Jersey Unreported Judgments

Companies - application to issue a letter of request to the High Court of England and Wales for the appointment of an administrator.

[2013]JRC046

Royal Court

(Samedi)

28 February 2013

Before     :

J. A. Clyde-Smith, Esq., Commissioner, and Jurats Fisher and Milner.

 

IN THE MATTER OF THE REPRESENTATION OF HSBC BANK PLC

AND IN THE MATTER OF AN APPLICATION TO ISSUE A LETTER OF REQUEST TO THE HIGH COURT OF ENGLAND AND WALES FOR THE APPOINTMENT OF AN ADMINISTRATOR PURSUANT TO THE INSOLVENCY ACT 1986

Advocate R. O. B. Gardner for the Representor.

judgment

the commissioner:

1.        HSBC Bank Plc ("the Bank") seeks an order that the Court sends a Letter of Request to the High Court of England and Wales, Chancery Division, Companies Court, for assistance by way of the appointment of administrators under the English Insolvency Act 1986 over a Jersey Company, Tambrook Jersey Limited (the "Company".)  The Bank granted facilities of some £9.65 million to the Company, to enable it to acquire and develop property in Margate, Kent.  As explained in the affidavit of Mr Brian Alderson, the beneficial owner of the Company, it has run into serious financial difficulties and is now insolvent on both the cash flow and balance sheet tests.  There is some urgency in the matter as the properties are deteriorating.

2.        It is settled law that this Court has jurisdiction to issue a request to the English Court, it being recognised that Jersey Insolvency Law does not make provision for the flexibility offered by the administration process; see REO Powerstation Limited [2011] JRC 232A.  Although for the purposes of English Law, the Company's main centre of interest is not in England (it's registered office is in Jersey) and thus the Company has no right to apply directly to the English Court for the appointment of administrators using the "out of court route", the English High Court is nevertheless, able to make an administration order on the request of this Court.  This case is similar to that of Representation of RBS Plc [2012] JRC 080 in that all of the assets of the company are situated in England, and all but one of its creditors are located in England.  Whilst the facility with the bank is governed by Jersey Law, the security documentation is all governed by English Law.  The Bank is the only secured creditor.

3.        The application is supported by an opinion from Felicity Toube, QC dated 7^th February, 2013, confirming that:-

(i)        pursuant to Section 426(4) Insolvency Act 1986 the High Court may assist the Royal Court (being the court having corresponding jurisdiction in relation to insolvency law in Jersey);

(ii)       pursuant to English Insolvency Act 1986, Schedule B1, para 3:-

"The administrator of a company must perform his functions with the objective of -

1.        Rescuing the company as a going concern, or

2.        Achieving a better result for the company's creditors as a whole than would be like if the company were wound up (without first being in administration), or

3.        Realising property in order to make a distribution to one or more secured or preferential creditors."

(iii)      Pursuant to English Insolvency Act 1986, Schedule B1, para 11, the High Court can make an administration order if, and only if, it is satisfied that:-

"1. The company is or is likely to become unable to pay its debts;

2. The administration order is reasonably likely to achieve the purpose of administration."

4.        In the opinion Felicity Toube QC, the English Insolvency Act 1986 (Schedule B1, para 11) is likely to satisfied in that:-

(i)        the Company is clearly unable to pay its debts as they fall due; and

(ii)       according the view of the proposed administrators the purposes of administration are reasonably likely to be achieved in this case.

5.        The only alternative Insolvency procedure available to a Jersey company, under Jersey Law, is a Désastre, which is not attractive, since:-

(i)        all of the assets of the Company are located in England.  The Viscount would need to seek recognition in England and there would be cross-border issues relating to ownership of the assets, all of which would vest with the Viscount as a matter of Jersey Law.

(ii)       the Viscount would need to appoint local agents to deal with the properties which might lead to a double layer of cost; and

(iii)      a Désastre might lead to termination of contracts which might need to be assigned or novated. 

6.        The Loi (1839) Sur Les Remises De Biens makes provision for a process comparable to administration.  However, it is not available to a creditor, and Jersey heritage is a pre-requisite.

7.        The Bank's only insolvency alternative in England to administration is to wind up the Company as a foreign company; this would lead to the appointment of the official receiver and associated delay.  Receivership for its part does not deal with the Company as a corporate entity, but simply with realisation of the charged assets, thereby leaving the Company as an empty shell with unresolved creditor claims.

8.        Mr Gardner submits that the appointment of administrators to the Company is more appropriate.  The proposed administrators are located in England.  If appointed they will seek to maximise the value of the Company's assets for the benefit of its creditors as a whole.  They would have wide powers to manage the Company and as Officers of the Court, their duty is to act in the interests of the creditors of the Company as a whole.  Administration would also have the effect of imposing a moratorium on creditor action against the Company in England and Wales, where all material assets are located.  The administrators are able to investigate antecedent transactions.  The Registrar of Companies has informally confirmed that at the end of the administration the administrators would at liberty to apply to dissolve the company.

9.        We have considered the evidence of both Mr Alderson and Mr Andrew Cartmell of the Bank, and for the reasons put forward by Mr Gardner we agree that it is appropriate and advantageous for administrators to be appointed to the Company by the High Court.  A pre-packaged sale is proposed, the details of which are set out in Mr Alderson's Affidavit.  The administrators would be free to implement that sale, but if they do so, the guidance set out in the ICC Statement of Insolvency Practice 16 will apply.  If the sale does not proceed, then the proposed administrators have indicated to Mr Cartmell that the other statutory purposes of administration are met.

10.      In this case the known creditors have been convened (it was proportionate for this to be done) and none have contested the relief sought and the Viscount has no observations to make.  The Company itself supports the application.  We therefore grant the application and approve the draft of the letter that will now be sent by this Court to the High Court.

Authorities

Insolvency Act 1986.

REO Powerstation Limited [2011] JRC 232A.

Representation of RBS plc [2012] JRC 080.

Loi (1839) Sur Les Remises De Biens.

ICC Statement of Insolvency Practice 16.