[2007]JRC107
royal court
(Samedi Division)
1st June 2007
Before: |
M. C. St J. Birt, Esq., Deputy Bailiff with Jurats Bullen and Morgan |
In the matter of Montrow International Limited and Likouala SA
Between |
William Tacon |
Representor |
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|
|
And |
1. Nautilus Trust Company Limited |
Respondents |
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2. John Grimshaw |
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3. Montrow International Limited |
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Advocate M. H. Thompson for the Representor.
Advocate J. P. Michel for the First and Second Respondents.
Advocate A. D. Robinson for the Third Respondent.
judgment
DEPUTY bailiff:
1. This is an application by all three respondents to stay most of an order made by the Court on 14th March 2007 whereby it recognised the appointment by the High Court of the British Virgin Islands ("BVI") of the representor as provisional liquidator of Montrow International Limited and Likouala SA and authorised him to exercise in Jersey various powers as provisional liquidator of those companies.
The background
2. Kensington International Limited ("Kensington") is an investment fund incorporated in the Cayman Islands. It has acquired at a discount the benefit of various sums owed by the Republic of Congo ("Congo"). In particular it has the benefit of four judgments in the English High Court for sums totalling in excess of US $ 93 million, upon which interest continues to accrue.
3. As appears from an affidavit sworn by Mr Donald Schwarzkopf on behalf of Kensington and produced to the High Court in the BVI in connection with the present matter, Congo has a history of avoiding its liabilities and seeking to render its assets 'judgment proof'. It has been the subject of strong criticism in a number of judgments in the English commercial court and elsewhere. To give but one example, Mr Justice Cooke in a judgment delivered in 2005 in the case of Kensington v Republic of Congo [2005] EWHC 2684 (Comm), made the following findings:-
(i) Congo had engaged in a complex scheme, controlled by a Mr Gokana on its behalf, to sell its oil with the deliberate object of evading enforcement of its existing liabilities by hiding its assets from view;
(ii) Mr Gokana and others involved on behalf of Congo in creating and masterminding the scheme had acted dishonestly, creating and using sham companies and transactions which were mere "facades" to avoid enforcement of its existing liabilities;
(iii) Witnesses on Congo's behalf (including Mr Gokana) had lied under oath and given other false and misleading testimony in order to conceal the truth concerning the sham companies and the judgment-proofing scheme.
(iv) The sham companies controlled by Mr Gokana on behalf of Congo had been guilty of wholesale and deliberate failures to make proper disclosure;
(v) Mr Gokana and others had deliberately and dishonestly fabricated evidence; and
(vi) Mr. Gokana and others had deliberately attempted to circumvent and undermine orders of the Commercial Court.
4. Until 2003 Total Oil ("Total"), through its subsidiary in Congo, held 65% of a concession (issued in 1978 for fifty years) in a producing oilfield in Congo known as Likouala. As part of an overall settlement between Congo and Total, Total relinquished its interest in the Likouala oilfield to Congo in 2003 for the price of one franc.
5. It would appear that Congo then sold this interest in the Likouala oilfield to a newly established company incorporated in Congo called Likouala SA. The exact nature of the interest which was sold to Likouala SA and the price which was paid for it is not known for certain although various figures have been suggested. It would however seem clear that the purchase was funded by a loan from Banque National de Paris (BNP) to Likouala SA in the region of $70 million, which was no doubt secured on the oil assets of Likouala SA.
6. Likouala SA is wholly owned by Montrow International Limited ("Montrow"), a company incorporated in the BVI in 2003. Montrow's sole asset is its shareholding in Likouala SA. Montrow is in turn owned by a Jersey charitable trust of which Nautilus Trust Company Limited ("Nautilus") is trustee. Nautilus is a Jersey trust company and four employees of Nautilus serve as directors of Montrow including Mr Grimshaw, the second respondent.
7. Kensington asserts that the Likouala SA/Montrow structure is a sham and is yet another example of Congo seeking to distance itself from its oil producing assets so as to make it difficult for Kensington (and other creditors) to enforce their claims. It points out that the prime mover on the Congo side in relation to the Likouala/Montrow structure referred to above was Mr Gokana, who had been the subject of such criticism in the Commercial Court and who had been found to be central to Congo's attempts to hide its assets by the means of sham companies.
The BVI and Jersey proceedings
8. On 7th March 2007, by originating application, Kensington applied to the High Court in the BVI ("BVI Court") for an order that Montrow and Likouala SA be placed in liquidation on the grounds that it was just and equitable to do so. Mr Tacon (who is an insolvency practitioner in the BVI) was suggested as the liquidator. The grounds for the application were essentially that the Likouala/Montrow structure was a sham and that the underlying economic interest in the oil field ultimately owned by the structure was in truth an asset of Congo and was therefore available for its creditors such as Kensington.
