Before : |
J. A. Clyde-Smith, Esq., Commissioner, and Jurats Clapham and Nicolle. |
Between |
Maltese Holdings Limited Zollinger Investments Limited |
Representors |
And |
Astro Properrties Limited |
First Respondent |
And |
Breifne O'Brien |
Second Respondent |
And |
IBRC Asset Finance Plc |
Third Respondent |
And |
Danier Maher |
Fourth Respondent |
And |
Louis Dowley |
Fifth Respondent |
And |
Robert Dowley |
Sixth Respondent |
And |
David Bell |
Seventh Respondent |
And |
Paul Bell |
Eighth Respondent |
And |
David O'Reilly |
Ninth Respondent |
And |
Evan Newell |
Tenth Respondent |
And |
Barty O'Brien (Martin O'Brien) |
Eleventh Respondent |
And |
Bernard Lambilliotte |
Twelfth Respondent |
IN THE MATTER OF THE REPRESENTATION OF MALTESE HOLDINGS LIMITED AND ZOLLINGER INVESTMENTS LIMITED
AND IN THE MATTER OF ARTICLE 155 OF THE COMPANIES (JERSEY) LAW 1991
Advocate M. J. Thompson for the Representors.
Advocate J. D. Kelleher for the First and Twelfth Respondents.
Advocate R. O. B. Gardner for the Third Respondent.
judgment
the commissioner:
1. Zollinger Investments Limited ("Zollinger") and Maltese Holdings Limited ("Maltese") have applied to the Court to be wound up under Article 155 of the Companies (Jersey) Law 1991 ("the Companies Law"); the date for the substantive hearing is yet to be fixed. At a directions hearing on 10th September, 2012, the Court made certain orders and we now set out our reasons.
2. Zollinger was formed as a special purpose vehicle to acquire a commercial property in Germany. It has two ultimate beneficial owners, namely the twelfth respondent, Bernard Lambilliotte ("Mr Lambilliotte") and the second respondent, Breifne O'Brien ("Mr O'Brien") who were related by marriage and who through two intermediate companies ultimately own 50% each of Zollinger. In the case of Mr Lambilliotte, the intermediate company is the first respondent Astro Properties Limited ("Astro") and in the case of Mr O'Brien, Maltese. Astro, Maltese and Zollinger are all Jersey incorporated companies administered by RBC Services (Channel Islands) Limited ("RBC"). Mr Lambilliotte and Mr O'Brien have each invested some €1.5M by way of loan to Astro and Maltese, which sums have been lent onwards to Zollinger. Zollinger acquired its commercial property with the benefit of a loan from IBRC (formally known as Anglo Irish Asset Finance plc) in the sum of €8M.
3. Mr O'Brien, who lives in Ireland, got into financial difficulties in 2008 and 2009 and has a number of creditors in that jurisdiction who have judgments against him, a number of whom (including Mr Lambilliotte) have been convened to the application as the fourth to twelfth respondents. The Irish High Court has injuncted Mr O'Brien from disposing, reducing, charging or diminishing the value of his assets within or without the jurisdiction of the Irish High Court save in so far as the value of his assets shall exceed the sum of €20M. Perhaps surprisingly, Mr O'Brien has not been made the subject of bankruptcy proceedings in Ireland and no steps have been taken by his Irish creditors, other than Mr Lambilliotte, to enforce their judgments against his interest in Maltese.
4. It is asserted by his creditors that Mr O'Brien dishonestly misappropriated funds from them and there are questions therefore as to the source of the funds received by Maltese and ultimately Zollinger.
5. The problems that have caused the directors of Maltese and Zollinger to apply for the companies to be wound up relate inter alia to an apparent drop in the value of the commercial property to a sum barely sufficient to cover the loan from IBRC, the fact that IBRC has given notice for the repayment of the capital sum lent, the claims of the creditors of Mr O'Brien and the possibility that they may be able to trace their funds through to Zollinger and the conflicts between the three companies that RBC administers. The application for their winding up is supported by IBRC and the Viscount. It would seem that it would not be opposed by the creditors of Mr O'Brien, other than Mr Lambilliotte.
