D. R. Hunt, Q.C., Commissioner and Jurats Fisher and Olsen
IN THE MATTER OF THE REPRESENTATION OF THE LIQUIDATORS OF ANTHONY INVESTMENTS (ESPLANADE) LIMITED, EVREUX HOLDINGS LIMITED AND JCN INVESTMENTS (JERSEY) LIMITED
IN THE MATTER OF ANTHIONY INVESTMENTS (ESPLANADE) LIMITED AND EVREUX HOLDINGS LIMITED AND JCN INVESTMENTS (JERSEY) LIMITED
AND IN THE MATTER OF THE COMPANIES (JERSEY) LAW 1991, AS AMENDED
Advocate P. O. Lewis for the Joint Liquidators.
1. At the conclusion of the hearing on 2nd December, 2014, the Court announced its decision that it would grant the declarations sought by Mr Adrian Rabet and Mr Philip Sykes of Messrs Moore Stephens, the Joint Liquidators ("the Liquidators") of Anthony Investments (Esplanade) Limited ("AI(E)"), in their Representation dated 18th November, 2014, ("the 2014 Representation") as amended for reasons that we would deliver today (3rd December). The Liquidators were seeking the Court's confirmation that they had power to sell AI(E)'s freehold interest in Ogier House, 44 Esplanade, St Helier, Jersey, JE4 9WG ("the Property") and the Court's approval to proceed with a sale of the Property to Standard Life Investments ("SLI") or its designated subsidiary for £27,000,000. This judgment sets out our detailed reasons for that decision.
2. On 9th October, 2013, the Court ordered the winding up of three Jersey companies, namely AI(E), Evreux Holdings Limited ("EHL") and JCN Investments (Jersey) Limited ("JCN") (jointly "the Companies") under Article 155 of the Companies (Jersey) Law 1991 ("the Companies Law"), for reasons that would be given in due course ("the October 2013 order"). The Court appointed the Liquidators and made a number of ancillary orders. The Court delivered its reasoned judgment on 12th November, 2013, ("the November 2013 judgment").
3. Although the October 2013 order was, of course, in the public domain, the Court ordered that the proceedings on that date should be private. Likewise the November 2013 judgment was private to the parties. By an order of 12th November, 2013, the Court directed that privacy should expire when the Property was sold or by further order of the Court. At the commencement of the hearing on 2nd December, 2014, the Liquidators applied for this hearing likewise to be in private. For the same reasons as we gave in respect of the 2013 hearing and the November 2013 judgment, we acceded to that application. That privacy ruling applies also to this judgment.
4. This is set out in more detail in paras 2 to 8 of our November 2013 judgment. The following, updated summary will suffice for the purposes of the present application.
5. In November 1997 Mr John Neal established a discretionary trust "(the Trust") in Jersey, the present beneficiaries being his wife (Chrystal), his four adult sons, including Simon (married to Aida) and Stephen, and their issue. (For the sake of convenience and without meaning any disrespect, we again refer in this judgment to the various members of the Neal family by their first names.) In February 1999 John suffered a serious stroke and was thereafter incapacitated; he died earlier this year. The present trustee of the Trust is Hawksford Trustees Jersey Limited ("the Trustee" or "Hawksford"), the relevant director being Mr Michael Powell. Unfortunately the history of the Trust, at least in the years immediately preceding the liquidation, had been one of hostility, mistrust and dispute between some at least of the beneficiaries. In particular Simon and Aida had made claims against JCN and AI(E) in 2011, which were compromised in December 2012 on terms requiring substantial payments to Simon and Aida.
6. The only substantial asset of the Trust is now the Property, which is let to Ogier Esplanade Limited. In October 2013 the Property was occupied by the law firm Ogier. In January 2014 it was announced that the Ogier law firm was splitting from its fiduciary services business. In due course Ogier Fiduciary Services was the subject of a management buyout and is now known as Elian. The Property is presently occupied by Ogier and Elian. The Property is owned by AI(E) and is the subject of a first charge in favour of HSBC. AI(E) is 100% owned by JCN, JCN is in turn 100% owned by EHL and EHL is in its turn 100% owned by the Trust. It was common ground between the parties to the 2013 winding up proceedings, especially after a refinancing proposal had fallen through in September of that year, that the only way forward for the Trust as a whole was for the Property to be sold and for any surplus after payment of creditors to be distributed upwards from AI(E) via JCN and EHL to the Trust for distribution among the beneficiaries.
