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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Rubin & Anor v Eurofinance SA & Ors [2009] EWHC 2129 (Ch) (31 July 2009) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2009/2129.html Cite as: [2009] BPIR 1478, [2010] 1 All ER (Comm) 81, [2009] EWHC 2129 (Ch) |
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Chancery Division
Companies Court
B e f o r e :
(sitting as a deputy judge)
In the matter of the Consumers Trust
and
In the matter of the Trustee Act 1925
and
In the matter of the Cross-Border Insolvency Regulations 2006
____________________
(1) David Rubin | ||
(2) Henry Lan | Applicants | |
-and- | ||
(1) Eurofinance SA | ||
(2) Adrian Roman | ||
(3) Justin Roman | ||
(4) Nicholas Roman | Respondents |
____________________
Mr. Marcus Staff, instructed by Brown Rudnick LLP, appeared for the respondents.
____________________
Crown Copyright ©
Introduction
(1) recognition under article 15 of bankruptcy proceedings in the U.S. Bankruptcy Court of the Southern District of New York (Case No. 05-60155) as a "foreign main proceeding", together with recognition of the applicants as foreign representatives; and
(2) an order under article 25 enforcing the decision of the U.S. bankruptcy court, holding the respondents liable for the debts of TCT totalling $160 million, as a judgment of the English courts.
The facts
"(i) to make application to the High Court of Justice, Chancery Division ("the High Court") in London for recognition of this Chapter 11 case as a foreign main proceeding under the (regulations);
(ii) to seek assistance and cooperation from the High Court in connection with the Chapter 11 case, and, in particular, to seek the High Court's assistance and cooperation in the prosecution of litigation which may be commenced in this court, including relief regarding service of process, discovery, and the enforcement of judgments of this Court that may be obtained against persons and entities residing or owning property in Great Britain (my emphasis); and
(iii) to take such further actions on behalf of the Debtor as may be necessary or appropriate in accordance with the applicable provisions of the (Regulations)."
The Model Law
"1. The UNCITRAL Model Law on Cross-Border Insolvency, adopted in 1997, is designed to assist States to equip their insolvency laws with a modern, harmonized and fair framework to address more effectively instances of cross-border insolvency. Those instances include cases where the insolvent debtor has assets in more than one State of where some of the creditors of the debtor are not from the State where the insolvency proceeding is taking place.
2. The Model Law reflects practices in cross-border insolvency matters that are characteristic of modern, efficient insolvency systems. Thus, the States enacting the Model Law ("enacting States") would be introducing useful additions and improvements in national insolvency regimes designed to resolve problems arising in cross-border insolvency cases. Both jurisdictions that currently have to deal with numerous cases of cross-border insolvency and jurisdictions that wish to be well prepared for the increasing likelihood of cases of cross-border insolvency will find the Model Law useful.
3. The Model law respects the differences among national procedural laws and does not attempt a substantive unification of insolvency law. It offers solutions that help in several modest but significant ways. These include the following:
(a) Providing the person administering a foreign insolvency proceeding ("foreign representative") with access to the courts of the enacting State, thereby permitting the foreign representative to seek a temporary "breathing space", and allowing the courts in the enacting State to determine what coordination among the jurisdictions or other relief is warranted for optimal disposition of the insolvency;
(b) Determining when a foreign insolvency proceeding should be accorded "recognition" and what the consequences of the recognition may be;
(c) Providing a transparent regime for the right of foreign creditors to commence, or participate in, an insolvency proceeding in the enacting State;
(d) Permitting courts in the enacting State to cooperate more effectively with foreign courts and foreign representatives involved in an insolvency matter;
(e) Authorizing courts in the enacting State and person administering insolvency proceedings in the enacting State to seek assistance abroad;
(f) Providing for court jurisdiction and establishing rules for coordination where an insolvency proceeding in the enacting State is taking place concurrently with an insolvency proceedings in a foreign State;
(g) Establishing rules for coordination of relief granted in the enacting State in favour of two or more insolvency proceedings that may take place in foreign States regarding the same debtor."
