1. Harbour Fund II LP v. (1) Orb a.r.l. (2) Litigation Capital Funding [2017]JRC171 ("the September judgment")
  2. Harbour Fund II LP v. (1) Orb a.r.l. (2) Dr Gail Cochrane [2017]JRC007 ("the January judgment")
  3. Representation of the Viscount re Cochrane and Orb a.r.l. [2017]JRC025 ("the February judgment")

The high profile cross border insolvency of Orb a.r.l. ("Orb") has been the subject of three linked judgments from the Royal Court in Jersey. These judgments have supplied some additional light on the use of English Administration in Jersey and the use of Letters of Request by the crown dependencies.

Background

Dr Cochrane is the sole shareholder in Orb, a company registered in Jersey. Orb first ran into difficulties when Gerald Smith, who was at the time the chief executive of Orb and Dr Cochrane's husband, misappropriated funds in the region of £35 million from a company in which Orb owned a large proportion of shares. Criminal and civil proceedings were brought against Mr Smith and Orb, but not before significant assets belonging to Orb were sold to the high profile businessman Andrew Ruhan.

Proceedings ensued in both the Manx and English courts on the basis that there was an oral agreement between Orb and Mr Ruhan to share in the profits of these assets. Harbour Fund II LP ("Harbour") was the litigation funder for Orb, and had the benefit of fixed and floating charges over Orb's assets and a personal guarantee from Dr Cochrane. As a result of a settlement agreement in the Isle of Man, some assets were transferred to Dr Cochrane in her personal capacity. Harbour therefore issued a demand for payment under the funding agreement and then sought to place Orb into insolvency proceedings.

The September judgment

Harbour applied to the Royal Court seeking a letter of request to place Orb into English Administration as there is no equivalent procedure under Jersey law. This is an established procedure that has been used successfully in the past in both Jersey (HSBC v. Tambrook [2013]) and the Isle of Man (Capita Asset Services v. Gulldale Limited [2014]) {LINK TO: http://www.ashfords.co.uk/article/cross-border-restructuring-and-insolvency-update-april-2014}

However, the Court declined to do this. Their reasoning was:

  1. There were doubts over a substantial connection to England and whether there were any assets;
  2. Inevitably whoever was appointed would have to investigate this issue and the Viscount could do this through désastre; and
  3. The main difference between Administration and désastre was the ability to rescue Orb as a going concern but that was not the case here.

The January judgment

Following the September judgment, Harbour then sought a declaration en désastre against both Orb and relying on the personal guarantee against Dr Cochrane. These proceedings were opposed, but the Court made both declarations on 24 November 2016, with reasons given in the January judgment.

The Court acknowledged that, given the complexity and size of the désastres, a significant burden would be placed upon the Viscount who is responsible for the administration of all désastres. However, the Court "felt it was important that the Island, as a well-respected financial centre, discharged its responsibility for dealing with the affairs of this Jersey registered company and Jersey resident."

The February judgment

The Viscount then made an application to the Court seeking a Letter of Request to the English High Court for assistance with the désastre. The grounds for this application built on the complexity that the Court had noted in the January judgment. In particular, Dr Cochrane now claimed that significant assets were not owned by her but by linked companies in the US and Panama, and both Dr Cochrane and Orb were subject to at least five sets of legal proceedings in the English courts. In essence the Viscount was seeking recognition in England and Wales and to have certain persons summonsed to the High Court in England for an examination should they not voluntarily attend upon the Viscount. In the light of this information, the Court granted the application.

Comment

The case of Orb has shown that obtaining a Letter of Request from the Court in Jersey for English Administration requires strong evidence of why Administration would be preferable to désastre, and a substantial connection to England. The Court is clearly concerned that the insolvency regime in Jersey was in danger of being disregarded, and would prefer that proceedings continue under Jersey law even where there is significant complexity. The Court's decision to then allow a Letter of Request for assistance is clearly indicative of the staged approach the Jersey Court will consider.