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Re Bank of Credit and Commerce International SA ((in Liquidation)) (No. 11)

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Vincent
JurisdictionEngland & Wales
Judgment Date06 August 1996
Date06 August 1996
CourtChancery Division
[CHANCERY DIVISION] In re BANK OF CREDIT AND COMMERCE INTERNATIONAL S.A. (No. 10) [Ch. No. 007615 of 1991] 1996 July 16, 17, 18, 22, 23, 24, 25; Aug. 6 Sir Richard Scott V.-C.

Insolvency - Winding up - Set-off - Principal liquidation in foreign country of incorporation - Ancillary liquidation in England - Mutual set-off allowed by English law but not by foreign law - Whether English liquidators to retain funds to satisfy set-off in English liquidation - Whether jurisdiction to disapply set-off rule - Insolvency Rules 1986 (S.I. 1986 No. 1925), r. 4.90

The bank, which transacted a large part of its business in the United Kingdom and which formed part of an international group carrying on banking business through branches in 75 countries, went into liquidation in Luxembourg, the country of its incorporation. Ten days later an order was made in England that the bank be wound up by the English court under the Insolvency Act 1986. It was subsequently agreed between the bank's liquidators in Luxembourg, in England and in various other jurisdictions that 48·5 per cent. of the global realisations of the bank's assets should be distributed by the English liquidators, who had at their disposal substantial proceeds of realisations of English assets. The liquidators also agreed that the liquidation worldwide should be a joint enterprise with all creditors wherever situate receiving the same level of dividend from a central pool. The English liquidators wished to release the funds at their disposal to the Luxembourg liquidators for a distribution among creditors worldwide pari passu, with the money, once transferred to Luxembourg, being distributed according to the principles of Luxembourg insolvency law. Luxembourg insolvency law disallowed set-off for a debtor who was simultaneously owed money by the insolvent, whereas rule 4.90 of the Insolvency Rules 1986F1 provided for mutual credit and set-off.

On the application of the English liquidators for directions whether, before releasing the funds to the Luxembourg liquidators, they should retain sufficient funds to satisfy debtors and creditors entitled to take advantage of any set-off available to them under rule 4.90:—

Held, that where a foreign company was in liquidation in its country of incorporation, any winding up in England would be ancillary thereto; that the functions of the ancillary liquidators were to realise the English assets, to settle a list of English creditors and to transmit the assets and the list to the principal liquidators to enable a dividend to be declared and paid; but that the ancillary nature of such an English winding up did not relieve the English court of the obligation to apply English insolvency law to the resolution of any issue arising in the winding up in the English court; that there was no power to disapply rule 4.90 of the Insolvency Rules 1986 regarding set-off or any other substantive rule forming part of the statutory scheme under the Insolvency Act 1986 or those Rules; that, in the circumstances, it would not be appropriate to disapply rule 4.90 even if there were jurisdiction to do so; and that, accordingly, the English liquidators would be directed to retain sufficient funds to make provision for the dividend that net creditors entitled to take advantage of the English insolvency rules of set-off would receive in the English liquidation, but that no provision need be made for net debtors (post, pp. 191A, 197C–F, 198B, E–H, 200B, D–E, G–H, 202B).

The following cases are referred to in the judgment:

Alfred Shaw & Co. Ltd., In re, Ex parte Mackenzie (1897) 8 Q.L.J. 93

Commercial Bank of South Australia, In re (1886) 33 Ch.D. 174

English, Scottish, and Australian Chartered Bank, In re [1893] 3 Ch. 385

Federal Bank of Australia Ltd., In re (1893) 62 L.J.Ch. 561; 68 L.T. 728, C.A.

Felixstowe Dock & Railway Co. v. United States Lines Inc. [1989] Q.B. 360; [1989] 2 W.L.R. 109; [1988] 2 All E.R. 77

Fitzgerald v. Williams [1996] Q.B. 657; [1996] 2 W.L.R. 447; [1996] 2 All E.R. 171, C.A.

Hibernian Merchants Ltd., In re [1958] Ch. 76; [1957] 3 W.L.R. 486; [1957] 3 All E.R. 97

North Australian Territory Co. Ltd. v. Goldsbrough Mort and Co. Ltd. (1889) 61 L.T. 716

Queensland Mercantile Agency Co. Ltd., In re (1888) 58 L.T. 878

Sedgwick Collins and Co. v. Rossia Insurance Co. of Petrograd [1926] 1 K.B. 1, C.A.

