Before : |
R. M. MacRae, Esq., Deputy Bailiff, sitting alone |
IN THE MATTER OF AN APPLICATION UNDER THE COURT'S INHERENT JURISDICTION TO ISSUE A LETTER OF REQUEST TO THE HIGH COURT IN ENGLAND AND WALES THAT IT MAKE AN ADMINISTRATION ORDER IN RESPECT OF BETINDEX LIMITED
Advocate M. L. A. Pallot for the Representor.
EX TEMPORE judgment
the deputy bailiff:
1. The Court has been requested to sit at short notice in order to consider an application that it issue a Letter of Request to the English High Court in respect of a Jersey company BetIndex Limited which registered office is at 4 Business Suites Unit, 32 Wharf Street, St Helier ("the Company").
2. The Court has been furnished with a significant amount of material including the affidavit sworn by the current sole director of the Company, Neil Kelly, an affidavit by Richard Toone, and two opinions from English leading counsel.
3. Mr Kelly says the company was formed in 2015 in order to create and operate an innovative form of online gambling product which is the called the Football Index. Football Index is operated on a website at www.footballindex.co.uk. The Company is regulated to provide its gambling business by both the Jersey Gambling Commission and also the UK Gambling Commission. The Court has been shown documentation indicating that there are rather less than 100 customers of the Company in Jersey but over 100,000 in the United Kingdom. Both regulators are aware of the hearing today and there has been correspondence between the advocates representing the Company who make this application today and the Jersey Gambling Commission and the latter are content with the relief that is being sought on behalf of the Company today. Importantly there has also been notification both by email and by notification on the Company's website to customers of the Company that took place on 16th March and provided under the title "Company Announcement":
"All Football Index customers will now be aware that there has been as suspension of the platform. The directors of BetIndex Limited, (the "Company") have resolved that, as a result of the market conditions, customer sentiment and current suspension, it is proper that the Company enter into Administration in the UK under the provision of the UK Insolvency Act 1986.
The benefit of that process is that it provides a chance for the Company to be rescued as a going concern, but also ensures that independent third party professionals are appointment to consider all relevant matters to the Company. That will include all customer complaints and points of view. Our priority is to safeguard the interests of our customers and to seek the best outcome for our community with the goal of continuing the platform in a restructured form.
The Company is a Jersey company. It is therefore necessary to apply to the Royal Court of Jersey for an order of that Court asking that the High Court of England & Wales takes jurisdiction in this matter. That hearing will occur at the Royal Court of Jersey at 0900 on Thursday 18th March 2021.
This is formal notice of that hearing and it is confirmed that the terms of this notice will be provided by the Royal Court of Jersey."
4. It is not necessary for the purpose of this judgment to describe in detail how the Company operates, and the Football Index works. Those who bet using the platform are described as buying shares in a specific football player and by doing so they place a bet on a football player's future performance. But "shares" on the football index are not equity in the sense of share capital but refer to instead in effect a bet in the form of a time limited right to receive winnings which are described as dividends, and the share that each customer holds is in effect a right against the company to receive dividends on the occasion of a "dividend event" as defined during the relevant share period.
5. As I have said the matter of the Company's insolvency has been considered by English leading counsel and the Court has been assisted by the consideration of the opinion provided by Christopher Boardman QC dated 16th March, 2021. His advice was sought as to whether or not the English Court had power to give assistance to this Court under Section 426 of the Insolvency Act 1986 and if so whether that assistance can take the form of making an administration order in respect of the company and whether in his opinion the English Court would in the circumstances set out, exercise its power under Section 426 of the UK Insolvency Act to make an administration order. He notes that Section 426 of the Act provides inter alia
"(4)The courts having jurisdiction in relation to insolvency law in any part of the United Kingdom shall assist the courts having the corresponding jurisdiction in... any relevant country or territory.
(5)For the purposes of subsection (4) a request made to a court in any part of the United Kingdom by a court... in a relevant country or territory is authority for the court to which the request is made to apply, in relation to any matters specified in the request, the insolvency law which is applicable by either court in relation to comparable matters falling within its jurisdiction.
In exercising its discretion under this subsection, a court shall have regard in particular to the rules of private international law.
...
(10)In this section "insolvency law" means-
(a)in relation to England and Wales, provision extending to England and Wales and made by or under this Act
...
(d)in relation to any relevant country or territory, so much of the law of that country or territory as corresponds to provisions falling within any of the foregoing paragraphs;
...
(11)In this section "relevant country or territory" means-
(a)any of the Channel Islands..."
6. The points that he makes in relation to the powers of the English Court to give assistance if this request is granted are:
(i) Firstly, before assistance is given, a request must be made by a court in a relevant country or territory
I note that that the Royal Court, in its discretion, has made similar requests for assistance in relation to Jersey companies for the purpose of them being subject to a administration order in the United Kingdom.
(ii) Secondly, the Requesting Court must have jurisdiction in respect of insolvency law in its country or territory. There is no requirement that there be formal insolvency proceedings in the territory or country in question for the Requesting Court to issue a letter of request.
(iii) Thirdly, in determining what, if any, assistance is appropriate following receipt of a letter of request from the Requesting Court, the English Court is exercising a discretion. As with all statutory discretions, it must be exercised in accordance with the purpose for which the discretion is given.
(iv) Fourthly, where a letter of request is received from the Requesting Court, the English Court should provide such assistance as it can properly provide. This is seen from the use of the word "shall" in section 426(4) of the 1986 Act and is consistent with the principle of comity.
