Insolvency Bulletin: December 2014
Apologies for the second email, due to a number of technical glitches that occurred in the original bulletin we are resending an updated version.
The December edition of the XXIV Old Buildings insolvency bulletin covers three Privy Council cases, two in the Saad litigation and one following the Madoff fraud, which build upon the senior judiciary’s thinking on cross-border tensions in insolvency. Other cases digested here deal with office holders’ remuneration and standards of conduct, and we report on a case reviewing the principles to be applied in winding up a foreign company.
The Saad litigation provided the Privy Council with an opportunity to consider who might have locus to challenge the court’s jurisdiction to wind up a company – could a person who was neither a contributory nor a creditor do so? The Privy Council in PwC v Saad answered that question in the affirmative: a firm of accountants against whom liquidators were seeking to exercise powers to obtain documents and information was in this case sufficiently affected and interested to challenge, successfully as it happened, the winding up of a company in Bermuda (not its home jurisdiction) effected solely in order to enable the liquidators to seek orders for delivery up of documents.
In a closely related second appeal to the Privy Council Singularis v PwC, a majority held that whilst there was a common law power to order a person to produce information to assist a foreign insolvency the power was not wide enough to enable a liquidator to do something which he would not be able to do under the law of the place of his appointment.
The third Privy Council case considered in the bulletin is Stichting Shell Pensioenfunds v Krys, an appeal from the BVI arising out of the Madoff and Fairfield Sentry litigation. The liquidators of Fairfield Sentry, the main Madoff feeder fund, sought an anti-suit injunction against Shell from pursing a claim in the Netherlands for money held by Fairfield Sentry at a Dutch bank in an account in Ireland. The Privy Council explained that an anti-suit injunction could be made to restrain a creditor proceeding in a foreign court with a view to gaining a priority for himself over the debtor’s foreign assets provided the court had in personam jurisdiction over the creditor.
Back in England, Buccament Bay v Harlequin Property (SVG) contains a useful reminder about the principles which the Court will apply on a petition to wind up a foreign company as an unregistered company under s.221 of the Insolvency Act 1986. The discretion is to be exercised cautiously and with an eye on the connection to this country and the benefit which will thereby accrue to the applicants.
Re Leeward Islands Resorts, a decision of the Eastern Caribbean Court of Appeal, Top Brands v Sharma and Re Brilliant Independent Media Specialists are three very different cases all focussing on office holders. In Re Leeward Islands Resorts the liquidator had failed to report to the creditors in good time, not applied for approval of his final accounts on time, had never called a creditors’ meeting and had exposed the company to criminal liability by failing to apply for a landholder’s licence. All in all, it was unsurprising that creditors had lost confidence in him and he was removed.
The former liquidator of the company involved in the case of Top Brands v Sharma had acted negligently and caused the loss of £548,000 to a fraudster. The fraud was one which was so clumsy it would have been revealed to any competent liquidator but the former liquidator in question paid the sum away. She was also in breach of her fiduciary duties to the company. The case looks likely to go further.
In Re Brilliant Independent Media Specialists, the Registrar provided a useful summary of the principles to be applied in considering applications to fix office holders’ remuneration.
Finally the court in Ludsin Overseas v Maggs allowed an appeal after permitting fresh evidence as to value of security over property. The evidence showed that no one had been willing to offer anything like the sum which an expert valuer had put on it, which demonstrated that it was worth much less and on the facts less than the sum due to the creditor. Accordingly the creditor should have been allowed to serve and rely upon a statutory demand for the balance.