England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		12/04/2013

Mr Justice Mann :

1. This is an application seeking the appointment of administrators over Tambrook Jersey Ltd ("Tambrook") made by secured creditors. It is made pursuant to a letter of request issued by the Royal Court of Jersey dated 28^th February 2013, which is said to amount to a request for assistance within section 426(4) of the Insolvency Act 1986. It presents the relatively unusual feature that there are no existing insolvency proceeding in Jersey, and apparently no intention to commence any. That raises the question of whether what is being proposed falls within the verb "assist" in section 426(4). This is a significant point of principle, and a forthcoming intended sale of assets makes delivery of this judgment urgent.
2. The background can be shortly stated. Tambrook is a Jersey-registered company. Its centre of main interests is in Jersey (or at least the contrary is not contended for on this application). Its main business activity, however, is in England. It has borrowed a sum exceeding £6m from HSBC Bank plc, which it has apparently spent in buying, and starting the development of, certain properties in Margate. To say that the development has not been a success is something of an understatement, because the properties (which are Tambrook's principal asset) are thought to be worth no more than £150,000, and conceivably rather less. The bank is Tambrook's main creditor, though there are other creditors in England. The bank debt is now well over £8m. It has debentures and fixed charges over Tambrook's property.
3. The sole director of Tambrook and the bank have provisionally arranged sale of the properties, and they acknowledge that a form of insolvency procedure is desirable before that sale takes place. However, it is not considered that any available form of Jersey insolvency proceedings would be appropriate. The only suggested candidate is a procedure known as "Désastre". This is not thought to be a satisfactory procedure in the present circumstances. It would bring to an end certain contracts which need to remain in place, or be assigned or novated. Furthermore, if it is entered into, the appointment of the Viscount to supervise the procedure (which is what would happen in Jersey) would lead to problems. If he sought recognition in England that would give rise to conflicts between Jersey law, which bests all the company's property in him, and English law, which does not. No moratorium would be available in Désastre. All in all, that procedure is sufficiently unattractive that no one proposes it, and apparently there is no intention to bring it about.
4. An English administration, however, is thought to be highly desirable. I do not need to set out the consequences of an administration order; suffice it to say that it would achieve the objectives of the sole director and of the bank. The bank wishes to have the properties sold so that it can recover whatever meagre sums can be made available to it under its security. A form of sale has been negotiated, and if adopted by the proposed administrators it might yield £15,000 to the bank. That, it is said, is better than nothing. In any event, the bank and the company consider that, if achievable, an English administration is the way forward.
5. Because the company's centre of main interests is not England, an application for the appointment of administrators cannot be made by what might be thought to be the conventional route. Instead, the parties have sought to approach the matter through section 426. They have applied for, and obtained, a letter of request from the Royal Court of Jersey. The letter records that an application was made by the bank and that the Royal Court is a court exercising insolvency jurisdiction in Jersey. Certain background matters relating to the company are then set out and the letter records that the evidence has demonstrated to the satisfaction of the Court:

"that it is just and convenient and in the interests of creditors of the Company that this request should be issued and that an administration order should be made in England in relation to the Company."

Then the letter goes on:

"(6) This Court hereby requests that the English High Court, pursuant to the provisions of section 426 of the IA 1986 or otherwise, assist and act in aid of and be auxiliary to this court by: [appointing administrators and performing certain other ancillary acts]."

6. Armed with all this, Mr Stephen Robins, who appeared for the bank, seeks his administration order. He points out all the parts of the evidence which demonstrate how desirable an administration order would be, and also points out certain strong connections between the company and England. He then relies on the letter of request and section 426(4) and invites me to make an order appointing administrators. It is proposed that the administrators, provided that they agree with the potential sale which has already been lined up, will enter into that sale agreement and thereafter conduct all such activities as it may be appropriate for them, as administrators, to conduct.
7. Were it not for one point, I would accept that this case would be an appropriate one for the appointment of administrators. However, that one point is a jurisdictional one which cannot be ducked. As indicated at the beginning of this judgment, it turns on the meaning and effect of the word "assist" in the statute.
8. Sections 426(4)(5) provide for cooperation between courts exercising insolvency jurisdiction. It reads:

"426(4) [Assistance between courts] The court having jurisdiction in relation to insolvency law in any part of the United Kingdom shall assist the courts having the corresponding jurisdiction in any other part of the United Kingdom or any relevant country or territory.