9. At the same time, Kensington applied for the appointment of Mr Tacon as provisional liquidator of the two companies pursuant to sections 170(1) and 170(4)(b)(i) of the Insolvency Act 2003 of the BVI. On 9th March, following an ex-parte hearing, the BVI Court (Hariprashad-Charles J) granted that application. Accordingly Mr Tacon became the duly appointed provisional liquidator of the two companies with the powers set out in paragraph 2 of the orders of 9th March. Furthermore a gagging order was imposed until 12th March.
10. On 13th March, following an ex-parte application, this Court made an order recognising Mr Tacon's appointment as provisional liquidator by the BVI Court and granting certain injunctive relief. On 14th March, following receipt of a Letter of Request from the BVI court, this court made further orders as follows:-
"2 That William Richard Tacon as provisional liquidator be permitted within the jurisdiction of Jersey to take the following steps:
(a) to ascertain the assets of Montrow and/or Likouala;
(b) to locate, protect, secure and take possession of all books, records, papers, statements and other documents of Montrow and/or Likouala including accounting and statutory records, wherever located within Jersey and in whatever form and to exercise such powers as may be necessary for the purpose of acquiring, retaining possession or making copies thereof;
(c) to take over and manage the affairs of Montrow and/or Likouala and to carry on the business of Montrow and/or Likouala to the extent necessary to preserve the assets of Montrow and/or Likouala and to protect the interests of their investors;
(d) to appoint over such period as Mr Tacon consider necessary any person including a manager, administrator, custodian or other functionary whose services may be required for the proper conduct of the affairs of Montrow and/or Likouala;
(e) to pay out the assets of Montrow and/or Likouala or [sic] reasonable expenses or disbursements incurred in the management and administration of Montrow and/or Likouala as the case may be and the execution of the powers and duties of the provisional liquidator;
(f) to bring or defend any actions to the [sic] proceeding whether civil or criminal on behalf of Montrow and/or Likouala and to give such instructions in connection therewith and take such action as may be necessary;
(g) to examine by interview any director or officer of Montrow and/or Likouala in particular Mr Grimshaw and/or any other employee of Nautilus who is reasonably believed to have in his or her possession any property of Montrow and/or Likouala or any information concerning the promotion, business dealings or affairs of Montrow and/or Likouala.
3. That service of this representation upon Mr Grimshaw and Nautilus shall operate as an immediate interim order:-
a. ...........................
(b). ordering them forthwith to produce any and all books, papers or other records in their possession or under their control in whatever capacity which contain information about or in any way relating to Montrow and/or Likouala and the assets of Montrow and/or Likouala including, but not limited to the identity of their client of record and of the beneficial owner(s) of Montrow and/or Likouala;
(c). ordering them to co-operate fully with Mr Tacon or in the exercise of any powers vested in him pursuant to paragraph (2) above, in particular to answer any questions about the location of any assets or books, papers or other records of Montrow and/or Likouala.
4. That, if requested by Mr Tacon following consideration of any material provided pursuant to the exercise of the powers referred to at paragraph (2) above, an order be granted requiring the examination of such directors, officers, employees, servants, agents, nominees of Montrow and/or Likouala and/or other persons subject to the jurisdiction of the Jersey Court who can be shown to the satisfaction of the Jersey Court to be likely to have dealt with the affairs and/or business of Montrow and/or Likouala in a way that is or might be relevant to the conduct of the provisional liquidation of Montrow and/or Likouala. Such examination shall relate to the business, dealings, property and affairs of Montrow and/or Likouala before the Viscount or the Judicial Greffe at such place in Jersey and on such day(s) and at such time(s) as shall be fixed by them and generally in accordance with such directions as they may from time to time specify.
5. That Mr Tacon be permitted to use, for the purposes of fulfilling the statutory and other functions and duties relating to the provisional liquidation and pursuing such causes of action as he may consider appropriate in accordance with the powers granted to him by this Court, any books, papers and other records (as defined in paragraph (3) above) or evidence provided by way of examination of any person in accordance with an order made by the Jersey Court by reason of this Letter of Request."
Save only for some typing errors, the terms of the order made by this Court mirrors exactly the terms of the Letter of Request from the BVI Court and paragraph 2(a)-(g) replicates exactly the powers conferred upon Mr Tacon as provisional liquidator by the order of the BVI Court made on 9th March.
11. The order of this Court was served on Nautilus which, following consultation with a firm of advocates (although not its normal firm as Advocate Michel was on leave) complied with the order and handed over its files to Mr Tacon on 16th March.
