In the matter of the representation of Anglo Irish Asset Finance  JRC087
This is the latest decision of the Royal Court in relation to an application by a UK creditor (a bank) for a letter of request to be issued to the English High Court requesting that an administration order be made in respect of a Jersey company.
The company had defaulted on lending in excess of £30m from the applicant bank. The bank had appointed receivers in respect of the property of the company. The receivers had ensured completion of the development of that property (being the project for which the bank had leant the funds). However, the company remained unable to pay its debts and was also insolvent on the balance sheet test. Accordingly, the bank wished to apply for the appointment of administrators in England, the company’s property being located in London.
The application followed the principals set out in earlier decisions (such as Re O.T. Computers Limited and In The Matter of First Orion Amber Limited) relating to the obtaining of a letter of request to form the basis for the grant of an order under Section 426 of the Insolvency Act 1986. The Royal Court received affidavit evidence from the bank’s UK solicitors and English Counsel setting out the background to the receivership and also explaining the basis on which an administration order would be sought. That evidence confirmed the limited scope of the receivers’ appointment, and the fact that they had no duty to deal generally with the claims of unsecured creditors, nor to act beyond the security documentation pursuant to which they were appointed. The court noted, by contrast, the powers that administrators have and that, based upon UK Counsel’s opinion, the placing of the company in administration might well achieve a better result for the company’s creditors as a whole, and in particular with a view to realising the property to enable some distribution to the bank as a secured creditor. Both of those possible results met two of the recognised objectives of seeking an administration order. In the exercise of its inherent jurisdiction, the Royal Court determined that the case was an appropriate one for a letter of request to be issued and made the order accordingly.
This case further illustrates the Royal Court’s willingness to consider applications by creditors for letters of request seeking the assistance of the English High Court in placing Jersey companies into administration. It is of further note in that the Royal Court recognised the limited scope of a Law of Property Act receiver’s appointment and in so doing reconfirmed that the interests of creditors as a whole, in circumstances where a property holding company is clearly insolvent, will be taken into account by the Royal Court in considering such applications.