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Modified Universalism comes to Scotland: Hooley Ltd, Petitioners

Document Cited authorities 3 Cited in Related
Vincent
DOI10.3366/elr.2017.0441
Published date01 September 2017
Date01 September 2017
Pages436-441
Author

The opinion of Lord Tyre in Hooley, Petitioners 1 offers rare consideration of the issues raised by cross-border insolvencies from the standpoint of Scots law. Importantly, it contains the first Scottish endorsement of the principle of “modified universalism.” It will be suggested, however, that the narrow formulation adopted therein runs counter to the spirit of that principle.

FACTS

Three Scottish companies, each with their head offices in Dundee, operated jute mills in India: Titaghur, Samnugger, and Victoria. The three companies came under associated control in the late 1880s, before merging formally in 1969, with Titaghur as parent. In 1976, the central administration of all three companies was moved to India. Subsequently, after liquidity problems, each incurred substantial pension liabilities that went unpaid. From 1985, an Indian enforcement agency sought satisfaction of these liabilities. On its application, a Calcutta court made a series of orders. First, it placed the control of the mills in the hands of licensees. Secondly, it granted an order precluding Samnugger and Victoria from dealing with or granting any further security over their assets. Thirdly, it ordered that Titaghur's shares in its two subsidiaries be sold. Liquidation of Titaghur was ordered in 2006, and a petition to wind up Samnugger was presented immediately prior to the Scottish action. Yet more Indian litigation was pending at the time of decision, three decades after the attempts to recoup the pension liabilities were initiated.

Hooley Ltd, the petitioner and pursuer, was an assignee of floating charges granted by the three jute companies. It appointed an administrator on the basis of being the holder of a qualifying floating charge, and then agreed to purchase the assets of the three companies. Ganges Ltd, the respondent and defender, was an Indian creditor of those three companies and sought to challenge the purported sale of those assets.

 PROCEDURE AND ISSUES

Hooley presented a petition craving a declarator affirming the validity of the sales. Ganges challenged the procedural competency of declaratory relief in petition procedure,2 so Hooley raised a parallel ordinary action.3 Two substantive issues were debated: first, did the principle of modified universalism justify the Scottish court in deferring to the Indian courts to decide whether or not the administrators had the power to deal with Indian assets? Secondly, Ganges challenged the appointment of the administrator by Hooley on the basis that the floating charges did not relate to the “whole or substantially the whole of the company's property”4 and were not “enforceable”,5 on the basis that the assets were primarily located in India where, as it had not been registered there, the charge was unenforceable. The court rejected both arguments, but this note will focus on its treatment of the first issue, the second being primarily a matter of statutory interpretation.6

PRINCIPLES OF CROSS-BORDER INSOLVENCY Introduction

The rules of cross-border insolvency consist of a complex layering of various statutory regimes – the European Insolvency Regulation (“EIR”),7 the Cross Border Insolvency Regulations 2006 (“CBIR”),8 and section 426 of the Insolvency Act 1986 – on top of the residual Common Law doctrine of ancillary liquidation. Despite these different sources, the principle which animates all...

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