Jersey Unreported Judgments

2002/29

ROYAL COURT

(Samedi Division)

31^st January 2002 

In re O.T. Computers Limited.

Representation of O.T. Computers Limited applying for an Order that the Court

 issue a Letter of Request to the High Court of England,

requesting the assistance of the High Court

for an Administration Order, under the Insolvency Act 1986.

Advocate A.J.N. Dessain for the Representor.

judgment

the bailiff:

1.        This is a representation by OT Computers Limited to which we shall refer as "the Company" seeking an order that the Court issue a Letter of Request addressed to the High Court of England and Wales.  The Company is insolvent both on the application of the balance sheet test and on a cash flow basis.  The Company could, therefore apply either to have its property declared en désastre pursuant to the Bankruptcy (Désastre) (Jersey) Law, 1990 or for a winding up pursuant to the Companies (Jersey) Law, 1991.  The Company seeks neither of those remedies.  For reasons that will appear it seeks a Letter of Request which will lay the foundation for an administration order in England pursuant to section 426 of the Insolvency Act 1986.  Under English Law on existing authority it is only at the request of the Royal Court of Jersey that the English High Court will have jurisdiction to consider the making of an administration order in relation to a Jersey company.

2.        The administration order is not a concept familiar in this jurisdiction.  It has been summarised judicially by Nicholls LJ in Re Atlantic Computer Systems plc [1992] Ch 505 at 528 in the following terms:

"...an administration is intended to be only an interim and temporary regime.  There is to be a breathing space while the company, under new management in the person of the administrator, seeks to achieve one or more of the purposes set out in section 8(3).  There is a moratorium on the enforcement of debts and rights, proprietary and otherwise, against the company, so as to give the administrator time to formulate proposals and lay them before the creditors, and then implement any proposals approved by the creditors.  In some cases winding up will follow, in others it will not."

3.        The relevant purpose here is that a more advantageous realisation of the Company's assets will be achieved through an administration order than would be effected on a winding up.

4.        The first question for us is whether the Court has the jurisdiction to make such a request of the English Court.  There is no statutory authority for such a jurisdiction, but the Court invoked an inherent jurisdiction, in seeking the assistance of the English Court in a case which was subsequently reported in England as In re a Debtor (1981) 1 Ch. 384.  That was a case where the property of the debtor had been declared en désastre in Jersey, but, in our judgment, nothing turns on that.  Provided that we are satisfied that it is in the interests of the creditors to issue this Letter of Request, notwithstanding the absence of any insolvency proceedings in Jersey, we have, in our judgment, an inherent jurisdiction to seek the assistance of the English Court. 

5.        Mr. Dessain, who appeared for the Company, informs us that the principal business of the Company is the manufacture of computer hardware and the retail sale of that hardware through approximately 160 high street shops.  The Company is expected to lose its banking facilities in 2 days' time. 

6.        Material parts of the business are, however, of interest to one particular, prospective purchaser - a competitor called Time Group Ltd.  A sale has not been achievable thus far, within the time constraints that have applied.  Nevertheless, counsel tells us that a sale is believed to be achievable if the Company is placed in administration in England, pursuant to the Insolvency Act 1986.  Indeed, Time Group Ltd has stated that it will purchase the business only through the medium of an independent insolvency practitioner.  In such circumstances a much better price could be obtained than would be possible if the Company were to go into liquidation, or its property to be declared en désastre.  In such circumstances the assets of the Company would be broken up and sold to the great disadvantage of the creditors.  Another important factor is that on a sale to Time Group Ltd the employment of the Company's 950 employees is likely to be maintained. 

7.        We have received an opinion of English leading counsel asserting: (1) that the English Court would receive a Letter of Request in the form drafted; (2) that receipt of the Letter of Request would enable the English Court to consider whether to make an administration order; and (3) that on the material available to leading counsel, the English Court would be likely to consider this to be an appropriate case for the making of an administration order. 

8.        The report of Messrs. Grant Thornton (Chartered Accountants), which has been laid before us, concludes as follows: 

We have evaluated the offer from Time and consider that it represents a realistic valuation of the assets being acquired and, in forming this view, have had regard to the separate advice from our agents, Wetheralls, in relation to the following assets, leasehold premises, leasehold improvements, fixtures and fittings, computer equipment, stocks, work in progress and finished goods.  In conclusion, therefore, we consider that the offer from Time represents the best return for creditors that can be obtained in the present circumstances and that the offer represents a significant premium above break up  values. 

9.        We are satisfied that it is in the interests of creditors to request that the Company be placed in administration by the English Court, pursuant to the Insolvency Act 1986.  We, accordingly, grant paragraphs A to D and F of the prayer of the representation.  The Letter of Request will issue in the terms approved by the Court. 

10.      It remains only to add that we have sat in camera in order to prevent the ends of justice being defeated by premature publication of the issuance of this Letter of Request.  This judgment will be released after the conclusion of the application to the High Court of England and Wales, when the order that these proceedings should be in camera will cease to have effect.      

Authorities

Re Atlantic Computer Systems plc [1992] Ch.505.

In re a Debtor (1981) 1 Ch. 384.