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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Representation of the Joint Liquidators of Barclays Investment Funds (Channel Islands) Limited [2024] JRC 236 (06 November 2024) URL: http://www.bailii.org/je/cases/UR/2024/2024_236.html Cite as: [2024] JRC 236 |
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Before : |
M. J. Thompson Esq., Commissioner and Jurats Hughes and Cornish |
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Between |
Joint Liquidators of Barclays Investment Funds (Channel Islands) Limited |
Representors |
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And |
(1) His Majesty's Receiver General (2) Barclays Wealth Management Jersey Limited (3) Advocate Alexander as an Amicus Curiae |
Respondents |
IN THE MATTER OF THE REPRESENTATION OF THE JOINT LIQUIDATORS OF BARCLAYS INVESTMENT FUNDS (CHANNEL ISLANDS) LIMITED
Advocate R. O. B. Gardner for the Representors.
The Firs Respondent appeared in person.
Advocate D. Evans for the Second Respondent.
Advocate S. J. Alexander as Amicus Curiae.
judgment
the COMMISSIONER:
1. This judgment contains the Court's reasons for authorising on 17 October 2024 a transfer of funds held by the joint liquidators ("the Representors") of Barclays Investment Funds (Channel Islands) Limited ("the Company") which formerly held a portfolio of assets comprising the Sterling Bond Fund ("the Fund") to the Receiver General. The rationale for the application by the Representors was that despite efforts by the Company prior to its liquidation and by the Representors and individuals engaged on their behalf during the course of the liquidation, the Company and the Representors have been unable to trace and repay all investors to enable the Company to be closed and then dissolved.
2. In approving the transfer of funds to the Receiver General, the Receiver General was directed to hold all funds and investor details for a period of ten years from the date of the Court's decision and to pay any investors their investment upon receipt of proof of investment and appropriate anti-money laundering documentation. We also made certain modifications to the orders sought so that any investor or heirs or personal representative of any such investor should on reasonable enquiry become aware of the transfer of funds and the orders we made. In addition, we approved the Representors recovering certain costs incurred to try to trace investors in addition to the provision for costs made at the commencement of the winding up. The background to our decision and the details of the various orders we made are set out in this judgment.
3. The Company is a Jersey company. It was placed into summary winding under Chapter 2 of Part 21 of the Companies (Jersey) Law 1991 (As Amended) ("the Companies Law") by way of a special resolution passed on 9 November 2020 and the Representors were appointed liquidators.
4. The Fund was originally marketed by the Company as part of the Barclays group on a worldwide basis and accordingly attracted a diverse range of investors located in over one hundred countries. Detailed evidence about the Fund, how it was set up and its history was set out in the affidavit of Richard Wilkinson Thomas sworn on 22 July 2024. Mr Thomas has been a director of the Company from 20 July 1999.
5. It is right to record in relation to Mr Thomas that at the convening hearing on 29 July 2024, Commissioner Thompson disclosed that he was in partnership with Mr Thomas at the law firm Ogier until Commissioner Thompson's retirement in July 2013. While the director's fees earned by Mr Thomas would have been part of the income of Ogier, Commissioner Thompson could not recall ever having been asked to give any advice in relation to the Company or the Fund and was not aware of its existence until the Representors presented their application to the Royal Court. Commissioner Thompson therefore concluded that his former partnership with Mr Thomas did not prevent him from sitting as the presiding judge in relation to the Representation.
6. In Mr Thomas' affidavit, he explained that the investment objective of the Fund was to provide high level income consistent with security of capital through investment primarily in sterling denominated government and corporate bonds.
7. As Mr Thomas deposed at paragraph 4.5 of his affidavit, the attractiveness of the Fund to investors changed:
"4.5 At the time of the Fund's inception, government bond funds were seen as a popular and relatively low risk investment for clients to generate income whilst preserving capital. However, the investment industry has changed considerably in the last 30 years such that government bond funds, like the Fund, are no longer considered as strategic an investment for investors as they once were. In the circumstances, while the historic performance of the Fund has generally been good and has yielded positive returns for investors, its assets under management (AUM) have seen a steady decline over the years as investors have cashed in their holdings seeking alternative investments and returns."
8. In view of the declining interest in government bonds, proactive marketing of the Fund ceased in 2013. This caused the pool of assets held for the Fund to diminish. By way of example, in 2002, the net asset value of the Company was approximately £971 million, whereas by 2020, the net asset value had reduced to £191,029,758, a decline of approximately 80%.
9. In addition, by 2019, the costs of the Company to manage the Fund were either fixed or rising. Combined with the diminishing assets under management, it was anticipated that these costs would have a negative impact on investor returns.
10. By 2017, the profile of the remaining investors in the fund was that 79% were over the age of sixty-five with 37% over the age of eighty.
11. While the Company itself endeavoured to trace and repay investors to enable the Fund to be closed, this ultimately proved unsuccessful which was why the Company was placed in summary winding up. At the date of the winding up there were 4,491 investors.
12. As set out in the first affidavit of Mr Howlett, one of the Representors sworn on 24 July 2024, at the time the Company was wound up, the Representors had formed the view that almost all investors would be redeemed or capable of being easily redeemed in the early course of the winding up. This was later not found to be accurate. The Representors also came to realise that the liquidation process would entail a more significant anti-money laundering remediation exercise beyond what was initially anticipated.
13. As the liquidation continued, other complications arose including:
(i) investors becoming unresponsive or passing away;
(ii) payment difficulties in high-risk jurisdictions; and
(iii) little or no information from a group of investors whose subscriptions were handled by the Bank of New York Mellon.
14. By May 2024, the number of investors still unaccounted for had reduced to 1,901. The amount of funds held by the Representors had reduced from £180,342,149 to approximately £29.7 million. It is these funds apart from funds held for investors who have come forward and who are in a process of completing various steps to have funds be released that will be transferred to the Receiver General.
15. It is also right to record that at all material times, the Company and then the Representors as liquidators have kept the Jersey Financial Services Commission ("the JFSC") informed of the steps they took. The JFSC were also made aware of this application and were supportive of it.
16. The affidavits of Mr Howlett also set out the detailed updates provided to the JFSC and steps taken by the Representors. It is not necessary to set out the detail of all the steps taken and the updates provided, save to say that an extremely thorough exercise has been carried out both by the Representors to endeavour to trace investors and to address the difficulties that have arisen referred to above.
17. There were also a number of meetings with the Receiver General so that he understood the process followed and was therefore comfortable with receiving funds from the Representors, if approved by this Court, and accepting the responsibility of releasing funds thereafter to investors who came forward seeking their share.
18. As a result of the work of the Representors, the categories of investors who had not been traced were described by Mr Howlett in his first affidavit as follows:
(1) "Gone Away": investors who are either AML verified or AML unverified, but contact has ceased despite efforts to trace.
(2) "Deceased": deceased investors who were either AML verified or AML unverified, but contact has ceased despite efforts to trace. Inherited Investors who are known to have a representative going through the probate process are included in this category for reporting purposes.
(3) "AML Verified": investors who are unpaid due to other factors including the inability to make cheque payments to high-risk jurisdictions due to the risk of fraud.
(4) "AML Verified -paid": investors who are AML verified but their cheques remain uncashed despite efforts to establish alternative payment methods.
(5) "BNY Mellon Cohort": investors who subscribed to the Fund when BNY Mellon acted as Transfer Agent prior to Northern Trust's appointment in 2015. Information relating to this cohort was (and remains) extremely limited and in some cases, zero information is held.
(6) "AML Unverified": investors whose AML profiles were (and remain) deficient."
19. Mr Howlett's affidavit also explained that the Representors had instructed Capita Tracing and Data Solutions ("Capita") and Price Waterhouse Coopers Advisory Services Pty Limited in South Africa ("PWC SA").
