Jersey Unreported Judgments

Companies - application for letter of request for appointment of administrators.

[2015]JRC260

Royal Court

(Samedi)

16 December 2015

Before     :		J. A. Clyde-Smith, Esq,., Commissioner, and Jurats Nicolle and Sparrow
Between	Siena SARL		Representor
And	Glengall Bridge Holdings Limited		First Respondent
And	Newbridge (G.P.) Limited		Second Respondent
And	Newbridge (G.P.) Limited in its capacity as General Partner of Newbridge Limited Partnership		Third Respondent
And	Linray Limited		Fourth Respondent
And	Omey Limited		Fifth Respondent
And	Gryphon Limited		Sixth Respondent

IN THE MATTER OF THE REPRESENTATION OF SIENA S.A.R.L. AND IN THE MATTER OF THE INHERENT JURISDICTIONOF THE COURT

AND IN THE MATTER OF AN APPLICATION TO ISSUE A LETTER OF REQUEST TO THE HIGH OF ENGLAND AND WALES IN RESPECT OF THE FIRST TO SOXTH RESPONDENTS FOR THE APPOINTMENT OF AN ADMINISTRATOR

Advocate N. A. K. Williams for the Representor.

Advocate E. B. Drummond for the Respondents.

Advocate J. M. P. Gleeson for the Interveners.

judgment

the commissioner:

1.        The representor ("Siena") applies to the Court for a letter of request to be issued to the High Court of England and Wales for the appointment of administrators to the respondents (all Jersey incorporated companies) on the basis that their main assets are situated within the jurisdiction of the High Court and that administration in England (which is not available in Jersey) would be in the interests of all the creditors. 

2.        The application follows a line of cases where such requests have been issued in similar circumstances (see In re Alard Investments Limited [2015] JRC 137, In re HSBC Bank Plc [2013] JRC 046, In re RBS Plc [2012] JRC 080, In re REO (Power Station) Limited [2011] JRC 232A and In re Anglo Irish Asset Finance [2010] JRC 087) and the English Court of Appeal has recently confirmed its ability and willingness to assist in response to such requests (see HSBC Bank Plc v Tambrook (Jersey) Limited [2013] EWHC 866 (Ch)). 

3.        This application differs, however, in two respects:-

(i)        Whilst it is accepted that the respondents are insolvent on the cash-flow test, there is a possibility that they are solvent on the balance sheet test. 

(ii)       The appointment of administrators might give rise to a material reduction in the value of the assets of the respondents, which will disproportionately prejudice the interests of the unsecured creditors and the shareholders. 

Background

4.        There is no dispute as to the factual background, which although complex, can be summarised in this way:-

(i)        Siena is a special purpose vehicle, wholly owned by Meadow Real Estate Fund II L.P., an entity managed by Meadow Capital Management Limited ("Meadow"), which is registered with the New York Securities and Exchange Commission and is a fund manager. 

(ii)       Siena is a creditor of the first respondent, pursuant to a mezzanine finance agreement dated 7^th March, 2014.  The original principal amount of the facility provided by Siena to the first respondent was £14.5M ("the Mezzanine loan"). 

(iii)      The remaining respondents were a party to the Mezzanine loan as guarantors, hence the financial position of the respondents being considered on a consolidated basis. 

(iv)      The respondents are all managed and controlled from Jersey.  Together with an English company, Glenart Limited, they carry on the business of investment in and development of a number of adjacent properties in London called the Glengall Bridge Estate, Millwall Dock, E14 ("the property"), title to which vests in the respondents. 

(v)       At the time the Mezzanine loan was advanced, there was an existing loan outstanding in favour of Bank of Scotland Plc ("the Senior loan") and by the terms of an intercreditor agreement, the Mezzanine loan was subordinated to the Senior loan. 

(vi)      Both the Senior and Mezzanine loans are governed by English law and both are secured by way of fixed and floating charges over the assets of the respondents. 

