Kaupthing Capital Partners II Master LP Inc. Between: Pillar Securitisation SARL & Others v Spicer and Another
| Jurisdiction | England & Wales |
| Judge | MRS JUSTICE PROUDMAN |
| Judgment Date | 01 April 2010 |
| Neutral Citation | [2010] EWHC 836 (Ch) |
| Court | Chancery Division |
| Date | 01 April 2010 |
[2010] EWHC 836 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: Mrs Justice Proudman
Mr Moss QC and Mr Gledhill appeared on behalf of the Applicant.
Mr Todd QC and Mr Watson-Gandy appeared on behalf of the Respondent.
Mr Arden appeared on behalf of HF and Risikins.
MRS JUSTICE PROUDMAN:
Several urgent applications have been made. I am giving my decision relatively briefly on the principal issues so that the parties know where they stand. I have not gone into the underlying facts in the detail they deserve, but I should make it clear that I've read the extensive evidence in the case and have endeavoured to take it all into account.
Kaupthing Capital Partners II Master LP Inc, (“Master”) is a limited partnership established in Guernsey. It has legal personality pursuant to an election under the Limited Partnership (Guernsey) Law 1995 (“the 1995 Law”). The general partner is KCP II (GP) Limited (“KCP”). Master was a special-purpose vehicle used in connection with an investment fund known as Kaupthing Capital Partners II. There are four limited partners, comprising four feeder fund entities, themselves vehicles for investment by different classes of investor. The investment fund was created in order for employees and others involved in the Kaupthing group of companies to invest alongside the ultimate parent of the group, the Icelandic bank Kaupthing Bank hf(“the Bank”), which was the single largest investor in the fund. Unconnected third parties were also able to invest in the fund through the feeder fund known as the Main Fund.
The fund comprised four limited partnerships; investors' money went to Master and equity investments were made in Master's name in various UK registered companies, both private and public.
Master was managed by its operator, Singer & Friedlander Asset Management Limited, which initially delegated certain administrative functions to Kaupthing Bank Luxembourg SA (“BankLux”) and delegated investment management to Kaupthing, Singer & Friedlander Limited (“KSF”) an English registered investment bank. All three companies were part of the Kaupthing Group.
On 7 October 2008, the Bank entered into insolvency proceedings in Iceland. On the following day KSF was placed into administration by Her Majesty's Government. Also on 8 October 2008, BankLux, Master's largest creditor, made a demand against Master for repayment of its £67 million credit facility by 10 October 2008. On 9 October 2008 BankLux was placed into insolvency proceedings in Luxembourg. Master was unable to comply with the demand, and therefore was insolvent on the basis it could not pay its debts as they fell due.
On 9 October 2008 the joint administrators were appointed, or purportedly appointed, by KCP. On the same day, they were also appointed as joint administrators of KCP.
The administration of KCP and KSF potentially triggered termination of the fund. The joint administrators decided to restructure Master's management. A new subsidiary of KCP was incorporated to act as Master's new general partner and a new operator and a new investment manager were appointed. There were difficulties with funding from BankLux. The applicant Pillar Securitisation was created as a result of restructuring BankLux, and Pillar took over Master's debt to BankLux standing at some £63 million, which represents 99.4 per cent of Master's aggregated unsecured indebtedness. Another 0.4 per cent is owed to the other two applicants, Candesic Limited and Redgrave Partners LLP. The applicants' total share of Master's indebtedness is therefore 99.8 per cent.
There are currently five applications before the court relating to the administration. First, there is the applicants' application. That raises the following issues:
• Was KCP's appointment of the administrators for Master effective? The applicants say it was not, on the following grounds:
• Master's centre of main interests (“COMI”) was Guernsey for the purposes of the Council Regulation on Insolvency Proceedings (1346/2000/EC) so that the English court has no jurisdiction in relation to the insolvency;
• The appointment out of court, and the written resolution leading to the appointment, are both formally and substantively invalid.
• If the appointment was invalid, what becomes of the remuneration drawn by the administrators to date?
