BAILII is celebrating 24 years of free online access to the law! Would you consider making a contribution?
No donation is too small. If every visitor before 31 December gives just £5, it will have a significant impact on BAILII's ability to continue providing free access to the law.
Thank you very much for your support!
 |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] | |
Jersey Unreported Judgments |
||
|
You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Rep of Standard Chartered (Jersey) Ltd [2013] JRC 210 (28 October 2013) URL: http://www.bailii.org/je/cases/UR/2013/2013_210.html Cite as: [2013] JRC 210 |
||
[New search] [Help]
Banking - application for sanction of proposed scheme of transfer of deposit.
|
Before : |
W. J. Bailhache, Q.C., Deputy Bailiff, and Jurats Marett-Crosby and Blampied. |
IN THE MATTER OF THE REPRESENTATION OF STANDARD CHARTERED (JERSEY) LIMITED ("FIRST REPRESENTOR") AND STANDARD CHARTERED BANK ("SECOND REPRESENTOR")
AND IN THE MATTER OF AN APPLICATION FOR ARTICLE 48D AND THE SCHEDULE TO THE BANKING BUSINESS (JERSEY) LAW 1991.
Advocate M. P. Cushing for the Representors.
judgment
the deputy bailiff:
1. This is an application by the representors for sanction by the Royal Court of a proposed scheme of transfer of deposit taking business such that the entirety of the private banking business carried on in and from within Jersey by the first representor would be transferred, with limited exceptions, to the Jersey branch of the second representor. The first representor is an indirect subsidiary of the second representor and both are registered deposit takers under the Banking Business (Jersey) Law 1991 ("the Banking Law"). The representation was heard on 11th September, and an order was made to sanction the scheme, with reasons to follow. This judgment contains these reasons.
2. The transfer is an intra-group transfer which we are told is being undertaken for operational and organisational reasons. It is not expected that the transfer will have any practical impact on the day-to-day operation of customer accounts or on service levels.
3. The statutory regime is set out in Article 48D of the Banking Law, which provides that the Schedule has effect to regulate any transfer of deposit taking business from one registered deposit taker to another.
4. The Schedule provides further detail in relation to the transfer of deposit taking business. The language of the Schedule is quite similar to Schedule 2 of the Insurance Business (Jersey) Law 1996.
5. By Clause 3 of the Schedule to the Banking Law, the Court should not determine an application for sanction of a scheme unless the application is accompanied by a report on the terms of the scheme by an independent auditor, and the Court is satisfied that the requirements of paragraph 4 have been complied with. Those latter requirements are that a notice must have been published in the Jersey Gazette giving information as to the application which has been made and the address of the offices at which and the period for which copies of the documents referred to in the Schedule will be available. Clause 4 requires that unless the Court has otherwise directed, a statement setting out the terms of the scheme and containing a summary of the independent report has been sent to each of the customers and to every member of the transferor and transferee.
6. When the Court sat on 17th July, 2013, before Commissioner Clyde-Smith, the Court made orders dispensing with the requirements of paragraph 4(b) of the Schedule to the Banking Law save for the following provisions:-
(i) The representors should cause to be sent by post to each of the first representor's customers save for the hold mail customers, whereabouts unknown customers, deceased customers and new customers (each as defined in the representation) at their database address, as defined in the representation, a letter containing a summary statement setting out the terms of the scheme and summarising the independent auditors report, such documents to be substantially in the terms of the draft annex to the order.
(ii) The representors should use their reasonable endeavours to contact by telephone all hold mail customers of the first representor to ascertain whether or not they wished to receive the letter at their database address or another address and, where applicable, the representors should cause the letter to be sent in accordance with such wishes.
(iii) The representors should provide a copy of the statement referred to in sub-paragraph (1) above to all new customers alongside the relevant account opening documentation.
7. The provisions of Clause 4 of the Schedule to the Banking Law also require that a copy of the application to the Court, of the independent auditor's report and any statements sent out pursuant to the provisions set out above should be served on the Jersey Financial Services Commission and that at least 21 days should elapse between the hearing of the application and the date of that service. Finally Clause 4 requires that copies of the application to the Court and of the independent auditor's report should have been open to inspection at offices in Jersey of both the transferor and transferee for a period of not less than 21 days following publication of the notice in the Jersey Gazette.
8. Advocate Cushing pointed to the various documents in the Court bundle which showed that the formalities, including those referred to in paragraph 6 above, had been complied with, and we expressed ourselves so satisfied. Representatives of the Jersey Financial Services Commission were also present in Court and indicated that the Commission did not object to the proposed scheme. No one else attended in Court, and we are therefore satisfied that all or nearly all of the customers of both first and second representors do not feel anxious about the proposed transfer.
