On appeal from the Court of Appeal of the British Virgin Islands
Liquidation – Anti-suit injunction – restraint of proceedings by a creditor seeking to execute against overseas assets of company in liquidation
This case arose out of the liquidation of Fairfield Sentry, a BVI feeder fund of the collapsed Madoff fund. Fairfield Sentry had assets in its own name at a Dutch bank in an account in Ireland.
On 12 December 2008 (the day after Madoff’s arrest) Stichting Shell Pensioenfunds (“Shell”) applied to redeem its shares in Fairfield Sentry but no redemption payment was made and the directors of Fairfield, 6 days later, suspended determination of the Net Asset Value per share effectively preventing further redemptions.
On 22 December 2008, Shell obtained an order from the Amsterdam District Court for attachments over the sums in the Dublin account amounting to US$71m. Whilst the effect of the attachment was not to give Shell any proprietary interest in the money or any priority over other creditors at law, it did give the Dutch court jurisdiction to entertain underlying adjudication proceedings which Shell then brought for damages based upon alleged breaches of representations and warranties made in subscription agreements by which it had subscribed for shares in the Fairfield Sentry in 2003.
Fairfield Sentry went into liquidation in July 2009. Shell put in a proof of debt of some US$63m, calculated by reference to the Net Asset Value per share at 31 October 2008.
The effect of the Dutch proceedings, if they succeeded, would be that Shell would be able to satisfy its own debt from the Dublin funds, leaving other creditors to fight over other assets. Shell considered this fair as it said any other creditor could have done the same, in which case there would have been a ‘mini-liquidation’ in the Netherlands. But of course in practice, as Shell recognised and accepted, the effect was to obtain a priority over those assets in the liquidation which it would not otherwise have.
The first instance judge in the BVI, Bannister J refused an anti-suit injunction sought by the liquidator against Shell prosecuting the Dutch action. The Court of Appeal allowed the appeal holding (i) that Shell was amenable to the Court’s jurisdiction having lodged a proof, (ii) that the assertion of jurisdiction by the Dutch Court was exorbitant and that (iii) Shell should not be permitted to gain a priority to which it would not be entitled under the BVI insolvency laws of distribution.
The Privy Council considered the underlying public interest in enabling a single court, in the place of incorporation of a company, to conduct an orderly winding up of its affairs on a worldwide basis. It also considered the principles behind the grant of anti-suit injunctions as applicable in insolvency cases, which raise particular issues of their own. It held that it was not necessary to show, when the court was concerned with insolvency proceedings, that the foreign proceedings were vexatious or oppressive; the test was whether the foreign proceedings would give a litigant a prior interest in assets subject to the statutory trust imposed on liquidation.
The Board noted that the submission of a proof in the liquidation was sufficient to give the Court jurisdiction over Shell, following Rubin v Eurofinance [2013] 1 AC 236. The Court could grant an anti-suit injunction to restrain prosecution by a litigant (if amenable to the jurisdiction) who prosecutes foreign proceedings which would interfere with the statutory trusts over the insolvent company’s assets irrespective of the nationality or residence of the creditor. Accordingly it did not matter that the Dutch proceedings were proceedings in Shell’s home jurisdiction, as long as the court had in personam jurisdiction over Shell, which it did in this case. The appeal was therefore dismissed.
This case draws upon the law on anti-suit injunctions and reminds us that in insolvency cases the court will exercise this jurisdiction to grant an anti-suit injunction even against a foreigner creditor suing in his home court if the foreign proceedings will interfere with the liquidation process, provided the court has in personam jurisdiction over the foreign creditor.
