Bedell Cristin acts for Joint Liquidators in high value winding up proceedings
25 November 2015
Bedell Cristin has acted for the Joint Liquidators in the winding up of three Jersey incorporated companies ordered under the Companies (Jersey) Law 1991 (the "Companies Law"). The winding up proceedings are particularly significant as they involved the successful sale of one of the most valuable pieces of Jersey commercial real estate ever to take place.
Advocate Gardner and Advocate Lewis both appeared for the Joint Liquidators in the Royal Court during the winding up proceedings.
The privacy ruling which previously attached to the judgments given in this matter has recently been lifted and as such all judgments are now in the public domain. The judgments delivered touch on several different and interesting aspects of court ordered windings up on just and equitable grounds.
Background - the Trust
In 1997, Mr. John Neal established a discretionary trust in Jersey ("the Trust"). The settlor, his wife and their four children were the beneficiaries of the Trust. At the time of the winding up, the only substantial asset of the Trust was a freehold interest in the property at 44 Esplanade, St Helier, Jersey ("the Property"), which was owned by Anthony Investments (Esplanade) Limited ("Anthony"). Anthony, in turn, was 100% owned by JCN Investments (Jersey) Limited ("JCN") which in turn was 100% owned by Evreux Holdings Limited ("Evreux") (together "the Companies"). At the time of the winding up, Hawksford Trust Company (Jersey) Limited was the trustee of the Trust and owned the corporate structure through its 100% ownership of Evreux. After the settlor fell seriously ill in 1999 the Trust became subject to difficulties which resulted inter alia in hostile litigation between some of the beneficiaries and the Companies.
Court winding up
On 9 October 2013, the Royal Court ordered the winding up of the Companies under Article 155 of the Companies Law. Article 155(1) allows the Court to order a company to be wound up if it is of the opinion that it is just and equitable to do so. The applications for the winding up of the Companies were made by one of the directors of the Companies, Mr Stephen Neal, against the wishes of certain other directors. The applications were successfully made after the Court accepted that Anthony was insolvent on the cash flow basis and was supported by the Viscount. Under Article 155(3), Adrian Rabet and Philip Sykes (both of Moore Stephens at the time) were appointed as Joint Liquidators of the Companies by Order of the Royal Court following the making of winding up orders.
Sale of the Property
During the first half of 2014, the Liquidators were heavily engaged in arbitration proceedings to settle a disputed rent review on the Property. Following the conclusion of the rent review, an intensive marketing campaign followed to secure the sale of the Property which resulted in a preferred buyer, Standard Life Investments, being identified. Following a hearing on 2 December 2014, the Liquidators successfully applied to the Royal Court to sanction the sale of the Property to the preferred buyer for £27,000,000. The sale subsequently completed on 16 January 2015.
As well as confirming that a power of sale was to be implied into Article 170(2) of the Companies Law, the Court went on to consider the nature of the Court's jurisdiction where a liquidator seeks the approval of the Court to exercise a power of sale when there is no statutory requirement to do so. In particular, the Court considered whether the threshold test ought to be the same as that which applies where the Liquidator is required by statute to obtain the Court's approval. In such a case, before taking a view on whether to grant its sanction, the Court would have to weigh the interests of the creditors or contributories as well as the views of the liquidator (Re Edennote Ltd (No 2)  2 BCLC 89). This was to be contrasted with cases where no sanction is required by statute but a creditor applies to the Court to review the exercise of a power by a liquidator. Here the Court's role appeared to be much more limited, with sanction only to be withheld where either the liquidator acts mala fide or takes a decision which no reasonable liquidator could take (Re Greenhaven Motors Ltd (in liquidation)  1 BCLC 635. Ultimately the Court agreed with the Liquidators that both possible threshold tests would be met on the facts of the case. The Court nevertheless noted that the Liquidators' application effectively fell into a third category of case (''voluntary'' sanction for the sale by a liquidator) which raised a novel point of law. It will be interesting to see how the law develops in this area in the future. The decision to sanction the sale is reported at  JRC240B.
In February 2015, the Liquidators wrote to all those creditors who had made claims against the Companies setting out the Liquidators' adjudications on such claims. Shortly after this, the Liquidators successfully obtained declaratory relief from the Royal Court endorsing their proposed approach to claims adjudication and sanctioning compromises of certain of the creditor claims. In particular, the Court approved the Liquidators' decision not to adopt the conclusions of a heavily disputed forensic accountancy report which had been commissioned in 2011 by the then trustee of the Trust into the workings of the Companies (nor to commission a similar report to cover the same issues). The Court noted that the Liquidators were "clearly correct" not to adopt the report and its conclusions and endorsed the decision not to commission a similar report on the basis that such an exercise would have been "expensive, time-consuming and ultimately unsatisfactory." The decision to sanction the Liquidators' approach and compromise of creditor claims is reported at  JRC056A. None of the claims adjudications made by the Liquidators were successfully contested by any creditor.
The winding up of the group continues. Notwithstanding its cash flow insolvency at the time of the commencement of the winding up Anthony is, and JCN is expected to be, fully solvent on a balance sheet basis and a partial distribution is expected for the creditors of Evreux.