CMS has succeeded in its application on behalf of HSBC to overturn the High Court’s decision in Re Tambrook Jersey Limited. The ruling will be welcomed by creditors and practitioners alike as the Court of Appeal has confirmed the UK courts have jurisdiction to grant assistance to a foreign court under the cross-border assistance provisions of section 426 of the Insolvency Act 1986 even where formal insolvency proceedings have not been opened in the foreign jurisdiction.
Tambrook Jersey Limited (“Tambrook”) was incorporated in Jersey, but its assets were development properties situated in England. It had defaulted on its loan with HSBC (the “Bank”) to develop the properties and its sole director agreed with the Bank that the best outcome would be a sale of the properties under the umbrella of an English administration. As Tambrook’s centre of main interests was in Jersey, it was unable to apply directly to the English Court for an administration order. Instead, the Bank successfully applied to the Royal Court of Jersey for a Letter of Request asking the English Court to make an administration order in respect of Tambrook.
The High Court refused to make the order on two grounds, namely: (i) section 426 was only to be applied where there were two concurrent insolvency proceedings (i.e. in both Jersey and in the UK); and (ii) on the facts, the Jersey Court could not be said to be "exercising" jurisdiction in relation to insolvency law (which the Court stated was required for section 426(4) to apply). In other words, if no foreign insolvency proceeding had been opened or contemplated, the English Court had no jurisdiction to grant assistance as there were no proceedings to assist.
Yesterday the Court of Appeal overturned that decision. Whilst the formal judgment is yet to be handed down, the Court of Appeal accepted that section 426 had been
implemented with the intention that, so far as practicable, there should be only one insolvency proceeding for any insolvent person subject to the jurisdiction of the insolvency laws of the UK, the Channel Islands and the Isle of Man.
The Court of Appeal did not express a view on the exact wording of section 426(4). However, it made it clear that even if Mr Justice Mann’s interpretation of the legislation was correct, the Jersey Court was in fact exercising jurisdiction by choosing not to open local desastrè proceedings in Jersey. Lord Justice Davis expressly acknowledged that in this case, creditors of Tambrook had all been notified of the Bank's application for the Letter of Request and no opposition had been forthcoming. Further, the Jersey Court was indeed exercising its jurisdiction in relation to insolvency law as it had heard and considered the Bank’s application and decided to make an order granting relief in the form of issuing a Letter of Request to the English High Court. The "exercise" of jurisdiction need not be more active than that; it was not necessary for formal insolvency proceedings to have been opened as a prerequisite for the English court to grant assistance.
Rita Lowe commented: “This decision will be greeted with relief by all those parties interested in the assistance provided between courts in cross border insolvencies involving the designated territories. Were the decision of the High Court upheld, it would have reduced enforcement options available to creditors – perhaps entirely – where the debtor was a foreign entity falling the jurisdiction of one of the territories referred to in section 426, which could have had serious implications for all.”
Further Reading: HSBC Bank Plc v Tambrook Jersey Limited , (01/05/2013); Section 426 Insolvency Act 1986