12. Drawing on information contained in those files Mr Tacon prepared a report to the BVI Court on 10th April summarising what he had established so far. On 13th April the BVI Court refused an application by Montrow for a stay of the provisional liquidation and directed that it should continue. The judge delivered her reasons for this decision on 9th May and paragraph 23 of that judgment contains a useful summary of the BVI Court's understanding of the allegations following receipt of the report:-
"23 Learned Queen's Counsel submitted that the focus of the structure is the LSA oilfield in the Congo ("the Oilfield"). It appears that MIL[ Montrow] and LSA [Likouala SA] were created to enable the Congo covertly to receive an oil-backed loan from BNP Paribas ("BNP") in breach of undertakings given by it by the IMF. To achieve this end, the Congo purported to sell the Oilfield to LSA, the purchase price being funded by a US$72m BNP loan ("the Loan") to LSA. LSA is 100% owned by MIL, whose shares are held by a Jersey charitable trust. None of the profits generated by the Oilfield (the revenue is estimated at US$70m per annum) have ever been distributed to MIL (thus nothing has been received by the charitable trust, which seems to have introduced simply to obfuscate the position) and accordingly, those assets have either been retained by LSA or siphoned off elsewhere. Further, at the end of a 10 year period, Total, the operator of the Oilfield, is entitled to exercise a call option to purchase LSA's share capital ("the Shares") for a nominal Euro 1,500. The value of the Oilfield is estimated to be in excess of US$160m. Total not only makes no reference in their accounts to having any interest in the Oilfield but has expressly denied having any such interest. For this to be true, the option must in truth have no value i.e. it must follow that Total must in turn be obligated to transfer the Shares for a similarly nominal consideration (although no document to this effect has yet been produced). As the Congo has stated that only it and Total have any interest in the Oilfield, it follows that the recipient is the Congo. Therefore, the object of the structure appears to have been principally to conceal, through the facades of LSA and MIL, the oil-backed loan by BNP to the Congo, with the Congo in reality owning the Oilfield throughout."
13. Following submissions as to the use which Mr Tacon had made of the documents obtained in Jersey, the BVI Court did however make an order concerning the use to which Mr Tacon could put information he obtained as provisional liquidator in the following terms:-
"Unless the Court gives permission to do otherwise;
(a) The Provisional Liquidator shall be entitled to use documents or information obtained by him during the course of the proceedings only for the purposes of furthering the provisional liquidation or any liquidation subsequently ordered on this petition (which purposes shall include (a) taking proceedings on behalf of Montrow whether to obtain information or enforce its rights and (b) the performance of other duties or responsibilities).
(b) No other person (including [Kensington]) to whom any such documents or information might be given shall use such documents or information which has not entered the public domain otherwise than for these proceedings or assisting in the furtherance of the provisional liquidation or any liquidation which follows".
14. Subsequently Montrow applied for a stay of the provisional liquidation pending appeal. At the date of the hearing before this Court, the decision of the BVI Court in relation to that application had not been given. However the Court has since been informed that the BVI Court has refused such a stay. The Court has been informed by Mr Thompson that the application for the liquidation of Montrow and Likouala SA will now be heard on 3rd July and that, at the same time, the BVI Court will also consider whether the provisional liquidation should be discharged.
The BVI statutory provisions
15. As all the documents in Jersey have already been disclosed to Mr Tacon, the only outstanding matter is the possible exercise of the power conferred by para 2(g) of the Order, namely that Mr Tacon be entitled to examine a director of Montrow; in particular Mr Tacon wishes to examine Mr Grimshaw under that provision.
16. In view of the arguments submitted to us, we need to refer briefly to certain provisions of the relevant BVI legislation, namely the Insolvency Act 2003. Under Section 162(1)(b), the BVI Court may appoint a liquidator of a company, inter alia, on the grounds that it is just and equitable to do so. That was the basis of the application brought by Kensington.
17. Under s170(1), where an application for the appointment of a liquidator has been filed but not yet determined, the BVI Court may appoint an eligible insolvency practitioner as provisional liquidator of the company on one of the grounds set out in subsection (4), which provides:-
"(4) The Court may appoint a provisional liquidator under subsection (1) if:
(a) The company, in respect of which the application to appoint a liquidator has been made, consents; or
(b) The Court is satisfied that the appointment of a provisional liquidator:-
(i) is necessary for the purpose of maintaining the value of assets owned or managed by the company, or
(ii) is in the public interest"
18. S171 deals with the rights and powers of a provisional liquidator and provides as follows:-
"(1) Subject to subsection (2), a provisional liquidator has the rights and powers of a liquidator to the extent necessary to maintain the value of the assets owned or managed by the company or to carry out the functions for which he was appointed.
(2) The Court may limit the powers of a provisional liquidator in such manner and at such times as it considers fit."
