Harms Offshore AHT "Taurus" GmbH and Company KG and Another v Bloom and Others
| Jurisdiction | England & Wales |
| Judge | Sir John Chadwick,Lord Justice Stanley Burnton,Lord Justice Ward |
| Judgment Date | 26 June 2009 |
| Neutral Citation | [2009] EWCA Civ 632,[2009] EWCA Civ 723 |
| Docket Number | Case No: A2/2009/1018(A),Case No: A2/2009/1018 |
| Court | Court of Appeal (Civil Division) |
| Date | 26 June 2009 |
[2009] EWCA Civ 632
Lord Justice Ward
Lord Justice Stanley Burnton and
Sir John Chadwick
Case No: A2/2009/1018(A)
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
Robert Englehart QC (Sitting as a Deputy Judge of the Chancery Division, Companies Court)
Royal Courts of Justice
Strand, London, WC2A 2LL
Elspeth Talbot Rice QC and Edward Cumming (instructed by Ince & Co) for the Appellants
William Trower QC and Tom Smith (instructed by Herbert Smith LLP) for the Respondents
Hearing date: 20 May 2009
Lord Justice Stanley Burnton:
Introduction
On 7 January 2009, on the application of Oilexco North Sea Limited (“the Company”) Patten J made an administration order in respect of the Company appointing the Respondents as Joint Administrators. On 15 May 2009, on the application of the Administrators, Mr Robert Englehart QC, sitting as a deputy judge of the Chancery Division in the Companies Court, granted a mandatory injunction requiring the Appellants to use their best endeavours to procure the release of two ex parte orders of maritime attachment and garnishment made by the United States District Court for the Southern District of New York (“the District Court”) against the tangible and intangible assets of the Company and the release of attachments effected pursuant to those orders. The order also restrained the Appellants from taking any steps in substantive proceedings they had commenced in the District Court seeking judgment for sums due to them from the Company. The deputy judge granted permission to appeal but refused to stay his order.
On 20 May 2009 as a matter of urgency this Court heard an application on the part of the Appellants for a stay of the order made on 15 May 2009 and their appeal against that order. The application and appeal were urgent because the United States Bankruptcy Court in the Southern District of New York (“the Bankruptcy Court”) was due to hear an application by the Administrators for the release of attachments secured by the Appellants later that day. In addition, the Administrators contended that the release of the attachments was necessary for them to be in a position to vacate office and thereby to enable completion of a sale of the shares of the Company. We dismissed the appeal, and Sir John Chadwick gave a brief summary of our reasons for doing so on the basis that it would be of assistance to the Bankruptcy Court to know why the Courts in this country had maintained the injunction, and on the basis that this Court would give its reasons more fully in writing subsequently. The dismissal of the appeal rendered the application for a stay pending appeal otiose.
This judgment sets out my reasons for dismissing the appeal.
The facts
The Company is incorporated in England. It carried on the business of offshore oil and gas exploration in the North Sea. It encountered financial difficulties, and as a result, as mentioned above, the administration order was made on 7 January 2009. On the same date, on the application of the Administrators, the Companies Court made an order authorising them to enter into and to procure the Company to enter into a loan agreement with specified lenders and to draw down funds under that agreement for the purpose of “making such payments in respect of the post-administration liabilities of the Company as the Joint Administrators consider likely to achieve the purpose of the administration”. The Company was thus able to continue to trade, with a view to the sale of the Company or, failing that, of its business and assets.
The Appellants are companies incorporated in Germany. They are one-ship companies, and are pre-administration creditors of the Company under time charterparties of their vessels, the Taurus and the Magnus, dated 7 November 2008. The charterparties are in the standard Supplytime 89 form for offshore service vessels; they are governed by English Law and include an arbitration agreement requiring any dispute to be referred to arbitration in London. The charter hire and other payments to be made under the charterparty were denominated in sterling. The amounts outstanding under the charterparties are, according to the Appellants, £583,987.70 in respect of the Taurus and £595,203.65 in respect of the Magnus.
By letters dated 7 January 2009 the Administrators informed the known creditors of the Company, including the Appellants, that it had entered administration and that they had been appointed administrators. The letter stated that the Company was continuing its business under their supervision whilst they investigated its financial affairs and endeavoured to realise a sale of the Company or of its business or assets.
On 16 January 2009, without notice to the Administrators, the Appellants commenced proceedings in the District Court under its admiralty and maritime jurisdiction seeking judgment for the sums due from the Company and an attachment and garnishment of its tangible and intangible property sufficient to answer their claims. Paragraph 7 of their verified complaints stated:
“Under the laws of the United Kingdom, which governs the parties' Charter, the prevailing party is entitled to recover its interest and attorneys fees. Upon information and belief, it will take two years to bring this dispute to conclusion, resulting in a total of the following estimated interest and attorney's fees in addition to Plaintiff's principal claim: …”
In the case of the Taurus, interest of $85,641 and lawyers' fees of $100,000 were thus added to the sum attached; in the case of the Magnus, $87,286 interest and $100,000 were added to the sum attached.
The Appellants' verified complaints made no mention of the fact, known to the Appellants, that the Company was the subject of an administration order. Although paragraph 7 of the complaints stated that the sums claimed were disputed, no mention was made of the London arbitration agreements, of which, if their claims were disputed, the Appellants were in breach by commencing substantive proceedings otherwise than by arbitration. Of course, the United States of America is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which would require the District Court to refer the claims to arbitration at the request of the Company. In fact, I have seen nothing to show that the sums claimed by the Appellants were disputed; but even if they were, in my judgment the Appellants' complaints misled the District Court by omitting mention of the administration and the arbitration agreements.
On 21 and 26 January 2009 ex parte orders were made by the District Court attaching the property of the Company within the Southern District of New York. On the same date a summons was issued naming the Company as Defendant. Shortly thereafter writs of attachment and garnishment were issued against the property of the Company, including property held for its benefit or moving through or within the possession of 19 named banks.
The Appellants did not inform the Administrators that they had commenced the proceedings in the District Court or that they had obtained and were seeking to enforce attachments against the Company's property. In ignorance of the attachments, on 19 March 2009 the Administrators sought to make a payment of $3,380,963 to a post-administration supplier of services to the Company. That sum went to the supplier's account with one of the banks in New York that had been served with the attachment orders. As a result, a total of approximately $2.2 million was attached.
The New York proceedings and attachment orders were not served on the Administrators until 24 March 2009.
The Administrators agreed a sale of the shares of the Company. It was conditional on a compromise of its liabilities to its creditors, which was to be effected by a company voluntary arrangement pursuant to Part I of the Insolvency Act 1986. The CVA was approved by the creditors of the Company. It was a condition precedent of the sale of the shares of the company that the appointment of the Administrators cease to have effect. There was an alternative agreement for the sale of the Company's assets but it would result in a significantly smaller sum being available for unsecured creditors. Both of the Appellants submitted forms of proxy and voting dated 9 April 2009 in favour of the CVA.
In addition to seeking relief in the Companies Court, on 7 May 2009 the Administrators brought proceedings in the Bankruptcy Court seeking an order vacating the attachments obtained by the Appellants. The basis of the Administrators' proceedings is that the Bankruptcy Court in New York should recognise the administration order under principles of comity embodied in Chapter 15 of the U.S. Bankruptcy Code. Chapter 15 is the U.S. domestic adoption of the Model Law on Cross-Border Insolvency promulgated by the United Nations Commission on International Trade Law (UNCITRAL) in 1997. Its purpose is to “provide effective mechanisms for dealing with cross-border insolvency”.
The contentions of the parties
On behalf of the Appellants, Miss Talbot Rice QC submitted that the Appellants had not acted in breach of any statutory restriction on legal proceedings being commenced against a company...
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