6. The winding up application was brought before the Court on 30th July, 2012, when directions were given for the convening of the parties for what was proposed to be a directions hearing on the afternoon of 10th September, 2012. Mr Lambilliotte was served the papers on 7th August, 2012. On 17th August, 2012, he applied to the Royal Court to recognise his Irish judgment in the sum of €1.85M, obtained on 2nd February, 2009, in or around, it would appear, the same time that the other creditors obtained their judgments. In default of an appearance by Mr O'Brien, the Court recognised the judgment and inter alia authorised Mr Lambilliotte to cause Mr O'Brien's movables to be distrained on and sold. The Order of Justice which was handed to the Court without prior notice made scant reference to the existence of other creditors and did not disclose the application to wind up Maltese.
7. On the same day the judgment was granted, the Viscount was instructed to distrain upon the shares of Mr O'Brien in Maltese and have them sold by public auction. The Viscount, being aware of the winding up application, referred the matter to the Court, Bailhache, Deputy Bailiff presiding, which on 4th September, 2012, directed that the shares in Maltese should be distrained upon but no sale effected until the directions hearing on 10th September, 2012, when the Viscount was instructed to raise the matter for the Court's further directions.
8. Mr Thompson, for Maltese and Zollinger, had hoped that the convened parties would consent to the use of the directions hearing on 10th September for the substantive application, but Carey Olsen, acting for Mr Lambilliotte, required time to prepare arguments against the application, which Mr Thompson conceded was his right. There was no argument as to the directions given to enable that to be done and for a date to be fixed for the substantive hearing, but an issue arose as to whether the Court should further stay enforcement of Mr Lambilliotte's judgment, pending the outcome of the substantive hearing. Mr Kelleher, for Mr Lambilliotte, opposed any stay.
9. The central submission of Mr Thompson was that the Court, in the exercise of its inherent jurisdiction, should prevent Mr Lambilliotte obtaining an advantage over the other creditors of Mr O'Brien. Mr Lambilliotte's purpose was to acquire Mr O'Brien's shareholding in Maltese through the public auction process and thereby gain ownership of 100% of Zollinger. There were question marks over the valuation that had been provided to the directors in Zollinger of the commercial property it owned and the possibility that the may in fact be a substantial equity.
10. Carey Olsen had proposed in its email of 6th September, 2012, that the Viscount advertise the shares for sale in the Jersey Gazette and the equivalent in Ireland and conduct the sale within fourteen days. Whilst Mr Kelleher did not pursue such orders at the hearing, it is clear from the advice given to the Court by the Viscount that such a timescale was wholly unrealistic. There were real practical issues attending the sale of shares in a private company such as this. The Viscount could only recollect two occasions in the past where shares in private companies had been sought and even those did not reach an auction, being resolved by other means.
11. It is worth making the point that the Viscount would be advertising the sale of shares in a company that was the subject of an imminent winding up application, together with the company in which it ultimately held a 50% interest, making it extremely unlikely that any unconnected party would be interested in bidding. According to the affidavit of Brian Quigley of McCann Fitzgerald, an Irish solicitor acting for a number of the creditors, they are in very straitened financial circumstances, due to the substantial losses they have suffered. They might not, therefore, be in a position to participate in any potential sale.
12. Furthermore, Mr Thompson submitted that a sale of the shares at public auction would not address the issue of the loan account due by Maltese to Mr O'Brien, concerns over the source of funds and other issues which would be dealt with by a liquidator appointed to Maltese in an orderly fashion.
