The majority of the companies’ assets and liabilities were in
In the first instance, the decision went in favour of the English provisional liquidators, and the judge held that his jurisdiction did not extend to authorising assets to be remitted for distribution, which was not pari passu but gave a preference to some creditors.
The Court of Appeal reached the same decision, but for a different reason. It held that the
Disagreement from the Lords
The House of Lords, however, found unanimously in favour of remission. They held that the assets under the control of and realised by the English provisional liquidators should be remitted to the Australian liquidators for distribution in accordance with Australian priority rules. Lords Phillips, Scott and Neuberger based their opinions on the
- 426 (4): “the courts having jurisdiction in relations
to insolvency in any part of the - 426 (5) “…in relation to any matters specified in the request, the insolvency law which is applicable by either court in relation to comparable matters falling within its jurisdiction. In exercising its discretion under this subsection, a court shall have regard in particular to the rules of private international law…”
They considered these provisions as much a part of the statutory insolvency scheme as the principle of pari passu. So that, in exercising their power under section 426, which had the effect of imposing a different priority regime pursuant to the insolvency law of the foreign court making the request, in the absence of any “manifest injustice to a creditor” (not simply a different priority), the request should not be refused.
Limiting decisions
Lords Scott and Neuberger were specific that the English court’s powers under section 426 overrode its inherent powers (common law). The reason for limiting their decisions was undoubtedly in part due to Lord Scott’s finding in an earlier seminal case — Re BCCI (No 10) [1997] — that the English Court had no inherent jurisdiction under the common law to allow the remission of assets to a jurisdiction in such a way as to deprive some creditors of their rights under the English statutory insolvency scheme; in this case, statutory set-off rights under rule 4.90 of the Insolvency Act 1986. BCCI (No 10) was distinguished from the present case insofar as the principal liquidation in that case took place in
Universal view
Lord Hoffman based his decision on the principle of universalism. In his view, the power to remit assets should be exercised where the
The judgment provides much-needed clarity on the
The conclusions that can be drawn from the case are:
- Where remittal is to a jurisdiction covered by
section 426, and any manifest injustice to creditors is absent, the
English insolvency law. - Where remittal is to a jurisdiction whose court cannot make a request pursuant to section 426, the
English court’s inherent jurisdiction may only facilitate a transfer where the foreign court’s rules do not infringe the principles of English insolvency law.
Philip Hertz (pictured) is a partner and Giles Allison a lawyer at Clifford Chance; together with John Martin of Henry Davis York, they represented the Australian Insurance Creditor Appellants.