(vii)     The respondents are in default of the provisions of the Mezzanine loan.  The first event of a default occurred on 31^st July, 2014, but latitude was shown by Siena which remained supportive of the respondents until 30^th September, 2015, when it issued a formal demand for repayment.  Interest under the Mezzanine loan is at the fixed rate of 24.63% per annum, compounded quarterly, rising to 29.63% following a default and the amount due under the facility is £31,376,912.  Enforcement could not take place until a further 45 days had elapsed and that expired on 14^th November, 2015. 

(viii)    The Senior loan has been purchased by an entity related to Meadow.  The respondents are in default of that facility and it was placed on demand on 19^th November, 2015, although repayment has not been demanded.  The amount outstanding under the Senior loan is circa £16.6M.  The new senior lender does not oppose the enforcement of the Mezzanine loan or the appointment of administrators. 

(ix)      By letter dated 20^th November, 2015, Mr Patrick Conlan of Glenart Limited complained of what he said was the failure of both secured lenders to engage with a view to a consensual outcome and gave notice that unless details of the enforcement steps they intended to take were given by 23^rd November, 2015, the respondents would take their own steps to commence insolvency proceedings in Jersey.  He expressed concern that the appointment of administrators by the English court would crystallise significant UK tax liabilities prejudicial to the existing unsecured creditors and shareholders. 

(x)       It is admitted by the respondents that they are in default both under the Mezzanine and Senior loans and are insolvent on the cash flow test. 

Insolvency regime

5.        It was not in dispute that if an insolvency regime is to be put in place, then the appointment of administrators by the English courts was in the best interests of all of the creditors for all the reasons canvassed in the previous cases cited above and which it is unnecessary to rehearse for the purposes of this judgment. 

6.        In this case, there is a pre-let agreement with Telecity Plc ("Telecity") over the northern part of the site and planning applications are in progress in relation to the southern part of the site which is earmarked for residential development.  The project needs active management in order to maximise value for all the creditors, which can be achieved through an English law administration and which cannot be achieved under any Jersey law insolvency process. 

7.        Siena is entitled unilaterally to appoint receivers over the property, who would be entitled to realise the property by sale at open market value with the proceeds (after costs) being distributed to the secured creditors and with any sums remaining thereafter being distributed to the persons entitled.  However, as a receiver will be appointed in relation to the property, the procedure would not enable the overall control of the businesses and assets of the respondents afforded by administration, which Siena considers more appropriate in the context of a relatively complex structure with different freehold and leasehold interests and the property being vested in different respondents and where a strong and coordinated management of those assets is required in order to preserve and maximise value.  The other parties do not demur from this. 

The issue

8.        The issue before the Court is therefore not what insolvency regime to request be put in place, but whether, on the application of the interveners supported by the respondents, it should adjourn the application for a letter of request to be issued to the English High Court until the end of February 2016 (the significance of which we will explain later), in order to see whether a consensual approach can be agreed between the respondents and Siena.  Before turning to the reasons put forward for such an adjournment, we need to deal next with the interveners. 

The interveners

9.        Advocate Gleeson applies to intervene on behalf of the shareholders of the respondents, namely Mrs Mary Connolly, Mr Michael Cosgrave, Minerva Trust Company Limited as trustee of the Assam Trust, Mr Neville O'Boyle as trustee of the Mill Harbour Trust, Mr Cosgrave as trustee for himself and his wife Mrs Nadine Cosgrave, and Mrs Helen Conlan. 

10.      Of these, we are told only Mr Cosgrave and Mr Conlan, are actively involved in the business of the respondents. 

11.      Advocate Gleeson also sought to intervene on behalf of the following unsecured creditors, namely Mr Conlan, Tameric Management Consultants Limited and Glenart II Grosvenor Crescent Limited. 

12.      Collectively, these unsecured creditors claim to be owed £7.8M by the respondents.  This figure includes some £7.35M of what may be intra group loans.  The affidavit of Mr Raymond John Wood of Minerva Trust and Corporate Services Limited attaches a schedule of unsecured creditors totalling only £1.7M (excluding any intra-group loans), and a consolidated statement of assets and liabilities as at 23^rd November, 2015, drawn up by Mr James Andrew McDaniel of Meadow, from information provided by the respondents and exhibited to his affidavit, lists the claims of unsecured creditors as totalling a lower figure still of £882,680. 