13. Mr Thompson accepted that the Court had no express power under Article 155 of the Companies Law to stay the enforcement of proceedings, but submitted that the Court had an inherent jurisdiction to do so. He referred us to Rule 47/1/12 of the Supreme Court Practice, 1999 edition, and the statutory power under the Companies Act 1948 of the English court to restrain further proceedings any time after the presentation of the petition for the winding up of the company. He also referred us to the case of Bowkett-v-Fullers United Electric Works [1923] 1 KB 160 CA with reference to the earlier statutory power under the Companies (Consolidation) Act 1908 where Scrutton LJ said at page 164 that the purpose of such provision was to prevent "a scramble by the creditors while the court is considering whether it will wind up the company or not, and to ensure that all creditors of the same class shall obtain equal terms".
14. Mr Kelleher pointed out, correctly, that even if the Court had an inherent power to stay proceedings by creditors of a company which was the subject of a winding up application, we were concerned here with a stay against creditors of Mr O'Brien, not Maltese. He questioned whether the Court had a power to order a stay in such circumstances. In his view, Mr Lambilliotte was perfectly entitled to pursue his remedies and obtain whatever advantages he legitimately could, but acknowledging that the Court might be concerned to ensure equality of treatment amongst the creditors of Mr O'Brien, he offered not to proceed with enforcement of the judgment without first giving 48 hours' notice, presumably to the other convened parties. The matter could then be argued more fully.
15. It is well established that the Court is the master of its own procedure ("la Cour est toute puissante"-see Bastion Offshore Trust Co Ltd-v-F & E [1994] JLR 370 and Croxford-v-Le Claire [1994] JLR 304) and it resolved to maintain the status quo by restraining Mr Lambilliotte and any other creditors of Mr O'Brien from enforcing their judgments in this jurisdiction, pending the hearing of the winding up application or further order. It did so for the following reasons:-
(i) The Irish High Court has acted to preserve the assets of Mr O'Brien (which would include his assets in Jersey) for the benefit of his creditors.
(ii) The Court was concerned that the actions taken by Mr Lambilliotte might give him an advantage over the other creditors of Mr O'Brien. The Court had a legitimate interest in ensuring, if it properly could, that all creditors of a debtor of the same rank are treated equally. It was that interest which motivated the Court into creating the "désastre" procedure in the late eighteenth and nineteenth centuries (see paragraph 7.54 of The Jersey Law of Property by Paul Matthews and Stéphanie Nicolle). Whether the Court could do so on the facts of this case was something that would need to be argued at a future date, but at this stage the Court was acting procedurally to allow that argument to be made by the other creditors.
(iii) Although the Court was concerned with an application to wind up Zollinger and Maltese, the debtor, Mr O'Brien, and it would seem a large number of his creditors, including Mr Lambilliotte, had been convened before the Court.
(iv) Counsel for Mr Lambilliotte, when seeking recognition of his judgment on his behalf and the order authorising him to distrain on the movables of Mr O'Brien, had not disclosed the full background to the Court and in particular, the existence of the winding up application in relation to Maltese.
16. The Court acknowledges that these arguments in relation to the rights of the creditors of Mr O'Brien might more properly be dealt with in separate proceedings and that can be addressed in due course but at the time it was convenient to make the orders in these proceedings. Ordinarily the Court would have expected insolvency proceedings to have been commenced in Ireland and for the trustee in Bankruptcy (or the Irish equivalent) to apply to have his or her appointment recognised by the Jersey Court, thus ensuring an orderly and fair realisation of the assets of Mr O'Brien. Bearing in mind what we have read about the financial affairs of Mr O'Brien, it is difficult to understand why this has not taken place.
Authorities
Companies (Jersey) Law 1991.
Supreme Court Practice, 1999 edition.
Companies Act 1948.
Bowkett-v-Fullers United Electric Works [1923] 1 KB 160 CA.
Companies (Consolidation) Act 1908.
Bastion Offshore Trust Co Ltd-v-F & E [1994] JLR 370.
Croxford-v-Le Claire [1994] JLR 304.
The Jersey Law of Property by Paul Matthews and Stéphanie Nicolle.