Jersey Unreported Judgments

Companies - application for the just and equitable winding up of companies within the Horizon group of companies.

[2012]JRC113A

Royal Court

(Samedi)

7 June 2012

IN THE MATTER OF ARTICLE 135 OF THE COMPANIES (JERSEY) LAW 1991, AS AMENDED.

Advocate P. D. James for the Representors.

judgment

the commissioner:

1.        On 30^th May, 2012, the Court ordered the just and equitable winding up pursuant to Article 155 of the Companies (Jersey) Law 1991 ("the Companies Law") of Horizon Corporate Directors Limited and Horizon Nominees Limited, which are wholly owned subsidiaries of Horizon Trustees (Jersey) Limited ("Horizon Trustees").  We will refer them as "the subsidiaries". 

2.        This is the third application for the just and equitable winding up of companies within the Horizon group of companies, which is not a group in the corporate context, but which shares common ownership. 

3.        The first application was made by Horizon Investments (Jersey) Limited ("Horizon Investments") which carries on an investment management business and the reasons for the just and equitable winding up of that company are set out in the judgment of the Court dated 22^nd February, 2012, ([2012] JRC 039).  That judgment sets out the general background to the difficulties that have beset the Horizon group and we will not repeat that background here.  

4.        The second application was made by Horizon Trustees, which carries on a trust company and fund administration business, on 18^th May, 2012.  The underlying reasons for that application were broadly the same as for Horizon Investments and accordingly, no judgment was issued by the Court.  

5.        In the case of Horizon Investments, it had entered into an agreement for the sale of client assets to Spearpoint Retirement Services Limited with staged payments and support from that company during the process of transfer.  In the case of Horizon Trustees, it had entered into an agreement with JTC Management Limited ("JTC") for the sale of client assets, again with staged payments and support from that company during the process of transfer.  As at 17^th May, 2012, there remained 46 clients of Horizon Trustees who had yet to transfer to JTC and 17 clients which had yet to transfer to third party providers.  The transfer of certain clients had not commenced because there were significant issues to resolve. 

6.        The applications by both Horizon Investments and Horizon Trustees were made with the support of the Jersey Financial Services Commission, and their (different) creditors were notified and given the opportunity to be heard.  Mr Andrew Isham and Mr Gregory Branch of Deloitte LLP were appointed joint liquidators of Horizon Investments and Mr Alan John Roberts and Mr James Robert Toynton of Grant Thornton Limited were appointed joint liquidators of Horizon Trustees.  It was proposed that the latter should act as joint liquidators of the subsidiaries. 

7.        The subsidiaries are, as stated above, wholly owned by Horizon Trustees.  Pursuant to the registration certificate issued by the Jersey Financial Services Commission, Horizon Trustees is an affiliation leader and the subsidiaries are participating members.  The subsidiaries exist to facilitate the activities of Horizon Trustees by the provision of services as their respective names imply.  They do not trade and have no significant assets.  They have no creditors.  They are pure functionaries but are essential for the orderly transfer of the client assets out of Horizon Trustees to JTC or to new service providers. 

8.        The directors of the subsidiaries are Mr Andrew Treharne, Mr Timothy McKinnon and Miss Julie McClafferty.  They are not connected with either the joint liquidators or with Grant Thornton Limited.  On 25^th May, 2012, they resolved that the subsidiaries should apply for their just and equitable winding up for the following reasons, namely that it would be in the best interests of the subsidiaries, the clients of Horizon Trustees and the public of the Island of Jersey for the actions of the subsidiaries in facilitating the transfer of Horizon Trustees' clients to be subject to the oversight of the joint liquidators. 

9.        In his skeleton argument, Mr James reviewed the avenues available to the joint liquidators, namely a summary winding up, a désastre or a just and equitable winding up, but submitted that a just and equitable winding up was in the best interests of Horizon Trustees, the subsidiaries, the clients of Horizon Trustees and the public of the Island for the following principal reasons:-

(i)        There are clients of Horizon Trustees which are yet to transfer to JTC or to third party providers and, given that the subsidiaries will play a central role in enabling Horizon Trustees to undertake trust company business and fund services business, there was a clear public interest in completing this transfer in an orderly fashion without adverse publicity for the Island's financial services industry. 