13.      We did not have time to explore these discrepancies with the parties during the hearing, but make the observation that if the claims of the unsecured creditors are as high as £7.8M as stated by Mr Conlan in his affidavit, it would appear to put paid to any possible argument that the respondents may be balance sheet solvent. 

14.      Advocate Williams for Siena resisted the shareholders and unsecured creditors being convened to the hearing on two grounds:-

(i)        The respondents had all been convened.  They had corporate directors on whose behalf an affidavit had been sworn by Mr Woods and they were represented at the hearing by Advocate Drummond.  There was no need, therefore, to convene the shareholders of the respondents who could have nothing to add to what the respondents themselves may have to say.  If there was any equity, at the end of the day it would accrue to the respondents in any event, and not directly to the shareholders.  

(ii)       The unsecured creditors represented by Advocate Gleeson were connected to the respondents and supportive of them.  The respondents could therefore speak for them. 

15.      In the case of In re RBS, the Court had refused a late application by three creditor companies which lay behind the insolvent respondent in that case.  The application was brought very late, was not supported by affidavit and the individual directors concerned had been fully involved in the business of the insolvent respondent and all of the negotiations leading up to the application.  The late application was seen by the Court as an abuse of process. 

16.      In this case only two of the shareholders, we are told, have any involvement in the business of the respondents and the applications are supported by affidavits.  Furthermore, the application differs from those previously brought before the Court for the reasons summarised in paragraph 3 above. 

17.      Taking first the position of the unsecured creditors, whilst connected, they are still creditors and have a clear interest in the matter.  We can see no reason to deny their application to intervene.  Indeed, in general terms and barring the kind of procedural abuse to which the Court took exception in the case of In re RBS, we can see no reason why the Court would deny any creditor the ability to intervene in an application of this kind. 

18.      The position of the shareholders is more difficult and there is merit in Advocate Williams' submission that there is a duplication in convening both a company and its shareholders.  However, Advocate Drummond and Advocate Gleeson made the point that when a company becomes insolvent, the directors' duties shift from the shareholders to the creditors as a whole and it may be difficult therefore for the directors to properly represent the interests of the shareholders, which may well conflict with the interests of the creditors.  Furthermore, as Advocate Drummond pointed out, there was a practical issue in the directors using the funds of an insolvent company to put forward the views of the shareholders, when they can pay for representation themselves.  

19.      The Court has a discretion in these matters and each case will turn on its own facts, but because in this case it was argued that the respondents were balance sheet solvent giving the shareholders an interest in the outcome, and because the duties of the directors have now shifted towards the interests of the creditors, we think it right to allow the application of the shareholders to intervene. 

20.      We therefore give the shareholders and the unsecured creditors represented by Advocate Gleeson leave to intervene.  In practice, the Court dealt with all of the applications before it in the round and we therefore have heard their substantive arguments for an adjournment. 

Application for an adjournment

21.      The Court, in issuing a letter of request, is exercising its inherent jurisdiction which was helpfully analysed in the case of In re REO, where Bailhache, then Deputy Bailiff, concluded at paragraph 16:-

"All these considerations, however, go to support these two propositions:-

(i)        The Court does lend its assistance in an appropriate case to a process by which formal proceedings against a debtor can be suspended in order to achieve an orderly realisation of the debtor's assets;

(ii)       In insolvency matters generally, the Court has in the past exercised an inherent jurisdiction in a number of different aspects."

22.      The Court has a discretion whether or not to issue a letter of request and as to the reasons for the exercise of that discretion, he went on to say this at paragraph 18:-

"It seems to us that the Court should be prepared to contemplate issuing a letter of request if it is in the interests of the creditors, or if it is in the interests of the debtor or if it is in the public interest.  In relation to the latter of these three considerations, the public interest obviously includes, indeed we think as a matter of priority, a satisfactory methodology for dealing with the interests of the creditors and the debtor. Subordinate to these considerations in relation to the public interest is also the interests of the Island in terms of its reputation outside these shores.  Public policy considerations do not overtake the requirements to do justice as between those who are directly affected, and in our view is therefore subordinate to those interests when it comes to exercising a discretion in a matter of this kind, but we can have regard, at the edges of our discretion, to the fact that a major insolvency of a Jersey company, causing extensive damage to creditors and debtor alike is not in the best interests of the island, and this can operate as an additional reason to exercise the discretion to issue a letter of request."