• In the alternative, the applicants asked that the administrators be removed from office and replaced with other identified insolvency practitioners pursuant to the Insolvency Act, Schedule B1, paragraphs 88 and 95(b).
• In the second application, the administrators asked that they be permitted to make an interim distribution.
• They also ask for an extension of their term of office to give them time to dispose of Master's remaining assets.
• In the context of this application the administrators ask for directions as to whether the applicants are entitled to interest on their claims in respect of the period of delay caused by their application.
• If the appointment was invalid, the administrators ask the court to make an administration order retrospectively.
• Again, if the appointment was invalid, there is the issue of the effect of paragraph 104 of Schedule B1 and whether there should be an order for indemnity pursuant to paragraph 34 or otherwise.
• The administrators ask that the court should allow an amendment to the notice appointing the administrators to correct what is said to be a slip.
• Lastly, two of the investors ask to be joined to the applications to support the administrators' applications and oppose the applicants' applications. Their expressed basis for joinder, which is opposed by the applicants, is that they have a genuine economic interest justifying their presence.
The first issue, therefore, is as to the validity or otherwise of the appointment.
COMI
The first ground on which the applicants say that the appointment was bad relates to Master's COMI. The English Court may assert jurisdiction to open insolvency proceedings in respect of an entity outside England and Wales where the EC Council Regulation on Insolvency Proceedings (1346/2000/EC) applies and the entity's COMI is within England and Wales. The applicants assert that Master's COMI was Guernsey, which is not an EU Member State, so that the English Court has no jurisdiction in relation to the insolvency.
The English Court also has jurisdiction where it would, apart from the EC Regulation, have jurisdiction under domestic legislation. The applicable provision is Section 117 of the Insolvency Act 1986, as amended and applied to partnerships by the Insolvent Partnerships Order 1994. There is jurisdiction if Master has, or at any time has had, a principal place of business in England and Wales: section 117(1). Mr Todd QC asserted on behalf of the administrators that Master had “a” principal place of business in London, notwithstanding that it had another principal place of business elsewhere. This was to get round the fact that, in order to obtain registration as a limited partnership in Guernsey, Master had declared for the purposes of section 8(2)(d)(ii) of the 1995 Law, that its principal place of business was at an address in St Peter Port, Guernsey.
Mr Todd QC did not really pursue the argument under Section 117. The argument before me centered on Master's COMI. COMI is a separate matter from principal place of business, and in considering COMI, Mr Todd submitted that the court need not grapple with the inconsistency between the statement as to principal place of business under the 1995 Law and the contention that a principal place of business was in England.
The test for establishing COMI under the EC regulation was authoritatively stated by the ECJ in Re Eurofood IFSC Limited [2007] BCLC 150, and recently explained, after analysis of the authorities, by the majority of the Court of Appeal in Re Stanford International Bank Limited [2010] EWCA Civ 137. It is common ground in this case that the following principles fall to be applied:
(i) There is a presumption that the body's COMI is in the state where its registered office is located.
(ii) The presumption can be rebutted only by factors which are both objective and ascertainable by third parties. Thus the court is to have regard to factors already in the public domain, or which would be apparent to a typical third party doing business with the body, excluding such matters as might only be ascertained on inquiry.
(iii) Accordingly, the place where the body's head office functions are carried out is only relevant if so ascertainable by third parties.
(iv) Each body or individual has its own COMI, there is no COMI constituted by an aggregation of bodies or individuals.
My starting point is therefore that as Master's registered office is located in Guernsey, there is a presumption that its COMI is also in Guernsey. I have to go on to determine whether the presumption is rebutted by objective and ascertainable factors as explained in Stanford.
I would make the following preliminary observations. First, Master was registered in Guernsey as a limited partnership under the 1995 Law and its filed declaration pursuant to the 1995 Law that its “principal place of business” was in St Peter Port, Guernsey, was a matter of public record. Further, it is evident from a private placement memorandum as amended in July 2007 that the Group's investment would be challenged through Master “to facilitate tax-efficient investment by the Kaupthing investor”. The...
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