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Jersey Unreported Judgments |
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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Investin Quay House Limited v BUJ Architects LLP [2021] JCA 299 (30 November 2021) URL: http://www.bailii.org/je/cases/UR/2021/2021_299.html Cite as: [2021] JCA 299 |
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30 November 2021
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Before : |
James McNeill, QC., sitting as a Single Judge |
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Between |
Investin Quay House Limited (In Liquidation) |
Appellant |
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And |
BUJ Architects LLP |
Respondent |
Advocate H. B. Mistry for the Appellant.
Advocate S. J. Alexander for the Respondent.
judgment
Mcneill ja:
1. There is before me, sitting as a Single Judge of the Court of Appeal, a renewed application for leave to appeal and for ancillary orders, leave having been refused by the Royal Court (R. J. MacRae, Esq., Deputy Bailiff, sitting alone) on 13 October 2021 (Investin Quay House Limited (In Liquidation) v BUJ Architects LLP [2021] JRC 255 .
2. The Applicant, Investin Quay House Limited (In Liquidation) (the "Company") is the plaintiff in a cause before the Samedi Division of the Royal Court by which it sought an interim injunction against the Respondent. A hearing before the Royal Court (R. J. MacRae, Esq., Deputy Bailiff, with Jurats Ronge and Christensen) took place on 27 August 2021. Judgment was given on 21 September 2021 (Investin Quay House Limited (In Liquidation) v BUJ Architects LLP [2021] JRC 233) (the "Judgment") whereby the Royal Court refused to grant an anti-suit injunction and, in addition, indicated that it would be prepared to entertain an application from the Respondent for interim payment of costs by the Company in respect of the costs of and incidental to the application.
3. From the Judgment, the following uncontested narrative can be taken.
4. The Company was incorporated in Jersey on 17 December 2013, and at all relevant times Mr John Downer ("Mr Downer") was the sole director and only shareholder.
5. For most of its life, all meetings of the Company's board of directors took place in Jersey. During its existence the Company had had seven directors, six of whom had been resident in Jersey. Apart from Mr Downer, the directors had been supplied by the service providers for the Company, the JTC Group (the "JTC directors"). In July 2019 the JTC directors had resigned, leaving Mr Downer as the sole director. Mr Downer lives in Portugal and has done for some years.
6. At some point the Company ceased to carry on business. As the result of a judgment against the Company in England in November 2019, obtained by the Respondent in the sum of £354,000.00 plus interest, it appears that the Company was unable to pay its debts. There are two other significant creditors of the Company holding awards or orders in their favour.
7. On 27 July 2020, the Respondent issued a winding-up petition against the Company before the High Court in England. The petition was subsequently listed on the general winding-up list. On 18 November 2020, by consent, the High Court ordered that the petition be removed from the general winding-up list and gave leave to the Company to file evidence in opposition, including any evidence to challenge the High Court's jurisdiction to wind up the Company.
8. After the Company filed its evidence, the High Court scheduled a hearing for 8 June 2021 to deal with the preliminary issues raised by the Company. The Company then called a meeting of its shareholders and creditors for 3 June 2021 to consider and vote on whether to wind up the Company in Jersey by a creditors' winding-up. Notwithstanding correspondence between the Advocate acting for the Respondent in Jersey and the Advocate for the Company and its proposed liquidators, in which it was clear that the Respondent opposed the initiation of a Jersey insolvency process, the Company, through Mr Downer, resolved on 3 June 2021 to place itself into voluntary liquidation in Jersey by way of a creditors' winding-up. The shareholders' meeting to consider this proposal had been called by Mr Downer in his capacity as sole director and also in the purported capacity of a creditor of the Company, said to be owed in excess of £2.3m by way of an unpaid loan. The resolution to place the Company into a creditors' winding-up was approved by Mr Downer in his capacity as sole shareholder.
9. On 7 June 2021 the Company commenced proceedings in the Royal Court by way of an Order of Justice seeking various forms of relief. An application ex parte for interim relief was refused by the learned Deputy Bailiff, but the Company was given liberty to pursue that application at an inter partes hearing. That hearing took place on 27 August 2021 and the order sought against the Respondent was "to restrain pursuit of the Petition [before the English High Court] forthwith and [that] any questions regarding the conduct of the winding-up of the Company shall be raised with the Royal Court of Jersey." At that hearing the Royal Court reserved its decision, and the decision and reasoning were given in the Judgment, now sought to be reviewed.