"1. This Law applies where –
(a) assistance is sought in Great Britain by a foreign court or a foreign representative in connection with a foreign proceeding; or
(b) assistance is sought in a foreign State in connection with a proceeding under British insolvency law; or
(c) a foreign proceeding and a proceeding under British insolvency law in respect of the same debtor are taking place concurrently; or
(d) creditors or other interested persons in a foreign State have an interest in requesting the commencement of, or participating in, a proceedings under British insolvency law."
There follow a series of exceptional cases which the Model Law does not apply.
"(f) "foreign court" means a judicial or other authority competent to control or supervise a foreign proceeding;
(g) "foreign main proceeding" means a foreign proceeding taking place in the State where the debtor has the centre of its main interests;
.....
(i) "foreign proceeding" means a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganisation or liquidation;
(j) "foreign representative" means a person or body, including one appointed on an interim basis, authorised in a foreign proceeding to administer the reorganisation or the liquidation of the debtor's assets or affairs or to act as a representative of the foreign proceeding;
"In the interpretation of this Law, regard is to be had to its international origin and to the need to promote uniformity in its application and the observance of good faith."
"A foreign representative is entitled to apply directly to a court in Great Britain"
There is no requirement that the foreign proceeding must first have been recognised in this country, but the definition of "foreign representative" depends upon the applicant having been authorised in the foreign proceeding, and the foreign proceeding must be within the definition set out above.
"Article 15. Application for recognition of a foreign proceeding
1. A foreign representative may apply to the court for recognition of the foreign proceeding in which the foreign representative has been appointed.
2. An application for recognition shall be accompanied by –
(a) a certified copy of the decision commencing the foreign proceeding and appointing the foreign representative; or
(b) a certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of the foreign representative; or
(c) in the absence of evidence referred to in sub-paragraphs (a) and (b), any other evidence acceptable to the court of the existence of the foreign proceeding and of the appointment of the foreign representative.
3. An application for recognition shall also be accompanied by a statement identifying all foreign proceedings, proceedings under British insolvency law and section 426 requests in respect of the debtor that are known to the foreign representative.
4. The foreign representative shall provide the court with a translation into English of documents supplied in support of the application for recognition.
Article 16. Presumptions concerning recognition
1. If the definition or certificate referred to in paragraph 2 of article 15 indicates that the foreign proceeding is a proceeding within the meaning of sub-paragraph (i) of article 2 and that the foreign representative is a person or body within the meaning of sub-paragraph (j) of article 2, the court is entitled to so presume.
2. The court is entitled to presume that documents submitted in support of the application for recognition are authentic, whether or not they have been legalised.
3. In the absence of proof to the contrary, the debtor's registered office, or habitual residence in the case of an individual, is presumed to be the centre of the debtor's main interests.
Article 17. Decision to recognise a foreign proceeding
1. Subject to article 6, a foreign proceeding shall be recognised if –
(a) it is a foreign proceeding within the meaning of sub-paragraph (i) of article 2;
(b) the foreign representative applying for recognition is a person or body within the meaning of sub-paragraph (j) of article 2;
(c) the application meets the requirements of paragraphs 2 and 3 of article 15; and
(d) the application has been submitted to the court referred to in article 4.
2. The foreign proceeding shall be recognised –
(a) as a foreign main proceeding if it is taking place in the State where the debtor has the centre of its main interests; or
(b) as a foreign non-main proceeding if the debtor has an establishment within the meaning of sub-paragraph (e) of article 2 in the foreign State …"
"Article 21. Relief that may be granted upon recognition of a foreign proceeding
1. Upon recognition of a foreign proceeding, whether main or non-main, where necessary to protect the assets of the debtor or the interests of the creditors, the court may, at the request of the foreign representative, grant any appropriate relief, including –
(a) staying the commencement or continuation of individual actions or individual proceedings concerning the debtor's assets, rights, obligations or liabilities, to the extent they have not been stayed under paragraph 1(a) of article 20;
(b) staying execution against the debtor's assets to the extent it has not been stayed under paragraph 1(b) of article 20;
(c) suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor to the extent this right has not been suspended under paragraph 1(c) of article 20;
(d) providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor's assets, affairs, rights, obligations or liabilities;
(e) entrusting the administration or realisation of all or part of the debtor's assets located in Great Britain to the foreign representative or another person designated by the court;
(f) extending relief granted under paragraph 1 of article 19; and
(g) granting any additional relief that may be available to a British insolvency officeholder under the law of Great Britain, including any relief provided under paragraph 43 of Schedule B1 to the Insolvency Act 1986 [32].