7. The lease of the Property to Ogier commenced on 7th November, 2009, and will terminate on 6th November, 2033, (subject to break clauses in 2021, 2025 and 2029). The original rental was £27 per square foot, which came to £2,047,684 a year. A rent review under the lease started in November 2012. The lease provides for an upward only adjustment in the rent, with an automatic uplift to at least £28.50 per square foot (making a total rent of £2,155,639 a year) but AI(E) was seeking a greater uplift. As at October 2013, the rent review had gone to arbitration but had not been concluded.
8. According to the Affidavits filed by Stephen in the autumn of 2013, the Property was estimated to be worth around £29,700,000, based on a rental of £2,155,639 and a yield of 7.25%. All parties to the 2013 winding up proceedings were agreed that the Property could not sensibly be marketed, or the best price obtained for it, unless and until the rent review had been concluded, either by an arbitration award or by agreement. Even then, as we pointed out in our November 2013 judgment, the amount of the new rent would be but one factor in the overall picture; the amount of the yield would be another. On the figures put before us in October 2013 we accepted that there was a real possibility that the sale of the Property might in due course generate a modest surplus for distribution to the beneficiaries. But we added that in the ultimate analysis the Property was, of course, only worth what someone would pay for it.
9. The Amended Representation for the winding-up of AI(E) was made by Stephen as one of the four directors on 19th September, 2013. It was supported by Affidavits of Stephen and of Mr Gardner-Hillman (a fellow director of AI(E)) sworn the same day. On 20th September, 2013, the Court, following a private hearing, adjourned further consideration of the application until 9th October. The same day Stephen swore a further Affidavit in support of the Amended Representation of AI(E). The Representations for the winding up of both EHL and JCN (each made pursuant to a unanimous resolution of its directors) were dated 3rd October; each was supported by a further Affidavit of Stephen sworn the same day.
10. At the hearing on 9th October, 2013, the Representors appeared by Advocate Young of Bois Bois, the Trustee appeared by Advocate Robertson of Appleby and the Viscount appeared by Advocate Millar. The proposed liquidators were also represented, by Advocate Gardner of Bedell Cristin Jersey Partnership. At the outset of the hearing Simon and Aida, appearing by Advocate Hanson of Hanson Renouf, applied to intervene in the proceedings. After full argument the Court acceded to their application for the reasons set out in the Court's ruling of 9th October, 2013.
11. The Representors argued for the winding up of the Companies under Article 155 of the Companies Law on three grounds, namely that:-
(i) AI(E), and therefore EHL and JCN, were insolvent;
(ii) the cost of any further forbearance in relation to the claim of Simon and Aida was unacceptable; and/or
(iii) action by other creditors in due course was inevitable.
The Viscount's Department agreed that from the information supplied to them a just and equitable winding up "would be the best insolvency option". The winding up application was resisted by both the Trustee and by Simon and Aida. In summary, the Court granted the Representors' application on the first two grounds. The Court found that:-
(iv) on the basis of the figures set out in Stephen's various Affidavits, and of the opinion of Mr Rabet, AI(E) was insolvent on a cash flow basis; and
(v) the price to AI(E), and to JCN and EHL, of further forbearance by Simon and Aida in respect of their claim made it just and equitable to wind the companies up.
12. We take the following summary from the Affidavits sworn by Mr Simon Buckley on 19th November, 2014, and by Mr Rabet on 20th November, together with the exhibits thereto. We record that there was no dispute about these events.
13. In 2012 the Neal family had approached Buckley & Co. ("Buckley"), a well-established local firm of property agents, with a view to a possible sale of the Property. In September 2012 both Buckley and Cushman & Wakefield LLP ("C&W"), a significant global sales agent, had been appointed joint agents, as Mr Buckley's letter to Stephen of 13th September, 2012, confirmed. The initial marketing material for the Property had been produced in November 2012 but no buyer had emerged by the time that the Companies were ordered to be wound up. Mr Buckley attributes this lack of progress in 2013 to two factors, namely the depressed state of the real estate market in Jersey at the time and the uncertainty caused by the ongoing rent review. As a result of these two factors, the agents had not actively marketed the Property in 2013 and following the winding-up order they were asked not to do so by the Liquidators during the first half of 2014 pending the outcome of the rent review.
14. The rent review was concluded in early June 2014. AI(E)'s attempt to procure an uplift in the rent greater than that provided by the lease failed; the effect of the arbitrator's award dated 6th June was that the rent for the Property was not increased beyond the contractual rent applicable from 7th November, 2012. Accordingly the new rent became £2,155,639 a year. Later the same month the Liquidators confirmed the joint appointment of Buckley and C&W to find a purchaser for the Property. In response to this appointment a revised sales brochure was produced on 10th July, 2014, and distributed on 12th July.
