In the matter of the E Trust [2017] JRC 060 (07 April 2017)

judgment the deputy bailiff: 1. On 6 th February, 2017, this Court, on the representation of Michael Magnay and Philip Stephen Bowers ("the Representors") gave effect to a request from the Court of Session in Scotland, recognised the Representors' appointment as joint liquidators of E Trustee Company Limited ("the Company") and granted a just and equitable winding up of the Company pursuant to Article 155 of the Companies (Jersey) Law 1991 ("Companies Law"). These, in brief, are our reasons.

2. The Company is a Jersey company with an authorised share capital of £10,000 divided into 10,000 shares of £1 each in which two shares were issued, paid up in full and allotted to A Limited, also a Jersey company.

3. The Company's main activity was to act as a trustee of the E Trust ("the E Trust") which was a Jersey unit trust established by a declaration of trust dated 24 th May, 2005. The E Trust was to invest the proceeds of issuing units to its unitholders in Scottish immovable property known as the E Industrial Park.

4. The Company acquired that property and funded that acquisition by issuing units to B Limited and C Limited which companies are the only unit holders of the E Trust. Together those companies have paid approximately £36 million for the units. That money was provided by their parent company D Limited which borrowed a total of £55 million approximately from Norwich Union Finance Mortgage Limited.

5. The Company, B Limited and C Limited gave various securities to Norwich Union for D Limited's borrowing. Amongst those securities were securities over the E Industrial Park.

6. Norwich Union assigned its interests and entitlements under the facilities to F Company ("the Creditor") on 15 th October, 2015. The Creditor wrote to D Limited and to the Company giving notice of default, demanding payment and, in the case of the Company, notifying it that it intended amongst other things to appoint liquidators.

7. The Company replied to the Creditor on 8 th June, 2016, confirming that it understood that the Creditor intended to apply to the Court of Session in Scotland for the appointment of liquidators to the Company and confirmed that there was no objection to that course of action.

8. The Creditor did petition the Court of Session on 20 th June, 2016, and as, pursuant to Scottish law, the Company carried on business in Scotland and the Court of Session accordingly had jurisdiction it appointed the Representors as joint interim liquidators and thereafter on 9 th September, 2016, confirmed them as joint liquidators.

9. The Court has before it a letter of request from the Court of Session requesting that pursuant to Article 49 of the Bankruptcy (Désastre)(Jersey) Law 1990 this Court recognise the Representors as joint liquidators. Although the letter of request asks this Court to grant to the joint liquidators a wide range of powers to give effect to their recognition in Jersey, in fact the only purpose of the recognition of the Representors as joint liquidators is to enable them to make an application to this Court for a just and equitable winding up of the Company pursuant to Article 155 of the Companies Law.

10. The appropriateness of doing so is, so it was put to us, that the Company is a Jersey company which is in effect the trustee of a Jersey trust and therefore the Royal Court should have jurisdiction over any liquidation and liquidators.

11. The representation was first presented on 23 rd December, 2016, and the Court then made orders convening and serving B Limited and C Limited, D Limited, and A Limited. B Limited and C Limited confirmed that there was no objection to the liquidation of the Company, D Limited did not respond (having been served on 4 th January, 2017,) and A Limited wrote a letter confirming that they had no objection to the application before the Royal Court of Jersey.

12. It is clear that we have jurisdiction to accede to the Court of Session's request pursuant to Article 49 of the Bankruptcy (Désastre)(Jersey) Law 1990 . The Company is on the evidence hopelessly insolvent and it seems to us that we should facilitate an appropriate insolvency process being put in place. Given, however, the fact that the Company is a Jersey company, and the trust that it administers is a Jersey trust, it seems to us entirely appropriate that any insolvency is dealt with within this jurisdiction.

13. Accordingly we acceded to the letter of request and recognised the Representors as liquidators of the Company for the sole purpose of seeking an order for a just and equitable winding up.

14. We have jurisdiction to order a just and equitable winding up pursuant to Article 155(1) of the Companies Law. By reason of the hopeless insolvency of the Company it is entirely clear that its substratum has gone and we accordingly order a just and equitable winding up of the Company.

15. We were asked to appoint liquidators and to specify their powers as is usual in an application of this nature. The names of the liquidators were given to us and one was a Jersey resident liquidator and the other a UK resident liquidator. The request was made to us that the liquidators should be in a position to act jointly or severally in the exercise of all of their powers. We gave consideration to this but decided that we should specify certain powers that must be the subject of a joint decision of the liquidators. This seemed important to us because the liquidation was essentially to be carried out in Jersey and the steps taken within this jurisdiction and in our view certain steps should only be taken with the direct agreement of a liquidator within this jurisdiction who may be taken to fully understand the various Jersey processes and how such matters may operate on the ground in Jersey. Hence the Act of Court specifies that certain powers should be exercised by the liquidators jointly and severally and some may only be exercised by the liquidators acting jointly.

16. We are most grateful to the Viscount for her observations on this application. Those observations were made when the Viscount had seen the documentation in a slightly earlier stage and when, indeed, it appeared that the Representors were seeking a full implementation of the letter of request from the Court of Session which gave them very broad powers within Jersey. Given, however, that the application was in fact for a recognition of the Representors in order to seek a just and equitable winding up the Viscount's concerns were largely met by the fact that the liquidation would in effect be carried out within this jurisdiction, pursuant to a Jersey process. Authorities Companies (Jersey) Law 1991. Bankruptcy (Désastre)(Jersey) Law 1990. Page Last Updated: 22 May 2017 BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII