The English Court refused an application by Liquidators to stay English proceedings pending the outcome of similar proceedings in the US.

The Joint Liquidators of a Luxembourg company ("the Company") applied to stay English proceedings that they had brought against private equity investors ("the Defendants") until similar proceedings in the US had been resolved, or for three months to enable the Liquidators to raise finance for the litigation.

The Defendants had acquired the Company and refinanced in 2006, taking approximately €978 million out of the Company. The Company went into Administration in 2009, after defaulting on floating rate notes, and in 2011 the Joint Liquidators were appointed.

The Liquidators claimed the Defendants knew the 2006 refinance had made the Company insolvent, with an unsustainable level of debt, and that the proceeds of the refinance had wrongly been withdrawn from the Company, which it needed as working capital. The Liquidators brought claims under s.213 Insolvency Act 1986 that the Defendants had been knowing parties to carrying on the business with the intent to defraud, as well as under s.423 IA '86 that the refinancing had been a transaction at an undervalue with the intention of putting the assets beyond the reach of creditors.

In 2014, US proceedings were brought against defendants affiliated with the English Defendants, for which an application had been made to dismiss the proceedings on the grounds of forum non conveniens and lack of personal jurisdiction. A decision had not been made in the US in relation to this challenge, but the Liquidators had reluctantly issued protective proceedings in the UK and applied for the English proceedings to be stayed pending the outcome of the US proceedings, or on a temporary basis to raise litigation funding.

Whilst it is generally desirable not to incur the expense of two sets of proceedings covering the same issues, the Court refused to exercise their discretion to grant a stay, as to do so the applicant had to show very strong reasons and that the benefits clearly outweighed the disadvantages, which was not the case here.

The Defendants were entitled to challenge the US proceedings and to prefer the claim to be decided by the English Court. The majority of the parties to the US proceedings were based in England, and the Defendants had not acted unreasonably. There was little certainty in relation to the timescale of the US proceedings and, accounting for appeals, it could take some time to resolve. Further, a US decision would not bind the Defendants as the parties were affiliates, not the Defendants themselves. The Court held that the resolution of the US proceedings could have little impact on the English proceedings; however, an English decision could influence the US proceedings. The Court also had regard to the fact that 10 years had passed since the refinancing and, as such, the case should progress as quickly as possible.

There would be no limited stay for the Liquidators to pursue finance options as they had not put forward any evidence of their attempts to obtain funding. There would be a short stay by way of the Court having to relist a Case Management Conference, but this would be for the first available date in the Autumn.