IN THE MATTER OF OILEXCO NORTH SEA LTD (IN ADMINISTRATION)

26 July 2009

INSOLVENCY AND INTERNATIONAL AND OFFSHORE GROUPS

IN THE MATTER OF OILEXCO NORTH SEA LTD (IN ADMINISTRATION)
HARMS OFFSHORE AHT “TAURUS” GMBH & CO KG AND ANR v BLOOM &
ORS [2009] EWCA Civ 632

Insolvency – Administration – Conflict of Laws – Anti-Suit Injunctions – Foreign Attachment Interfering with Administrators’ Statutory Functions – Para 43(6), Sch B1, Insolvency Act 1986

In a judgment handed down on 26 June 2009, the Court of Appeal found that the prohibition on legal proceedings imposed by the Insolvency Act 1986 when a company goes into administration did not prohibit proceedings being taken outside the territorial jurisdiction of the Court, but that the court nevertheless had jurisdiction in an appropriate case to grant an anti-suit injuction to restrain foreign proceedings so as to enable the administratiors to exercise their statutory functions and to fulfill their statutory duties where a creditor’s conduct in pursuing such proceedings could be castigated as oppressive, vexatious or otherwise unfair or improper.

The Appellants, Harm Offshore, were pre-administration creditors of Oilexco North Sea Ltd (“Oilexco”) under time charterparties of their vessels. They appealed against the grant of an anti-suit injunction by Robert Englehart QC sitting as a deputy judge of the High Court on the application of Oilexco and its administrators, requiring them to procure the release of attachment orders they had obtained from the New York District Court and restraining them from taking steps in the US proceedings in which those attachments orders had been made.

Without notice to Oilexco and its administrators, after having received notice of Oilexco’s administration and despite a London arbitration clause in the charterparties, Harms Offshore, commenced a maritime claim in the New York District Court for the sums owed by Oilexco and, in those proceedings, sought and obtained Rule B attachment orders. The effect of those attachment orders was that if and when any sums passed through New York (including through the main clearing banks in New York) to or from Oilexco, they were attached in favour of Harms Offshore. In seeking those Rule B attachments, Harms Offshore had not disclosed that Oilexco was in administration.

After obtaining the Rule B attachments, Harms Offshore neither served them on Oilexco and the administrators nor otherwise notified Oilexco or the administrators of their existence. In ignorance of them, the administrators made a substantial payment in US dollars to a post-administration supplier. The payment, being in US dollars, had to, and did, go through one of the clearing banks in New York, whereupon it was attached. Upon learning of the attachment, Oilexco and its administrators sought an order injuncting Harms Offshore from further pursuing the New York proceedings and requiring them to release the attachment orders in New York. Such an order was granted, at first instance, by Robert Englehart QC.

Harms Offshore, on an expedited appeal, challenged the injunction on the basis that (1) Paragraph 43(6) of Schedule B1 to the Insolvency Act 1986 (which prohibits the commencement or continuation of legal proceedings against a company in administration) did not have extra-territorial effect and (2) the justification for the granting of anti-suit injunctions restraining foreign proceedings against a company in liquidation was the fact that such a company’s assets were subject to a statutory trust in favour of its creditors (Re Oriental Inland Steam Company (1874) LR 9 Ch App 557 and Re Vocalion (Foreign) Ltd [1932] 2 Ch 196), which did not exist in the case of a company in administration.