2. Upon recognition of a foreign proceeding, whether main or non-main, the court may, at the request of the foreign representative, entrust the distribution of all or part of the debtor's assets located in Great Britain to the foreign representative or another person designated by the court, provided that the court is satisfied that the interests of creditors in Great Britain are adequately protected. …"
"Article 25. Cooperation and direct communication between a court of Great Britain and foreign courts or foreign representatives
1. In matters referred to in paragraph 1 of article 1, the court may cooperate to the maximum extent possible with foreign courts of foreign representatives, either directly or through a British insolvency officeholder.
2. The court is entitled to communicate directly with, or to request information or assistance directly from, foreign courts or foreign representatives.
Article 26. Cooperation and direct communication between the British insolvency officeholder and foreign courts or foreign representatives
1. In matters referred to in paragraph 1 of article 1, a British insolvency officeholder shall to the extent consistent with his other duties under the law of Great Britain, in the exercise of his functions and subject to the supervision of the court, cooperate to the maximum extent possible with foreign courts or foreign representatives.
2. The British insolvency officeholder is entitled, in the exercise of his functions and subject to the supervision of the court, to communicate directly with foreign courts or foreign representatives.
Article 27. Forms of cooperation
Cooperation referred to in articles 25 and 26 may be implemented by any appropriate means, including –
(a) appointment of a person to act at the direction of the court;
(b) communication of information by any means considered appropriate by the court;
(c) coordination of the administration and supervision of the debtor's assets and affairs;
(d) approval or implementation by courts of agreements concerning the coordination of proceedings;
(e) coordination of concurrent proceedings regarding the same debtor."
(a) Article 25 paragraph 1 provides that the court may co-operate, whereas the UNCITRAL Model provides that it shall co-operate: there is no similar difference in Article 26 paragraph 1.
(b) There are some minor alterations to article 26; and
(c) Article 27 in the UNCITRAL Model concludes:
"(f) [the Enacting State may wish to list additional forms or examples of co-operation]."
But no additional forms or examples for co-operation have been listed.
The recognition application
"It is not a convention, but a set of provisions drafted to be enacted by individual states, with such local variations as may be necessary."
Therefore, it is submitted, uniform interpretation is unnecessary, and the words used in the Model Law should be given their ordinary domestic meaning.
The enforcement application
(a) article 21.1(e), which permits the court to grant any appropriate relief including "entrusting the administration or realisation of all or part of the debtor's assets located in Great Britain to the foreign representative or another person designated by the court"; and
(b) article 25.1, which permits the court to "co-operate to the maximum extent possible" with foreign courts or foreign representatives.
"16. The English common law has traditionally taken the view that fairness between creditors requires that, ideally, bankruptcy proceedings should have universal application. There should be a single bankruptcy in which all creditors are entitled and required to prove. No one should have an advantage because he happens to live in a jurisdiction where more of the assets or fewer of the creditors are situated. For example, in Solomons v. Ross (1764) 1 HBl 131 in a firm in Amsterdam was declared bankrupt and assignees were appointed. An English creditor brought garnishee proceedings in London to attach £1,200 owing to the Dutch firm but Bathurst J, sitting for the Lord Chancellor, decreed that the bankruptcy had vested all the firm's moveable assets, including debts owed by English debtors, in the Dutch assignees. The English creditor had to surrender the fruits of the garnishee proceedings and prove in the Dutch bankruptcy.
17. This doctrine may owe something to the fact that 18th and 19th century Britain was an imperial power, trading and financing development all over the world. It was often the case that the principal creditors were in Britain but many of the debtor's assets were in foreign jurisdictions. Universality of bankruptcy protected the position of British creditors. Not all countries took the same view. Countries less engaged in international commerce and finance did not always see it as being in their interest to allow foreign creditors to share equally with domestic creditors. But universality of bankruptcy has long been an aspiration, if not always fully achieved, of United Kingdom law. And with increasing world trade and globalisation, many other countries have come round to the same view.
