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Jersey Unreported Judgments |
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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Representation of RBS Plc [2012] JRC 080 (18 April 2012) URL: http://www.bailii.org/je/cases/UR/2012/2012_080.html Cite as: [2012] JRC 80, [2012] JRC 080 |
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[2012]JRC080
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Before : |
J. A. Clyde-Smith, Esq., Commissioner, and Jurats Morgan and Nicolle. |
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Between |
Bank of Scotland Plc |
Representor |
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And |
The Control Centre General Partner Limited |
Respondent |
IN THE MATTER OF THE REPRESENTATION OF BANK OF SCOTLAND PLC
AND IN THE MATTER OF THE INHERENT JURISDICTION OF THE COURT
AND IN THE MATTER OF AN APPLICATION TO ISSUE A LETTER OF REQUEST TO THE HIGH COURT OF ENGLAND AND WALES FOR THE APPOINTMENT OF AN ADMINISTRATOR.
Advocate C. J. Swart for the Representor.
Advocate R. O. B. Gardner for the Respondent.
judgment
the commissioner:
1. On 19th March, 2012, Bank of Scotland PLC (hereinafter referred to as "the representor") was granted an application for the issue of a Letter of Request to the High Court of Justice of England and Wales, Chancery Division, Companies Court ("the English Court") seeking the making of an administration order under the English Insolvency Act 1986, with respect to the respondent, Control Centre General Partner Limited ("the Company").
2. The representor's representation dated 2nd March, 2012, first came before the Court on 9th March, 2012, when the Court ordered that it should be served upon the Company and its legal advisers, Messrs Bedell Cristin, with the Company being convened to appear on 19th March, 2012.
3. Notice of the representation has been given to the Viscount by letter dated 7th March, 2012, and he has confirmed that he has no observations to make in relation to it.
4. The Company is a limited liability company incorporated under the laws of Jersey on 30th November, 2005, and is the general partner of the Control Centre Limited Partnership. This is a Jersey limited partnership registered on 30th November, 2005, under the Limited Partnerships (Jersey) Law 1994. The limited partner of the partnership is Bedell Corporate Trustees Limited, as trustee of the Control Centre Exempt Unit Trust. All of the assets and liabilities of the partnership are held and owed by the Company in its capacity as the general partner.
5. The partnership was established for the purpose of acquiring and developing property in the United Kingdom. The Company is indebted to the representor in the sum of £100,483,289.54, which sum is due and payable. The representor's claim against the Company arises from loan facilities made available to the Company on 7th July, 2006, pursuant to a facility agreement which became repayable in full on 5th July, 2011. The Company has accepted by letter dated 16th February, 2012, that the loan is overdue for payment. The partnership's latest accounts (and in effect, the Company's accounts) show that it has total assets of £110,842,105 and total liabilities of £145,555,279. The Company therefore appears to be insolvent on both a cash flow and balance sheet basis.
6. The Company owns five freehold commercial properties situated in England, together with the benefit of long term leases in respect of each of the properties. On 7th July, 2006, the Company entered into a security agreement with the representor in terms whereof the Company granted fixed and floating charges over all its assets in favour of the representor. On 11th July, 2006, the Company entered into a supplementary security agreement, under which the Company granted a further legal mortgage over additional assets and a fixed charge over all interests in any freehold or leasehold property owned by the Company.
7. The representor has the right under the security agreements to appoint receivers over the secured assets. The security agreements also entitle the representor to appoint English law administrators to the Company.
8. On 10th February, 2012, in accordance with its rights under the security agreements, the representor appointed receivers of all the property, assets and rights of whatever nature of the Company mortgaged or charged by way of fixed charge.
9. The receivers have powers to deal with the assets over which they are appointed but their powers are not as extensive as those of an administrator appointed pursuant to the provisions of the Insolvency Act 1986.
10. We were informed that upon the appointment of administrators, the representor would envisage either removing the receivers or limiting the scope of their appointment to ensure any duplication of work and effort as between the receivers and the administrators is avoided.
11. If the Company has its centre of main interests in England and Wales, the representor would have the right to appoint administrators to the Company using the provided for in paragraph 14 Schedule B1 of the English Insolvency Act 1986. However, where a petitioner is unable to show that a company's centre of main interest is in England and Wales, the English High Court has no power, in the absence of a Letter of Request, to make an administration order against that company. The representor was unable to show that the Company has its centre of main interests in England and Wales; hence the application for a Letter of Request to be issued to the English Court.
