Banking - reasons for court's sanction of a proposed scheme
of transfer.
[2014]JRC161
Royal Court
(Samedi)
27 August 2014
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Before :
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J. A. Clyde-Smith, Esq., Commissioner and
Jurats Le Cornu and Milner
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IN THE MATTER OF THE REPRESENTATION OF
BARCLAYS PRIVATE BANK AND TRUST LIMITED AND BARCLAYS PRIVATE CLIENTS
INTERNATIONAL LILMITED
AND IN THE MATTER OF AN APPLICATION
PURSUANT TO ARTICLE 48D OF AND THE SCHEDULE TO THE BANKING BUSINESS (JERSEY)
LAW 1991
Advocate G. S. Robinson for the Representors.
judgment
the commissioner:
1.
On 5th
June, 2014, the Court sanctioned a scheme under the Banking Business
(Jersey) Law 1991 ("the Banking Law") whereby, in essence,
Barclays Private Bank & Trust Limited ("BPB&T") would
transfer its banking, investment business and funds services business to the
Jersey branch of the Isle of Man Company, Barclays Private Clients
International Limited ("BPCI"), whilst retaining its trust company
business. Assets and liabilities to
be transferred to BPCI would include over £2.7 billion in client
deposits, over £388 million in loans and advances and over £2.1
billion of assets under management.
The legal framework
2.
Article
48D of the Banking Law provides that the Schedule to the Banking Law has effect
to regulate any transfer of deposit-taking business from one registered deposit
taker to another. Both BPB&T
and BPCI, Jersey Branch, are registered by the Jersey Financial Services
Commission ("the Commission") to undertake deposit-taking business.
3.
The
Schedule to the Banking Law requires the sanction of the Court to any scheme
where the whole or part of the deposit-taking business carried on or from
Jersey is to be transferred from one registered person to another. The Schedule provides in particular that
the Court shall not determine any application for sanction unless the Court is
satisfied that:-
(i)
an
independent auditor's report has been obtained (paragraph 3);
(ii) appropriate notice has been given (paragraph
4);
(iii) the transferee is authorised to carry on the
deposit-taking business to be transferred under the scheme (paragraph 7).
4.
The
principles to be applied by the Court in the exercise of its discretion to
sanction a scheme under the Banking Law were considered in the case of Re
Standard Chartered (Jersey) Limited [2013] JRC 210. The Court applied the principles which
had been applied previously in analogous cases for the transfer of insurance
business. Quoting from paragraphs 9
and 10 of the judgment of Bailhache, Deputy Bailiff:-
"Interestingly this lack of
statutory guidance does not appear to be a wholly Jersey phenomenon. In the matter of Alliance and
Leicester Plc and Santander UK Plc [2010] ECHC 2858 (Ch) Henderson J had to
consider an application under Section 111(1) of the Financial Services and
Markets Act 2000 sanctioning a transfer of the banking, mortgage and other
financial activities business then carried on by Alliance and Leicester Plc to
Santander UK Plc, of which Alliance and Leicester was a wholly owned
subsidiary. At paragraph 42 of his
judgment, Henderson J said this:-
'I come finally to the
exercise of the Court's discretion.
There is apparently no reported authority on the approach that the court
should adopt in relation to the transfer of a banking business. However there
is plenty of authority in relation to the long established jurisdiction of the
Court to approve transfers of long term insurance business under Schedule C to
the Insurance Companies Act 1982.
The passages which are usually cited in that connection are from the
unreported judgment of Hoffman J, as he then was, in Re London Life
Association Limited 21st February 1989, and the subsequent decision of
Evans-Lombe J in Re AXA Equity and Law Life Assurance Society and AXA Sun
Life Plc [2001] 1 All ER (Comm) 1010.'
11. Both
those decisions have been cited to the Royal Court in connection with
applications to approve transfers of long term insurance business in
Jersey. The Re AXA Equity and
Law Life Assurance Society [2001] 1 All ER (Comm) 1010 case was cited by
Birt, Bailiff in the matter of the Representation of Royal London 360
Limited and Royal London 360 Insurance Company Limited [2011] JRC 192,
where, having referred to that case, he said at paragraph 3:-
'...and we would take the
opportunity of transposing what Evans-Lombe J said in that case into the Jersey
context so that in our judgment the principles to be applied in such cases are
as follows:-
(i) the
1996 Law confers an absolute discretion on the Court whether or not to sanction
a scheme but this is a discretion which must be exercised by giving due
recognition to the commercial judgment entrusted by the company's
constitution to its directors;
(ii) the Court is concerned whether a
policyholder, employee or other interested person or any group of them will be
adversely affected by the scheme;
(iii) this is primarily a matter of
actuarial judgment involving a comparison of the security and reasonable
expectations of policyholders without the scheme with what would result if the
scheme were implemented. For the
purposes of this comparison the 1996 Law assigned an important role to the
independent actuary to whose report the Court will give close attention;
(iv) the Jersey Financial Services
Commission, by reason of its regulatory powers, can also be expected to have
the necessary material and expertise to express an informed opinion on whether
policy holders are likely to be adversely affected. Again the Court will pay close attention
to any views expressed by the Jersey Financial Services Commission;
(v) that
individual policyholders and groups of policyholders may be adversely affected
does not mean that the scheme has to be rejected by the Court. The fundamental question is whether the
scheme as a whole is fair as between the interests of the different classes of
persons affected.