15. In his Affidavit Mr Buckley describes what happened thereafter as follows:-
"31. Between early July and early September 2014, an intensive two month marketing campaign took place. The marketing effort included marketing publicity being sent to 4,632 agents and investors of C&W. These agents and investors include well-known UK pension funds and UK and foreign based private wealth investors (both individuals and sovereign). This was therefore a massive global marketing effort. Subject to obvious variations as to the identities of the precise recipients of the marketing material, in my view the Property was as widely exposed to the global market as is feasible and could not, in my view, have been more widely marketed through any other agent.
32. I understand that of these agents and investors, 1,169 viewed the e-form containing marketing particulars relating to the Property.
33. Various specific enquires followed this comprehensive re-marketing push. In response to this, C&W sent out a call for bids by the second week of September 2014...
34. We had a number of inspections during this time. Eventually, we got down to two leading bidders who included the Preferred Buyer.
The Preferred Buyer
35. The Preferred Buyer is the well-known pension fund, SLI. SLI has done an enormous amount of work in terms of investigating and evaluating the Property before deciding to proceed with the purchase. Indeed, SLI first demonstrated its interest in purchasing the Property during the initial round of marketing which took place in 2012.
38. SLI have looked at the Property for some time and they've (sic) made what I consider to be an appropriate bid at £27,000,000.
39. SLI are in the process of completing their due diligence and have shown themselves to be active in wanting to push the deal through. I am aware that they have sent various professionals to Jersey to inspect the Property including an investment surveyor. They have also commissioned mechanical and engineering reports. They are therefore materially investing in the sale process. Although the process is still on-going, we have every confidence at this time that the sale will proceed.
40. SLI have expressed a desire to progress matters on a tight timetable with the sale to complete 15 days from receipt of documentation. At present, we are proceeding on the basis that [the] sale will complete in 'one step' before year end."
16. For the sake of completeness there is another matter to which we should refer, namely the financial position of the Companies. In his Affidavit Mr Rabet describes the position as follows:-
"19. It is appropriate for me to deal in very brief terms with the issue of claims adjudication. Following our appointments as Joint Liquidators of [AI(E)], [EHL] and JCN, we advertised the appointments in the Jersey Gazette on 21 October 2013 and sought proofs of debt from creditors of the three companies. We are currently in the course of adjudicating creditor claims of [AI(E)]. On 23 July 2014 we wrote to all known creditors offering the opportunity to inspect claims of all other creditors of [AI(E)] and inspections were carried out between 11 August 2014 and 5 September, a period of 4 weeks. This has thrown up a host of complex issues in relation to the claims filed, their correct value and the extent to which they have been filed against the correct entity within the JCN Group. It is worth stating that the claims as filed far exceed the value of such claims as recorded by the directors in the Companies' books and records.
20. The position in summary is that HSBC, as the only secured creditor of [AI(E)], is owed £21,499,102.26. As a result, at a sale price of £27 million, the net sum of £5,500,897.74 is left. From this figure, an allowance for outstanding and ongoing remuneration, fees, expenses and disbursements in the liquidations of the Companies will have to be provided for.
21. Claims with a face value of £8,200,351.75 have been filed against [AI(E)]. It is not presently known what level these claims will be adjudicated down to. However, if the proposed sale goes ahead, it is plain that there is a reasonable chance that [AI(E)] itself may be insolvent on a balance sheet basis following the claims adjudication process. Plainly the precise position depends on the outcome of the adjudication process in relation to [AI(E)] and the ultimate level of costs and expenses.
22. Claims with a face value of £1,303,213.19 have been filed against JCN and claims with a face value of £1,337,798.56 have been filed against [EHL].
23. Accordingly, the aggregate unsecured claims filed against the JCN Group amount to £10,841,363.50.
24. On the basis of the above, it is worth noting that aggregate claims against the JCN Group will have to be adjudicated down very significantly (by more than 50%) before any equity will be available for the Trustee as the ultimate shareholder of the structure."
As Advocate Gardner explained in his submissions to us on 2nd December, this information was included in Mr Rabet's Affidavit in case the Liquidators' application were to be opposed by any creditor; in that event the size of the claim of the creditor in question would be a material factor in assessing the weight to be attached to such opposition. Since, however, the Liquidators' application proved to be unopposed, this consideration falls away. That said, clearly the financial position of the Companies brings a sharper focus to bear on the sale of the Property generally and the sale price in particular.
