Jersey Unreported Judgments

En désastre - re Letter of Wishes - reasons.

[2020]JRC199

Royal Court

(Samedi)

30 September 2020

IN THE MATTER OF THE REPRESENTATION OF ANTHONY JOHN WRIGHT AND ALASTAIR REX MASSEY

IN THE MATTER OF MONSOON ACCESSORIZE LIMITED (IN ADMINISTRATION)

AND IN THE MATTER OF ACCESSORIZE LIMITED (IN ADMINISTRATION)

AND IN THE MATTER OF ARTICLE 49 OF THE BANKRUPTCY (DÉSASTRE) (JERSEY) LAW 1990, AS AMENDED

Advocate J. M. Dann for the Representors

judgment

the deputy bailiff:

Introduction

1.        On 13^th July, 2020, we made various orders in response to a Letter of Request from the High Court of England and Wales dated 1^st July, 2020, requesting the assistance of the Royal Court pursuant to Article 49 of the Bankruptcy (Désastre) (Jersey) Law 1990 ("the Law"). 

2.        We now give reasons for our decision. 

Background 

3.        Monsoon Accessorize Limited (in administration) ("Monsoon") and Accessorize Limited (in administration) ("Accessorize") are companies incorporated in England and Wales which are leading retailers of womenswear and accessories respectively.  As a consequence of well-publicised difficulties in the retail sector, both have fallen into financial difficulty. 

4.        Prior to entering into administration in the United Kingdom, Accessorize had 116 stores, Monsoon had 21 stores and there were 123 dual stores. 

5.        Two of the stores are in Jersey - one Accessorize store and one Monsoon store.  Both hold leases of the premises they occupy. 

6.        By way of background, Monsoon was incorporated in 1973 and the first Monsoon stores opened that year.  Accessorize was established subsequently, and the first Accessorize stores opened in 1984.  At that time the Accessorize brand was owned and traded by Monsoon. 

7.        Monsoon became listed on the London Stock Exchange in 1998.  The original creator of Monsoon, Peter Simon, purchased the shares in Monsoon in 2007 and the company was delisted and became privately owned again. 

8.        Accessorize became an independent brand in 2016 when it was transferred to a newly created entity.  The employees who worked exclusively for the Accessorize brand, including the store staff, were then transferred from Monsoon to Accessorize.  However both companies remained closely connected.

9.        Various challenges in the UK retail market led to both companies being subject to a company voluntary arrangement ("CVA") in 2019.  The effect of this process was to reduce the cost to both companies of occupying premises such that it was possible to operate both businesses profitably.  The companies returned to profit, but unfortunately were challenged again by the global public health crisis earlier this year, leading to both companies closing all stores, laying off their staff and thereafter engaging FRP Trading Advice Limited, insolvency practitioners and joint administrators of Monsoon and Accessorize respectively.  Continued trading of the two companies in administration was not likely to be a viable option and thereafter the businesses and assets of both companies were marketed for sale.  All but 35 out of 162 of the stores may now be saved, including the two stores in Jersey.  This is a consequence of purchasers being identified for the business after a process described in the report of FRP, two officers of which were appointed Administrators of Monsoon and Accessorize Limited respectively by the directors of the company on 9^th June, 2020.  The document setting out the proposals of the Administrators, dated 16^thJune 2020, gives the reasons for sale of the companies and the details of the same and why sale as a going concern is in the overall best interests of the creditors.  The Administrators have confirmed that the proposed transaction will achieve a better result for the companies than would be possible if the companies were wound up.  The alternatives to sale of the businesses were considered in the report.  To continue to trade was not an option because the companies would exhaust their working capital in June 2020 and thereafter collapse into insolvent liquidation.  Other options were also considered and discounted.  The principal secured lender and the principal unsecured creditors of the companies were consulted by the Administrators.  303 potential acquirers of the business were identified.  Ultimately three offers for the business were received by the Administrators.  These offers either did not proceed or were not guaranteed to produce a net return to the companies. 

10.      On 22^nd May, 2020, two newly incorporated entities Adena Brands Limited and Adena Services Limited made an offer for certain of the business and assets of the company.  These companies are connected to Mr Peter Simon, the original founder, as he beneficially owns them both.  He is also director of the companies. 

11.      The offer provided credit for the businesses, an option to occupy many of the stores, thus protecting the employment of the majority of employees, and provides for an option to purchase the fixture and fittings in the stores.  The acquisition was completed by sale and purchase agreement dated 9^th June, 2020, the consideration consisting of a credit bid of £8,480.000 and £20,000 on account of the option over the fixtures and fittings.  A personal guarantee from Mr Simon has been provided in respect of the indemnities given in favour of the Monsoon and Accessorize and the Administrators in the sale and purchase agreement.  Accordingly the purchasing companies are assuming responsibilities for the debt of Monsoon and Accessorize and releasing them from various liabilities. 

The Letter of Request

12.      On 1^st July, 2020, the English High Court transmitted to the Royal Court a request in respect of Monsoon and Accessorize requesting that the Royal Court, pursuant to its power under Article 49 of the Law "and/or under customary law and or as a matter of comity to assist and to act in aid of this Court" by, inter alia, ordering that the administration of the companies and the appointment of the joint Administrators be given recognition and effect in Jersey; that the joint Administrators be accorded such powers as are necessary or likely to be necessary to enable them to fulfil and discharge their duties, these powers being the same or similar to those being conferred upon them in England and Wales by virtue of their appointment pursuant to the provisions of the Insolvency Act 1986 and the Insolvency Rules and that the Administrators be entitled to use the powers accorded to them for the purpose of surrendering the lease of the two premises and novating the contracts of employment of the employees in Jersey, and that they shall not exercise their powers for any other purpose other than as provided for in the order of this Court without first returning to the Royal Court for further directions in relation to the proposed exercise of any such powers. 

The Court's jurisdiction

13.      Article 49 of the Law provides: 

"(1) The court may, to the extent it thinks fit, assist the courts of a relevant country or territory in all matters relating to the insolvency of a person, and when doing so may have regard to the extent it considers appropriate to the provisions for the time being of any model law on cross border insolvency prepared by the United Nations Commission on International Trade Law.

(2) For the purposes of paragraph (1), a request from a court of a relevant country or territory for assistance shall be sufficient authority for the court to exercise, in relation to the matters to which the request relates, any jurisdiction which it or the requesting court could exercise in relation to these matters if they otherwise fell within its jurisdiction. 

(3) In exercising its discretion for the purposes of this Article the court shall have regard in particular to the rules of private international law.

(4) In this Article "relevant country or territory" means a country or territory prescribed by the Minister."  

14.      Under Article 6(e) of the Bankruptcy (Désastre) (Jersey) Order 2006, the United Kingdom is prescribed as a relevant country for the purpose of Article 49 of the Law.  Birt, Deputy Bailiff observed in the case of In the matter of Montrow International Limited and Likouala [2007] JRC 107 that:

"Jersey does not have the concept of placing a company in administration but, given that under English law, an administrator once appointed is the person empowered to act for the company, this Court would, in conformity with the remarks of Lord Hoffman, recognise the administrator of an English company as being the person entitled to act on behalf of that company."  

15.      In a number of recent cases the Royal Court has exercised its discretion so as to grant relief to foreign liquidators and administrators. 

The exercise of the Court's discretion

16.      The purpose of this application for recognition of the Joint Administrators is ultimately to ensure that two well-known shops in Jersey can continue to trade and that the 20 employees who work in these stores can retain their jobs.  It is plainly a desirable outcome.  The joint Administrators intend to use their powers only for the purpose of surrendering the existing leases of the properties and for novating the employment contracts of the employees.  New leases will be entered into with the landlords of the two premises.  As to the Jersey creditors of Monsoon and Accessorize, the Court was provided a list of the same.  Apart from the landlords owed rent, the main creditors were the Parish of St Helier, income tax, social security, the utilities and a property agent.  The sums owing by way of parish rates, tax and social security payments are priority debts pursuant to Article 32 of the Law.  The sums owing to the utilities are not.  The purchasers have confirmed that they will be responsible for paying in full the unpaid income tax, social security and Parish rates in place of Monsoon and Accessorize respectively.  As to the unsecured creditors, including those in Jersey, the Administrators envisage a distribution of 3.36 pence in the pound so far as Accessorize is concerned and 1.76 pence so far as Monsoon is concerned.  The Viscount was consulted in relation to this application and confirmed that she had no observations to make.  Accordingly, in our discretion pursuant to Article 49 of the Law and as a matter of comity, we granted the Letter of Request and made orders substantially in the terms of the assistance sought by the English High Court. 

Authorities

Bankruptcy (Désastre) (Jersey) Law 1990 as amended. 

Insolvency Act 1986 and the Insolvency Rules

Bankruptcy (Désastre) (Jersey) Order 2006

In the matter of Montrow International Limited and Likouala [2007] JRC 107