19. In this case, the application by Kensington for the appointment of a provisional liquidator referred specifically to Section 170(4)(b)(i) and the BVI Court must be taken to have appointed Mr Tacon on that ground. The correct construction of a BVI statute is of course ultimately a matter for the BVI Court but, for the purposes of this hearing, we need to reach a view as to the meaning of the statute in the light of the differing submissions made to us by Mr Robinson and Mr Thompson. Mr Thompson submitted that the provisional liquidator could exercise his powers for either of the two purposes mentioned in s171(1). Mr Robinson, on the other hand, argued that the reference to "or to carry out the functions for which he was appointed" is a reference back to section 170(4)(b)(ii). Where, as here, the provisional liquidator had only been appointed for the purposes of maintaining the value of assets owned or managed by the company, he could only exercise the powers and rights of liquidator to the extent necessary for that purpose.
20. We prefer Mr Robinson's argument. Give that Mr. Tacon was appointed only under s170(4)(b)(i), we think the natural construction of these provisions is that he has the powers of a liquidator to the extent necessary to maintain the value of the assets owned or managed by the company. It follows that he may only exercise the wide powers conferred on him for that purpose.
21. One of the powers conferred upon a provisional liquidator (as well as a liquidator or administrator) is that conferred by s282(1) which reads as follows:-
"(1) subject to subsection (2), an office holder may, by notice in writing, require a person specified in subsection (2):-
(a) to provide him with such information concerning the company, including the promotion, formation, business, dealings, accounts, assets, liabilities or affairs as he reasonably requires;
(b) to attend on him at such reasonable time and at a such place as may be specified in the notice; or
(c) to be examined on oath or affirmation by him, or by his legal practitioner, on any matter referred to in paragraph (a)."
A director of the company is one of the persons listed in subsection (2) and accordingly he may be the subject of a requirement by a provisional liquidator to provide information in accordance with the section.
Preliminary Objections
22. In his skeleton argument Mr Robinson foreshadowed two preliminary arguments which related to the jurisdiction of this Court. He did not develop these to any material extent in oral argument but we think it nevertheless appropriate to deal briefly with them.
23. The first objection is that the power to interview a director (or other person) conferred by s282 is not exercisable in respect of an individual who is overseas (i.e. outside the BVI). Reliance is placed on Re Tucker [1990] 1 Ch148. It is of course a matter of BVI law as to whether this point is well made or not and that can only be resolved by the BVI Court. However, for the purposes of considering the matter which is before us, we intend to proceed on the basis that s282 is not limited in this way. We do so for the following reasons:-
(i) The Letter of Request from the BVI Court specifically asked that this Court should make an order under para 2(g), which reflects s282. The BVI Court must therefore have been of the view that there was power to interview an overseas director. We appreciate that the order was made ex-parte but nevertheless the fact remains that the request was issued and no application has apparently been brought before the BVI Court to revoke this part of the Letter of Request on the basis that it was beyond its power.
(ii) In any event there are powerful arguments against the construction contended for by Mr Robinson. A person who accepts appointment as a director of a BVI company takes on the duties of that office which BVI law prescribes. He is submitting himself to BVI law which governs his relationship with the company. One of the duties of a director of a BVI company is the duty imposed under s282. It would be very surprising if, merely because he was not resident in the BVI - as is the case with many directors of BVI companies - that duty was not applicable to him.
(iii) The reasoning in Re Seagull Limited [1993] 2 WLR 872 (which upheld the power under the relevant English statutory provisions to order public examination of a non-resident director of an English company and explained why such a person should be considered within the 'legislative grasp' of the statutory provision) is equally applicable, in our judgment, to a private examination of an individual under s282. The Court in Seagull distinguished the case of Tucker and we agree with its reasons for so doing.
24. The second preliminary objection was that this Court does not have power to order a director to provide information etc at the instance of a provisional liquidator of an overseas company because Jersey does not have the concept of a provisional liquidator. Reliance was placed upon a dictum of Lord Hoffmann in Cambridge Gas Transport Cooperation v the Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] 3 WLR 689 where he said at para 22
"What are the limits of the assistance which the court can give? In cases in which there is statutory authority for providing assistance, the statutes specifies what the court may do.................At common law, their Lordships think it doubtful whether assistance could take the form of applying provisions of the foreign insolvency law which form no part of the domestic system. But the domestic court must at least be able to provide assistance by doing whatever it could have done in the case of a domestic insolvency. The purpose of recognition is to enable the foreign office holder or the creditors to avoid having to start parallel insolvency proceedings and to give them the remedies to which they would have been entitled if the equivalent proceedings had taken place in the domestic forum."
25. However, that comment was made in the context of what powers the domestic court could exercise in aid of the foreign court. It was not concerned with the question of to whom such assistance could be given. In that respect Lord Hoffmann had at para 20 said the following:-
"Corporate insolvency is different in that, even in the case of movables, there is no question of recognising a vesting of the company's assets in some other person. They remain the assets of the company. But the underlying principle of universality is of equal application and this is given effect by recognising the person who is empowered under the foreign bankruptcy law to act on behalf of the insolvent company as entitled to do so in England."