17. By an Act of Court made on 13th November, 2014, ("the November 2014 order") the Court ordered that the Liquidators' intended application should be heard on 2nd December, 2014. The Court also made, in summary, the following directions (adopting the numbering of the order):-
"(2) that by 18 November, the Liquidators (or their legal representatives) should by letter notify all persons (or their appointed legal representatives) who appeared to be potential creditors of the Companies of the 2 December hearing;
(3) that any evidence to be presented by the Liquidators in support of their application should be filed by 20 November;
(4) that permission be granted to any creditor to attend the hearing on 2 (and, if necessary, 3) December 2014, provided that prior notification was to be provided in writing to the Liquidators and to the Court by 27 November;
(5) that permission be granted to any creditor who wished to express a view in writing on the Liquidators' application to file and serve a response either by letter or by evidence, any such written response to be filed and served by 28 November; and
(6) that permission be granted to any party intending to appear at the 2 December hearing to file a skeleton argument by 28 November and that any skeleton arguments filed with the Court should simultaneously be provided to any other party intending to appear at the hearing."
In each instance the deadline was 5:00 pm on the day in question.
18. On 18th November, 2014, Bedell Cristin on behalf of the Liquidators duly sent a bespoke letter to each of the potential unsecured creditors of the Companies (totalling 17), enclosing copies of the November 2014 order and of their Representation dated 18th November, 2014, ("the 2014 Representation"), in accordance with para.(2) of the order. The 2014 Representation contained a brief summary of the factual history. The relief sought by the 2014 Representation included the following:-
"1. A declaration that the Liquidators of [AI(E)] have the power to sell and convey the freehold interest in [the Property].
2. A declaration approving the transfer of the freehold interest in [the Property] by the Liquidators of [AI(E)] to SLI on the terms or substantially the terms set out in the Heads of Terms.
3. An order that the Representors' costs of this Representation be treated as an expense in the winding up of [AI(E)]."
On 20th November, in accordance with para.(3) of the November 2014 order, the Liquidators filed their evidence in support of the 2014 Representation; such evidence comprised the Affidavits of Mr Rabet and Mr Buckley to which we have already referred.
19. The reaction from potential creditors to the letters from Bedell Cristin was as follows.
(i) BBA, a firm of chartered accountants which had filed a proof of a small debt in the liquidation of JCN, wrote on 21st November that they supported "all of the relief being sought by the Joint Liquidators".
(ii) 15 creditors expressed no views at all.
(iii) Only one creditor, Hawksford, indicated by an email of 27th November an intention to attend the hearing but then only dependent on the responses received from the Liquidators to two letters dated 26th November.
20. The longer letter, written by Hawksford in its capacity as Trustee, raised a number of questions in relation to the marketing of the Property; the shorter letter, written by Hawksford as a potential creditor, addressed the issue of the Trustee's fees. Bedell Cristin replied to Hawksford by two letters of the following day. At para 6 of its longer letter the Trustee had asked:-
"... are the Joint Liquidators satisfied that the Offer is the very best that can be negotiated?"
to which Bedell Cristin replied:-
"We can really add no more to the detail already contained in the evidence filed and in this letter. The Joint Liquidators are firmly of the view that this is the very best price that can be negotiated for the Property. The Property has been fully marketed and the preferred bidder's offer is the best offer received during the duration of the Joint Liquidators' appointment. The Joint Liquidators understand that this will be the highest ever price for an office building of this kind in Jersey to date."
In its response of 28 November, the Trustee, while expressing concern that not all the questions which it had asked had been properly answered, concluded as follows:-
"It is not our intention to object to the proposed sale when we are not in a position to understand fully the Joint Liquidators' thoughts and considerations. We simply raise these points as a concerned party, who as trustee is required to act prudently and diligently to protect the interests of its beneficiaries."
21. Only the Liquidators filed a skeleton argument in accordance with para (6) of the November 2014 order. We are grateful to the Liquidators and to Bedell Cristin for the assistance given to us by their skeleton argument and to Advocate Gardner for his helpful oral submissions to us at the hearing.
22. Only the Liquidators appeared at the hearing on 2nd December, 2014. Representatives of the Trustee, of Hawksford and of Appleby were also present in Court but only as observers.
23. At the outset of his submissions Advocate Gardner applied to amend para (2) of the 2014 Representation so as to read:-
"A declaration approving the transfer of the freehold interest in [the Property] by the Liquidators of [AI(E)] to SLI for £27,000,000."
He explained that SLI had indicated a preference for the Heads of Terms not to be made widely available as part of the application. He described the amendment as minor in nature and not such as to cause prejudice to any other party. Having read the Heads of Terms ourselves, we agreed and gave the Liquidators permission to amend para.(2) of the 2014 Representation as requested.