[Request under s.426(4)] For the purposes of subsection (4) a request made to a court in any part of the United Kingdom by a court in any other part of the United Kingdom or in a relevant country or territory is authority for the court to which the request is made to apply, in relation to any matters specified in the request, the insolvency law which is applicable by either court in relation to comparable matters falling within its jurisdiction.

In exercising its discretion under this subsection, a court shall have regard in particular to the rules of private international law."

9. Section 426(4) presupposes a request and then contains 3 elements: a UK court exercising insolvency jurisdiction, a foreign court exercising a similar jurisdiction and assistance of the latter by the former ("shall assist"). It is therefore anticipated that there will be a request for assistance from the latter courts to the former court. If there is such a request, then the English court can (and in the vast majority of cases will) render appropriate assistance.
10. The problem in the present case lies in the fact that it is not possible to see how the Royal Court is "assisted" for these purposes. The English court is not empowered to act merely because a foreign court invites it to do so. The foreign court has to be an insolvency court (which I accept the Jersey court is) and the English court has to be invited to "assist" that court. In my view that requires that the foreign court be assisted in its functions as an insolvency court. That in turn presupposes that the foreign court is doing something, or perhaps planning to do something, which the English court can, and is invited to, assist. That is what the plain words seem to me to mean.
11. The section is part of what has been described as "modified universalism":

"The primary rule of private international law which seems to me applicable to this case is the principle of (modified) universalism, which has been the golden thread running through English cross-border insolvency law since the 18^th century. That principle requires that English courts should, so far as is consistent with justice and UK public policy, co-operate with the courts in the country of the principal liquidation to ensure that all the company's assets are distributed to its creditors under a single system of distribution." (per Lord Hoffman in In re HIH Casualty and General Insurance Ltd [2008] UKHL 21, [2008] 1 WLR 852 at para 30).

"Consequently, there are four main methods under English law for assisting insolvency proceedings in other jurisdictions, two of which are part of regionally or internationally agreed schemes. First, section 426 of the Insolvency Act 1986 provides a statutory power to assist corporate as well as personal insolvency proceedings in countries specified in the Act or designated for that purpose by the Secretary of State." (per Lord Collins in Rubin v Eurofinance SA [2013] 1 AC 236 para 25.)

12. Thus its natural habitat is one in which assistance is to be provided in the context of some form of insolvency procedure in the requesting state. Indeed, if one looks at the commentaries on the statute and in textbooks the cases referred to all seem to be cases of that sort. That makes sense. The foreign insolvency court is doing something within its jurisidiction, and, in that context, seeks the assistance of the English courts.
13. The present case is different. There is no Jersey insolvency proceeding currently on foot, and no intention on the part of anyone (apparently) to start one. The Jersey court does not express the assistance to be in support of current or intended proceedings. Its request for assistance is in general terms. Indeed, the whole request (at least so far as the applicants for the letter and for the administration order are concerned) is premised on the undesirable nature of Jersey proceedings, and of the need to avoid those proceedings. The English court is not, on analysis, being asked to assist the Jersey court in any endeavour. It is being asked to provide insolvency proceedings in lieu of any Jersey insolvency proceedings. There is no relevant assistance at all. It is being asked to provide (if an alternative word is required) a substitute, not an assistance.
14. It therefore seems to me that while the letter of request seeks assistance, it does not seek assistance which the English statute empowers an English court to give; or rather, it is not assistance which crosses the threshold of the requirements of the Act. The Jersey letter of request is, of course, entitled to full respect, and if the assistance sought were assistance in the what I consider to be the relevant sense then an English court would be strongly inclined to provide it. But there has to be assistance in a sense relevant to the statute. The Jersey court is not to be assisted in the exercise of its insolvency jurisdiction (or indeed any jurisdiction). The request does not fall within the statute.
15. During the course of the debate in court I asked Mr Robins if there was authority on this point, and in particular if there were examples of cases in which such "assistance" had been provided by the English courts to a foreign court which was not conducting any insolvency activity which was, as a matter of fact, being assisted. Mr Robins' researches revealed 5 Jersey cases in which the present circumstances are said by him to have been apparently repeated, that is to say there was a request from the Jersey court for the appointment of administrators with no apparent intention to have any insolvency proceedings in Jersey, and where administrators were nonetheless appointed. The cases are:

