Before : |
J. A. Clyde-Smith OBE., Commissioner, and Jurats Blampied and Ramsden.
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Matthew David Smith, Daniel James Mark Smith, Daniel Francis Butters, Robert Scott Fishman and Maher |
Representors |
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IN THE MATTER OF ARCADIA GROUP LIMITED (IN ADMINISTRATION)
AND
IN THE MATTER OF REDCASTLE LIMITED (IN ADMINISTRATION)
AND
IN THE MATTER OF TO TOP SHOP/TOP MAN LIMITED (IN ADMINISTRATION)
AND
IN THE MATTER OF TOP SHOP/TOP MAN (PROPERTIES) LIMITED
AND
IN THE MATTER OF BURTON/DOROTHY PERKINS PROPERTIES LIMITED (IN ADMINISTRATION)
AND
IN THE MATTER OF DOROTHY PERKINS TRADING LIMITED (IN ADMINISTRATION)
AND
IN THE MATTER OF BURTON TRADING LIMITED (IN ADMINISTRATION)
AND
IN THE MATTER OF ARTICLE 49 OF THE BANKRUPTCY (DESASTRE)(JERSEY) LAW 1990 AS AMENDED
Advocate J. Dann for the Representors.
judgment
the commissioner:
1. On 2nd December 2020, the Court recognised the appointment of the Representors ("the Joint Administrators") as administrators of Arcadia Group Limited, Redcastle Limited, Top Shop/Top Man Limited, Top Shop/Top Man (Properties) Limited, Burton/Dorothy Perkins Properties Limited, Dorothy Perkins Trading Limited and Burton Trading Limited, all companies incorporated under the laws of England and Wales ("the Group") and this pursuant to a letter of request issued by the High Court of England and Wales dated 1st December 2020.
2. The Group comprises very well-known fashion retailers. Redcastle Limited owns two freehold properties in Jersey, namely 40 King Street and 4 New Street, St Helier, let to Top Shop/Top Man Limited. The retail brands traded from these properties are Top Shop and Burton respectively.
3. Burton/Dorothy Perkins Properties Limited holds a contract lease of the store located at 31 Queen Street, St Helier, from which the well-known women's fashion retailer Dorothy Perkins trades. The Group also trades via a Miss Selfridge concession in Voisin and a Wallis concession in de Gruchy.
4. The affidavit of Matthew David Smith, a licensed insolvency practitioner and partner of Deloitte LLP and one of the Joint Administrators shows that in 2019, the Group was facing significant financial difficulties and developed plans to restructure its business. These plans included certain of the companies within the Group seeking the approval of their unsecured creditors for company voluntary arrangements which were approved on 12th June 2019, and which reduced certain of the companies' obligations and overall improved the Group's financial position.
5. However, trading continued to be difficult and the Group was therefore already vulnerable to market shocks when the Covid-19 pandemic struck. As a result of national lockdown measures, the Group was instructed to close all of its retail outlets in the UK in March 2020. As soon as the potential impact of the pandemic and the March lockdown became clear, the Group took a number of steps to mitigate that impact, but it was not possible to ultimately avoid significant financial damage as a result of the store closures.
6. Further national lockdown restrictions were imposed in England on 5th November 2020, and impact of these restrictions on the Group's finances was significant. The directors took measures to seek to mitigate this financial impact including by seeking additional liquidity, but these measures were largely unsuccessful, and the directors concluded that there were no further steps available that were likely to mitigate the financial impact of the lockdowns/pandemic or otherwise improve the financial position of the Group, so as to enable it to continue to operate as a going concern outside formal insolvency proceedings.
7. The directors had regard to the most recently available information about the tiers into which England would be placed post lockdown and concluded that the companies within the Group were or were likely to become unable to pay their debts as they fell due. An administration application was made to the High Court of England and Wales on 30th November 2020, when the companies were placed into administration and the Joint Administrators appointed.
8. The purpose of the application for recognition was to ensure that the Joint Administrators could continue to trade the stores in the Christmas period and hopefully, to bring about a sale of some or all of the businesses in due course. The effect in the meantime would be that the 32 employees who worked in these stores in Jersey could retain their jobs.
9. The Joint Administrators intended to use their powers in Jersey only for the purpose of trading the businesses for the foreseeable future. In so far as they propose to use their powers for any other purpose, they would return to the Court for further directions before doing so. They confirmed that for the period in which the businesses were traded under their control, they would be responsible for meeting employee wages, Social Security, Income Tax and GST.
10. The letter of request asked the Court to recognise the administration of the companies within the Group and the appointment of the Joint Administrators for the purposes of justice, and to assist the Joint Administrators in the performance of their duties. It asked that the Joint Administrators be accorded such powers as were necessary or likely to be necessary to enable the Joint Administrators to fulfil and discharge their duties, these powers being the same as or similar to those conferred upon the Joint Administrators in England and Wales by virtue of their appointment as administrators and pursuant to the provisions of the Insolvency Act 1986, and as set out in a schedule attached to the letter of request. The letter asked that the Joint Administrators be entitled to use the powers accorded to them to and for the purpose of taking all steps as required in the administration of the companies within the Group in relation to continuing to operate and trade the stores in Jersey, and anything ancillary thereto and that the Joint Administrators should not exercise any of their powers for any other purpose without first returning to the Royal Court for further directions.