24. At the commencement of the resumed hearing on 3rd December, Advocate Lewis (who was deputising for Advocate Gardner) applied further to amend the 2014 Representation so as to include the words "or its designated subsidiary" after "SLI" in para.(2) of the relief sought. He explained that SLI had indicated that it might wish to give effect to the agreement with the Liquidators by purchasing the Property through a subsidiary rather than itself. Since the precise identity of the purchasing company was not of any significance in the context of our deliberations or our decision, we acceded to Advocate Lewis' application.
25. Finally, we record that following the hearing Bedell Cristin applied by email to amend the second sentence of para 13 of the Representation so as to read:-
"The effect of the arbitrator's award dated 6th June was that the rent for the Property was not increased beyond the contractual rent applicable from 7th November, 2012".
Bedell Cristin explained that the Representation as originally drafted was factually incorrect and the Liquidators wished to ensure that the error was put right. Again we acceded to the Liquidators' application.
26. Advocate Gardner properly, and helpfully, drew our attention to three legal issues, namely:-
(i) the Liquidators' power to sell the property;
(ii) the nature of the Court's jurisdiction; and
(iii) the position of the Trustee/Hawksford.
His submissions in relation to these three issues were as follows.
27. Para 1 of the relief sought in the 2014 Representation seeks a declaration that the Liquidators have the power to sell the Property. As Mr Rabet explained in his Affidavit (at para 5), this declaration was sought for the sake of clarity and good order, at the request of SLI.
28. Para.3 of the October 2013 order conferred upon the Joint Liquidators:-
"all powers as set out in Chapter 4 of Part 21 of the [Companies] Law and the following specific powers:-
(iv) to exercise any of the powers of the Companies as may be required for their beneficial winding up, having regard to the creditors including (without limitation) carrying on their business, transferring their business to another company and/or individual, making payments, assigning rights and interests, charging assets and incurring liabilities in the ordinary course of its business;
(vi) to apply to the Royal Court for a revision or extension of any of their powers and for the sanctioning or ratification of any of their acts ..."
Chapter 4 of the Companies Law includes the following provisions:
"170 Powers and duties of liquidator
(1) The liquidator in a creditors' winding up may, with the sanction of the court or the liquidation committee ...
(a) pay a class of creditors in full;
(b) compromise any claim by or against the company.
(2) A liquidator may, without sanction, exercise any other power of the company as may be required for its beneficial winding up."
29. Advocate Gardner's primary submission was that although neither Art.170(2) of the Companies Law nor para (3)(iv) of the October 2013 order confers upon the Liquidators an express power to sell the Property, such a power is plainly to be implied into both provisions. Alternatively he submitted that if that was wrong, the Court should confer an express power of sale on the Liquidators pursuant to para (3)(vi) of the October 2013 Order.
30. On the assumption that the Liquidators have power to sell the Property, the next question is the nature of the Court's jurisdiction when, as here, a liquidator seeks the approval of the Court to the exercise of that power. In this respect Advocate Gardner drew our attention to the relevant case law in England under two heads, namely:-
(a) where the court's sanction is required; and
(b) where no sanction is required.
31. In England (as in Jersey) certain powers of a liquidator cannot be exercised without the sanction of the court or the liquidation committee (s.167(1)(a) of the Insolvency Act 1986 ("the 1986 Act") and Art.170(1) of the Companies Law). If in such a case the liquidator applies to the court for sanction, the decision is that of the court. Thus in Re Greenhaven Motors Ltd (in liquidation)  1 BCLC 635 Chadwick L.J., in the context of what the Court of Appeal treated as an application by a liquidator for sanction to compromise proceedings, said as follows (at p.643):-
"In my view, the correct approach in cases under s.167(1)(a) of the Act was described by Lightman J. in Re Edennote Ltd (No 2)  2 BCLC 89 at 92. He said:-
'Where a liquidator seeks the sanction of the court and takes the view that a compromise is in the best interest of the creditors, in any ordinary case, where (as in this case) there is no suggestion of lack of good faith by the liquidator or that he is partisan the court will attach considerable weight to the liquidator's views unless the evidence reveals substantial reasons why it should not do so, or that for some reason or other his view is flawed.'