12. The application was supported by an affidavit by Ewan Bruce Tocher, the Lead Director within Corporate Real Estate, Business Support, at the representor. He set out the reasons why the representor considered it appropriate and advantageous for administrators to be appointed to the Company by the English Court:-
(i) The Company has a very substantial connection with England and Wales.
(ii) The large majority of the Company's assets, including the properties which represent the substance of its business, are located in England.
(iii) The properties are charged in favour of the representor.
(iv) The Company's financing and security documentation is governed by English law.
(v) The representor was unaware of the Company having any material assets in Jersey or creditors based in Jersey other than possibly the limited partner of the partnership (whose claims are subordinated in any event) and professional advisers. There is a very real doubt that there will in any event be sufficient value to make a distribution to any other creditors of the Company.
(vi) The Company submitted to the jurisdiction of the English courts in relation to any disputes in connection with the facilities agreement. The Company has also waived any objection to the English courts as regards proceedings that may be taken against it.
(vii) The security agreements expressly contemplate the appointment of administrators to the Company.
(viii) There could be significant value in capital allowances held by the Company in connection with the properties. It would be necessary for an administrator, as recognised officer of the Company, to sign the election for Her Majesty's Revenue & Customs to allocate the value of the capital allowances between the Company and any purchaser of the properties at the time of the transaction in order to maximise the value of such capital allowances for the benefit of the Company and its creditors.
(ix) The administrators' primary objective would be to rescue the Company as a going concern. If this is not possible then their secondary objective would be to obtain a better result for creditors as a whole than would be achieved on a winding-up of the Company. Only if neither of these objectives could be achieved would the administrators' objective be the realisation of some or all of the Company's property to make a distribution to the secured creditor (i.e. the representor).
(x) Whilst the administrators may well ultimately conclude that there are insufficient assets to lead to a return to unsecured creditors, they have wide powers to manage the Company.
(xi) The appointment of administrators would result in a stay on proceedings against the Company in the United Kingdom (the location of its principal assets) which would provide the Company in administration with breathing space to restructure or realise its assets to maximise value for its creditors as a whole. In contrast, the appointment of receivers under the security document does not bring about any such moratorium on claims or enforcement efforts in the UK.
13. We were informed that there was some urgency in the application in that in order to maximise the value of the capital allowances referred to above, it was necessary to take advantage of them prior to the end of the current tax year on 5th April, 2012. If the capital allowances were not realised before the end of the current tax year, their value might thereby be significantly diminished.
14. It is settled law that this Court has jurisdiction to issue a Letter of Request to the English Court - see In Re OT Computers Limited 2002/29, In the matter of the Representation of the Governor and Company of the Bank of Ireland [2009] JRC 126, In the matter of the Representation of Anglo-Irish Asset Finance [2010] JRC 087 and In the matter of an application by Bank of Scotland PLC and the Governor and Company of the Bank of Ireland [2011] JRC 232A. As recognised in those cases, Jersey insolvency law does not make provision for the flexibility offered by the administration process.
15. The only Jersey insolvency framework ordinarily available to a creditor of a company is that which is contained under the Bankruptcy (Désastre)(Jersey) Law 1990. Unlike the rescue and work-out features contained within an administration, a désastre has sudden-death nature which invariably involves cessation of all business activities of the debtor. It is likely that the Viscount, on a désastre, would engage professionals in the United Kingdom to assist with the realisation of the company's assets but their powers would nonetheless be constrained by the extent of the powers available to the Viscount.
16. The Loi (1839) sur les Remises des Biens makes provision for a process which is in some respects comparable to that of administration but it is not a mechanism that is available to a creditor, only to the debtor. It seems to us unlikely in the extreme that the Court would grant a remise, were it to be applied for, partly as a matter of jurisdiction as it is doubtful in our view whether it has power to do so over immoveable property situated outside the Island but also because an administration order in England would provide a more satisfactory remedy.
17. The representor has procured an opinion from Felicity Toube QC, who confirms:-
(i) That pursuant to section 426(4) of the Insolvency Act 1986 the English courts are required to assist the court having jurisdiction in relation to insolvency law in Jersey. This legislative provision provides the English court with jurisdiction to make an administration order in respect of the Company upon the request for assistant from this Court.
(ii) That the purpose of an administration is (in order of priority):-
(a) rescuing the Company as a going concern;
(b) achieving a better result for the Company's creditors as a whole than would be likely if the Company were wound up (without first being in administration), or
(c) realising property in order to make a distribution to one or more secured or preferential creditors.
