Knowledge

On 6 November 2024, the Jersey Royal Court (the "Court") handed down a judgment to allow the transfer of almost £25 million unclaimed investment funds to the Crown.

This was the result of a long process involving unclaimed investor funds from a portfolio of assets held by a company who appointed PricewaterhouseCoopers CI LLP ("PwC") as liquidators to trace and repay 4,491 investors of a long-standing fund with an aggregate value of over £180 million.

Despite extensive efforts by PwC, investors could not be found. As a result, in accordance with legal procedures, the unclaimed funds are now set to be transferred to the Crown. 

Bedell Cristin represented the Joint Liquidators, Neil Howlett and Christiaan van den Berg of PwC, providing guidance throughout this complex case. This briefing outlines the background of the fund, PwC's efforts as liquidators and the final procedural transfer of unclaimed assets to the Crown. Read on for an in-depth look at how PwC navigated the challenges of investor tracing, addressing intricate legal considerations and ensuring a compliant resolution to this unique case.

The Court's Decision

On 17 October 2024, the Court authorised the transfer of almost £25 million to His Majesty's Receiver General ("HMRG") from the Joint Liquidators of a company (the "Company") which held a portfolio of assets comprising the Sterling Bond Fund (the "Fund").

The Joint Liquidators sought the Court's approval for the significant transfer because, despite considerable efforts by the Company pre-liquidation and by the Joint Liquidators and tracing agents instructed on their behalf during the course of the liquidation, due to various complications, the Joint Liquidators were unable to trace and repay all investors of the Fund, to enable it to be closed and the Company dissolved.

Facts

The Fund attracted a diverse range of investors located in over 100 countries. In 2019, after approximately 30 years in operation, the decision was made to close the Fund. The Company, along with its various service providers, consequently endeavoured to trace and repay investors to enable the closure.

Despite those efforts, the Company was unable to locate and repay all investors and a decision was made to wind up the Company by summary winding up, and to appoint the Joint Liquidators. Upon their appointment on 9 November 2020, the Joint Liquidators inherited 4,491 investors with an aggregate value of over £180 million.

The Joint Liquidators made significant progress in distributing monies to the remaining investors with the assistance of external specialist third party tracing agents. However, due to various complications, by October 2024, roughly 1,770 investors remained unpaid.

One of these complications related to the age profile of the remaining investors. In 2017, it was recorded that 79% of the investors were over the age of 65 and 37% were over the age of 80, and, therefore, a large number of investors became unresponsive or passed away. Other complications included payment difficulties in high-risk jurisdictions, incomplete Know Your Client or Anti-Money Laundering documents, and little or no information recorded for some investors.

The Joint Liquidators therefore sought orders from the Court to allow the funds allocated to, and details relating to, the remaining investors to be passed to HMRG, in two tranches. The majority of the investors would pass to HMRG in the first tranche, but there was a smaller number of investors who were in contact with the Joint Liquidators and in the process of being paid, as well as a number of investors who had passed away and their next of kin and/or personal representatives were in the process of going through probate. This smaller number of investors were afforded an additional six months to provide the necessary documentation to enable the investors to be paid and, if not completed within that timeframe, the Court ordered that their money would also pass to HMRG.

Legal Principles

The Joint Liquidators sought the substantive relief pursuant to article 186A of the Companies (Jersey) Law 1991, an article under which the Court possesses a wide discretion to determine questions referred to it. 

Monies treated as bona vacantia (which literally means "ownerless goods") can be claimed by the Crown by virtue of the Royal Prerogative. However, usually HMRG will hold assets for 10 years before they are claimed absolutely by the Crown.  That equates to the 10 year period within which a dissolved company can be restored to the register. In this case, the monies belonging to the investors who could not be traced despite substantial efforts are considered as monies which have no owner.

Liquidators have a duty to complete a winding up in a timely manner. Matters cannot drag on for ever. Where circumstances arise which prevent them from being able to distribute all assets as part of the winding up, these unclaimed assets must be dealt with in a cost-effective way. Best practice for liquidators after ensuring that all reasonable methods are pursued (such as advertising etc.) is to request that HMRG accept the assets to enable the liquidators to conclude the winding up.

Conclusion 

There is an expanding bank of decisions in Jersey where assets have been passed to HMRG. Most involve liquidations, although another significant recent case involved a bank administering an employee benefit trust, in which the Trusts (Jersey) Law 1984, as opposed to provisions of the Companies (Jersey) Law 1991, was applied. There may be cases in which a liquidator deals with trust assets not belonging to the company, in which case both sets of provisions could apply. This case involved the largest transfer of funds recorded in Jersey and therefore serves to illustrate the rule that, even where the value of assets is significant, the Court will approve a transfer of assets to HMRG if extensive steps have been taken to locate the investors.  

If liquidators, companies, funds or trusts find themselves in a similar situation, they can refer to a number of helpful steps taken by the Joint Liquidators in this case, which have no doubt assisted in reaching the desired outcome at Court: 

• balancing their duties set out above, the Joint Liquidators instructed specialist tracing agents to trace investors who had invested more than £5,000, where the threshold was adopted to ensure that the tracing exercise remained proportionate;
• the Joint Liquidators also kept the Jersey Financial Services Commission updated throughout the course of the winding up;
• an Amicus Curiae was appointed to represent unpaid investors and to reassure the Court that appropriate steps had been taken to locate such investors; and
• the Joint Liquidators entered into early discussions with HMRG to ensure that he was comfortable accepting the money and holding it for the period of 10 years.