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Ruling Promotes International Co-Operation in Insolvency Cases

In a decision which dispels uncertainty over the extent to which English judges can co-operate with overseas courts in the context of insolvency proceedings, the Court of Appeal has acceded to a request from the Royal Court of Jersey and appointed administrators over a debt-laden property company based on the channel island.

Following a disastrous property development on the English mainland, the company owed more than £8 million to a bank and had assets worth no more than £150,000. The company’s sole director had agreed that its assets should be sold to enable the bank to recover what meagre sums it could.

Both the bank and the director considered that insolvency procedures available in Jersey would be inappropriate to deal with the matter and that it would be highly desirable that an English administration order be made. Armed with a written ‘request for assistance’ from the Royal Court of Jersey, the bank applied to the High Court for such an order under section 426(4) of the Insolvency Act 1986.

The application was dismissed at first instance by a High Court judge who ruled that the English courts had no jurisdiction to provide assistance to the Jersey court in circumstances where no insolvency proceedings were on foot on the channel island and the parties had no apparent intention to commence any.

Allowing the bank’s appeal against that decision, the court noted that that judge had departed from what had been either accepted or assumed by other Chancery Division judges on five previous occasions when administration orders were made in response to a letter of request from the Royal Court of Jersey.

Appointing administrators, the court accepted the bank’s arguments that the judge had wrongly equated ‘having’ jurisdiction with ‘exercising’ jurisdiction and had taken an ‘unduly and necessarily restrictive’ interpretation of the international co-operation provisions contained within section 426

The Royal Court of Jersey was in fact ‘engaged in an endeavour’ in furthering the interests of the insolvent company and its creditors and in facilitating the most efficient collection and administration of the company’s remaining assets and the High Court did have jurisdiction to grant the assistance sought.

The court concluded: “For the avoidance of any doubt, it follows of course that the orders made by other Chancery judges, in comparable circumstances, on the five previous occasions were orders which the court had jurisdiction to make”.