Stein v. Blake [1996] A.C. 243; [1995] 2 W.L.R. 710; [1995] 2 All E.R. 961, H.L.(E.)

Suidair International Airways Ltd., In re [1951] Ch. 165; [1950] 2 All E.R. 920

Vocalion (Foreign) Ltd., In re [1932] 2 Ch. 196

The following additional cases were cited in argument:

Abidin Daver, The [1984] A.C. 398; [1984] 2 W.L.R. 196; [1984] 1 All E.R. 470, H.L.(E.)

Aectra Refining and Manufacturing Inc. v. Exmar N.V. [1994] 1 W.L.R. 1634, C.A.

African Farms Ltd., In re (1906) T.S. 373

Alabama, New Orleans, Texas and Pacific Junction Railway Co., In re [1891] 1 Ch. 213, C.A.

Amin Rasheed Shipping Corporation v. Kuwait Insurance Co. [1984] A.C. 50; [1983] 3 W.L.R. 241; [1983] 2 All E.R. 884, H.L.(E.)

Aratra Potato Co. Ltd. v. Egyptian Navigation Co. [1981] 2 Lloyd's Rep. 119, C.A.

Australian Federal Life and General Assurance Co. Ltd., In re [1931] V.R. 317

Baden v. Société Générale pour Favoriser le Développement du Commerce et de l'Industrie en France S.A. (Note) [1993] 1 W.L.R. 509; [1992] 4 All E.R. 161

Banco de Portugal v. Waddell (1880) 5 App.Cas. 161, H.L.(E.)

Bank of Credit and Commerce International S.A., In re [1992] B.C.L.C. 570

Bank of Credit and Commerce International S.A., In re [1994] 1 W.L.R. 708; [1994] 3 All E.R. 764, C.A.

Bank of Credit and Commerce International S.A. (No. 2), In re [1992] B.C.L.C. 579

Bank of Credit and Commerce International S.A. (No. 3), In re [1993] B.C.L.C. 106; [1993] B.C.L.C. 1490, C.A.

Bank of Credit and Commerce International S.A. (No. 8), In re [1996] Ch. 245; [1996] 2 W.L.R. 631; [1996] 2 All E.R. 121, C.A.

Bankers Trust International Ltd. v. Todd Shipyards Corporation [1981] A.C. 221; [1980] 3 W.L.R. 400; [1980] 3 All E.R. 197, P.C.

Banque des Marchands de Moscou (Koupetschesky) v. Kindersley, In re [1951] Ch. 112; [1952] 1 All E.R. 1269, C.A.

Banque Indosuez S.A. v. Ferromet Resources Inc. [1993] B.C.L.C. 112

Blain, Ex parte; In re Sawers (1879) 12 Ch.D. 522, C.A.

Clark v. Oceanic Contractors Inc. [1983] 2 A.C. 130; [1983] 2 W.L.R. 94; [1983] 1 All E.R. 133, H.L.(E.)

Commercial Bank of India, In re (1868) L.R. 6 Eq. 517

Compania Merabello San Nicholas S.A., In re [1973] Ch. 75; [1972] 3 W.L.R. 471; [1972] 3 All E.R. 448

Company (No. 00359 of 1987), In re A [1988] Ch. 210; [1987] 3 W.L.R. 339; [1987] 3 All E.R. 137

Continental Bank N.A. v. Aeakos Compania Naviera S.A. [1994] 1 W.L.R. 588; [1994] 2 All E.R. 540, C.A.

Gibbs (Antony) & Sons v. La Société Industrielle et Commerciale des Métaux (1890) 25 Q.B.D. 399, C.A.

Halesowen Presswork & Assemblies Ltd. v. National Westminster Bank Ltd. [1972] A.C. 785; [1972] 2 W.L.R. 455; [1972] 1 All E.R. 641, H.L.(E.)

Halifax Building Society v. Registry of Friendly Societies [1978] 1 W.L.R. 1544; [1978] 3 All E.R. 403

Hanak v. Green [1958] 2 Q.B. 9; [1958] 2 W.L.R. 755; [1958] 2 All E.R. 141, C.A.