(ii)       If the role of the subsidiaries in facilitating the transfer of Horizon Trustees' clients is subject to the oversight of the joint liquidators, this will ensure that a consistent approach is maintained by the subsidiaries. 

(iii)      A just and equitable winding up under Article 155 of the Companies Law is appropriate in the circumstances given the need for the subsidiaries to continue to assist Horizon Trustees and its regulated business whilst it is wound down; and

(iv)      It would be in the best interests of all of the stakeholders for the process to be overseen by liquidators who are directly accountable to the Court. 

The Jersey Financial Services Commission supports the application for a just and equitable winding up. 

10.      In his oral submissions, Mr James said that the joint liquidators of Horizon Trustees wished to have control of the subsidiaries.  That raised an issue for the Court in that they already have the means to control the subsidiaries.  As joint liquidators of Horizon Trustees, they are in a position to exercise the powers of that company to remove and appoint members of the boards of the subsidiaries. 

11.      It seemed to the Court that where it had ordered the just and equitable winding up of a parent company, it would expect the liquidators appointed to use the powers vested in the parent to control any subsidiaries, without the Court having to separately order the just and equitable winding up of those subsidiaries.  If particular issues arose, they could be dealt with by directions, but it was preferable to have one appointment and one set of orders/directions governing their conduct in relation to the group as a whole.  It appeared to the Court, without the benefit of any authority, that there would need to be good reason for the Court to make separate orders in respect of some or all of the subsidiaries. 

12.      However, Mr James submitted that there was good reason for the Court to do so in this case:-

(i)        The current directors were uninsured and may resign at any point.  The joint liquidators were not prepared to appoint themselves or other members of their firm as directors as they were not insured for the provision of the services of directors.  They would therefore have to try and find other parties willing to act which might not be feasible in the current circumstances. 

(ii)       There are no creditors and so a creditors' winding up was not appropriate.  They could proceed with the summary winding up of the subsidiaries (they were given specific authority to do so when they were appointed on 18^th May, 2012,) and their appointment as liquidators of the subsidiaries, for which role they would, apparently, be insured.   However, liquidators appointed under a summary winding up are subject to the provisions of Article 148 of the Companies Law:-

"148.   Effect on status of company

(1) The corporate state and capacity of a company continues after the commencement of the company's summary winding up until the company is dissolved.

(2) However, the company's powers shall not be exercised except so far as may be required -

(a) To realise its assets;

(b) To discharge its liabilities; and

(c) To distribute its assets in accordance with Article 150.

(3) Paragraph (2) is subject to Articles 154 and 186A."

13.      These restrictions would arguably prevent any liquidators of the subsidiaries appointed under a summary winding up from continuing their functions and facilitating the transfer of the clients from Horizon Trustees.  Accordingly, such liquidators would have to apply to the Court under Article 186A for directions enabling them to do so.  Any such directions would be in the same terms as the orders being sought from the Court on this application.  The only consequence, therefore, of being required to proceed with a summary winding up would be one of delay and additional expense. 

14.      We accepted those submissions.  In the absence of any authority, we maintained the view that ordinarily the Court would not expect to have subsidiaries of a company under a just and equitable winding up themselves placed under a just and equitable winding up, giving rise to multiple appointments.  However, in this case, we were dealing with a regulated business and there was a clear public interest in ensuring that the clients of that business were transferred in a cost-effective, efficient and orderly manner by professional liquidators appointed by and answerable to the Court.  We accepted the reasons why in this case, the joint liquidators felt unable to use the powers of Horizon Trustees to appoint directors to the subsidiaries nominated by them and that requiring them to proceed by way of summary winding up would only give rise to delay and additional cost.  

15.      We therefore granted the application. 

Authorities

Companies (Jersey) Law 1991.

Representation of Horizon Investments (Jersey) Limited [2012] JRC 039.