In deciding whether or not to sanction a proposed compromise the court must consider whether the interests of those, whether creditors or contributories, who have a real interest in the assets of a company in liquidation are likely to be best served (i) by permitting the company to enter into that compromise with all the terms that it contains; or (ii) by not permitting the company to enter into that compromise. It is not for the court to speculate whether the terms of the proposed compromise were the best that could have been obtained; or whether the proposed compromise would have been better if it did not contain all the terms that it does contain. Unless it is satisfied that, if the company is not permitted to enter into the compromise on the terms which the liquidator has negotiated, there will then be better terms or some other compromise on offer, the decision is between the proposed compromise and no compromise at all.
In reaching that decision, the court may have to weigh the different interests of creditors and contributories and, perhaps, the different interests of preferential and non-preferential creditors. It will not give weight to the wishes of those who will be unaffected whichever way the decision goes; for example, the interests of contributories who have no realistic prospect of receiving a distribution in any foreseeable circumstances, or the wishes of preferential or secured creditors who will be paid in full in any event. Subject to that, the court will give weight to the wishes of creditors and contributories whose interests it has to consider, for the reason that creditors and contributories, if uninfluenced by extraneous considerations, are likely to be good judges of where their own best interests lie. For the same reason the court will give weight to the views of the liquidator, who may, and normally will, be in the best position to take an informed and objective view. But, as I have said, at the end of the day it is for the court to decide whether or not to sanction the compromise."
32. In England, even where the sanction of the court is not required, a court winding up process nevertheless remains subject to the control of the court and a creditor or contributory may apply to the court with respect to the exercise or proposed exercise of a liquidator's powers (s.167(3) of the 1986 Act). Further, if any person is aggrieved by a liquidator's decision generally in a court winding up, that person can apply to the court and the court may confirm, reverse or modify the act or decision (s.168(5) of the 1986 Act). When faced with such an application, the court's role is more limited. As Chadwick L.J. went on to say in Re Greenhaven Motors Ltd (at p.643):-
"Nothing that I have said is intended to cast doubt on the correctness of the approach in Leon v York-o-Matic Ltd ...  1 WLR 1450 in cases under s.167(3) of the Act. In cases of that nature the court is asked to control the exercise of a power for which the liquidator does not require sanction or, exceptionally, for which he has obtained sanction from the liquidation committee. The liquidator has taken a decision which under the Act he is entitled to take. It is right that the court should not interfere in such a case unless the liquidator is acting mala fide or his decision is one which no reasonable liquidator could take."
33. Turning to the position in Jersey, in Branch & Manning (as joint liquidators of AAA Holdings Ltd.) v McEvoy  JRC 110, which again involved the court's sanction of a compromise of proceedings, the Royal Court cited with approval the passage from the judgment of Chadwick L.J. which we have quoted at para 30 above as reflecting the correct approach of this Court to applications by liquidators under Art.170(1) of the Companies Law. The Court held that the compromise of a claim proposed by a liquidator will be sanctioned by the Court if it is in the best interests of all the creditors of the company and that the liquidator's view as to the creditors' best interests will normally be given considerable weight. No Jersey authority was cited to us on the approach to be adopted where the sanction of the court is not required, but Advocate Gardner submitted that there is no reason to suppose that it would differ from the English approach.
34. In the present case, no sanction of the Court is required by statute. Conversely, this is not a case in which a creditor or contributory is applying to the Court for a review of the exercise of a power by the Liquidators. Effectively, therefore, the present application constitutes a third category of case where a liquidator voluntarily seeks the sanction of the Royal Court with no statutory requirement that he should do so. In such a category of case, which of the tests set out above should the Court adopt? It was Advocate Gardner's submission that it was unnecessary for the Court to decide that issue because, he said, whichever test was adopted the outcome would be the same, namely that the proposed sale to SLI should be approved.
35. Hawksford has potential claims against the Companies as an ordinary creditor in respect of its fees, and, in its capacity as Trustee, as a contributory in respect of the Trust's shareholding in EHL. The Liquidators accepted that Hawksford would have a right to object to their application in its capacity as an ordinary creditor but submitted that since there was no realistic prospect of any distribution to contributories, it could not object in its capacity as trustee. Since Hawksford/the trustee did not in the event object to the application, this point is now academic and we say no more about it.
36. Advocate Gardner understandably based his submissions on the evidence of Mr Buckley and Mr Rabet. We have already set out the relevant history in paras.13 to 15 above. Mr Rabet's evidence as set out in his Affidavit was as follows:-
"18. The Joint Liquidators are satisfied that the marketing effort has been fully and professionally carried out by the agents instructed and we are content to rely on the agents' advice and the views of the agents as expressed in Mr. Buckley's affidavit.
19. Accordingly, the Joint Liquidators are content to proceed with the sale on the terms we have reached with the proposed purchaser."
