ROYAL COURT
(Samedi Division)
24 May 1999
Before: FC Hamon Esq Deputy Bailiff and
Jurats Rumfitt and Le Breton
Representation of Pall Mall Capital Holdings Limited
Application by the Representor, under Article 6 of the Bankruptcy (Désastre) (Jersey) Law, 1990 for an Order that it be declared en désastre.
Advocate PS Landick for the Representor;
Advocate FJ Benest for the Viscount;
Advocate JP Speck for Worrell Enterprises, Inc, a Creditor;
Advocate JD Kelleher for Mr Heeschen, interested through trusts.
JUDGMENT
THE DEPUTY BAILIFF: This is an application for a declaration en désastre by a company known as Pall Mall Capital Holdings Limited. The application is not supported by the Viscount. We have three affidavits, one sworn by two directors of the company, Eric John Biscoe and Heather Susan Falle on 11th March, 1999; the second sworn by Heather Susan Falle on 20th May, 1999; and the third as yet unsworn by Heather Susan Falle but in its agreed final form and to be sworn when Mrs. Falle returns to Jersey from England where she is apparently on business.
Accompanying the affidavits is the representation and a statement under Article 3 of the Bankruptcy (Désastre) (Jersey) Law, 1990. That statement - which is undated - shows an estimated liability to creditors of £5,620,658 and an estimated value of assets of £83,592 consisting only of movable property. That movable property represents the shares in Pall Mall Capital Limited.
A letter received from Andreas Heeschen effectively puts an end to the anticipation that Pall Mall Capital Limited now has any value. That letter is dated 20th May, 1999, and it reads:
"With reference to today’s telephone conversation I have reviewed the year end data of Pall Mall Capital Limited and have made the following amendments to the current figures as far as I am aware. Please find the schedule enclosed.
With reference to your request to subordinate any receivables payable from Pall Mall Capital (Jersey) Limited to myself and to Pall Mall Capital Limited, I confirm for myself and on behalf of Pall Mall Capital Limited the sums of £55,153.22 and DM92,054.79 payable to myself and invoice numbers 219, 234, 235, 260 and 276 totalling £42,097.39 payable to Pall Mall Capital Limited, that these sums are subordinated to all other party indebtedness and they should rank behind all other creditor claims in the event of the company being wound up. I understand that the only creditor of the company other than Pall Mall Capital Limited and myself are ANZ Grindlays Trust Corporation and Xenuro Company or related interests.
Yours faithfully,
(Signed): Andreas Heeschen
(Signed): Andreas Heeschen
on behalf of Pall Mall Capital Limited."
Mr. Heeschen is the investment adviser to the company.
Mrs. Falle in her third affidavit says that "The letter suggests that the realisable assets stated in the debtor’s désastre statement as movable property potentially worth £83,592 now have no value because of the insolvency of Pall Mall Capital Limited."
The accounts have been revised but when we look at them we see that they are internal accounts, unsigned, and not approved by the Board.
In the second affidavit of Mrs. Falle she states:
"The debtor’s external accountants from whom I have requested certified accounts or indeed draft accounts have refused to provide those accounts at this time as they are unable to verify the assets of the debtor sufficiently for accounts to be certified or produced in draft from. Therefore, the revised accounts cannot be held to be reliable other than that they do reflect, as far as the debtor can ascertain to its best knowledge and belief, the current status of the debtor."
But the note to those accounts at 2(c) reads:
"On a forced sale basis it is the opinion of the Directors that Pall Mall Capital (Jersey) Limited has no value and it has therefore been written off."
That is particularly surprising when Mrs. Falle in her third (as yet unsigned) affidavit intends to say: "However, I am also now informed that Pall Mall Capital (Jersey) Limited, again a wholly owned subsidiary of the debtor, has cash at the bank of DM10,228, DM7,972.45 is held at Grindlays Private Banking, Account Number: 1293206-12 in the name of Pall Mall Capital (Jersey) Limited and DM2,255.71 held by Sal Oppenheim JR & Cie in Germany in the name of Pall Mall Capital (Jersey) Limited, Account Number: 66023. At today’s exchange rate of DM2.971 to the pound sterling, those balances are equivalent to £2,683.42 and £759.24 respectively, totalling£3,442.66. Therefore, there still remain realisable assets for the debtor." We must, of course, point out that Mrs. Falle appears also to be a director of Pall Mall Capital (Jersey) Limited.
The waters are further muddied by a letter handed to us in Court this morning. It is dated 21st May and is sent to the representor from Sal Oppenheim jr & Cie. By way of background in a circular to the creditors and shareholders of the company sent somewhere around 20th March, 1999, the company said this:
"On 11th March, 1999, the Board received a letter from Mr. Andreas Heeschen which proposed a re-structuring of the Company’s affairs under which the shares held by the company in Luhns GmbH ("Luhns") would be assigned to a third party corporate assignee in consideration of a release and discharge by Sal Oppenheim jr & Cie, (Sal Oppenheim) of the company’s debt owed to Sal Oppenheim. A copy of this letter is enclosed. Although it is firmly believed that there is no net equity in the Luhns’ shares nonetheless the Board takes the view that Sal Oppenheim should make a payment to the Company in further consideration of any such assignment of the shares."
The letter seems to show that Mr. Heeschen has obtained some form of prior security but it is not to us completely clear. What is clear is that one of the creditors pointed out, when the suggestion was mooted in March, that there was a concern that the proposal to assign the Luhns shares to Oppenheim could be regarded as a preference in the absence of a proper evaluation of that company’s value.
A potential liquidator had been approached at some time and the creditors were informed at the Extraordinary General Meeting of 8th March that he would not be prepared to put pen to paper without receiving an advance of £40,000 together with the undertaking to meet the fees of a legal adviser to be appointed as his joint liquidator. In fact all the potential liquidators apparently requested security for their costs from the creditors of the debtor when they were approached.
The circular letter to which we have referred which was sent to creditors also said this:
"The Viscount has indicated to the Board that he would oppose any application for a declaration of désastre unless it could be shown that the Company has realisable assets. He has however indicated that if he was placed in funds in the approximate sum of £10,000 it would be possible for him to open the désastre proceedings; complete the formal steps required by statute (notification of the Creditors, notices in the Gazette and so on) and make some limited enquiries into the value of the Company’s assets whereupon he would ask the Royal Court to terminate the désastre proceedings in the event that his enquiries led him to believe that the Company in fact had no realisable assets."
We must also note in passing that the shareholders formally voted against a creditors winding up.
It is clear that the debtor has no realisable assets. We say this in the light of the confusing situation apparent in the ever-changing material placed before us on affidavit. Mr. Landick cautioned us by saying that Jersey is a very high profile finance centre and the directors are all employees of a reputable bank. All that goes without saying and we do not demur from what Mr. Landick said. What the representor is asking us is not for a déclaration en désastre that will resolve anything which could be for the financial benefit of any creditor. It is asking for the Viscount - at public expense - to go through preliminary motions which will always remain in Jersey but which will eventually and effectively extricate the directors of the company from a profound difficulty.
We have every sympathy with those directors but we decline to make the order. We have a discretion but in our view the requirements of the law and the rules have not been fulfilled to our satisfaction.
No Authorities.