10. As recorded in the Judgment, the Company argued that those dealing with the Company had always been aware that they were dealing with a Jersey company, managed and controlled in and from Jersey. The Royal Court should ensure that creditors were not permitted to pursue competitor proceedings in other jurisdictions and that the principle of modified universalism ("Universalism"), which underpins the insolvency regimes in other jurisdictions throughout the world, be upheld. Universalism in this context, it was argued, meant that where a Company was being wound up in the jurisdiction of its place of incorporation, the courts of that jurisdiction ought to view their own proceedings as paramount; a proposition with which the Royal Court agreed as being the appropriate starting point, all things being equal. Reference was made to Singularis Holdings v Price Waterhouse Coopers [2014] UKPC 36 at [23] (Lord Sumption JSC).
11. It was contended for by the Company, and accepted by the Royal Court, that the alternative approach - a race to begin insolvency proceedings in other jurisdictions in which individual creditors might perceive particular advantages for their individual positions - could result in an unattractive free-for-all in the distribution of a company's assets.
12. For the Respondent it was argued that the Company's claim for injunctive relief was purely tactical in being designed to prevent a claim being made against Mr Downer personally in the English winding-up proceedings and, accordingly, unlikely to be in the best interests of the Company's creditors as a whole. It was unchallenged that the Company had paid in excess of £20m to Mr Downer between 30 July and 17 September 2018. By reference to the Insolvency Act 1986 sections 238-240, an application could be pursued in the English Courts challenging those payments as the giving of an inappropriate preference to someone connected with the Company within the period of two years prior to the onset of insolvency. A successful challenge would be in the interests of the Company's creditors other than Mr Downer. The position was quite different in Jersey. Under the Companies (Jersey) Law 1991 article 176A, and in particular paragraph (9), an alleged preference could be the subject of challenge only if it had been given in the period of 12 months preceding the commencement of the winding-up. It followed that the pursuit of a preference claim under Jersey Law in respect of payments made by the Company in 2018 would be time-barred. It could therefore be seen that the commencement of a creditors' winding-up in Jersey at the eleventh hour by Mr Downer was a matter of self-interest seeking to defeat the preference claim for his personal benefit.
13. It was also observed that, if the Company's claim for injunctive relief succeeded, the other two creditors would seek to take over the winding-up proceedings before the English Courts.
14. Separately, reliance was placed by the Respondent on the judgment of the High Court in England handed down on 20 August 2021, recording that the court had jurisdiction to hear insolvency proceedings where the proceedings related to a debt and "the centre of the debtor's main interest" was in England. The judge had concluded that the centre of main interest of the Company was at all times within England and Wales in that, among other matters, the sole economic purpose was to carry on business within the United Kingdom by reference to its principal asset, Quay House, London; that its contracts were governed by English Law and subject to the jurisdiction of the courts of England and Wales; that Mr Downer made decisions on the spot in England and Wales; and that head office functions were carried out in England by an English company of which Mr Downer was the sole shareholder until 2015. The learned judge also held that the Company could be wound up in England and Wales, although it is not registered there, under the Companies Act 2006, on the footing that it had sufficient connection with England and Wales.
15. The Royal Court, whilst noting that it had ordered the matter to be determined as a cause de brievété, agreed with the Respondent that the court was sitting to determine a claim for interlocutory injunctive relief on an inter partes basis and not at a trial of the action as a whole. The Court therefore proceeded to apply the principles set out in American Cyanamid v Ethicon [1975] AC 396.
16. Applying those principles to the facts of the case before it, the Royal Court held that there was a serious issue to be tried between the parties. Merely because it had been found that the Company's centre of main interest was in one jurisdiction did not necessarily mean that it was not managed and controlled in another. In any event, the starting point should be that insolvency proceedings should take place in the jurisdiction of the place in which a company was incorporated. In other words, notwithstanding the English proceedings having been commenced, there could be reason to order the injunctive relief for the purpose of considering the appropriateness of winding-up being carried out in Jersey.
