment) Rules 2010 (SI 2010/686) Sch.4 paras 1 (7)(a) seem clear and are to the effect that the amendments do not apply to a winding up order made after 6th April 2010 which is immediately preceded by an administration order made before that date. In any event this is a future and hypothetical question which I am not prepared to consider further now. Who knows what form the Insolvency Rules will take then?
36. Accordingly, I will make the declaration sought by the Administrators of KSF to the effect that the claim sought to be made by KHF against KSF in both Iceland and England will not, if established, constitute a provable debt in the administration of KSF.
The Permission Application
37. When the Permission Application was issued it was assumed, first, that the permission of the court in England was required for the issue of proceedings by KHF against KSF in Iceland and, second, that, if successful, the consequential debt would be capable of proof in the administration of KSF. That is no longer the case. Though not foreshadowed in the application notice, counsel for KHF now submits that the leave of the court is not required in relation to the proceedings in Iceland. In addition he maintains that, even if I concluded, as I have, that KHF could not have any debt provable in the administration of KSF such proceedings are still worthwhile for establishing a right of set off.
38. Paragraph 43 Schedule B1 to the Insolvency Act 1986 provides:

"Moratorium on other legal process

43. (1) This paragraph applies to a company in administration.

[...]

(6) No legal process (including legal proceedings, execution, distress and diligence) may be instituted or continued against the company or property of the company except –

(a) with the consent of the administrator, or

(b) with the permission of the court."

39. In Harms Offshore AHT Taurus GmbH v Bloom [2010] Ch 187 [21] the Court of Appeal recognised, as had been established by Re Oriental Steam Co. LR 9 Ch App 557, that the statutory provision did not extend to proceedings brought by a claimant not subject to the jurisdiction of the English Courts in those courts. That case did not involve any credit institution. This case does. RWR Article 10(e) has the effect that the law of England determines the effects of winding up (including administration) proceedings on proceedings brought by individual creditors. Effect has been given to that provision in England by CIR 22(3)(f). Iceland was obliged to give effect to it as well. Accordingly, on the face of it, proceedings brought against KSF in any court of any member state of the EEA require the consent of the Administrator of KSF or the Court in England.
40. But, CIR reg 22(3)(f) is subject to two limitations. The first is reflected in reg 22(2). That provides that

"In a relevant winding up, the matters mentioned in paragraph (3) are to be determined in accordance with the general law of insolvency of the United Kingdom."

The second is in regulation 30. This mirrors article 30 of RWR and is quoted in paragraph 15 above. I see nothing in either to qualify the clear words of paragraph 43 of Schedule B1 Insolvency Act 1986 and CIR regulation 22(3)(f).

41. As I understood the argument of counsel for KHF, it is suggested that the general law of insolvency of the UK includes the principle established in Re Oriental Steam Co and recognised by the Court of Appeal in Harms Offshore AHT Taurus GmbH v Bloom that paragraph 43(6) Schedule 1B Insolvency Act 1986 does not have extra-territorial effect. I do not accept that submission, neither Re Oriental Steam Co nor Harms Offshore AHT Taurus GmbH v Bloom concerned a credit institution to which the terms of CIR applied. So the general law of insolvency to which regulation 22(2) relates cannot apply to a credit institution which is subject to CIR as a whole.
42. For all these reasons I conclude that KHF does require the permission of this court (or of the Administrator) to commence proceedings against KSF in either Iceland or England. The question therefore is whether I should give permission for either or both and whether any such permission should be subject to conditions or unconditional.
43. I approach this issue on the footing that KHF has no provable debt in the administration of KSF in England even if I give permission for the proceedings to be commenced or continued. Accordingly, there can be no purpose in authorising proceedings to be brought or continued in England. Iceland appears to me to be quite different. First, there is the question of set-off in the liquidation of KHF in Iceland. In that liquidation the law of Iceland prevails and, of course, is best applied by the courts in Iceland. Second, there is the position of the reserve defendants to consider. The claim against them, even assuming that it could be brought in England, is dependent on the claim against KSF being unsuccessful. For me to refuse permission for the claims to be continued in Iceland seems to me to constitute an unwarranted intrusion into the matters properly to be left to the Icelandic courts dealing with the liquidation of KHF.
44. The Administrators are concerned that if I authorise the continuance of the proceedings brought by KSF in Iceland I will prejudice a defence available to them under Art.30 RWR. I have difficulty with that proposition. Art.30 RWR is effective in England under Article 30 CIR and in Iceland, subject to the wording, under Art.99(n)IBA. Whatever the effects of Article 30 RWR, the same defences are available to the parties whether the claim is pursued in England or Iceland. The suggestion that it will receive a more sympathetic hearing in the former as opposed to the latter is not one on which I am prepared to place any weight.
45. On the other hand I am entitled to impose conditions and should do so so as to protect the assets and creditors interested in the administration of KSF. That necessitates the imposition of a condition on giving permission for the proceedings to continue in Iceland to the effect that, save by way of set-off in the winding up of KHF in Iceland, KHF will not seek to enforce any order against KSF it may obtain in such proceedings in Iceland.
46. For these reasons I am prepared to grant permission to KHF to continue its proceedings in Iceland, but not in England, on the condition referred to. I invite counsel to agree a minute of my order.
Summary
47. For all these reasons:

(1) I will make a declaration, as sought by the administrators of KSF, to the effect that neither the claims made by KHF in Iceland which they seek to continue there nor any similar claims made in England would, if successful, give rise to any debt provable in the administration of KSF in England.

(2) I grant permission to KHF under paragraph 43 Schedule B1 to the Insolvency Act 1986, as applied by regulation 22(3)(f) Credit Institutions (Reorganisation and Winding Up) Regulations 2004 (SI 2004/1045), to continue the proceedings commenced by it against KSF and others in the District Court of Reykjavik on 10^th June 2012 on condition that save by way of set-off in the winding up of KHF in Iceland, KHF will not seek to enforce any order against KSF it may thereby obtain whether by proof of debt or otherwise.

(3) I refuse permission to KHF to institute any similar proceedings against KSF in England.

I invite counsel to agree a minute of my order.