Mark Holligon, a partner in the Litigation and Insolvency practice at Appleby (Isle of Man) LLC, has been involved in a case which it is believed has made legal history regarding the relationship between Manx companies and the English High Court.
Mark explained: ‘On 6 March 2014, Mann J placed Gulldale Limited into administration in England. In so doing, Gulldale became what is believed to be the first Isle of Man incorporated company, with its Centre of Main Interest in the Isle of Man, to be placed into administration in England.
‘Gulldale formed part of a commercial property structure which owned a number of large properties (held on long leasehold) in the City of London. The beneficial interest in the properties was held by Gulldale; the legal interest was vested in two English companies.
‘The structure had been financed by lending secured over the properties. The loan was in default and receivers had been appointed over the properties and the two English companies had been placed into administration.
‘The special servicer of the loan concluded that it was preferable for all of the companies in the structure to be in the control of administrators in England. Isle of Man insolvency law does not include a concept akin to administration and it was considered that placing Gulldale into liquidation (or even provisional liquidation) could be detrimental to the realisation strategy.
‘This gave rise to a problem that needed to be overcome: The jurisdiction of the English Court to make an administration order is set out in Schedule B1 to the Insolvency Act 1986 (“IA 1986”). The appointment of an administrator by the court is dealt with in paragraphs 10-13 of Schedule B1. Paragraphs 10-11 empower the English Court to make an administration order only in relation to a “company” which is defined in Paragraph 111 (1A) of Schedule B1. Gulldale, being a company incorporated in and with its centre of main interest in the Isle of Man did not fall within the definition of “company” and thus the English Court had no jurisdiction to place Gulldale into administration in England unless it did so pursuant to a request from the Manx Court received under section 426 of IA 1986.
‘On 9 January 2014, Deemster Doyle, First Deemster of the High Court of the Isle of Man, heard an application in the matter of Capita Asset Services (London) Limited v Gulldale Limited for the issuance of such a letter of request.
‘Deemster Doyle considered in detail a number of decisions from the Royal Court of Jersey which culminated in the decision of the English Court of Appeal in HSBC Bank Plc v Tambrook Jersey Limited. He noted that the issue of such a letter of request was an exercise of discretion, taking account of the interests of creditors, the debtor and the public interest. In particular, he noted that Deputy Bailiff Bailhache of the Royal Court of Jersey in Bank of Scotland Plc and the Governors and Company of the Bank of Ireland in respect of REO (Power Station) Limited and others had also referred to the relevant factor of “the interests of the Island in terms of its reputation outside these shores”. The Deputy Bailiff had regard “at the edges of our discretion, to the fact that a major insolvency of a Jersey company, causing extensive damage to creditors and debtors alike is not in the best interests of the Island, and this can operate as an additional reason to exercise the discretion to issue a letter of request.”
‘In issuing the letter of request, Deemster Doyle stated that he could see the real practical advantages in proceeding via the English administration route. He noted that Manx law, like Jersey law, did not make provision for the flexibility offered by the English administration process and expressed the hope that the issuing of a letter of request would facilitate the most efficient and effective administration of Gulldale’s assets in the best interests of all concerned.’
Capita Asset Services (London) Limited was represented in the Manx proceedings by Mark Holligon.
Category: Finance & Business