(vi) It is not the function of the Court to
produce what, in its view, is the best possible scheme as between different
schemes all of which the Court may deem fair. It is the company's
directors' choice which to pursue.
(vii) Under the same principle the details of the
scheme are not a matter for the Court provided that the scheme as a whole is
found to be fair. Thus the Court
will not amend the scheme because it thinks that individual provisions could be
improved upon.
12. All
these principles (before transposition to the Jersey context) were also
referred to and adopted by Henderson J at paragraph 49 of his judgment in Re
Alliance and Leicester Plc and Santander UK Plc (supra)."
Jurisdiction of the Court
5.
The
jurisdiction of the Court under the Banking Law to transfer not only the
banking business but also the investment business and the funds services
business was considered by Commissioner Clyde-Smith at the earlier directions
hearing in this matter Barclays Private Bank and Trust Ltd-v-Barclays
Private Clients International Ltd [2014] JRC 117. The inter-connectivity between the three
businesses is explained in the affidavit of Mr Ashley Stuart Cox, a director of
BPB&T dated 16th April, 2014. Assuming the sanctioning court accepted
the factual position as presented by him, Commissioner Clyde-Smith found that
the Court would have jurisdiction to sanction the scheme, saying at paragraphs
10 and 11:-
"At paragraph 26 of the [case
of Representation of Standard Chartered [2013] JRC 172], I said this:-
'In my view, provided the
non-deposit taking activities are integral to the business to be transferred
and have not been artificially grafted on to a deposit-taking activity in order
to get through the jurisdictional gateway, the Court can exercise its
discretion to sanction the scheme.
From the description of the business of Standard Chartered Jersey given
to me, which is distilled above, it is clear that the deposit-taking and
investment management services are integral to each other, managed on a unitary
basis and could not be separated without fundamentally altering the business
proposition and model. On that
basis there does not seem to be any good reason for the Court to decline to
sanction the scheme on structural grounds.'
That test seems to me to be
satisfied in this case. The funds
services business is inextricably linked to the provision of investment advice
as part of the overall proposition to clients of BPB&T and BPCI. The activity delegated to BPB&T is
undertaken by exactly the same operational staff as the direct investment
management business. It is part of
Barclays Wealth Management from the market-facing perspective and internally
the investment management business for clients of BPB&T and of BPCI is
treated as a single unit for reporting, strategic and budgetary purposes. There is no suggestion that the services
provided for clients of BPCI have been artificially grafted on to the business
of BPB&T and there appears no good reason for it to be left behind in
BPB&T with the trust company business.
It will be for the Court, on 5th
June 2014, to consider the evidence of Mr Cox but on the assumption that it
accepts the factual position as presented by him and is satisfied that the
non-deposit-taking activities are integral to the business to be transferred
and have not been artificially grafted on to a deposit-taking activity in order
to get through the jurisdictional gateway, the Court will have jurisdiction
under Article 48D to include in the transfer of the deposit-taking business of
BPB&T both its investment business and its funds services business."
Decision
6.
The Court
was satisfied that the formalities of the Schedule to the Banking Law had been
complied with:-
(i)
An
independent auditor's report had been obtained. Nothing had come to the attention of the
auditor which would indicate a materially adverse effect on BPB&T's
or BPCI's financial position or would indicate that BPB&T or BPCI
would not have the ability to meet their liabilities following the
transfer. This scheme did not
appear to the auditor to disadvantage customers or creditors of BPB&T as a
whole.
(ii) Appropriate notice had been given as earlier
directed by the Court and no one had responded objecting to the scheme. By way of summary, a notice was
published in the Jersey Gazette and due notice was given to the clients of
BPB&T, to the members of BPB&T and BPCI, to the Commission, to those
employees who would be transferred to BPCI and to BPB&T's material
creditors and/or counter parties; notifications which go beyond the strict
requirements of the Schedule to the Banking Law.
(iii) Pursuant to paragraph 7 of the Schedule, BPCI
was appropriately authorised to conduct the deposit-taking business to be
transferred.
7.
The representors
had consulted with the Commission throughout the process and it had confirmed
that it had no objections or specific comments to make concerning the
provisions of the scheme. The Isle
of Man Supervision Commission had also provided its consent to the transaction,
provided the Commission had no objection to the scheme.
8.
The Court
accepted the factual position as presented by Mr Cox and was satisfied that the
non-deposit-taking activities were integral to the business to be transferred
and had not been artificially grafted on to a deposit-taking activity in order
to get through the jurisdictional gateway.
The Court accordingly had jurisdiction to sanction the scheme.
9.
As to the
merits of the scheme, the Court noted that BPCI had a credit rating when
BPB&T had none. It offered a
better covenant and the current terms and conditions and services for
transferring customers would remain the same.
10. The Barclays Group wished to re-organise its
business in Jersey and due recognition had to be given to the commercial
judgement of the directors concerned.
No one would appear to be adversely affected by the scheme and no one
had objected. There was nothing
unfair that we could see in the scheme as a whole as between the interests of
the various classes of persons affected.
We therefore sanctioned the scheme.
Authorities
Banking Business (Jersey) Law 1991.
Re
Standard Chartered (Jersey) Limited [2013] JRC 210.
Barclays
Private Bank and Trust Ltd-v-Barclays Private Clients International Ltd
[2014] JRC 117.