18. As Professor Fletcher points out (Insolvency in Private International Law, 1st ed (1999), p.93) the common law on cross-border insolvency has for some time been "in a state of arrested development", partly no doubt because in England a good deal of the ground has been occupied by statutory provisions such as section 426 of the Insolvency Act 1986, the European Council Regulation (EC) No. 1346/2000 of 29 May 2000 on insolvency proceedings (OJ 2000 L160, p.1) and the Cross-Border Insolvency Regulations 2006 (SI 2006/1030), giving effect to the UNCITRAL Model Law. In the present case, however, we are concerned solely with the common law.
19. The underdeveloped state of the common law means that unifying principles which apply to both personal and corporate insolvency have not been fully worked out. For example, the rule that English moveables vest automatically in a foreign trustee or assignee has so far been limited to cases in which he was appointed by the court of the country in which the bankrupt was domiciled (in the English sense of that term), as in Solomons v. Ross, or in which he submitted to the jurisdiction; In re. Davidson's Settlement Trusts (1873) LR 15 Eq 383. It may be that the criteria for recognition should be wider, but that question does not arise in this case. Submission to the jurisdiction is enough. In the case of immoveable property belonging to a foreign bankrupt, there is no automatic vesting but the English court has a discretion to assist the foreign trustee by enabling him to obtain title or to otherwise deal with the property.
20. Corporate insolvency is different in that, even in the case of moveables, there is no question of recognising a vesting of the company's assets in some other person. They remain the assets of the company. But the underlying principle of universality is of equal application and this is given effect by recognising the person who is empowered under the foreign bankruptcy law to act on behalf of the insolvent company as entitled to do so in England. In addition, as Innes CJ said in the Transvaal case of In re. African Farms Ltd [1906] TS 373, 377, in which an English company with assets in the Transvaal had been voluntarily wound up in England, "recognition which carries with it the active assistance of the court". He went on to say that active assistance could include:
"A declaration, in effect, that the liquidator is entitled to deal with the Transvaal assets in the same way as if they were within the jurisdiction of the English courts, subject only to such conditions as the court may impose for the protection of local creditors, or in recognition of the requirements of our local laws."
21. Their Lordships consider that these principles are sufficient to confer upon the Manx court jurisdiction to assist the committee of creditors, as appointed representatives under the Chapter 11 order, to give effect to the plan. As there is no suggestion of prejudice to any creditor in the Isle of Man or local law which might be infringed, there can be no discretionary reason for withholding such assistance."
"Mr. Howe's submissions as to the rules of private international law concerning the recognition and enforcement of judgments in rem and in personam are of course correct. If the New York order and plan had to be classified as falling within one category or the other, the appeal would have to be allowed."
It is precisely because, as he went on to say, the order of New York bankruptcy court was neither a judgment in rem nor a judgment in personam, but an order which was "to provide a mechanism of collective execution against the property of the debtor by creditors whose rights are admitted or established", that it was to be given effect to by the Manx court.
"6. Despite the absence of statutory provision, some degree of international co-operation in corporate insolvency had been achieved by judicial practice. This was based upon what English judges have for many years regarded as a general principle of private international law, namely that bankruptcy (whether personal or corporate) should be unitary and universal. There should be a unitary bankruptcy proceeding in the court of the bankrupt's domicile which receives worldwide recognition and it should apply universally to all the bankrupt's assets.
7. This was very much a principle rather than a rule. It is heavily qualified by exceptions on pragmatic grounds; elsewhere I have described it as an aspiration: see Cambridge Gas Transportation Corpn v. Official Committee of Unsecured Creditors of Navigator Holdings plc [2007] 1 AC 508, 517, para. 17. Professor Jay Westbrook, distinguished American writer on international insolvency has called it a principle of "modified universalism": see also Fletcher. Insolvency in Private International Law, 2nd ed. (2005), pp.15-17. Full universalism can be attained only by international treaty. Nevertheless, even in its modified and pragmatic form, the principle is a potent one.
