Jersey Unreported Judgments

Companies - reasons in relation to liquidation of the company and matters relating to assets and liabilities.

[2015]JRC206

Royal Court

(Samedi)

7 October 2015

Before     :

T. J. Le Cocq, Esq., Deputy Bailiff, and Jurats Kerley and Grime

IN THE MATTER OF THE REPRESENTATION OF ALAN JOHN ROBERTS, JAMES ROBERT TOYNTON AND BENJAMIN ALEXANDER RHODES (AS JOINT LIQUIDATORS) OF HUELIN RENOUF SHIPPING LIMITED (IN LIQUIDATION)

AND IN THE MATTER OF ARTICLE 155 OF THE COMPANIES (JERSEY) LAW 1991, AS AMENDED

Advocate N. M. Sanders for the Representors.

judgment

the deputy bailiff:

1.        On 8^th September, 2015, we made an order to the effect that:-

(i)        the assets and liabilities of Huelin-Renouf Shipping Limited (in liquidation) ("Huelin-Renouf Jersey") shall be consolidated with the assets and liabilities of Huelin-Renouf Shipping (Guernsey) Limited (in compulsory liquidation) ("Huelin-Renouf Guernsey");

(ii)       such consolidation shall be effected by way of a transfer of the assets and liabilities of Huelin-Renouf Guernsey to Huelin-Renouf Jersey;

(iii)      the joint liquidators' costs that are incidental to the Representation rank as a cost of the liquidation of Huelin-Renouf Jersey.

2.        These are our reasons. 

3.        Huelin-Renouf Jersey was incorporated as a private company under the Companies (Jersey) Law 1991, as amended, ("the Companies Law") on 23^rd November, 1935.  On 20^th August, 2013, this Court ordered that Huelin-Renouf Jersey be wound up on the grounds that it was just and equitable to do so and appointed Alan James Roberts, James Robert Toynton and Benjamin Alexander Rhodes ("the Representors") as the joint liquidators.  On 21^st August, 2013, the Representors were also appointed by the Royal Court of Guernsey as joint liquidators of Huelin-Renouf Guernsey. 

4.        When this Representation was first presented before the Court on 22^nd July, 2015, we ordered that no other party needed to be convened to the hearing of the Representation, that the creditors of Huelin-Renouf Jersey should be notified in writing whether or not the joint liquidators intended to pursue their application for the above orders following a related application to be made by them to the Royal Court of Guernsey on 24^th August, 2015, with respect to Huelin-Renouf Guernsey, and adjourned the matter, with liberty to apply, to 8^th September, 2015. 

5.        On 8^th September Advocate Sanders for the Representors as joint liquidators renewed the application for the order which we granted. 

6.        The application was supported by a number of affidavits of Alan John Roberts. 

7.        The Court also had the benefit of a comprehensive judgment of the Royal Court of Guernsey before McMahon, Deputy Bailiff, which with reasons confirmed that the Royal Court of Guernsey had ordered the pooling of the assets of Huelin-Renouf Guernsey with Huelin-Renouf Jersey by transfer of the assets of the former to the latter. 

8.        There were no creditors or shareholders present and we therefore proceeded on the basis that no interested parties opposed the joint liquidators' application. 

9.        It is clear, in our view, that the Court has the power to make the orders sought.  Under Article 155(4) of the Companies Law it states:-

"If the Court orders a company to be wound up under this article it may:

(a)       appoint a liquidator;

(b)       direct the manner in which the winding up is to be conducted;

(c)       make such orders as it sees fit to ensure the winding up is conducted in an orderly manner."

10.      This it seems to us gives us a very broad discretion. Article 170 of the Companies Law provides at paragraph 1 that:-

"The liquidator in a creditors' winding up may, with the sanction of the court, or the liquidation committee (or, if there is no such committee, a meeting of the creditors):-

(a)       pay a class of creditors in full;

(b)       compromise any claim by or against the company."

11.      This provision is expressly incorporated into this just and equitable winding up under paragraph 3(k) of the Order of the Court of 20^th August, 2013. 

12.      Accordingly, the powers available to the Court in this matter are very wide-ranging and there is nothing that we can see in the wording of the Companies Law which would prevent the Court from making the order sought. 

13.      The Court has, on earlier occasions, ordered the pooling of assets.  For example, in the case of the Representation of Alan Roberts and others in the matter of Corebits Services Limited (in liquidation) and Zoombits Limited (in liquidation) [2011] JRC 166 the Court considered an application by liquidators to pool the assets and liabilities of the two companies (both of which were in creditors' winding-up) so as to treat them as a single entity on the grounds that the way the companies were traded would make it disproportionate to work out the assets and liabilities of each company individually.  Whilst in that case both of the companies concerned were Jersey companies the principle, it seems to us, applies equally to the present situation. 

14.      Although there are not a large number of reported judgments there are of a number of examples in which the Court has in the past authorised the pooling of assets in cases of désastre.  Reference to these can be found in Jersey Insolvency and Asset Tracking by Dessain and Wilkins, Fourth Edition, at paragraph 5.25.2 in which the authors say:-

"The Royal Court has authorised a "pooling" (general consolidation) in connected insolvencies where this has been demonstrated to be in the best interests of creditors (such as where there has been an inextricable intermingling of funds).