17. In the second place, the Royal Court found that for neither party would damages be an adequate remedy. Refusal of the injunction would leave the Company to face the proceedings in England with different consequences from those in Jersey; and granting the injunction might preclude a substantial claim regarding the alleged preference whereas the Company would be unable to meet any order for damages.
18. The Royal Court therefore turned to consider where the balance of convenience lay. Prohibition of pursuit of the proceedings in England would give rise to potential injustice to the Respondent and to other creditors of the Company, in that there would be no prospect of the preference claim against Mr Downer being pursued, let alone realised. This outweighed any inconvenience to the Company and to Mr Downer as its sole shareholder. In reaching this view, the Royal Court recorded at [37] that it had considered not only the broader interests in the desirability of there being one set of insolvency proceedings but also that, in most circumstances, those proceedings would be in the jurisdiction of residence or incorporation. However, having regard to the particular circumstances before it, the Court indicated that it was in no doubt that it was appropriate to decline the application and thus permit the English insolvency proceedings to continue.
19. The Royal Court also observed, at [38], that its decision might well have been different had the Jersey insolvency process begun (say) a year earlier. Whilst making no finding that Mr Downer was attempting to prefer himself to other creditors, the Royal Court held that it should not, in the whole circumstances, grant relief which would result in the defeat of legitimate third party claims by enabling Mr Downer to rely on certain features of Jersey insolvency legislation.
20. As regards costs, the Royal Court indicated that it was prepared to entertain the Respondent's application for an interim payment of costs once further information had been provided to ensure that the application was compliant with the approach in Chernukhin v Deripaska [2020] JRC 208 at [16]; and that were the Respondent to wish to maintain an application for costs against Mr Downer, there would need to be a personal convening of him.
21. After a hearing on 13 October 2021 the learned Deputy Bailiff, sitting alone, gave judgment ex tempore. He confirmed that he had been referred to the principles set out in Crociani v Crociani [2016] JCA 231 both as to the criteria to grant leave to appeal and as to the ambit for the Court of Appeal to interfere with the exercise of a discretion; and that he had directed himself in accordance with those principles. He indicated that, having considered the arguments set out in the skeletons and submissions he declined to grant leave.
22. The one substantive issue dealt with in detail was the contention that the Royal Court had fallen into error in treating the hearing now subject to application for leave as an inter partes application for an interlocutory injunction and directing itself by reference to the principles in American Cyanamid. On this, the learned Deputy Bailiff indicated that, in his judgment, the Royal Court was correct not to have determined the application as one being made on the merits. The hearing ordered had been that of an interlocutory application made and heard at a time when no pleadings had been filed, let alone orders made for production of discovery or for exchange of witness statements. Further, even had the matter been dealt with as a determination on the merits, the evidence available would have led to refusal of the application for injunctive relief.
23. Dealing with the issue as to the application for a stay of consideration of costs pending any appeal (none having yet been made), the learned Deputy Bailiff, noting that he had declined to give leave to appeal and could not know whether an application would be renewed or granted, indicated that, in his judgment, it was not helpful to postpone determinations of costs. Such applications should be determined when relevant factors were in the minds of parties and the court and the application for stay was declined.
24. By its Notice of Appeal, the Company seeks to ask the Court of Appeal to reverse the Orders of the Royal Court and grant the anti-suit injunction together with ancillary requests. It was submitted that the Royal Court had not engaged with when and why it would be appropriate to derogate from the principle of Universalism. The Royal Court had found that the principle of Universalism was recognised as part of the law of Jersey and was the appropriate starting point. It had also supported the broader public interest in the courts of the jurisdiction of incorporation conducting an orderly winding-up and distribution of assets on a worldwide basis. The Royal Court had also found that the Company had its administration in and substantial connection with Jersey. It would therefore be argued that the Royal Court had erred in fact and law in refusing to grant the anti-suit injunction and had identified no good reason why the Jersey insolvency regime should be required to give way to a different insolvency regime in England.