(iii) That in order for the English court to make an administration order it must be satisfied that:-
(a) The Company is or is likely to become unable to pay its debts within the meaning of section 123 of the Insolvency Act 1986; and
(b) That the administration order is reasonably likely to achieve the purpose of the administration.
18. The Company has failed to meet its liabilities to the representor as they fall due. Over £100 million has gone unpaid for many months. The Company is clearly unable to pay its debts.
19. The proposed administrators have concluded that the purposes of the administration are reasonably likely to be achieved in this case.
20. In counsel's opinion, the English court would receive the Letter of Request in the form presented by the representor and receipt of the proposed Letter of Request would enable the English court to consider whether to make an administration order in respect of the Company. The Letter will include a request that the status of any Jersey priority creditors under Article 32(1)(b) and (c) of the Bankruptcy (Désastre)(Jersey) Law 1990 as amended be honoured and protected in an administration as in a désastre.
21. Mr Gardner, for the Company, did not oppose the application. He made a number of observations contained both in correspondence with Mr Swart and before us, including:-
(i) He questioned whether the Company had a business or going concern which could be rescued. In his view, it simply held real property which the current receivers were well able to dispose of.
(ii) Under the terms of the facility, the representor had no recourse against assets, save to the extent that they were secured; there was a small fund of some £36,000 in the Island that was unsecured. There could be concerns that unsecured creditors might be worse off under an administration than under the local procedures.
(iii) Was it right for the Court to issue a Letter when a potential standstill agreement was in discussion?
(iv) Many of the advantages put forward by the representor for administration were generic in nature, and there was no specific purpose put forward.
22. Mr Swart responded that the Company does indeed have a going concern, namely a rental enterprise and that the generic advantages put forward by the representor were the same as those put forward in the previous cases cited above. Once in place, the administrators would decide how to proceed but it was not possible to guess at this stage how they will use their flexible powers. As to the possibility of a standstill agreement, the representor had always made it clear that it was open to discussion with the Company and those behind it but would pursue its remedies in parallel which it was entitled to do.
23. We accepted the reasons put forward by the representor for the issuing of the Letter of Request. We agreed that there would be considerable advantage in UK based administrators operating within the four corners of an administration order granted by the English court, carrying out the assessment of the options to achieve best value for creditors in what appeared to be entirely UK situs assets. We therefore granted the application and approved the form of the Letter.
24. At the commencement of the hearing, Mr Pallot
sought to intervene on behalf of three companies, namely Evans Randall
Investment Management Limited, Evans Randall (UK) Limited and
Evans Randall International Limited, which lie behind or are connected with the
Company (which is directly owned by Evans Randall Limited). His clients are creditors of the Company
and owed some £6 million. The
Company has four directors, one of whom is Michael David Evans, who is also a
director of Evans Randall Investment Management Limited.
25. Mr Pallot had been instructed only that morning and had not yet been put in possession of the documentation in the possession of his clients. He was only able to put forward headline grounds upon which the application for a Letter of Request to be issued to the English court would be resisted if leave was granted. He contended that as significant creditors of the Company, they should have been formally convened to the hearing, noting that in the case of In a Representation of the Governor and Company of the Bank of England cited above the Jersey creditors had been convened.
26. In our view, there is no requirement under Jersey law in applications of this kind for the Jersey creditors of the subject company to be convened. As Mr Swart pointed out, the applicant would not necessarily know the identity of the Jersey creditors and indeed, in the current case, it was not possible to ascertain from the accounts of the Company that Mr Pallot's clients were creditors. However, where the applicant is aware of the identity of the Jersey creditors and it is reasonably proportionate to do so, we think they should at least be notified of the application so that they can have the opportunity of intervening if they wish.
27. The application to intervene was refused for the reasons given in an oral judgment, namely:-
(i) It was clear that Mr Pallot's clients had been fully aware of the application from the outset. Indeed, the draft standstill agreement that we were shown and to which his clients were parties, made express reference to it in the preamble.
(ii) They could have applied to intervene on 9th March, when the matter was first heard before the Court. Indeed, Mr Gardner, for the Company, was in attendance on that occasion.
(iii) Mr Pallot conceded that all of the documentation in relation to the application had been in the possession of his clients from the outset.
(iv) The application was not supported by any affidavit.
28. In our view, his clients were the parties behind the Company with full knowledge of the matter and indeed, they were engaged in negotiations with the representor. They had no excuse whatsoever for leaving the application so late in the day. The application was, in our view, an abuse of procedure, which we would not accept.