23.      The overriding requirement therefore is for the Court to do justice as between those who are directly affected by such a letter of request being issued and two arguments were put forward for an adjournment of any such letter being sent, namely that there was a possibility firstly of the respondents being balance sheet solvent and secondly of Telecity terminating the pre-let to the prejudice not only of the shareholders but the unsecured creditors. 

24.      Taking first the possibility of balance sheet solvency, this was essentially based upon the valuation Siena had obtained from Cushman & Wakefield dated 11^th November, 2015, which gives a total valuation of the various elements of the property at £54.5M, and the consolidated statement of assets and liabilities drawn up by Mr McDaniel from information provided by the respondents.  Using the Cushman & Wakefield valuation, this statement shows the net assets of the respondents on a consolidated basis of £5.2M.  Previous analysis provided by the respondents as at 15^th October, 2015, shows an overall net asset position of a little over £2M on estimated values as at that date. 

25.      This has to be compared with the actual negotiations with prospective purchasers that have taken place in the period leading up to Siena calling in its facility.  Heads of terms have been entered into with Peveril Securities Limited for the sale of the northern part of the site (which is the subject of the Telecity pre-let) in an amended sum of £30M, but out of that, the respondents wish to retain approximately £4M, contrary to the terms of the Mezzanine loan.  This indicated to Siena that the shareholders are not in a position to fund the development of the balance of the site. 

26.      A preliminary indication of an offer of £16M had been received for the southern part of the site, with an unparticularised overage provision which might result in further sums becoming payable over seven years, depending on planning outcomes.  According to Mr Conlan the overage payments could be worth between £7M to £20M.  

27.      These offers/indications combined come to £46M for the whole property which, if sold in early course, is not sufficient to pay the secured creditors.  Turning to the Telecity pre-let, this can be terminated by Telecity if an "Event of Insolvency" occurs, which, on the basis of the valuation obtained by Siena from Cushman & Wakefield of 13^th November, 2015, would result in a reduction in the value of the property of some £10.5M, wiping out not only any possibility of any return to the shareholders but any chance of the unsecured creditors receiving a payment.  

28.      An Event of Insolvency is defined as: -

"Event of Insolvency

(a)       in respect of a company, limited liability partnership or other legal person:

the appointment of a receiver, an administrative receiver or an administrator, the making of a proposal for a voluntary arrangement with creditors (or any class of them) including a scheme of arrangement under section 425 of the Companies Act 1985, entering into liquidation whether compulsory or voluntary (except for the purpose of amalgamation or reconstruction), being unable to pay its debts under section 123 of the Insolvency Act 1986, the taking of any steps with a view to the dissolution or striking-off the register of the company, the determination of a limited liability partnership or other legal person or the happening outside the United Kingdom of any analogous event or proceedings."

29.      Accordingly, the appointment by the English court of administrators would unarguably constitute an Event of Insolvency, allowing Telecity to terminate the pre-let or to acquire that part of the property subject to the pre-let agreement at market value.  Whereas Advocate Drummond submitted it was possible to put forward the somewhat technical argument that to date there has been no Event of Insolvency, as defined, because the respondents were not unable to pay their debts under section 123 of the Insolvency Act 1986.  No written demand has been sent to the respondents in the prescribed form, nor have they been determined to be insolvent to the satisfaction of the English Court, as required by that section. 

30.      Advocate Williams responded that in all probability an Event of Insolvency had already occurred under the analogous events in Jersey, whereby formal demand had been made against the respondents.  Furthermore, he points to the provisions of the Telecity pre-let that under certain circumstances allow the senior lender to defeat the acquisition and termination rights of Telecity by nominating a replacement party to adopt the development obligations of the landlord. 