25. Further, in reaching its conclusion, the Royal Court had proceeded upon the incorrect basis that it was sitting to determine an application for interlocutory relief and not the final determination as to whether relief should be granted. The test to be applied was whether, as a matter of principle, it was correct to restrain the Respondent from pursuing the English proceedings rather than applying the test in American Cyanamid.
26. In incorrectly using the test in American Cyanamid, the Royal Court had been led to take into account matters which it ought not to have taken into account. The date of commencement of the Jersey insolvency process was irrelevant to the application of the principle of Universalism. The Royal Court had also failed to take into account matters which it ought to have done. I pause to note that not all the matters put forward in the Notice of Appeal related to contentions put before the Royal Court. Of those which had been, it was submitted that it was noteworthy that, having made no finding that Mr Downer was attempting to prefer himself to other creditors, the Royal Court had also failed to take into account the cost of English proceedings. Further, it should have been clear that management and control rested in Jersey which gave further weight to the arguments relating to Universalism.
27. For the Respondent it was submitted that there had been no misdirection. The Company had applied for an interim injunction, and it was appropriate to apply the test in American Cyanamid. In agreeing that the principle of Universalism would apply in most cases, and that one set of proceedings in one jurisdiction would generally be desirable, it was proper for the Royal Court to conclude that results of the application of the principle depended upon the facts of the individual case.
28. Further, the matters taken into account by the Royal Court had been relevant to the issues before the court. The fact that the hearing had taken place at a time when no pleadings had been filed, documents discovered, or witness statements exchanged supported the view that this had been a hearing of an interlocutory application.
29. There was no general principle to be decided for the first time. The Royal Court had applied the well-known principles set out in American Cyanamid; principles which had been applied since 1975. Nor was there any important question of law for the Court of Appeal.
30. Turning to costs, it was submitted for the Respondent that it was unclear whether the Company was (i) asking for leave to appeal the Royal Court's decision not to grant the stay or (ii) reserving its right to bring a new stay of costs application before the Court of Appeal at a future time. If the latter, the Company could not reserve such a right: it had decided to bring its application before the Royal Court and judgment had been handed down on that issue.
31. In any event, under the current circumstances there was no good reason for depriving the Respondent of its entitlement to bring a costs application. Any delay in resolving the issue of costs would be unhelpful and contrary to principle. If an application is made as regards Mr Downer, Mr Downer and the Company can raise arguments as to why costs orders should not be granted. The balance of advantage clearly favoured the Respondent. Even if this court were to grant leave, the decision of the Royal Court dismissing the application for an interim order to stay determination of costs pending the appeal should be sustained.
32. As regards costs of and incidental to the leave application before the Royal Court, there was no reason why costs should not follow the event in the usual manner. Reference was made to In re Elgindata Limited (No 2) [1992] 1WLR 1207, 1213 (Nourse LJ).
33. By virtue of Article 13(1)(e) of the Court of Appeal (Jersey) Law 1961, leave to bring an appeal is required, whether from the court in question or from the Court of Appeal, in order to bring a appeal in respect of any interlocutory order or judgment.
34. There was no dispute that, as set out in Crociani v BNP [2014] (1) JLR 427, 441, this court has confirmed that leave would be granted where required under Article 13(1)(e) only where (i) the appeal had a real prospect of success, (ii) a question of general principle fell to be decided for the first time or (iii) there was an important question of law upon which further argument and a decision of the Court of Appeal would be to the public advantage.
35. Nor was there any dispute but that from United Capital Corporation v Bender [2006] JLR 269 at [25]-[26] it is clear that this court may interfere in the exercise of judicial discretion only in cases where -
(1) there has been a misdirection with regard to the principles in accordance with which the discretion in question is to be exercised;
(2) matters have been taken into account which ought not to have been, or there has been a failure to take into account matters which ought to have been considered; or
(3) the decision was plainly wrong, in the sense that no reasonable judge, properly directed could properly have reached the same decision.