11. Article 49 of the Bankruptcy (Désastre) (Jersey) Law 1991 ("the Bankruptcy Law") is in the following terms:
"49 Assistance for other courts in insolvency matters
(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."
12. Under Article 6(e) of the Bankruptcy (Désastre) (Jersey) Order 2006, the United Kingdom is prescribed as a relevant country for the purposes of Article 49(4).
13. Jersey does not have the concept of placing a company in administration, but as the Court said in Tacon v Nautilus Trust Co and Others [2007] JRC 107 at paragraph 26:
"26 ......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 Hoffmann, recognise the administrator of an English company as being the person entitled to act on behalf of that company."
14. The remarks of Lord Hoffman are those made at paragraph 20 in the case of Cambridge Gas Transport Cooperation v the Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] 3 WLR 689 at paragraph 22:
"Corporate insolvency is different in that, even in the case of movables, there is no question of recognising a vesting of the company's assets in some other person. They remain the assets of the company. But the underlying principle of universality is of equal application and this is given effect by recognising the person who is empowered under the foreign bankruptcy law to act on behalf of the insolvent company as entitled to do so in England."
15. The Court has given its assistance to the English High Court on many occasions, the most recent being the case of In re Monsoon Accessorise Limited [2020] JRC 199, the circumstances of which were very similar.
16. The Court was satisfied that it had jurisdiction to grant the recognition and powers requested.
17. The letter of request also asked the Court to consider exercising its discretion to grant a moratorium, which is in the same, or substantially the same terms as the moratorium under paragraph 43 of Schedule B(1) to the Insolvency Act 1986 to the effect that:
(i) No step may be taken to enforce security over the company's property except (a) with the consent of the Administrators or (b) with the permission of the Royal Court.
(ii) No step may be taken to repossess goods in the company's possession under a hire-purchase agreement except (a) with the consent of the Administrators or (b) with the permission of the Royal Court.
(iii) A landlord (or other person to whom rent is payable) may not take any steps or issue proceedings with a view to obtaining an order for cancellation of a lease in relation to premises let to the company except (a) with the consent of the administrators or (b) with the permission of the Royal Court.
(iv) No legal process (including legal proceedings, execution, distress and diligence) may be instituted or continued against the company or property of the company except (a) with the consent of the Administrators or (b) with the permission of the Royal Court.
18. A list of the known creditors in Jersey was provided and it was not extensive, but the Joint Administrators considered that there was a real risk that creditors may seek to repossess assets, enforce security or cancel the lease of the Jersey leasehold property, and/or take other disruptive actions in a way which would undermine the purpose of the administration and the pari passu principle generally. If the lease of a Jersey leasehold property was cancelled, this would prevent the store from continuing to trade whilst the Joint Administrators explore the possibility of the sale of the assets and/or business.
19. A moratorium was in place in the United Kingdom and it was anticipated that a moratorium would be granted by the courts in Guernsey and the Isle of Man.
20. The Court was satisfied that it had the power to order a moratorium under Article 49(2) of the Bankruptcy Law, both by applying English law (as it did in the case of In the Matter of the Representation of Brittain and Edwards [2013] (1) JLR 145) and under its inherent jurisdiction. The concept of a moratorium is not repugnant to the laws of Jersey. Indeed, moratoriums apply in a désastre under Article 10 of the Bankruptcy (Désastre) (Jersey) Law 1990 and in a creditors winding up under Article 159(4) of the Companies (Jersey) Law 1991. Such moratoriums would not restrain secured creditors from exercising certain rights under the Security Interests (Jersey) Law 2012.
21. These were English companies trading throughout the British Isles and it was important that the task of the Joint Administrators was assisted by there being consistency of approach in the various jurisdictions. Moratoriums were or would be in place in the United Kingdom, the Isle of Man and Guernsey. The number of Jersey creditors was small and the amounts due proportionately small. The secured creditor was a large UK financial institution which would be familiar with the granting of moratoriums. The moratorium would be for a limited period and any creditor aggrieved had the ability to apply to the Court for leave to issue proceedings.
22. The Court has a discretion whether to grant assistance to the English court under Article 49 of the Bankruptcy Law and for the reasons set out in the request, this was manifestly a case where out of comity such assistance should be given and, consistent with the approach in the other jurisdictions, a moratorium granted.
23. The Court ordered accordingly.
Authorities
Insolvency Act 1986.
Bankruptcy (Désastre) (Jersey) Law 1991.
Bankruptcy (Désastre) (Jersey) Order 2006.
Tacon v Nautilus Trust Co and Others [2007] JRC 107.
Cambridge Gas Transport Cooperation v the Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] 3 WLR 689.
In re Monsoon Accessorise Limited [2020] JRC 199.
Insolvency Act 1986.
In the Matter of the Representation of Brittain and Edwards [2013] (1) JLR 145
Bankruptcy (Désastre) (Jersey) Law 1990
Companies (Jersey) Law 1991.
Security Interests (Jersey) Law 2012.