31.      As a consequence of these two features of the application, not seen in previous applications of this kind before the Court, the respondents argue that administration is not in the interests of the respondents and their stakeholders, although if any insolvency regime was to be imposed, administration was the preferred route.  As Mr Wood, on behalf of the respondents, said in his affidavit at paragraphs 7 and 8:-

"Desirability of an adjournment

7.        I do have a concern that significant value might be lost to the respondents if options for a consensual approach to selling the portfolio between the respondents (on the one hand) and Siena plus the senior lender, Glengall Senior Debt Holdco Limited (on the other hand) is not taken to conclusion.  What I have in mind by the term 'consensual approach' is a joint instruction to Cushman & Wakefield (Siena's preferred agent) to carry out the functions which administrators would otherwise carry out.

8.        Whilst I accept that any such consensual approach might not ultimately be agreed or progressed, I believe that an adjournment to the end of February 2016 ought to be granted to allow such discussions to be progressed."

32.      The corporate directors of the respondents had considered the financial position of the respondents and calculated that, putting the demands of the secured creditors to one side, they had sufficient cash and rental income to continue trading, without risk of wrongful or fraudulent trading or payments being set aside under the provisions of the Companies (Jersey) Law 1991 as being at an undervalue or a preference, until the end of February 2016, paying off some £160,000 of essential creditors or debts and paying quarterly interest on the secured loans.  Further quarterly rental income would be available in March 2016.  The unsecured creditors represented by Advocate Gleeson were supportive of the respondents and were not pressing for payment. 

33.      Advocate Gleeson, for the interveners, seeks an adjournment for substantially the same reasons, saying that there was no urgency in the appointment of administrators.  Initially, he was concerned at the little time the interveners had to prepare and respond to the case put forward by Siena, but he did not seek an adjournment for more time in that respect.  As to the consensual approach, the interveners were content for the property to be controlled and dealt with by Siena and its agent, Cushman & Wakefield. 

34.      In terms of additional information that might be of relevance to the Court, he submitted that the tax consequences of the appointment of administrators in England was not clear (a point also raised by Advocate Drummond) and the ability of the senior lender to nominate a replacement to complete the development under the Telecity pre-let had not been explored. 

35.      In his skeleton argument, Advocate Gleeson had proposed a set of directions for the filing of further evidence with a view to a final hearing taking place not before 26^th February, 2016.  However, in discussion he accepted that the Court could not impose the suggested compromise upon Siena and it seems to the Court that the real purpose of the adjournment was to allow the interveners and the respondents to put their proposals and any alternative solutions in detail to Siena with a view to the parties proceeding thereafter consensually. 

36.      Advocate Williams said there was no prospect of a consensual outcome.  Meadow had lost confidence in the respondents and it does not wish Siena to enter into any consensual arrangement.  In his second affidavit, Mr McDaniel says (at paragraphs 7) that "given the ongoing history of default, [Siena] is not prepared to consent to or engage in any further standstill or restructuring".

Decision

37.      In many ways, the respondents are looking for a procedure similar to that provided by a remise des biens in that there is evidence, on the basis of the valuation from Cushman & Wakefield, that the property may be sufficient for a surplus to be available to unsecured creditors.  It is a procedure only available to debtors and is not thought to extend to property outside the Island.  Quoting from the judgment in the case of In re Alard at paragraph 10:-

"10     A remise des biens was not available to the Bank which was a creditor and Jersey heritage is a pre-requisite.  As the Court noted in the case of Representation of RBS Plc [2012] JRC 080:-

'15      The only Jersey insolvency framework ordinarily available to a creditor of a company is that which is contained within the Bankruptcy (Désastre) Law 1990.  Unlike the rescue and work-out features contained within an administration, a désastre has a sudden-death nature which invariably involves cessation of all business activities of the debtor.  It is likely that the Viscount, on a désastre, would engage professionals in the United Kingdom to assist with the realisation of the company's assets but their powers would nonetheless be constrained by the extent of the powers available to the Viscount.

