Jersey Unreported Judgments

Companies - application by the Representor for an order of the Court for a just and equitable winding up of 5 Jersey companies.

[2018]JRC237

Royal Court

(Samedi)

20 December 2018

Before     :

T. J. Le Cocq, Deputy Bailiff, and Jurats Thomas and Ronge.

 

IN THE MATTER OF THE REPRESENTATION OF JULIAN CHARLES TYACKE

AND IN THE MATTER OF ARTICLE 155 OF THE COMPANIES (JERSEY) LAW 1991 

Advocate J. D. Garrood for Julian Charles Tyacke.

Advocate J. W. Angus for Longulf Trading (UK) Limited.

Advocate S Hurry for Salzgitter Mannesmann International GmbH and Salzgitter Mannesmann International (USA) Inc

the deputy bailiff:

1.        This is an application by Julian James Tyacke ("the Representor") for an order of the Court for a just and equitable winding up of five Jersey companies as follows:-

(i)        Petroleum Pipe Group Limited ("PPGL");

(ii)       Pipeline Supplies Bahrain WLL Limited ("PSBL")

(iii)      Petrostem Group Limited ("PGL");

(iv)      Petrostem International Limited ("PIL"); and

(v)       Petrostem Rentals Limited ("PRL").   

Together the "Jersey Companies". 

2.        The Jersey Companies operate within multijurisdictional structures (the "Groups") which include companies incorporated in other jurisdictions such as the United States, England, the United Arab Emirates and Malaysia, Singapore and Cyprus.  The assets of the Jersey Companies are located in various parts of the globe but predominantly are to be found in the Middle East.  There are five main creditors of the Jersey Companies being Salzgitter Mannesmann International GmbH, Salzgitter Mannesmann International (USA) Inc., Traxys North America LLC, Longulf Trading (UK) Limited and Lloyds Banking Group Plc.  All of these companies provide finance and banking facilities to many of the companies within the Groups. 

3.        It is clear that the Groups are operating at a significant loss and are, with regard to each of the Jersey Companies, cash flow insolvent. 

4.        We have had the benefit of information provided in the Representor's affidavits in connection with borrowings between the Jersey Companies and the Groups and the Representor has confirmed that he is a director of all of the entities involved in the Intercompany and Intragroup borrowings. 

5.        The application before us is part of a process which will also involve the other companies within the Groups being brought to an end, each in accordance with the process appropriate in the jurisdiction in which they are registered.  Again this information has been provided to us in the affidavits of the Representor, and an affidavit provided by one of the proposed joint liquidators, Mr Gavin Yuill. 

6.        The Groups are on any analysis complex and it is clear that with regard to the winding up of the companies both the Jersey Companies and the other companies in the Groups, there will need to be a significant amount of coordination. 

7.        As we understand it, PPGL and PSBL have no employees and their operational management is largely undertaken by other companies within one of the Groups.  Those companies will be subject to UK administration and Cayman liquidation proceedings.  PIL makes payments to employees which are employed by other companies within the Groups.  PRL is the principal asset owning entity within one of the Groups and does not have any direct employees. 

8.        The assets owned within the Groups in general are, we are informed, held on some 38 separate sites in various locations worldwide and it will be necessary to co-ordinate the securing of those assets to ensure that the winding up is dealt with in an orderly way and certain creditors are not improperly preferred over others. 

9.        The application is made pursuant to Article 155 of the Companies (Jersey) Law 1991 ("the 1991 Law") which is in the following terms:-

"155. Power for court to wind up

(1) A company, not being a company in respect of which a declaration has been made (and not recalled) under the Désastre Law, may be wound up by the court if the court is of the opinion that- 

           (a) it is just and equitable to do so; or

(b) it is expedient in the public interest to do so. 

(2) ...

(3) ...

(4) If the court orders a company to be wound up under this Article it may -

(a) appoint a liquidator;

(b) direct the manner in which the winding-up is to be conducted; and

(c) make such orders as it sees fit to ensure that the winding-up is conducted in an orderly manner."

10.      The jurisdiction to order a just and equitable winding up is a broad one and indeed the Court, in the matter of Leveraged Income Fund Limited [2002] JLR 209 said this:-

"Article 155 is based upon a similar provision of the Companies Act of the United Kingdom.  English authorities are therefore of assistance.  Although the English Courts have developed certain categories of cases where the Court will exercise its power under the just and equitable jurisdiction the Court is not confined to such categories.  The words "just and equable" are general words.  As Palmer's Company Law Vol. 3 para 15.219 puts it:

"It has sometimes been suggested that there is an exhaustive list of situations that may fall within the scope of the "just and equitable" clause, but it now seems that although such classification may be convenient for purposes of presentation, the words "just and equitable" require a more flexible interpretation.  In the words of Lord Wilberforce: "Illustrations may be used, but general words should remain general and not be reduced to the sum of particular instances.""

11.      In effect, the jurisdiction that we are asked to exercise is to enable the Jersey Companies to be wound up as a result of insolvency.  The use of the jurisdiction to order a just and equitable winding up has been considered by the Court in the past for example in Representation of Poundworld [2009] JRC 042 whilst noting that the jurisdiction was a wide one said, at paragraph 16:-

"We are satisfied that the best interests of the creditors would undoubtedly be served by Poundworld being able to sell its remaining stock at retail value from its outlets by means of the Company continuing to trade for the limited period necessary to achieve this.  Conversely, if the stock were to be sold at wholesale values, the recovery for creditors, other than the landlords and the shipper, would be minimal.  We are also satisfied that if the Court does not order an immediate winding up, there is a substantial risk that the shipper and/or the landlords will exercise their rights prior to the shareholders' and creditors' meetings required for a creditors' winding up and this would be to the prejudice of the creditors as a body.  Delay in the commencement of a liquidation until 16th February, would therefore be damaging to the creditors."

12.      There is no doubt that the Jersey Companies are insolvent and indeed at paragraph 72 of the Representor's affidavit it is stated:-

"Current trading is not generating sufficient profits or cash to service these liabilities.  The PP Groups are not in a position to fund continuing losses and are not generating sufficient cash for working capital to support new business.  The current position is not capable of being reversed due to the quantum of debts and the increasing debt servicing burden for which there is insufficient profits and cash being generated to cover."   

13.      It is clear that the insolvency process in one form or another is required. 

14.      It does not appear to us that désastre is appropriate in these circumstances.  In expressing this view we have in mind the fact that the Jersey Companies are part of highly complex Groups and the entire insolvency process will need to be, with regard to the Jersey Companies and the others in the Groups, very effectively co-ordinated.  There will need to be an interaction between any process for the Jersey Companies and the processes in other jurisdictions and many of the systems operated by the Jersey companies are in common with the companies from outside of the Island. 

15.      In addition, it is suggested to us that many of the assets of the Jersey Companies are located in what is termed "high risk jurisdictions".  Such jurisdictions, where it is important to act quickly to secure the assets, are not naturally within the Viscount's authority and the Viscount would therefore need to take extremely urgent action to take any steps and again this would need to be co-ordinated with other companies.  Furthermore, it is thought important not to enter a process where notice of its existence is likely to be given to certain creditors prior to the securing of the assets.  This is to avoid those assets being dissipated. 

16.      Because of these factors it seems to us unlikely that the Viscount is in a better position to deal with the winding up of the Jersey Companies than would professional liquidators. 

17.      We also do not consider that a creditors' winding up is appropriate in the circumstances.  There is the same potential risk with regard to the location of assets around the world, concern is expressed that giving notice to some creditors of the Jersey companies of insolvency process would jeopardise the recovery and realisation of some of those assets.  

18.      It is not thought that the major creditors listed above would pose any risk to the Jersey Companies with regard to the dissipation of assets and they have accordingly been given notice of the application before us today.  The Representor is proposing to meet with the major creditors to give them information and to deal with any queries.  Furthermore the majority of the major creditors have approved the Representor's proposed course.  Although there has not been formal approval of an application for the appointment of joint liquidators, they have not objected.  

19.      We have had the benefit of hearing from counsel from Salzgitter Mannesmann International GmbH and Salzgitter Mannesmann International (USA) Inc. and counsel from Longulf Trading (UK) each of whom appeared before us with instructions not to object the application being made and otherwise to note the outcome.  Counsel for Salzgitter also had some observations to make on the process to be followed by the joint liquidators.  He was primarily concerned that there be a creditors meeting in relatively early course so that the creditors could be informed of the progress of the winding up. 

20.      Counsel for the Representor was able to put before us a letter confirming that the Lloyds Banking Group also agreed to a just and equitable winding up in the circumstances.  

21.      We have had the benefit of hearing from Mrs Lynda Allo of the Viscount's Department who confirms that the Viscount supports, in the present circumstances, the making of an order for a just and equitable winding up as being preferable to a désastre. 

22.      In the circumstances, for the reasons that we have set out above, we were entirely satisfied that the companies are insolvent and that a just and equitable winding up would be the best way of proceeding given the highly complex Intercompany and Intergroup relationships and the worldwide location of the assets. 

23.      After hearing counsel for the Representor on the details of the order, together with counsel for the creditors before us, we made the order for just and equitable winding up of the Jersey Companies in the terms set out in the order of the Court.  

Authorities

Companies (Jersey) Law 1991.

Leveraged Income Fund Limited [2002] JLR 209

Representation of Poundworld [2009] JRC 042