9. Advocate Cushing informed me that as far as he was aware there was no local authority on the test which was to be applied by the Court to the sanction of a scheme under the Banking Law. The Schedule to that Law contains a number of negative provisions. The Court cannot consider an application unless the requirements of paragraph 4 have been complied with. The Court cannot make an order sanctioning the scheme unless it is satisfied that the transferee is, or immediately after the making of the order will be, authorised to carry on the deposit taking business which is to be transferred under the scheme (Clause 7). No transfer is to take place unless the Court does sanction that activity (Clause 8). The Schedule provides for the Court to make various other provisions in relation to the Scheme in Clause 9 of the Schedule. There is nothing however to indicate to the Court what it should take into account when considering an application for sanction. Clearly the requirement to ensure that the Jersey Financial Services Commission is advised of the application brings with it a requirement upon the Court to consider any representations which the Financial Services Commission might wish to take.
10. Interestingly this lack of statutory guidance does not appear to be a wholly Jersey phenomenon. In the matter of Alliance and Leicester Plc and Santander UK Plc [2010] ECHC 2858 (Ch) Henderson J had to consider an application under Section 111(1) of the Financial Services and Markets Act 2000 sanctioning a transfer of the banking, mortgage and other financial activities business then carried on by Alliance and Leicester Plc to Santander UK Plc, of which Alliance and Leicester was a wholly owned subsidiary. At paragraph 42 of his judgment, Henderson J said this:-
11. Both those decisions have been cited to the Royal Court in connection with applications to approve transfers of long term insurance business in Jersey. The Re AXA Equity and Law Life Assurance Society [2001] 1 All ER (Comm) 1010 case was cited by Birt, Bailiff in the matter of the Representation of Royal London 360 Limited and Royal London 360 Insurance Company Limited [2011] JRC 192, where, having referred to that case, he said at paragraph 3:-
12. All these principles (before transposition to the Jersey context) were also referred to and adopted by Henderson J at paragraph 49 of his judgment in re Alliance and Leicester Plc and Santander UK Plc (supra).
13. We note that by Clause 6 of the Schedule to the Banking Law, not only the Commission but also any person, including any employee of the transferor or transferee, who alleges the person would be adversely affected by the carrying out of the scheme is entitled to be heard. That clearly includes any depositor with the bank or indeed any counterparty with whom either the transferor or the transferee has a contractual arrangement. The same is true generally in respect of creditors, who could be heard to complain, if this were ever to be the position, that as a result of the transfer of assets from the transferor to the transferee, there was less protection for payment of their debt than otherwise would have been the case.
14. In the present case, the scheme transfers substantially all assets and liabilities from the Jersey subsidiary to a Jersey branch of Standard Chartered Bank. It is an intragroup transfer. There is no doubt that the bank covenant is stronger than the covenant of its subsidiary.
15. The comparable UK statute does not contain any requirement for the provision to the Court of an independent auditor's report. Given that in Jersey there is such a requirement, the independent report has been made available to the Court. It has been drawn up by KPMG Channel Islands Limited who emphasise that they have not undertaken any work to provide an opinion on the effects of the scheme as it relates to any specific customer, as each customer will have unique, undetermined requirements. KPMG point out, we think correctly, that customers and members of both transferor and transferee would have a common interest in the financial position and liquidity of the branch after the proposed transfer, and existing members, creditors and/or stakeholders in the transferor will also be interested in the financial position, liquidity and capital adequacy of the transferor after the proposed transfer has taken place. In their opinion, KPMG report as follows:-
"Based on the work undertaken by us on the returns and the scheme documents, as outlined in Appendix A, nothing has come to our attention that would indicate a materially adverse effect on the financial position of [the transferor] or the Branch [the transferee], or that would indicate that [the transferor] or [transferee] would not have the ability to meet their liabilities following the proposed transfer of business in accordance with the terms of the Scheme.
Based solely on the facts above, the proposed transfer of business in accordance with the terms of the Scheme would not appear to disadvantage the customers or creditors of [the transferor] as a whole."
16. Mr Richard Ingle is the Chief Executive Officer of the transferor and responsible for overseeing the consolidation of its business into the transferee, acting through its Jersey branch. In his affidavit, he points out that the transferee and its branches, including the Jersey branch, have a diversified portfolio operating across many jurisdictions, with a larger net balance sheet than the transferor, and stronger creditor ratings. He informs us that the transferee is rated AA- by the international credit rating agency Standard and Poor's and Fitch Ratings, and rated A1 by Moody's Investor Service Credit Rating Agency, which presents clients and creditors with a stronger counterparty. By contrast, the transferor is unrated.