16       The Loi (1839) sur les Remises des Biens makes provision for a process which is in some respects comparable to that of an administration but is not a mechanism that is available to a creditor, only to the debtor.  It seems to us unlikely in the extreme that the Court would grant a remise, were it to be applied for, partly as a matter of jurisdiction as it is doubtful in our view whether it has power to do so over immovable property situated outside the Island but also because an administration order in England would provide a more satisfactory remedy.'"

38.      A remise des biens is a much less flexible remedy than that provided by administration and there is no suggestion from the respondents that it could seriously be put forward as a remedy available to them in this case. 

39.      It is open to Siena (and to the respondents) to apply to have the respondents declared "en désastre" under the Bankruptcy (Désastre) (Jersey) Law 1990 ("the Bankruptcy law").  It is a requirement of such an application that the debtor is insolvent, which is defined under Article 1(1) as meaning the inability of a debtor to pay his or her debts as they fall due, i.e. the cash-flow test. 

40.      The granting of a declaration en désastre is discretionary, although the Court is likely to grant the application where the necessary pre-conditions have been met (see Jersey Insolvency and Asset Tracking 4th edition by Dessain and Wilkins at paragraph 5.2.2).   

41.      A declaration can be recalled under the provisions of Article 7 of the Bankruptcy Law if what the Court of Appeal, in the case of In re Désastre of Blue Horizon Holidays [1997] JLR 124, described as a "stringent balance sheet test" is met: -

"(1)     The Debtor may at any time during the course of the désastre apply to the court for an order recalling the declaration.

(2)      ...........

(3)     The court shall refuse an application made under paragraph (1) where it is not satisfied that property of the debtor vested in the Viscount pursuant to Article 8 or 9 is at the time of such application sufficient to pay in full claims filed with the Viscount or claims which the Viscount has been advised will be filed within the prescribed time."

42.      We can appreciate that if the evidence before the Court on an application for a declaration shows that the debtor will be in a position to meet that stringent requirement within, we suggest, a short time frame, then it may well decline to exercise its discretion to make a declaration in order to avoid both the cost and potential damage of a désastre. 

43.      Whilst there is no application for a declaration before us, the evidence we have seen is quite insufficient, in our view, to enable us to be satisfied that this stringent balance sheet test could be met by the respondents let alone within a short time frame; indeed, no timetable for the sale of the property is put forward.  We take the view, therefore, that on the evidence before us, Siena would be entitled to a declaration en désastre if one was sought.  All parties are agreed, however, that if an insolvency regime is to be imposed, administration is the preferable choice.  

44.      In the same way, the Court might be minded to decline to exercise its discretion to issue a letter of request to the English High Court for the appointment of administrators, if it was satisfied that the assets of the respondents were sufficient to pay all of the creditors in full within a short time frame and this again to avoid the cost and potential damage caused by the appointment of administrators.  Again on the evidence before us we cannot be so satisfied. 

45.      Rather than being asked to refuse the application however, we are being asked to delay the process by which administrators would be put in place (assuming the High Court accedes to the request and we have an opinion from Felicity Toube QC dated 3^rd December, 2015, which we accept, that it would be likely to do so) in order for Siena to agree to a consensual way forward or as Advocate Drummond put it, to judicially crack the parties' heads together.  The Court would be putting on hold the ability of Siena to see the preferred insolvency regime put in place but in the meantime, other creditors, albeit small in proportion, would be paid and there would be no moratorium on creditor claims. 

46.      As to claims by other unsecured creditors (other than those represented by Advocate Gleeson), Mr McDaniel says in his second affidavit, that by letters dated 23^rd and 27^th November, 2015, the respondents requested consent for payment of certain outstanding creditors to prevent proactive action by them.  In addition to any action they may take, the respondents themselves, perhaps though a sense of frustration, have threatened to commence insolvency proceedings in Jersey (see paragraph 4(ix) above).  An administration would of course bring about a moratorium. 