20. PWC SA were engaged to trace one hundred and sixteen remaining investors resident in fifteen different countries in Africa who had invested funds of more than £5,000. The figure of £5,000 was selected as explained at paragraph 66 of the first Affidavit of Mr Howlett, which we accept, to ensure that the tracing exercise below this level exercise was as cost efficient and proportionate as possible.
21. PWC SA traced sixty-eight investors, of whom thirty-four are yet to have provided appropriate anti-money laundering documentation. Repayment of their investments will either be made by the Representors if completed within six months or, failing that, by the Receiver General who will receive a further tranche of funds representing investors who have been identified but who have not yet provided the required anti-money laundering documentation. By the time of the hearing we were informed that there remained four traced investors currently going through an AML verification process and the funds representing these investors would be held back for six months to enable the verification process to be completed.
22. Capita were similarly retained to trace investors across twenty-eight countries in the rest of the world, again with balances greater than £5,000. There remain six traced investors still going through an AML verification process and the funds representing these investors will also be held back for six months to enable the verification process to be completed.
23. There are also fourteen investors who are obtaining probate who will not therefore form part of the initial transfer to the Receiver General as long as probate is obtained within 6 months.
24. Finally, there are thirty-three investors currently in contact with the Representors seeking repayment of their funds who will also not form part of the initial payment to the Receiver General. This tranche representing all these investors will therefore be held back for six months, but if the repayment of investors is not completed by that date then any funds then held by the Representors, together with any requisite information relating to the investors, will also be passed to the Receiver General.
25. For any investors who have come forward or been traced, if the process of a transfer of funds is not completed within 6 months of the Court hearing, then the funds representing such investors will also be transferred to the Receiver General.
26. The substantive relief sought by the Representors is pursuant to Article 186A of the Companies Law which permits the Representors in a summary winding up to apply to the Court for determination of a question arising in the winding up.
27. It is not in dispute that the Court possesses a wide discretion under this Article to determine questions referred to it (see Representation of HSBC Global Asset Management (International) Limited In Liquidation [2019] JRC 148 at paragraph 9).
28. The reason why the Representors wish to transfer assets to the Receiver General is that, by virtue of the Royal Prerogative, the Crown has the right to claim funds that are bona vacantia, which literally means ownerless goods (see Representation of the Viscount Re Bellows and Chimel [2022] JRC 035). For that part of the Fund where the Representors cannot trace the investors or their heirs or successors, despite the extensive efforts of the Representors, and before them the Company, any unclaimed investments are therefore monies where there is no owner. The Crown is therefore entitled to claim these monies. However, it is the general practice of the Receiver General to hold assets for ten years before they are claimed absolutely by the Crown - see Representation of Salamanca Corporate Services [2016] JRC 108A at paragraph 37(vi). This practice is to be applied in this case.
29. The nearest approach to the present application occurred in Representation of HSBC Global Asset Management (International) Limited In Liquidation [2019] JRC 148. At paragraph 16 of the HSBC decision, the Court stated:
30. It does not matter that the value of the assets might amount to significant sums, as long as extensive steps have been taken to attempt to locate the persons who are entitled to those sums. The Court in Representation of Deutsche Bank International Limited [2020] JRC 057 therefore noted at paragraph 21 as follows:
31. The Amicus confirmed his agreement with these legal principles.
32. The Amicus has also reviewed carefully the evidence filed by Mr Thomas and Mr Howlett. In particular, he reviewed the tracing arrangements carried out by PWC SA and Capita leading to the second affidavit of Mr Howlett. This led the Amicus to conclude that the approach of the Representors was "thorough and well-considered" and that "good efforts were taken to maximise the possibility of investors receiving funds they were due". He also described the tracing exercise undertaken by PWC SA and Capita as comprehensive.
33. This led to the following conclusions in his skeleton:
"46. In the Amicus' view, in consideration of the cost, uncertainty and length of time a further tracing exercise is likely to require, the Proposed Transfer appears to be a reasonable compromise that strikes a balance between the interests of the remaining Transfer Investors and the duties of the Joint Liquidators to undertake the liquidation process within a reasonable time frame, whilst avoiding unnecessary expense.
...