26. The person entitled under BVI law to act on behalf of Montrow is Mr Tacon as provisional liquidator. The Court should therefore recognise him even though Jersey does not have the concept of a provisional liquidator. The same point would arise in respect of a duly appointed administrator of an English company. Jersey does not have the concept of placing a company in administration but, given that under English law, an administrator once appointed is the person empowered to act for the company, this Court would, in conformity with the remarks of Lord Hoffmann, recognise the administrator of an English company as being the person entitled to act on behalf of that company.
27. No one suggested in argument that the liquidator of a Jersey company does not have a comparable power to obtain information from a director as is envisaged by Para 2(g) of the order and accordingly we reject the argument that this Court is unable to make the order in question merely because Jersey does not have the concept of a provisional liquidator.
The Directors' Submission
28. Mr Robinson, on behalf of the directors of Montrow, argued that the Court should stay all of the order which it has made other than that part which simply recognises Mr Tacon's appointment and orders that the documents etc in Jersey should be preserved. He recognises that, given that Nautilus has in fact supplied all its documents already to Mr Tacon, the only effective matter outstanding is the suggestion that Mr Grimshaw should be interviewed pursuant to paragraph 2(g) of the order, although he pointed out that Mr Tacon had also instituted proceedings seeking information from Mourant du Feu and Jeune and that such proceedings would be affected by any decision to stay the order.
29. He developed his arguments with great persuasiveness (to which we cannot do justice) but we would summarise them as follows (although not necessarily in the order in which he made them).
30. First, he pointed out that the directors intended to apply to set aside the orders of this Court of 13th and 14th March on the grounds that Mr Tacon had failed to make full and frank disclosure as required for an ex parte hearing. He went into some detail on the points which he would make in this respect. We do not think it necessary to rehearse them at this stage. Suffice to say that, in general, they related to a suggestion that Mr Thompson had not sufficiently drawn the Court's attention to those arguments which could have been made against the granting of the ex parte relief which was sought.
31. Secondly, he pointed out that there will be a number of challenges to the various orders in the BVI and therefore there are grounds for thinking that Mr Tacon's appointment may be short lived. In the first place there will be a challenge to the application for a liquidation itself. The application was an unusual one. It was made on the just and equitable basis. Kensington was not a creditor of Montrow or Likouala SA and accordingly an application would only stand any chance of success if Kensington could show that the companies were shams and were merely 'alter egos' or otherwise an asset of Congo. In the second place, it was, he submitted, highly unusual for a provisional liquidator to be appointed on an application for a winding up on a just and equitable basis where the underlying factual grounds (i.e. that the companies were shams and in truth were assets of Congo) had not yet been established. There was therefore a good prospect of the appointment of a provisional liquidator being set aside. In the third place, application had been made to discharge Mr Tacon on the grounds that he had gone beyond the proper role of a provisional liquidator.
32. It was on this aspect that Mr Robinson focussed most of his attention. He pointed out that a provisional liquidator was only entitled to do what was necessary for the purpose of ".... maintaining the value of assets owned or managed by the company." What Mr Tacon had done went well beyond that. Kensington was in effect using him to obtain information as plaintiff in order to support its claim for a winding up on just and equitable grounds. This was an improper role for a provisional liquidator. Thus the questions which he had stated that he wished to ask Mr Grimshaw went well beyond those necessary to maintain the value of the company's assets. They were concerned with understanding the underlying nature of the structure and for whose benefit the structure had been established. They were aimed at helping Kensington make its case for a winding-up. Furthermore, submitted Mr Robinson, if one looked at Mr Tacon's report ("the Report") to the BVI court dated 10th April 2007, this was not concerned with preserving assets; it was far more concerned with establishing who was behind the structure. Thus in his conclusions at para 7.2 Mr Tacon said:-
"The information I have received to date has led me to the conclusion that a complex scheme has been created whereby ownership of the Likouala oilfield has passed in consideration for a lump sum payment but Congo has every expectation of regaining ownership through Total exercising its options and then returning ownership to the Congo. I understand that the International Monetary Fund has obtained assurances from Congo that such arrangements and the collateralisation of all revenues would stop. The published accounts of Total refers to it no longer having its previous 65% interest in the Likouala concession. Whilst that may be true, the evidence I have seen shows that Total has de facto and day to day control of the oilfield and indeed Likouala itself. That would be inconsistent with Congo's published statements and Total's published accounts."