(v) Fifthly, the type of assistance that can be provided involves the application by the English Court of the insolvency law which is applicable to the English Court or the Requesting Court in relation to comparable matters falling within its jurisdiction. The English Court will apply flexibility when determining the appropriate approach.
(vi) Sixthly, the powers of the court under section 426(4) and (5) have been given a broad interpretation. When providing assistance to a Requesting Court, the English Court may, where it considers it appropriate, grant assistance which it could not have provided in a domestic case.
7. The Company is incorporated in and has its registered office in Jersey. The starting point therefore is that the English Court will presume that the Company's centre of main interests is in Jersey. That presumption can only be displaced if it is shown on objective grounds that the centre of management of the Company's interest is located elsewhere. In this case the directors, now the sole director, live in Jersey, board meetings have been held in Jersey; the business is managed and operated from Jersey; the Company leases premises in Jersey and the Company is regulated in Jersey under the provision of the Gambling (Jersey) Law 2012 as a remote gambling operator. The Company's client bank account is with Nedbank in the Isle of Man. Accordingly, it is unlikely that the English Court will be satisfied that the Company's centre of main interest is in England and unlikely to make an administration order absence any request from the requesting court, in this case the Royal Court.
8. The English Court does have jurisdiction to appoint an administrator following an application under Section 426 of the Insolvency Act. The position is that the Company is able to pay its debts as they fall due but this is unlikely to be the case in the short term owing to various liabilities which are set out in the documentation before me that I need not repeat for the purposes of this hearing today. The Company has substantial potential contingent liabilities and is currently running at a substantial loss which is why it ceased trading on 11th March.
9. Leading counsel considers it likely that the English Court will be satisfied that the Company is likely to be unable to pay its debts as they fall due and/or has contingent or prospective liabilities that are likely to exceed the value of is assets and as a result the Company is or likely to become unable to pay its debts.
10. As to whether or not the purpose administration would be reasonably likely to be achieved the primary objective of administration is to rescue the Company as a going concern although the Company's operations are currently suspended there are, according to Mr Boardman, good reasons to consider that the purpose of administration can be achieved; in particular the directors have been actively exploring the Company's rescue options which have centred around seeking additional funding in conjunction with a Company Voluntary Arrangement or CVA.
11. The strategy behind the CVA is to agree the terms of a restructuring of the platform which will involve the customers and the Company's parent company and sole shareholder Index Labs Limited which is a UK private company. The directors believe the Company can be rescued as a going concern and this will lead to a better recovery for the creditors than liquidation. Firstly, the underlying business model is attractive to customers and financially sustainable; secondly, the Company is presently still balance sheet solvent and, once creditors' claims are compromised, there may be assets with which to 'relaunch' the platform and the only realistic alternative to administration is for the Company to enter into an insolvency process under Jersey Law either by way of a creditors winding up or by a declaration that the Company's property is en désastre. Both of these options are liquidation process, do not offer the prospect of rescuing the Company as a going concern and the return to creditors would be materially worse. The Company has engaged Begbies Traynor to support his application and the Company's request for appointment as joint administrators and it is their professional opinion that the entry of the Company into administration will be more beneficial for the Company as a whole than compulsory liquidation in England or winding up or désastre in Jersey.
12. Accordingly, the view of Mr Boardman is that it is likely that the English Court will be satisfied that the purpose of administration is reasonably likely to be achieved in this case.
13. The Letter of Request has been considered by me and the draft is approved; and accordingly I order firstly, that the Court issues a Letter of Request in the form approved by me today so that the High Court of England and Wales is seized of the matter so as to enable the High Court to place BetIndex Limited into administration under the provision of the Insolvency Act 1986 if the High Court thinks it appropriate so to do.
14. The second matter before me involves the funds held by Nedbank to the tune of £4.5 million which are an asset of the Company. These are assets which are held in an account pursuant to the terms of a trust deed dated 18th February, 2020. This is an English Law trust made by BetIndex Limited and in summary the assets held in this trust are held on behalf of customers of the Company who fall into one of two categories, either these are effectively unspent funds placed by customers with the Company or they are unclaimed dividends. The precise effect of the terms of the trust in respect of the monies held therein is the matter of some dispute. That is a matter which in due course will be resolved in any insolvency proceedings and resolved by the English High Court and not by this Court. The view of leading counsel who advised upon this Andrew De Mestre QC, in his opinion dated 15th March 2021, is that it is desirable that the true interpretation and effect of the Deed should be determined as soon as possible and in the meantime that the monies in questions should be paid into Court pending determination of an application for directions as to whom these monies are payable. Certainly, it is the wish, as I understand it, of the Jersey regulator, the Jersey Gambling Commission, that this occurs. The bank that hold the funds, Nedbank, Isle of Man is represented by Advocate Dann in Court today and it is to be hoped that they, having taken such advice as is suitable will see the utility of such a course of action in this case.
15. Accordingly, I direct the Representor, as requested, to pay the sum in the Company's Nedbank account, the account entitled 639421 BetIndex Limited-Player Protection which as at 12th March, 2021 was in credit in the sum of £4,504,357.18 to an account identified by the Viscount, such some to be held by the Viscount pending order of this Court.
16. I thirdly direct that there be liberty to apply in respect of these orders to the Jersey Gambling Commission, to any customer of the Company or any other party, but that such other party is required to obtain leave of the Court before making an application, (that provision does not apply in relation to customers or the Commission who are entitled to apply to the Court as of right).
Authorities
Insolvency Act 1986.
Gambling (Jersey) Law 2012