Harbour Assurance Co. (U.K.) Ltd. v. Kansa General International Insurance Co. Ltd. [1993] Q.B. 701; [1993] 3 W.L.R. 42; [1993] 3 All E.R. 897, C.A.

I.T.T., In re (1975) 58 D.L.R. (3d) 55

International Tin Council, In re [1987] Ch. 419; [1987] 2 W.L.R. 1229; [1987] 1 All E.R. 890

Jabbour (F. & K.) v. Custodian of Israeli Absentee Property [1954] 1 W.L.R. 139; [1954] 1 All E.R. 145

Jarvis Conklin Mortgage Co., In re (1895) 11 T.L.R. 373

Joachimson (N.) v. Swiss Bank Corporation [1921] 3 K.B. 110, C.A.

Kloebe, In re; Kannreuther v. Geiselbrecht (1884) 28 Ch.D. 175

Kwok v. Commissioner of Estate Duty [1988] 1 W.L.R. 1035, P.C.

Levasseur v. Mason and Barry Ltd. (1890) 63 L.T. 700

Libyan Arab Foreign Bank v. Bankers Trust Co. [1989] Q.B. 728; [1989] 3 W.L.R. 314; [1989] 3 All E.R. 252

Macfadyen (P.) & Co., In re; Ex parte Vizianagaram Co. Ltd. [1908] 1 K.B. 675

Mackinnon v. Donaldson, Lufkin and Jenrette Securities Corporation [1986] Ch. 482; [1986] 2 W.L.R. 453; [1986] 1 All E.R. 653

Matheson Bros. Ltd., In re (1884) 27 Ch.D. 225

Melbourn, Ex parte; In re Melbourn (1870) L.R. 6 Ch.App. 64

Mersey Steel and Iron Co. v. Naylor, Benzon & Co. (1882) 9 Q.B.D. 648, C.A.

N.F.U. Development Trust Ltd., In re [1972] 1 W.L.R. 1548; [1973] 1 All E.R. 135

National Bank of Greece & Athens S.A. v. Metliss [1958] A.C. 509; [1957] 3 W.L.R. 1056; [1957] 3 All E.R. 608, H.L.(E.)

National Benefit Assurance Co., In re [1927] 3 D.L.R. 289

New York Life Insurance Co. v. Public Trustee [1924] 2 Ch. 101, C.A.

New Zealand Loan and Mercantile Agency Co. Ltd. v. Morrison [1898] A.C. 349, P.C.

Oriental Inland Steam Co., In re; Ex parte Scinde Railway Co. (1874) L.R. 9 Ch.App. 557

Paramount Airways Ltd., In re [1993] Ch. 223; [1992] 3 W.L.R. 690; [1992] 3 All E.R. 1, C.A.

Real Estate Development Co., In re [1991] B.C.L.C. 210

Rolls Razor Ltd. v. Cox [1967] 1 Q.B. 552; [1967] 2 W.L.R. 241; [1967] 1 All E.R. 397, C.A.

Rossano v. Manufacturers' Life Assurance Co. [1963] 2 Q.B. 352; [1962] 3 W.L.R. 157; [1962] 2 All E.R. 214

Russian Bank for Foreign Trade, In re [1933] Ch. 745

Sefel Geophysical Ltd., In re (1988) 54 D.L.R. (4th) 117

Smith v. Buchanan (1800) 1 East 6

Sovereign Life Assurance Co. v. Dodd [1892] 2 Q.B. 573, C.A.

Spiliada Maritime Corporation v. Cansulex Ltd. [1987] A.C. 460; [1986] 3 W.L.R. 972; [1986] 3 All E.R. 843, H.L.(E.)

Standard Insurance Co. Ltd., In re [1968] Qd.R. 118

Union Theatres Ltd., In re (1933) 35 W.A.L.R. 89

Application

The English liquidators of the Bank of Credit and Commerce International S.A. (“B.C.C.I.”) applied for directions, inter alia, that prior to (a) the English liquidators transmitting to the Luxembourg liquidators the proceeds of the realisations of B.C.C.I. property (as defined in the pooling agreement) now or hereafter held by the English...

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