17. Recognising that the independent auditor was not able to consider the fairness of the scheme other than in terms of the financial impact of it upon transferring clients generally, Mr Ingle continued at paragraph 64 of his first Affidavit:-
"In order to assist the Court in assessing the fairness of the scheme, [the transferor's] and [the transferee's] management teams have considered non-financial and financial factors, some of which fall outside the scope of the report, as described below, and have concluded that the Scheme is fair to Transferring Clients."
18. In particular Mr Ingle confirms to us that the accounts, products and services which will be offered to transferring clients by the transferee from the effective date of transfer are identical to those currently offered by the transferor, and subject to the same terms and conditions. The transferring clients will not be required to take any action under the scheme to continue to operate their accounts. They will continue to enjoy the products and services in accordance with the existing mandates and instructions. Sort codes and account numbers would remain the same. There would be no changes in the personnel providing the services to transferring clients as a consequence of the scheme and continuity of service would therefore be preserved.
19. We do not say that all these features are necessary for the purposes of obtaining Court sanction to a scheme of this kind, but they clearly give the Court the greatest comfort in satisfying itself that there should be no adverse impact upon customers of either transferor or transferee. Furthermore, despite the notice which has been given, no one has appeared in Court to object to the proposal. Mr Ingle very properly has brought to our attention that two transferring clients have been in touch by email, in which reference is made to the proposed transfer of business, and adverse comment made in relation to the conduct of the bank. We have read that email, which is dated 4th September, 2013, timed at 11:06, and it appears to us to be a complaint more about the conduct of the bank generally than about the proposed transfer of business. We do not consider it is relevant to the matters we have to consider in relation to this application.
20. There are a number of counterparties to whom the first representor owes contractual obligations which are not capable of assignment without consent from the counterparty in question. None of those counterparties appeared before us to raise any objections, but in any event, the transfer will result in customers, counterparties, creditors and employees of the transferor transferring to the principal operating company within the Standard Chartered Group. As at 31st December, 2012, Standard Chartered Bank had customer deposits in excess of US$144 billion and total assets in excess of US$387 billion. By comparison the total assets of the transferor at the same date amounted to some US$6.1 billion with customer deposits of some US$5.6 billion. The transferring business therefore represents a small percentage of the total business of Standard Chartered Bank which enjoys capital adequacy and liquidity ratios above those of the transferor.
21. Taking all these matters into account, the Court is satisfied that the scheme is fair overall. We understand the operational and organisational reasons why the Standard Chartered Group should consider it is an appropriate scheme to advance for full sanction under the Banking Law and it is a matter for the commercial judgment of the relevant directors, subject to the constraints described above, as to what should be proposed. In all the circumstances, and for the reasons given, the Court sanctions the proposed scheme.
22. There are two relatively minor points of detail which we mention for the sake of completeness. Standard Chartered Bank Jersey branch requires a permit from the Financial Services Board in South Africa if it is to give investment management advice to South African resident clients. We have been shown a communication dated 6th September, 2013, from the Financial Services Board in which, subject to conditions set out in that letter, exception from the requirements of section 7(1) of the Financial Advisory and Intermediary Services Act 2002 is granted. In addition, Standard Chartered Bank is a bank to which the UK Financial Services and Markets Act 2000 applies. The Bank has notified the regulatory authorities under that Act of the proposed scheme. We are therefore advised that the relevant foreign regulatory requirements have been met.
23. Finally, the draft order put before us included provision that, because one of the effects of the scheme would be to vest in the transferee with effect from 00:01 hours on 16th September, 2013, being the effective date, the benefit and burden of the registered leases held by, and under leases granted by the transferor, the order approving the scheme should be registered in the Public Registry of the Island by way of notification of such vesting. We have made that order. In the course of argument a question arose as to whether this was a transaction which required the consent of the Housing Minister under the Housing (Jersey) Law 1949. In our judgment, this was not a transaction to which that Law applies, as it does not fall within the relevant provisions of Article 10 which is in these terms:-
24. The approval of the scheme is not a transaction which can be described as a registered contract for the transfer of any land for a term expiring on the happening of the specified event, or for the unexpired portion of any such term, nor does it amount to a lease of land so as to include a registered contract of lease. The transaction is of a wholly different character and in our view falls outside the terms of the Housing Law.
