Representation of Green Equity Ltd [2013] JRC 169A (03 September 2013)

judgment the deputy bailiff: 1. This is an application by the representor under Article 155 of the Companies (Jersey) Law 1991 ("the Law") for an order for the just and equitable winding-up of Myfuel Limited ("Myfuel"), a company incorporated in Jersey on 9 th January, 2007, with an authorised share capital of 500 million ordinary shares of a penny each. Of these, according to the last annual return filed on behalf of Myfuel made up to 1 st January, 2009, 476,142,857 shares have been issued. The representor has 47,619,043 shares which is some 10% of the company. 2. The representation asserts that Myfuel is the parent company of two Malaysian companies Biodiesel LD Sdn Bhd ("BLD") and Biodiesel SP Sdn Bhd ("BSD"), which were engaged in the construction of two bio diesel plants in Malaysia. The construction costs of these plants were obtained with debt facilities. A company called Bio Diesel (L) Limited ("BLL"), incorporated in the federal territory of Labuan, Malaysia, lent the sum of $28million to BLD in May 2007, and this was drawn down in two tranches later in the year. The loan from BLL was secured by a debenture given by BLD in favour of BLL, by which a fixed and floating charge was created over all of BLD's assets in favour of the lender; by a deed of debenture from Myfuel in favour of BLL by which a fixed and floating charge was created over all the assets of Myfuel in favour of BLL; and by a charge granted by Myfuel in favour of BLL over all the shares in the Myfuel group of companies. 3. It is asserted that BLD defaulted on the loan agreement in December 2008 and was given a year's grace to pay outstanding interest. Notwithstanding this forbearance, the claim is that BLD then defaulted on its subsequent payment obligations as a result of which the principal sum became due to BLL, then in the sum of $49,928,955. 4. BSP owns non-functional Bio Diesel plant and equipment in the Port Klang Free Zone, Malaysia. The assets are subject to a secured loan of approximately $12,115,117 in favour of Sabah Bank, a Malaysian state owned bank. The evidence before us suggests that the liabilities of BSP exceed the value of its assets. 5. BLL has procured the appointment of a receiver and manager of BLD under the terms of the BLD debenture but the receiver has not yet been able to realise BLD's assets. We are told that the reasons the receiver has been unsuccessful in this are that an interested party is only likely to want to buy the Bio Diesel plant and equipment if it can also purchase the Bio Diesel plant and equipment of BSP, which requires a co-ordinated approach to be taken with Sabah Bank. 6. Myfuel is believed also to be insolvent, the assets being limited to its shareholdings in BSP and BLD. The company was dissolved on 1 st October, 2010, for failure to file its annual return for that year. Furthermore, the Registrar of the Companies Registry at the Jersey Financial Services Commission indicated on 20 th April, 2010, that she was no longer satisfied that the company's registered office address had been duly authorised by the company. The Registrar gave notice that if the company did not notify her within fourteen days of 20 th April, 2010, of an authorised change of registered office address, the company would be guilty of an offence. It appears that all thirty registered shareholders in Myfuel received a copy of that letter. 7. On 30 th June, 2010, the Deputy Registrar of Companies gave notice that Myfuel would be dissolved without further legal process at the expiration of three months from the date of the notice if an annual return as at 1 st January, 2010, was not filed with payment of the annual return and late filing fee. This notice does not appear to have been circulated to shareholders. On 1 st October, 2010, no annual return having been filed, Myfuel was dissolved. 8. The company was resurrected by order of this Court on the application of the representor earlier this year and the application now for an order for a just and equitable winding-up is made on the basis that the substratum of the company's business is at an end, both subsidiary companies no longer trading, and being faced with very large debt, and therefore it would be convenient that an order for a just and equitable winding-up be made; and for an order that Mr Adrian Rabet and Mr Dermot Boylan of Messrs Moore Stephens Risk and Recovery Limited should be appointed as joint liquidators. 9. The jurisdiction to make an order under Article 155 of the Law has been considered by this Court on a number of occasions. In the case of Jean-v-Murfitt [1996] JLR N8b there was a dispute between the beneficial owners of a quasi partnership company. The personal relationship had broken down and the situation was such that the company was effectively paralysed. No accounts could be prepared, debts could not be paid and shares should not be transferred. 10. The Court held that it was appropriate to exercise its powers under Article 155. Bailhache, Bailiff, said that the phrase "just and equitable" had to be given a flexible interpretation. It would be wrong to define fully the circumstances in which it would be just and equitable to wind a company up; it would depend on the circumstances of each individual case. 11. This approach was adopted by Birt, Deputy Bailiff, in In the matter of Leveraged Income Fund Limited 2002/209, Royal Court, October 31 st 2002 unreported, and in the matter of Pound World (Jersey) Limited [2009] JLR N12. The powers to wind up a company under Article 155 were described as "wide". In that latter case it was appropriate to do so because it was in the best interests of the creditors for liquidators to be appointed to secure the company's stock as soon as possible and to continue to trade so as to dispose of it on a retail basis. The Court noted in passing that insolvent companies should normally be wound up by creditors winding-up and the Court should be cautious before ordering just and equitable winding-up in an ordinary case of an insolvent company. 