The English High Court has refused to exercise its jurisdiction to hear winding up petitions against companies incorporated in Saint Vincent and the Grenadines but with connection to England and Wales.
Buccament Bay Limited and Harlequin Property (SVG) Limited ("Respondents") were incorporated in Saint Vincent and the Grenadines ("SVG"). The Respondents were part of the Harlequin group, which included a company incorporated in England, who developed and operated luxury Caribbean resorts.
The petitioners were investors who had paid deposits for individual units in a resort in SVG but had not had the units conveyed to them. The sole director and shareholder of the Respondents resided in Essex and signed the contracts giving rise to the petition debt in England. Had the transaction completed, the funds due from the petitioners would have been payable to a group company in England.
The Court found that the petitioners had no effective answer to the Respondents'' evidence that the business was largely managed in SVG. The petitioners could point to little more than the director''s residence in Essex, the existence of an office there and the fact that the Respondents had dealt with the petitioners (but not others) there.
The Court stated there was a four-staged test that the Court should consider when deciding whether or not to exercise jurisdiction to wind up foreign companies which should only be exercised with considerable caution. 1) The Company must have a sufficient connection with England and Wales. 2) There must be a reasonable possibility, if a winding up order is made, of benefit to those applying for the winding up order. 3) One or more persons interested in the distribution of assets of the company must be persons over whom the Court can exercise a jurisdiction. 4) There must not be a more appropriate jurisdiction.
The Court held that it was clear that virtually all the assets were situated in the SVG, and that SVG had a perfectly satisfactory winding up process. Critically a Liquidator in England would face considerable and possibly insuperable difficulties in gaining control of the Respondents'' assets as the evidence produced showed that SVG would not recognise or enforce a winding up order made in England and Wales.
Therefore, although stage 1 and 3 were satisfied, the Court held that there was no reasonable possibility of the petitioners deriving benefit from the winding up. Accordingly, SVG was by far the more appropriate forum and the Court''s discretion was not exercised.
Gardner v Lemma Europe Insurance Company Ltd (2014)
The English High Court refused to lift the stay imposed by the Cross-Border Insolvency Regulations 2006 ("CBIR") as the Liquidator of a professional indemnity insurance provider ("Lemma") had correctly assessed a solicitor''s claim as invalid.
Lemma was incorporated in Gibraltar. The applicant solicitor ("Gardner") had taken out professional indemnity insurance which provided for arbitration in London should a dispute arise. The policy provided that costs were recoverable if, within the policy year, Lemma was informed of a claim or relevant "circumstances", defined as any incident that might give rise to a civil liability claim. Gardner had notified Lemma of a possible negligence claim, in that a former client''s new solicitors had advised that they might issue protective proceedings to preserve their client''s limitation position.
The Solicitors'' Regulation Authority ("SRA") had brought disciplinary proceedings against Gardner in respect of five other clients who had made similar complaints. Lemma went into Liquidation and if Gardner''s claim was valid he could recover 90% of the value of his claim from the financial services compensation scheme. Lemma''s Liquidator rejected Gardner''s Proof of Debt as the complaint made to the SRA by the five other clients was not related to the current potential claim and therefore could not be treated as one claim under the policy.
Proceedings in England had been stayed under the CBIR; however, Gardner wanted to pursue arbitration in London. The issue was whether it was fair and just to determine the matter within the Liquidation rather than within the arbitration proceedings.
The application was refused. The Court held that the collective interest of creditors had to be established to enable debts to be handled with the least possible costs. The Court had to be wary of high litigation costs being imposed on Liquidators if cheaper and easier methods were available within the Liquidation. Lemma''s policy definitions clearly distinguished between a situation where a solicitor notified Lemma of the circumstances of a default, and where a solicitor was aware of a claim and had an obligation to notify them. In the former, a client needed to have indicated an intention to claim.
In Gardner''s case, his former client''s communications had only expressed that proceedings "might" be issued. As protective proceedings can be issued of the thinnest of grounds to protect limitation, the non-committal communication was sufficient for the Liquidator to dispose of Gardner''s claim.
Furthermore, the policy did not state that all claims arising from the same circumstances should be treated as one claim. If the same act led to claims in different policy years, there was nothing in the policy that required the claims to be treated the same unless Gardner notified Lemma.
The issues in dispute could be decided in the Liquidation or arbitration. However as the policy construction was the main issue, which could be dealt with relatively quickly and with minimal oral evidence, this weighed in favour of being determined in the Liquidation.
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