37. Mr Buckley's Affidavit commended the proposed sale in the following terms:-
"The Preferred Bidder's current offer
41. We have marketed the Property far and wide over a sustained period of time. If it is achieved, a sale at £27,000,000 will set a new benchmark for Jersey. Getting to the point where this offer is on the table has taken a huge amount of effort to achieve from our perspective in terms of attracting investment which might otherwise be placed in London or other parts of the UK, in favour of Jersey. While Jersey is an attractive alternative investment market for buyers who traditionally buy in London and the regions of the UK, the reality is that it does present particular extra hurdles for any would-be buyer and the Jersey market is regarded as perhaps more 'illiquid' than that of the UK. There are various important differences which include, for example, the unique conveyancing process which exists in Jersey whereby contracts of sale are passed before the Court rather than through a two-stage exchange and completion process. This is very different to the UK and is often not familiar to foreign buyers.
42. In the circumstances, and in light of the extra hurdles which Jersey presents to any foreign buyer, I am totally satisfied that a sale at £27,000,000 represents the best price which can be obtained for the Property in the current market. This is particularly so as there are only a small number of pension funds that I am aware of who have invested in significant Jersey commercial property.
Risks of not proceeding with the Preferred Bidder's current offer
43. There are several reasons why, in my view, it would be unwise not to make every effort to proceed with the Preferred Bidder's current offer at £27,000,000.
44. First, we have no certainty whatsoever that the current liquidity bubble in London is going to maintain. Concerns are being expressed that the London market is presently 'overheating' and that investment at present levels may not continue to rise at the same pace going forwards. It goes without saying that the world is presently very unsettled and the property market has shown itself to be sensitive to change and global events.
45. Second, due to its size and location, the Property represents something of a unique proposition in Jersey. By comparison with London, Jersey is tiny and is regarded as a somewhat illiquid marketplace. There are scarcely any similar 'prime' properties of this kind in the local market. This is quite different to London where there is plenty of liquidity. Investment buyers generally prefer to buy property in London if they have the choice. In short, there are very few investors who are prepared to stand up and invest a sum like £27,000,000 in commercial property in Jersey. Now that one has been found, every effort should be made to secure the sale.
46. Third, the current lease on the Property is decreasing. If this sale opportunity is lost, we will move into 2015, from which there will be one year less on the lease and one year less before the tenant's next break clause in November 2021. Every year which the lease decreases (and every year closer to the break clause falling due) makes the Property less attractive to any would-be investment buyer as the value of the asset is diminishing.
47. Fourth, despite the extensive marketing efforts which have taken place, there are no alternative offers to buy the Property which are as attractive in the round as the SLI offer. Several local agents have had an opportunity to make a bid on behalf of clients but have chosen not to do so. There are a limited number of pension funds who are sufficiently familiar with Jersey to be prepared to invest a sum like £27,000,000 in commercial property here. SLI has the particular advantage of having bought and sold property in Jersey in the past. The fact that they are well familiar with the Jersey market marks them out from other potential buyers of the Property. The offer which has been put forward by the under-bidder is not considered to be attractive for a wide variety of reasons.
48. Fifth, if we were not to proceed with the Preferred Bidder's current offer, the only alternative would be to return to the market again and seek another buyer. This would be the third time that we have gone to market. In my view, it is inevitable in these circumstances that a certain amount of stigma will attach to the Property and buyers will start to show concern as to why it has been on the market over such an extended period. This factor would tend to operate against a sale at the same level.
49. Sixth, the Preferred Bidder has expressed its wish to proceed quickly, within 15 days of the receipt of sales documentation. There is a risk that we will lose the current buyer if the sale was not to be completed by the year end.
50. Seventh, although I believe the market is recovering, it still remains fragile. We are certainly not in the [heyday] which existed before the global financial crisis when the Property may have achieved a higher sale price. The Property is only worth what a buyer is prepared to pay for it. In my view, anyone suggesting that this Property can be sold for more than £27,000,000 is not taking into account the current market conditions, where this Property is located in the world and also the outcome of the recent rent review.
Relief sought from the Court
51. As seller's agent, it is our function to achieve the best possible value in any sale of the Property. We now have a willing buyer at a suitable price and heads of terms have been reached. In our view, the ingredients are there for [the] transaction to proceed and every effort should now be made to ensure this happens.
52. Although there has been an improvement, the current market place is not the same as it was prior to the global financial crash. There has been some improvement, but we are [nowhere] near the [heyday] which existed before the global financial crisis.