12. In that connection, we note the case of Re Wyser-Pratte Eurovalue Fund Limited (FSD 167/2010, unreported, 26 th October 2010) where it was agreed that an open ended fund in which redemptions had been suspended must be liquidated and ultimately dissolved, but the issue was how that should be done. Jones J said at page 17:- "If the company is going to be liquidated, I see no basis for denying the shareholders the right to have it done in accordance with the provisions of the Companies Law." 13. It is clear from Part 21 of the Law that there are essentially these ways of dealing with the winding-up of companies:- (i) a winding-up under chapter 1 where the company is of limited duration or is a limited life company. (ii) Summary winding-up where the company is solvent. (iii) Winding-up by the Court on just and equitable grounds under Article 155; or (iv) a creditors' winding-up under chapter 4. 14. In addition to these chapters in Part 21 of the Law, of course it is also possible to see a company effectively come to an end through a declaration of désastre. 15. Of course a just and equitable winding-up is carried out in accordance with the provisions of the Law, but it seems to us that while this is a flexible remedy and one where the Court has a wide discretion, there should be, in the case of a company other than a company of limited duration, some valid reason for liquidation to take place other than as a summary winding-up or pursuant to a creditors' winding-up. It is frequently and rightly said that one of the grounds for an order under Article 155 is that the substratum for the company must have gone and that certainly seems to be the position, on the information we now have, in relation to Myfuel. There is no immediate prospect of it or its subsidiary companies recommencing investment business, as far as one can tell, and it may well be impracticable for Myfuel and its subsidiaries to continue in existence, if indeed these subsidiaries do still remain in existence. Certainly communications between the representor and the directors of Myfuel have not been particularly promising, and indeed in 2010 the directors permitted the company to be dissolved by operation of law. 16. When the current application was brought to Court on 14 th June, the Court ordered service of the representation, the Act of Court of that day and the affidavit in support on the former directors of Myfuel. No notice however was given to the shareholders, albeit that the Court ordered the representor to publish a notice in the Jersey Gazette setting out the nature of the present application. We cannot help noticing however that the majority of the shareholders in Myfuel appear to be resident in Malaysia, and it is unlikely that they would have seen the Gazette notice. 17. During the course of argument, we canvassed with Advocate Michel the possibility of a creditors' winding-up. This was based on the premise that as the holder of more than 10% of the issued shares in Myfuel, the representor could requisition a general meeting of the company, which if not called by the directors within 3 weeks of the requisition notice, could be called by the representor itself. The requisition notice would require a meeting of the Company for the purposes of voting on a special resolution to place the Company into liquidation appointing liquidators accordingly. Advocate Michel submitted that while that course might be a possibility, it might be difficult to comply with Article 160(2) of the Law which required that at a meeting of creditors in a creditors' winding-up, the directors should make out a statement as to the affairs of the company, verified on affidavit by some or all of them, and lay that statement before the creditors' meeting. It was not entirely clear whether any of the directors would co-operate in such a course, notwithstanding that by paragraph (3) of that Article, it was a criminal offence for directors not to do so. Advocate Michel submitted that if his client representor was obliged to go down that path, the probability was that in 3-6 months' time, his clients would be back in Court with their application under Article 155, now aided by the submission that the facts showed that no other way forward was possible. 18. The Court is provisionally attracted by such a submission, but it nonetheless considers that shareholders should be given the opportunity of having notice of the present application in order that they can, if they are so inclined, attend Court personally or through an advocate retained by them for this purpose, with a view to making submissions on the representor's application. Accordingly, we have adjourned the hearing of this application until 9:30am on October 4 th 2013 in the Royal Court, when further consideration will be given to it. We direct that forthwith the representor should serve upon each shareholder on the share register of Myfuel as at today's date - recognising that some of the addresses may no longer be accurate - a copy of:- (i) the representation; (ii) the affidavit in support, but without exhibits; (iii) this judgment; (iv) the Act of Court of 6 th August, 2013. 19. If any shareholder, having received those documents, wishes to apply to the representor for a copy of the exhibits to the affidavit sworn in support, a copy of such exhibits should be provided. 20. Unless cause is shown to the contrary, it is anticipated that a final order under Article 155 will be made on 4 th October. Authorities Companies (Jersey) Law 1991. Jean-v-Murfitt [1996] JLR N8b. In the matter of Leveraged Income Fund Limited 2002/209. Pound World (Jersey) Limited [2009] JLR N12. Re Wyser-Pratte Eurovalue Fund Limited (FSD 167/2010. Page Last Updated: 16 Sep 2016 BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII