The Companies Court has set out the requirements necessary to serve out of the jurisdiction under the Practice Direction on Insolvency Proceedings.
Hellas Telecommunications (Luxembourg) II SCA ("the Company") raised funds from external investors to re-finance in December 2006. The Company subsequently used these funds to redeem 27,321,600 Convertible Preferred Equity Certificates at an inflated rate. Relief was claimed by the Liquidators on the basis that the redemption resulted in the Company's insolvency and constituted a transaction defrauding creditors under s423 of the Insolvency Act 1986 and / or fraudulent trading under s213 of the Insolvency Act 1986. Several of the respondents sought to set aside the without notice permission given, which had allowed the Liquidators to serve the application on them out of the jurisdiction in Guernsey.
The grounds for the application were:
- The Liquidators could not establish a serious issue to be tried or reasonable prospect of; and/or
- There was misrepresentation; and/or
- There was material non-disclosure in the without notice application.
The court confirmed that paragraphs 6.4-6.6 of the Practice Direction on Insolvency Proceedings ("PDIP") applied to service out of jurisdiction involving insolvency proceedings, rather than Rule 6.30-6.51 of the Civil Procedure Rules.
Rule 6.6 PDIP states that "An application for permission to serve out of the jurisdiction must be supported by a witness statement setting out:
- The nature of the claim or application and the relief sought;
- That the applicant believes that the claim has a reasonable prospect of success...".
The court noted that the extent of detail required to satisfy paragraph 6.6 PDIP will turn on the facts of the individual case, however, a without notice application should not be accompanied by lengthy evidence or submissions. The court noted that what is required in a without notice application is the identification of the causes of action; a statement of facts relied on; identification of any potential defences considering the duty of full and frank disclosure; and evidence to satisfy the court that the applicant believes that the claim has a reasonable prospect of success.
In the present case, the court concluded that whilst there had been breaches of full and frank disclosure and the Liquidator's witness statements were lacking detail, the order should not be set aside as they were not material breaches. The proceedings had reached such a stage that it could be seen that the Liquidators had the belief required under paragraph 6.6 PDIP and the lack of disclosure did not undermine this belief.