Re OT Computers Ltd – Royal Court 31^st October 2002. The fact that an administration order was made is apparent from a later reported case about its assets – [2003] EWHC 1010.

First Orion Amber Ltd [2009] JRC 126; administration gazetted 1^st July 2009.

Re St John Street Limited [2010] JRC 087; administration gazetted 20^th May 2010.

REO Powerstation Ltd [2011] JRC 232A; administration gazetted 19^th December 2011

Re Control Centre General Partner Ltd [2012] JRC 080; administration gazetted 16^th April 2012.

16. The cases are gathered and considered in an online article entitled "Section 426 of the Insolvency Act 1986: Extending Rescue to Foreign Debtors on a 'Passporting Basis'" by Paul J Omar

(http://www.iiiglobal.org/component/jdownloads/viewcategory/647.html), but the author does not consider the point which has arisen in this case.

17. Those cases demonstrate that the Royal Court has given anxious consideration to its own jurisdiction to make a request, and has determined that it can do so. They also demonstrate a heavy emphasis on the interests of the creditors, and how they would be well served by an administration. It does not appear in any of those cases that Jersey proceedings were contemplated, though there was no articulation of that fact. The cases tend to concentrate on the merits of an English-style administration and they do not refer to the disadvantages of a Jersey Désastre or indicate clearly that no-one is going to invoke that procedure. The Jersey court had usually received an opinion from an English silk to the effect that it was open to the English court to make the order sought, but those Opinions were not available to me. In none of the English cases is a reasoned decision recorded. The only thing that is known about the hearing at which the order was made is its date and (in most but not all cases) the judge making it.
18. Accordingly those cases do not give me any real assistance in deciding the point which I consider I have to decide. I do, of course, afford full respect to the fact that the Royal Court has requested assistance, but I have to apply the English statute. I also give proper weight to the fact that 4 or 5 judges of this Division have, apparently, acted by making an order in similar circumstances, but it is not apparent that the point was drawn to their attention. None of the reports in those cases actually articulates clearly that there was no intention to have Jersey proceedings, so it may well be that that particular factual point was not known to any of the previous English judges, and they may have assumed that the English administration was to assist some form of primary proceedings in Jersey. In any event, now that the point has arisen starkly in the present case, and since it is in essence a jurisdictional point, I cannot ignore it. I consider that on the wording of the section, and against the insolvency context in which I consider the section was intended to operate, this court cannot "assist" another court which is not actually doing anything, or apparently intending to do anything, in its insolvency jurisdiction. The jurisdictional threshold is not crossed. Without some form of existing or future intended activity by the foreign insolvency court, I do not see how that court is "assisted". Creditors might be; a foreign commercial community might be helped by an English court doing what its own courts cannot do. But that is not enough. It is the foreign insolvency court, in its insolvency jurisdiction, which has to be assisted. The section does not exist to fill in gaps in another jurisdiction's insolvency processes without more. It exists to improve co-operation between actual processes. In the present case, for the reasons given, the Jersey court is not assisted in a relevant way.
19. I therefore refuse the application.