33. In support of this submission, Mr Robinson referred to the fact that Mr Tacon admits passing information and documents which he has obtained to Kensington. Thus at para 1.8 of the Report he admits showing the documents to Mr Schwarzkopf (who is a consultant retained by the New York lawyers acting for Kensington). It is quite improper, says Mr Robinson, for a provisional liquidator to supply documents obtained under compulsion of law to a potential claimant and for the provisional liquidator to allow himself to be used to try and prove the claimant's case. The proper course for someone in Kensington's position is to seek Norwich Pharmacal relief in the ordinary way. It should not be allowed to use a provisional liquidator to obtain documents and information on its behalf. The fact that Mr Tacon is not primarily interested in maintaining the assets of Montrow is shown, says Mr Robinson, by the fact that he has at no stage sought to have his appointment as provisional liquidator recognised in Congo and he has not sought in any other way to secure the income stream of Likouala SA.
34. Thirdly, in deciding whether to stay the order, the Court should have regard to the balance of prejudice which would be caused to each side. If the appointment of the provisional liquidator is in due course revoked, immense prejudice would have been caused to Montrow. Information, once released, could never be recovered. Kensington would have obtained confidential information about the affairs of Montrow and Likouala SA to which it was not entitled. Conversely, the prejudice to Mr Tacon caused by a stay would be minimal. He already had the documents and accordingly the only information of which he would be deprived by reason of a stay would be that which he might obtain from an interview of Mr Grimshaw. This was unlikely to add much. Furthermore, there was no real urgency. The judgments of which Kensington had the benefit were given a number of years ago and the transactions concerning the Likouala oilfield had been in the public domain for some time. The income stream from the oilfield was no doubt secured in favour of BNP, with the result that it could not be diverted. There was therefore no risk of Montrow's assets being depleted in the interim period. The hearing of the application to place Montrow in liquidation and Montrow's application for the removal of the provisional liquidator had been fixed by the BVI Court for July. There would therefore only be a short delay. If Kensington were successful at that stage, Mr Grimshaw could then be ordered to provide the necessary information. Conversely, if Kensington were unsuccessful at that stage, it would mean that the documents and any information supplied by Mr Grimshaw should never have been released and made available to Kensington. There was therefore no overwhelming urgency which required the interview of Mr Grimshaw to proceed immediately.
Decision
35. We have carefully considered Mr Robinson's submissions, but we have no doubt that we should not stay our order for the following reasons.
36. As to any challenge in Jersey to the ex parte order of this Court on the basis of a failure to make full and frank disclosure, no such application has in fact yet been brought. If we had been satisfied that there were very strong grounds for thinking that there had been material non disclosure, we might have taken this into account even in the absence of a formal application to set aside the ex parte order. But, having heard the points which Mr Robinson proposes to raise, they come nowhere near reaching the level which would be necessary if we were to make an allowance for the proposed challenge even in the absence of a formal application.
37. As to challenges in the BVI, we accept that the directors intend to challenge the various orders made or applied for as described by Mr Robinson. However, the fact remains that, at present, the appointment of Mr Tacon remains in force and has not been stayed. The BVI Court has maintained the appointment of Mr Tacon and has not withdrawn its Letter of Request to this Court. Montrow is a BVI company. Decisions relating to matters such as whether there should be a liquidation, whether a provisional liquidator should be appointed, the powers which should be conferred on such provisional liquidator and the nature of his role are therefore matters of BVI law for determination by the BVI Court. Whilst of course this Court retains a discretion as to whether it should assist an overseas court in such matters and, if so, the nature and degree of such assistance, the fact remains that this Court is playing a secondary role and it is merely assisting the BVI court insofar as concerns matters within Jersey. We should therefore pay considerable regard to any relevant decisions of the BVI Court.
38. As already mentioned, the directors have sought on two occasions to persuade the BVI Court to stay the provisional liquidation. On 13th April the BVI Court refused to stay its order. A further application for a stay pending appeal was made on 23rd April. The decision on that application was not known at the time of the hearing before this Court on 2nd and 3rd May but we have been informed by letter from Advocate Thompson dated 10th May that that application for a stay has also been refused. If the BVI Court, following application, has decided that it would not be right to stay the powers of the provisional liquidator, it seems to us that some fairly compelling reason would be required before we should reach a different decision.
39. At the heart of Mr Robinson's submissions lay the proposition that Mr Tacon had gone beyond the proper role of a provisional liquidator. We have already accepted Mr Robinson's argument that the powers of a provisional liquidator can only be exercised for the purpose of maintaining the value of the assets of the company. Mr Tacon asserts that it is necessary for him to understand the underlying structure and its purpose in order to fulfil his duty of maintaining the value of the company's assets.
40. Ultimately, whether a provisional liquidator of a BVI company has exceeded his powers is a question of BVI law and is therefore most suitable for resolution by a BVI court. In this respect, we note that the Report - which is relied upon by Mr Robinson as showing that Mr Tacon had gone beyond his proper role - was a report to the BVI Court and was produced to that court for the hearing on 13th April. Yet there is no suggestion that the BVI Court considered that the Report showed that Mr Tacon had exceeded his proper role. On the contrary, the BVI Court refused a stay on that occasion and at para 65 of her judgment Hariprashad-Charles J said "It is vital that Mr Tacon establishes as soon as possible the true nature of the scheme so that he may take all steps as may be available to him to preserve the underlying assets."