47.      The position in relation to the Telecity pre-let has given us cause for concern, as its potential impact would appear to fall disproportionately on the unsecured creditors, but we take the view that this is not a ground for delaying the appointment of administrators for the following reasons:-

(i)        in general terms the imposition of any insolvency regime is likely to have a negative impact on the value of a debtor's assets, particularly regimes which, unlike administration, have a sudden-death nature;

(ii)       irrespective of that observation, any reduction in the value of a debtor's assets will always disproportionately prejudice the interests of the unsecured creditors precisely because they are unsecured and rank behind the secured creditors;

(iii)      we take the view that in all probability the respondents have already committed an Event of Insolvency by failing to meet the formal demand of Siena, leaving only technical arguments available to it, and by admitting formally in these proceedings that they are insolvent on the cash flow test; and

(iv)      administrators appointed by the High Court must perform their functions with the objective of rescuing the respondents as going concerns and achieving "a better result for the companies' creditors as a whole than would be likely if the company were wound up (without first being in administration)" (Paragraph 3(1) of Schedule BI of the Insolvency Act 1986).  The administrators will therefore have regard to the interests of the creditors as a whole and, out of all the insolvency regimes available, will have the greatest flexibility to achieve a better result for all of them. 

48.      Advocate Gleeson pointed to the very high level of interest payable under the Mezzanine loan enabling Siena to demand some £31M against an initial advance in 2014 of £14.5M all to the detriment of the other creditors and shareholders. 

49.      The rate of interest is indeed very high, giving what Mr McDaniel described as "equity level returns" and it might well be challenged if Jersey law applied, but the facility is made under English law and the amount demanded is not challenged.  We are dealing here with experienced and sophisticated businessmen who have negotiated at arm's length and we do not think that any views we may have as to the fairness or morality of such an agreement should come into the exercise of our discretion. 

50.      The fact of the matter is that the respondents are on their own admission in default and are insolvent on the cash-flow test.  Time has been given to the respondents by Siena but it has now reached the point where it has made final demand and wishes to see the preferred insolvency regime in place.  It does not have to demonstrate urgency; the fact that the respondents are in default is enough.  Furthermore, it is not prepared to enter into any consensual arrangement and we cannot coerce it into doing so. 

51.      Ultimately, we do not regard it as a proper use of the Court's powers to grant a 2½ month adjournment in order, effectively, to put pressure on a creditor to enter into a consensual arrangement with its debtor. 

52.      We have concentrated in the short time available to us on the two issues that arose in this application, which otherwise conforms with those that have been made on many occasions before and, as stated above, we have the benefit of the advice of Felicity Toube QC as to English law.  

53.      In the circumstances, we accede to the application and will issue the letter of request in the form approved both by the Viscount and Felicity Toube QC, subject to one change in the preamble.  Siena may wish to consider whether there are any UK tax considerations which might need to be drawn to the attention of the High Court when it considers the letter of request.  

54.      A residual point arises in relation to the letter of request and that is whether Newbridge (GP) Limited should be listed twice (as it is in the heading to this judgment), the second listing as third respondent in its capacity as general partner of the Newbridge Limited Partnership. 

55.      Having considered the written submissions of Advocate Williams and Advocate Drummond, and because a limited partnership under the Limited Partnerships (Jersey) Law 1994 is not a separate legal person, nor a body corporate, we are inclined to think that Newbridge (GP) Limited should be listed once but in two capacities, namely in its personal capacity and in its capacity as general partner of the limited partnership.  As we understand it as a consequence of Article 11(1) of the Limited Partnerships (Jersey) Law 1994, Newbridge (GP) Limited will have unlimited liability for the liabilities and obligations of the Newbridge Limited Partnership and of course unlimited liability for its own liabilities and obligations.  

Authorities

In re Alard Investments Limited [2015] JRC 137.

In re HSBC Bank Plc [2013] JRC 046.

In re RBS Plc [2012] JRC 080.

In re REO (Power Station) Limited [2011] JRC 232A.

In re Anglo Irish Asset Finance [2010] JRC 087.

HSBC Bank Plc v Tambrook (Jersey) Limited [2013] EWHC 866.

Insolvency Act 1986.

Companies (Jersey) Law 1991.

Bankruptcy (Désastre) (Jersey) Law 1990.

Jersey Insolvency and Asset Tracking 4th edition by Dessain and Wilkins.

In re Désastre of Blue Horizon Holidays [1997] JLR 124.

Limited Partnerships (Jersey) Law 1994.