53. SLI are seasoned buyers in Jersey. They are well represented by serious investment agents and lawyers and have put significant investment into the sales process. In my view, the option of going back to market will involve significant risk for no obvious gain and is not attractive in these circumstances. A sale of the Property at £27,000,000 will set a new benchmark for Jersey and I therefore support the Liquidators' efforts to proceed with the sale."
38. One matter which only emerged during the hearing was that HSBC (which in an email dated 1st December, 2014, had confirmed its consent to the sale of the Property for £27,000,000) had in June 2014 commissioned an open market valuation of the Property. The valuation of July 2014 produced a figure of £28,000,000.
39. As we have already recorded, BBA supported the Liquidators' application.
40. As we have also recorded, no creditor opposed the Liquidators' application.
41. We first address the outstanding issues of law and then turn to the facts.
42. We limit ourselves to the first two legal issues identified above.
43. We are conscious that we have not had the benefit of full argument on this point but it is nevertheless a point which we have to decide. We have no doubt that the Liquidators' primary submission is correct. Taking first Art.170(2) of the Companies Law, it is clear to us that AI(E) would, as the owners of the Property, have had the power to sell the Property prior to going into liquidation. That power falls within the definition of "any other power" for the purposes of Art 170(2), so that the Liquidators may now exercise that power in AI(E)'s place. By a parity of reasoning, the powers of AI(E) which are now vested in the Liquidators by virtue of para (3)(iv) of the October 2013 order must, in our view, likewise encompass the power to sell the Property. Any other conclusion would make no sense whatsoever. If a liquidator did not have power to sell an asset of the company which he was liquidating, there would be no way in which he could discharge his basic responsibility to realise the company's assets for the benefit of the company's creditors.
44. If that conclusion were to be wrong, we would unhesitatingly exercise our powers under para (3)(vi) of the October 2013 order to confer on the Liquidators the power to sell the Property, for the same reasons as set out in the preceding paragraph.
45. Given that again we have not had the benefit of full argument on this point we consider that we should not express any concluded view, in circumstances where, as we explain below, we are persuaded by the Liquidators that our conclusion on the facts would be the same whichever test we applied.
46. Turning to the merits of the 2014 Representation, the evidence adduced by the Liquidators has, we repeat, not been challenged or contradicted by any evidence adduced by any creditor. We find the Liquidators' evidence compelling and we accept it. We also remind ourselves that the offer by SLI is the only offer to purchase the Property for £27,000,000 and that the offer by the under-bidder is, in Mr Buckley's words "not considered to be attractive for a wide variety of reasons". (Advocate Gardner explained in his oral submissions that he was not proposing to reveal the details of the under-bid because it would not be wise to do so; we agreed with that approach.) The result is that if the agreement with SLI were not to proceed, the only alternative would to return to the market yet again. Paraphrasing what Chadwick L.J. said in Re Greenhaven Motors Ltd., there is no better deal to be obtained than that which the Liquidators and their agents have negotiated. The choice is, therefore, between the proposed sale to SLI and no sale at all.
47. As for the £28,000,000 valuation obtained by HSBC in July 2014, we recognise that valuation can never be an exact science. In those circumstances the difference of less than 4% between the £27,000,000 being offered by SLI and the £28,000,000 valuation is, in our view, insignificant. Accordingly that valuation provides, in our view, strong support for the Liquidators' proposal to sell the property for £27,000,000 to SLI.
48. In those circumstances we see no reason whatsoever to take issue with Mr Rabet's recommendation at para 25 of his Affidavit that the proposed sale to SLI should proceed on the agreed terms. Accordingly if the correct legal approach were for the Court to exercise its own discretion, we would unhesitatingly exercise that discretion by approving the proposed deal with SLI. Alternatively if the correct test is that we should not interfere unless the Liquidators are acting in bad faith or their decision is one which no reasonable liquidator could take, we decline to interfere; bad faith is not alleged and the decision of the Liquidators is plainly not just reasonable but, we consider, the only decision that a reasonable liquidator could take.
49. It is for these reasons that we granted the declarations sought by the Liquidators. We therefore declare that the Liquidators have the power to sell and convey the freehold interest in the Property and we approve the transfer of the freehold interest in the Property by the Liquidators to SLI or its designated subsidiary for £27,000,000.
50. After we announced our decision to grant the declarations sought by the Liquidators, Advocate Gardner applied for an order that the Liquidators' costs of the Representation be treated as an expense in the winding up of AI(E). We acceded to that application and we so order.
Companies (Jersey) Law 1991.
Insolvency Act 1986.
Re Greenhaven Motors Ltd (in liquidation)  1 BCLC 635.