41. In our judgment, it would be a strong thing for this Court, in the face of such an approach by the BVI Court, to find that Mr Tacon had in fact exceeded his proper role. In any event, as a matter of general principle we would, for our own part, agree that it is reasonable for a provisional liquidator to wish fully to understand the underlying purpose behind a structure such as that of which Montrow formed part in order to ensure that he is able to do all that is necessary to maintain the value of the company's assets. Furthermore, as provisional liquidator of Montrow, it would be entirely proper for him to wish to establish the full and detailed position in relation to the assets of its wholly owned subsidiary Likouala SA. Thus it would be entirely proper for him to wish to establish in detail the exact nature of the rights to the oilfield held by Likouala. Where does the ultimate economic benefit lie? Is there an option or other arrangement whereby Total, after a period, can call for transfer of the oil rights from Likouala for a nominal consideration? What rights in the oilfield does Likouala have in the meantime? What is the financial position of Likouala? What is its income stream? What is happening to any surplus of the amount required to pay the debt to BNP? There are no doubt many other questions. In our judgment most of the proposed questions to be asked of Mr Grimshaw do fall within the scope of a provisional liquidator's duties but we do agree that questions 3, 6, 12 and 16 go beyond what is required and Mr Grimshaw need not answer them. We place no weight on Mr Robinson's submission that it was very odd that Mr Tacon had not yet applied to have his appointment recognised and enforced in Congo itself. We can well understand the difficulties involved in such a course of action.
42. Mr Robinson placed great weight on the disclosures made by Mr Tacon to Kensington and argued strongly that they were improper. The reason given by Mr Tacon for the disclosures is to be found at para 1.8 of the Report where he said:-
"A considerable amount of detailed information, including draft contracts, security documentation and a trust deed, together with correspondence, has been received from Nautilus. Much of this documentation is English translation of agreements prepared in French. In view of my lack of any previous involvement in this matter, I sought Mr Scwarzkopf's assistance as to the significance of the documents and made them available to him. He has been able to assist me in understanding the material provided and also better interpret what appears to be a complex structure involving Montrow, Likouala, the Congo, BNP Paribas, Total and TEP, from which I have drawn my own conclusions."
This issue of disclosure has been considered by the BVI Court on two occasions and it has built in the protection referred to at para 13 above by controlling the use to which Kensington may put any information so obtained. Mr Robinson is critical of this protection and submits that it amounts to very little. In particular it does not prevent Kensington from using information obtained by the provisional liquidator to make its case on winding up Montrow on just and equitable grounds. However, the fact remains that Mr Tacon is an office holder appointed by the BVI Court and owes duties to the BVI Court. The directors of Montrow have applied to the BVI Court for an order that Mr Tacon swear an affidavit explaining exactly what information and documents he has disclosed to Kensington and generally the nature of his contacts with Kensington. At the date of the hearing before us, the outcome of that application was not known but, since then, the BVI Court has roundly dismissed that application for the reasons set out in a judgment which has been supplied to us. There is no suggestion in the judgment that the BVI Court considered that Mr Tacon had in any way exceeded his proper role by reason of the various disclosures which he had made to Kensington. Subject to what is said at para 53 below, it must be a matter primarily for the BVI Court as to the extent to which the provisional liquidator should be able to disclose to others information and documents which he has obtained. Whilst this Court undoubtedly retains a discretion to control the use of information obtained by an office holder by compulsion in Jersey, we should pay considerable regard to the approach of the court which has primary responsibility for supervising and controlling the office holder in question.
43. As to the question of prejudice, we accept that information, once released, cannot be recovered. Nevertheless we are here concerned primarily with the release of information to a provisional liquidator (who effectively becomes the company) of information concerning the affairs of that company and its wholly owned subsidiary. There can be little prejudice from releasing information to such a person. A more significant prejudice arises, says Mr Robinson, because the information has been released to Kensington, which is an adverse party. However, that has to be balanced against the fact that the provisional liquidator needs to ascertain and, so far as possible secure the assets of Montrow and its wholly owned subsidiary. There is clear evidence of Congo being willing to go to extraordinary lengths to deprive its creditors of their entitlement and, like the BVI Court, we accept that there is an urgent need for Mr Tacon to ascertain the true nature of the scheme and the full and detailed financial position of the companies. Mr Robinson argued that there was no urgency. We do not agree. If Congo is behind this scheme, experience shows that it is likely to take advantage of any delay to try and put its assets beyond the reach of its creditors.