36. In the first place, it seems clear to me that this application was being dealt with on an interlocutory basis. Whilst the matter had been sent for hearing as a cause de brievété because of the existence of the proceedings in England, it is not obvious that this procedural approach should be determinative notwithstanding other considerations. As the learned Deputy Bailiff indicated at the leave application hearing, no pleadings had been filed by the Defendant and there had been no ancillary orders to suggest that the cause was at a developed stage such as might attend a determination on the merits. Manifestly, such further procedural stages can lead to altered circumstances as a result of which an application for injunctive relief might be renewed. The existence of such a possibility militates against the view that the appropriate characterisation of the hearing in question was that leading to a determination on the merits.
37. Adopting the approaches in Crociani and UCC v Bender, the first question is as to whether the appeal has a real prospect of success upon the basis of misdirection as to principles, or of an unreasonable approach to the matters to be taken into account or of a decision plainly wrong.
38. Upon the approach that the hearing below is properly to be characterised as interlocutory, there is no dispute that the principles to be applied are those set out in American Cyanamid. As there is no argument that there were failures in the application of those principles, it follows that the appeal has no prospect of success.
39. If my primary judgment is wrong and the hearing below is not properly to be characterised as interlocutory, the test which the Company contends should have been applied, as a matter of principle, is whether it was correct to restrain the Respondent. Upon the approach taken on behalf of the Company, this would appear to call into question whether there was good reason to decline to grant the anti-suit injunction having regard to the accepted principle of Universalism. On this there is no contention that the Royal Court laboured under a misdirection regarding the principles to be applied. Further, Universalism being a principle, it follows that the Royal Court was correct to consider the individual facts and circumstances by reference to which the principle fell to be applied. It is trite that a general rule espoused by a principle will not always be the result of the application of the principle to the facts.
40. Accordingly, by reference to the test proposed on behalf of the Company, the issue as to prospect of success will depend upon an appraisal of the matters taken into account and left out of account. On this, whilst approached by the Royal Court upon the basis of balance of convenience as provided for in American Cyanamid, the reasoning in the Judgment is equally applicable. As indicated at [37], notwithstanding the broader considerations within Universalism, the potential injustice to the Respondent and other creditors in being prevented from pursuing proceedings before the High Court in England constituted the over-riding consideration because the insolvency proceedings in England would allow the possibility, in the present circumstances, of challenge on the basis of inappropriate preference whereas proceedings in Jersey would not.
41. The Company does not point to any material consideration other than the jurisdictional aspect of the principle of Universalism which supports proceedings being maintained in Jersey. In contradistinction the High Court in England has identified numerous material considerations as to the practical operation of the Company in England. The material salient point identified by the Royal Court in the Judgment is that of the respective statutory provisions by which the relevant time the giving of a preference could be challenged. Whilst the Royal Court made no finding that Mr Downer was attempting to prefer himself to other creditors it was nonetheless relevant for the court to have in mind that the effect of the preferring of the vote to have a creditors' winding-up in Jersey would be to prevent the creditors other than Mr Downer from having the ability to challenge the alleged preferences. The vote on 3 June 2021 shows that those voting had in mind that the principal interest in the winding-up was that of the creditors. In consequence, it becomes highly material to consider any distinctions as between the remedies available under the insolvency regime first engaged by those unarguably external creditors and that sought to be engaged at a later date by someone intimately involved with the insolvent company. In circumstances in which the decision to move towards a creditors' winding-up in Jersey was taken by the only interested person at any level of that decision making process, and the only material effect of the decision would be to preclude other creditors from pursuing a potential remedy, it is clear that the determination of the Royal Court can only be regarded as one in respect of which any reasonable judge, properly directed, could properly have reached the same decision; irrespective of any views as to motivation by Mr Downer as to whether winding-up in Jersey would be more beneficial to himself.
42. In my judgment, therefore, the proposed appeal has no prospect of success.
43. Turning to the other considerations identified in Crociani v BNP, there is no matter of general principle to be decided for the first time: the Royal Court accepted the applicability of the principle of Universalism and applied it to the circumstances presented to it. It follows that there is no question of law on which further argument before the Court of Appeal would be to the public advantage.
44. The issue regarding stay in respect of costs applications is manifestly a matter within the discretion of the Royal Court and there is nothing within its approach with which the Court of Appeal could begin to interfere. The determination would have had to be one with which no other reasonable tribunal could have agreed. The reasoning given below is impeccable.
45. Leave to appeal is refused.