8. In the late 19th century there developed a judicial practice, based upon the principle of universalism, by which the English winding up of a foreign company was treated as ancillary to a winding up by the court of its domicile. There is no doubt that an English court has jurisdiction to wind up such a company if it has assets here or some other sufficient connection with this country: In re. Drax Holdings Ltd [2004] 1 WLR 1049. And in theory, such an order operates universally, applies to all the foreign company's assets and brings into play the full panoply of powers and duties under the Insolvency Act 1986 like any other winding up order: see Millett J in In re International Tin Council [1987] Ch 419, 447: "The statutory trusts extend to [foreign] assets, and so does the statutory obligation to collect and realise them and to deal with their proceeds in accordance with the statutory scheme."
.....
29. I therefore agree with the Court of Appeal that the court has jurisdiction, even if not for precisely the same reasons. But the Court of Appeal nevertheless decided that the jurisdiction should not be exercised because the outcome for some creditors would be worse than if the English assets were distributed according to English law. There as, said Carnwath LJ [2007] Bus LR 250, para. 72, no "rule of private international law, or any other countervailing benefit" which would require the court to disregard the principles applicable under English insolvency law.
30. I must respectfully disagree. The primary rule of private international law which seems to me applicable to this case is the principle of (modified) universalism, which has been the golden thread running through English cross-border insolvency law since the 18th century. That principle requires that English courts should, so far as is consistent with justice and UK public policy, co-operate with the courts in the country of the principal liquidation to ensure that all the company's assets are distributed to its creditors under a single system of distribution. That is the purpose of the power to direct remittal. "(My emphasis)"
"Chapter IV. Cooperation with foreign courts and foreign representatives
173. Chapter IV (articles 25-27), on cross-border cooperation, is a core element of the Model Law. Its objective is to enable courts and insolvency administrators from two or more countries to be efficient and achieve optimal results. Cooperation as described in the chapter is often the only realistic way, for example, to prevent dissipation of assets, to maximize the value of assets (e.g. when items of production equipment located in two States are worth more if sold together than if sold separately or to find the best solutions for the reorganization of the enterprise).
174. Articles 25 and 26 not only authorize cross-border cooperation, they also mandate it by providing that the court and the insolvency administrator "shall cooperate to the maximum extent possible". The articles are designed to overcome the widespread problem of national laws lacking rules providing a legal basis for cooperation by local courts with foreign courts in dealing with cross-border insolvencies enactment of such a legal basis would be particularly helpful in legal systems in which the discretion given to judges to operate outside areas of express statutory authorization is limited. However, even in jurisdictions in which there is a tradition of wide judicial latitude, enactment of a legislative framework for cooperation has proved to be useful.
175. To the extent that cross-border judicial cooperation in the enacting State is based on the principle of comity among nations, the enactment of articles 25-27 offers an opportunity for making that principle more concrete and adapted to the particular circumstances of cross-border insolvencies.
176. In the States in which the proper legal basis for international cooperation in the area of cross-border insolvency is not the principle of comity, but an international agreement (e.g. a bilateral or multilateral treaty or an exchange of letters between the cooperating authorities) based on the principle of reciprocity, chapter IV of the Model Law may serve as a model for the elaboration of such international cooperation agreements.
177. The articles in chapter IV leave certain decisions, in particular when and how to cooperate, to the courts and, subject to the supervision of the courts, to the insolvency administrators. For a court (or a person or body referred to in articles 25 and 26) to cooperate with a foreign court or a foreign representative regarding a foreign proceeding, the Model Law does not require a previous formal decision to recognize that foreign proceeding.
178. The importance of granting the courts flexibility and discretion in cooperating with foreign courts or foreign representatives was emphasized at the Second UNCITRAL-INSOL Multinational Judicial Colloquium on Cross-Border Insolvency. At that Colloquium, reports of a number of cases in which judicial cooperation in fact occurred were given by the judges involved in the cases. From those reports a number of points emerged that might be summarized as follows: (a) communication between courts is possible but should be done carefully and with appropriate safeguards for the protection of substantive and procedural rights of the parties; (b) communication should be done openly, in the presence of the parties involved (except in extreme circumstances), who should be given advance notice; (c) communications that might be exchanged are various and include: e.g. exchanges of formal court orders or judgements; supply of informal writings of general information, questions and observations; and transmission of transcripts of court proceedings; (d) means of communication include, for example, telephone, facsimile, electronic mail facilities and video; and (e) where communication is necessary and is intelligently used, there could be considerable benefits for the persons involved in, and affected by, the cross-border insolvency."
Conclusion