44. Moreover, this again is an issue where due weight must be given to the approach of the BVI Court. In deciding whether or not to stay the appointment of the provisional liquidator, the BVI Court has to balance similar consideration to those which were urged before us. If, having done so, the BVI Court decides that the balance comes down in favour of maintaining the provisional liquidation, the interests of comity would suggest that this Court should generally not take action which is contrary to that approach, although we accept that the matter is ultimately one of discretion for this Court.
45. For all of the above reasons we refuse this application for a stay of the powers of the provisional liquidator in Jersey.
Additional matters
46. During his submissions Mr Robinson made two additional requests. The first related to an action for Norwich Pharmacal relief brought by an entity called F G Hemisphere Associates ("Hemisphere") (another creditor of Congo) in November 2006 against Nautilus in respect of Montrow. Details of this action were contained in Mr Grimshaw's affidavit sworn for these proceedings. In the Hemisphere litigation there were stringent safeguards insisted upon by this Court in relation to what Hemisphere could do with the documents and information it obtained from Nautilus. Ogier acted for Hemisphere although Advocate Thompson was not involved. Mr Robinson argued that Ogier should not have acted for Mr Tacon given its previous involvement with Hemisphere. Furthermore, given that, following receipt of the same documents from Nautilus as were subsequently supplied to Mr Tacon, Hemisphere had decided not to proceed any further, this was clearly a matter which should have been disclosed to the Court at the ex parte hearing.
47. The matter was raised in correspondence before the present hearing. Mr Thompson stated that he had not personally been aware of the Hemisphere matter and the conflict checks carried out by Ogier before he had agreed to act for Mr Tacon had not disclosed the matter. He said that, after the ex parte orders had been obtained, he had been informed by a member of his firm that it had previously acted for Hemisphere. A Chinese wall had immediately been erected and he had not seen the Hemisphere file nor was he aware of its contents.
48. Mr Robinson submitted that the Court should order Mr Thompson to swear an affidavit describing the circumstances in which he first heard of the Hemisphere matter including when and by whom he was told, what he was told and generally how much information he had been given.
49. We do not propose to order the production of such an affidavit for two main reasons. In the first place Mr Thompson has informed us as an officer of the Court that he was not aware of the Hemisphere matter at the time he made the ex parte application and that, since becoming aware of it, he has been denied access to the file. Secondly, Mr Grimshaw has chosen to put the whole Hemisphere matter in the open by referring to it at some length in his affidavit. In the circumstances it is not at all clear what confidential information might be available to Mr Thompson which could cause prejudice to the directors of Montrow. In all the circumstances we decline to order Mr Thompson to swear an affidavit.
50. The second application made by Mr Robinson was that Mr Tacon should swear an affidavit giving details of documents and information obtained from Nautilus which have been disclosed to anyone other than his legal advisers. The grounds of this application are as follows. Mr Tacon gave an undertaking to this Court in support of its ex parte order of 14th March in the following terms:-
"Not to use any documents or information received pursuant to the orders other than for the purposes of his appointment and the powers vested in him."
As already mentioned, Mr Tacon admitted in the Report that he disclosed some of the documents and information which he had obtained to Mr Schwarzkopf, who is a consultant of Kensington. Mr Robinson submitted that such disclosure constituted a breach of the terms of the undertaking and that this Court should police the undertaking by requiring the production of an affidavit justifying such disclosure.
51. It is of course the case that the directors made a not dissimilar application to the BVI Court, which was rejected. However we agree that it is for this Court to police the specific undertakings given to it. This Court regularly relies upon undertakings given by applicants for ex parte relief. It is of the first importance that they should be strictly adhered to. If there are grounds for concern as to whether they have been observed to the letter, the Court may well wish to secure the provision of evidence so as to ascertain whether the undertaking has been fully complied with.
52. We have of course already held that there should be no stay on any of the grounds put forward by Mr Robinson, including his argument that Mr Tacon's actions (including disclosures he has made) has gone beyond those properly required of a provisional liquidator. Nevertheless, despite requests and correspondence, Mr Tacon has refused to disclose full details of what he has disclosed and to whom. Given the importance of adherence to undertakings given to the Royal Court, we think that he should file an affidavit along the lines suggested by Mr Robinson. We are willing to hear counsel on the exact terms of our order to this effect but we anticipate that the affidavit should cover the following matters:-
(i) Exactly which documents and what information obtained from Nautilus has he shown to any person acting on behalf of Kensington?
(ii) Who are the individuals with whom he has shared such documentation or information?
(iii) In each case, how was such disclosure for the purposes of his appointment and the powers vested in him?
Authorities
Kensington International Limited v Republic of Congo [2005] EWHC 2684 (Comm).
Kensington International Limited v Montrow International Limited (In Provisional Liquidation) British Virgin Islands. April 2007.
Insolvency Act 2003.
Re Tucker [1990]1 Ch148.
Re Seagull Limited [1993] 2 WLR 872.
Cambridge Gas Transport Cooperation v the Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] 3 WLR 689 para 22.