Accordingly, where it is impossible, impractical and disproportionately expensive to identify individual rights the pooling of assets and / or liabilities represents a practical solution warranted on just and equitable grounds."

15.      The only reasoned Jersey judgment placed before us in connection with this process in cases of dèsastre is that of the Royal Court In re Royco Investments Company Limited [1994] JLR 236 in which, at page 239, Bailhache, Deputy Bailiff as he then was said this:-

"In any désastre, it is the interest of the creditors which must be borne primarily in mind.  There is no sense in employing funds which would otherwise be paid to the creditors in pursuing lines of enquiry with only a remote prospect of recovering further assets.  That is particularly important, in our judgment, where the affairs of the debtor company are inextricably intermingled with other entities, the affairs of which are being administered in another jurisdiction.  Furthermore, we have been invited, quite rightly, to have regard to the principles of comity.  The High Court in England had reached the conclusion that the compromise put forward was in the interests of the general body of creditors not only of Royco Jersey, but of other associated companies.  We can see no good reason for reaching a different conclusion.  Like Millett, J we were entirely satisfied that the scheme of distribution proposed was the fairest both for creditors and to the investors."

16.      In summary, therefore, it is clear that the Court has the power to order a pooling in appropriate circumstances and that, in doing so, it should be satisfied that such would be in the interests of the creditors. 

17.      The affidavit evidence before the Court made it abundantly clear that the affairs of the companies Huelin-Renouf Guernsey and Huelin-Renouf Jersey were inextricably intertwined even though separate books of account were maintained for each company.  We do not need to refer to the position at length which has been comprehensively set out in the affidavits to which we have made reference above.  Suffice to say that the Court was satisfied that it would be impractical or in any event very expensive to unravel all of the assets and liabilities of Huelin-Renouf Guernsey and Huelin-Renouf Jersey and the cost of this would ultimately be prejudicial to the creditors of those companies.  It is clear that the Royal Court of Guernsey has taken the view that it would be in the interests of the Guernsey creditors for this pooling to take place.  On the figures as understood by the Court that was hardly surprising.  We were referred to a draft estimated outcome statement as at 24^th June, 2015, which illustrates that, after deduction of costs, nothing by way of dividend would be available to the unsecured creditors of Huelin-Renouf Guernsey if pooling were not to be ordered. 

18.      It might, therefore, seem counter intuitive to find that the pooling exercise would benefit the Jersey creditors.  However, an analysis of the potential costs submitted to us illustrates that, should the pooling not take place, the amount of work that would need to be undertaken to unravel the affairs of Huelin-Renouf Guernsey and Huelin-Renouf Jersey so that they could be treated separately would so increase the costs of the liquidation that in effect the Jersey creditors would be worse off.  In fact we were informed, with reference to the draft estimated outcome statement, that in the event that there was no pooling the Jersey preferential creditors would be paid in full and the unsecured creditors would receive 7.12 pence in the pound by way of dividend.  If, however, pooling did take place, the incidence of costs would be so much reduced, that not only would all of the preferential creditors in Jersey and Guernsey be paid off in full but the remaining unsecured creditors (including both the creditors of Huelin-Renouf Guernsey and Huelin-Renouf Jersey) would receive 7.8 pence in the pound by way of distribution. 

19.      Naturally, we accept that these are estimated figures but they seem to us to be reasonable estimates and that the orders sought would be for the benefit of all of the creditors both of Huelin-Renouf Jersey and of Huelin-Renouf Guernsey. 

20.      Before the Royal Court of Guernsey the joint liquidators gave an undertaking that they would deal with and treat the creditors of Huelin-Renouf Guernsey all times pursuant to and in accordance with Guernsey law.  An identical undertaking is provided to us to the effect that the joint liquidators would treat the creditors of Huelin-Renouf Jersey at all times pursuant to and in accordance with Jersey law.  This in effect is already anticipated in the order of the Court of 20^th August, 2013, in which, under Paragraph 5 of the Order it states:-

"Article 166 of the Companies Law relating to the application of the law relating to désastre shall apply to the winding up of the representor."

21.      Article 166 of the Companies Law incorporates the rules with regard to the respective rights of secured and unsecured creditors as are in force for the time being under the Désastre Law which, for our purposes, means Part 8 of the Bankruptcy Désastre (Jersey) Law 1990. 

22.      Accordingly, the Court accepted the opinion of the joint liquidators that the pooling of the assets of Huelin-Renouf Jersey and Huelin-Renouf Guernsey was in the best interests of the creditors of both of those companies and made the order in the terms set out in Paragraph 1 above. 

Authorities

Companies (Jersey) Law 1991, as amended.

Representation of Alan Roberts and others in the matter of Corebits Services Limited (in liquidation) and Zoombits Limited (in liquidation) [2011] JRC 166.

Jersey Insolvency and Asset Tracking by Dessain and Wilkins, Fourth Edition.

In re Royco Investments Company Limited [1994] JLR 236.

Bankruptcy Désastre (Jersey) Law 1990.