49. Whilst there remains a theoretical possibility that there are Transfer Investors who may seek to recover their final distribution following the relevant 10-year period, the Amicus regards this possibility as a minimal one. Based upon the steps undertaken by the Joint Liquidators to date, it is very likely that such funds will remain permanently unredeemed. The Amicus also observes that, within the relevant 10- year period, the opportunity for the remaining Transfer Investors to make contact and recover their final distribution is not, in any way, impinged by the funds being transferred to HMRG.
50. The Amicus is also reassured in this respect because the Joint Liquidators have confirmed that PwC will remain available to assist HMRG with this matter going forward, and that the Joint Liquidators are also seeking an order for the Manager to procure appropriate advertisements to be placed on the Barclays website directing the Transfer Investors to HMRG for a period of 10 years. The assistance of PwC and the proposed advertisement on the Barclays website are reasonable proposals which are likely to assist any remaining Transfer Investors in contacting HMRG and receiving their final distribution in the coming years.
51. Drawing all of the above together, the Amicus considers that the Joint Liquidators have approached this matter in a way that accords with the established law and what it would expect of reasonably acting liquidators thereby providing a sound basis for the court to exercise its discretion in relation to the Proposed Transfer."
34. The Amicus also concluded that it was reasonable for the costs of the tracing exercise to be deducted and paid to the manager before any transfer to the Receiver General.
35. In relation to the application, we could only agree with the conclusions of the Amicus. The Representation, affidavits and skeleton arguments filed were all comprehensive and made it clear that the Representor, and before that the Company, had gone through significant efforts to repay funds to investors. The Representors have gone as far as they can having tried to trace investors for four years, following significant attempts by the Company since 2016. Investors who have not yet come forward will all still have a further ten years to reclaim their funds. The mechanism proposed is a fair one, recognises the efforts taken by the Company and the Representors and is a proposal we were happy to approve.
36. The only concern we had was to ensure that if any investors or their heirs or successors did come forward in the future that sufficient steps were taken to advertise the decision we took so that any such investor, heir or successor could, if within time, make contact with the Receiver General to obtain release of any funds to which they could demonstrate they had an entitlement.
37. We therefore directed that in addition to the terms of the Act of Court being published in Jersey, that they were also published in the Gazette in the UK (which is now an online publication) and that the advertisements were kept on the website of Barclays in the UK as well as the website for Jersey. We also directed that a copy of the Act of Court approving the transfer be held at the Companies Registry maintained by the JFSC. We will also publish this judgment in due course. We hope that all these steps will increase the possibility of someone trying to trace funds that have been invested in the Fund being able to ascertain that such funds are now going to be held by the Receiver General for ten years from the date of our order.
38. The second order we made was to direct that in the event of any disagreement between any investor or heir or successor coming forward in the future and the Receiver General that there was liberty to apply to this Court to such an investor (and indeed the Receiver General) in the event of any disagreement between them on the release of funds. We imposed this condition so as to ensure there was a mechanism for this Court to review any release of funds where there was disagreement.
39. Thirdly, we directed the transfer of funds took place as soon as reasonably practical and no later than thirty days from 17 October 2024, apart from those categories of investors whom the Representors are in the process of looking to release funds within the next six months as described above.
40. In relation to costs, when the Company was placed in liquidation, a levy of 0.4% was raised against the assets of the Fund to cover the costs of the liquidation. In view of the complexities referred to above, this fee proved to be inadequate. Since September 2022, the fees of the Representors have therefore been met by Barclays Wealth Management Jersey Limited, the Second Respondent, who is the manager of the Company and the Fund. In their application, the Representors sought to recover out of the funds to be transferred the additional tracing costs of the £356,669 because the liquidation, including the tracing exercise and the engagement of Capita and PWC SA, turned out to be more complicated than envisaged at the time the Company was placed into liquidation. The remainder of the Representors' costs will be borne by the Second Respondent who confirmed they were content with the total level of fees incurred. We approved payment of these tracing costs because we were satisfied they had been reasonably incurred and we accepted that the liquidation had become more complicated.