Re Collins & Aikman Europe SA and Others
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE LINDSAY,Mr Justice Lindsay |
| Judgment Date | 09 June 2006 |
| Neutral Citation | [2006] EWHC 1343 (Ch) |
| Court | Chancery Division |
| Docket Number | Case Nos: 4697,4698,4700,4705,4711,4717-4719,4721,4722 of 2005 |
| Date | 09 June 2006 |
[2006] EWHC 1343 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Lindsay
Case Nos: 4697,4698,4700,4705,4711,4717-4719,4721,4722 of 2005
Mr Gabriel Moss Q.C. and Mr Tom Smith (instructed by Denton Wilde Sapte) for the Joint Administrators
Hearing dates: 6 th April 2006
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
In this judgment I deal with some questions arising where, for the particular reasons given, the English-appointed Joint Administrators of a number of related companies incorporated and previously carrying on business in several European jurisdictions now wish to respect, albeit indirectly, some special provisions of the law of those local jurisdictions notwithstanding that those provisions differ from those of the law which is the law of the main proceedings under Articles 3 and 4 of the Council Regulation of 29 th May 2000, namely English law.
On the 6 th April 2006 I had in front of me an Ordinary Application in the above matters. It sought provisional approval by the Court of a specified course of action, firstly, as to distributions proposed to be made by the Joint Administrators (whom I shall describe below), secondly as to consultations with creditors' committees and with creditors in relation to such distributions and, thirdly, for the matters to return to Court after an interval. The plan was that on the return the Court might take into account the result of those consultations and of any objections duly raised to the proposals before then, if appropriate, issuing directions in relation to them. At that hearing in April I gave the provisional approval asked of me. I made ancillary directions to carry forward the consultation process and directed the matter to return to Court on the 6 th June.
Today, the matter having returned to me on the 6 th June, I make the order of today's date which refers to this judgment. I now give the reasons for that order.
The Collins & Aikman Group was a leading supplier of automotive components, typically plastic and soft-trim products used in the interiors of motor vehicles. It supplied, inter alios, Ford, General Motors and Daimler Chrysler. In Europe there were within the Group 24 companies spread over 10 countries. A broad indication of the size of the Group's European operations is given by the facts of its having employed some 4,000 persons in Europe at 27 operational sites with a turnover in all of the order of $1bn p.a..
The Group carried on business also within the USA where, on the 17 th May 2005, the United States wing filed voluntary petitions for re-organisation under Chapter 11 of the US Bankruptcy Code. That the US operations were placed into Chapter 11 proceedings put the European Companies under severe financial pressure and on the 15 th July 2005 the 24 European Companies applied to the High Court in England for Administration Orders. Lawrence Collins J. made such orders in each of the 24 cases before him, which included a Luxemburg holding company and, of the trading companies, 6 companies in England and Wales and companies in Spain, Sweden, Germany, Belgium, Italy and the Netherlands.
Those Administration Orders were made within this jurisdiction on the basis that the High Court was satisfied on the evidence put before it that the EC Regulation applied and that the proceedings in England and Wales were main proceedings for the purposes of Articles 3 and 4 of the Regulation. By the Orders then made Messrs S.J. Appell, A.P. Beveridge and G.P. Squires of the firm of Kroll were appointed Joint Administrators (hereinafter called "the Joint Administrators"). A Schedule forming part of those Orders described the effect and purpose of the administration in each case. At paragraph 3 of that Schedule it said:-
"By way of summary, the Joint Administrators must perform their functions with the objective of:
3.1 Rescuing the Company as a going concern or (only if it is not reasonably practical to achieve that objective, or if the pursuit of the objective set out in 3.2 would achieve a better result for the company's creditors as a whole) then
3.2 Achieving a better result for the company's creditors as a whole than would be likely if the Company were wound up (without first being in administration)
……………."
The Schedule pointed out that the Joint Administrators were officers of the Court and, in summary, described their powers (a subject to which I shall later return).
The Joint Administrators immediately recognised that, although the European Companies were incorporated in several different European jurisdictions, they formed a closely-linked group, many of the functions of which were organised on a Europe-wide rather than national basis. The strategy developed by the Joint Administrators was thus to adopt a co-ordinated approach to the continuation of the businesses, to the funding of the Administration and to the sale of the businesses and assets of the European Companies, in the firm belief that such approach would lead to the best possible returns to creditors. The Joint Administrators were, however, very aware that, whilst the main proceedings were in England, creditors remained entitled to seek the opening of secondary proceedings in any of the other countries where a relevant company had an "establishment". The Joint Administrators were of the view that the opening of such secondary proceedings and the appointment of local officeholders would have been likely to have impeded the achievement of the purposes of the Administration by making it difficult to continue to trade the businesses, fund the administrations and conduct sales processes on a group-wide basis. To avoid such secondary proceedings oral assurances were given by or on behalf of the Joint Administrators to creditors at creditors' meetings and creditors' committees' meetings that if there were no secondary proceedings in the relevant jurisdiction then their respective financial positions as creditors under the relevant local law would as far as possible be respected in the English administration. With only minor exceptions creditors did not seek to open secondary proceedings or take other divisive steps but rather supported the broad strategy which the Joint Administrators had proposed. The Joint Administrators attribute both that degree of restraint on the creditors' parts and the degree of support which they achieved to such assurances so given, which enabled them to conduct sales achieving very favourable realisations, in all some $45m more than had been the estimates that they had received. The Joint Administrators are of the view that the giving of the assurances was of critical importance to that successful execution of the administration strategy.
By April 2006 the realisations were virtually complete and the Joint Administrators held over $125m for distribution to the creditors of the European companies and the Joint Administrators had come to the view that it was of the utmost importance to seek to give effect to the assurances which had been given and which had led to the cooperation which, in turn, had procured the successful outcomes of the various administrations. A particular unfairness that would arise were the assurances not to be honoured would be that, by the time assets had been sold and businesses realised, it would, at lowest, be arguable that in various jurisdictions there no longer would be any "establishment". Where that was found to be the case, the local creditors would no longer be able to launch the secondary proceedings which the giving of assurances had seemed to have rendered unnecessary but which, had it even been hinted that those assurances would not be punctually honoured, creditors would be likely to have wished immediately to have begun.
By April 2006, then, the Joint Administrators had a problem before them. They had given assurances which they wished to honour, assurances given not only with a view to the benefit of creditors generally but assurances which had conduced to achievement of that benefit. Those assurances had included performance by the Joint Administrators of differing provisions, country by country, as to local law as to, for example, the preferences to be given to particular classes of creditors and the subordination or not of inter-company indebtedness, provisions which were different from the applicable provisions of English law, the law of the main proceedings. The Joint Administrators and their advisers took the view, however, that, properly examined, so wide were the powers conferred upon them by English law (at all events if their proposals received the sanction of the Court by appropriate directions being given) that full effect could be given to the assurances notwithstanding that that involved payments to creditors which, had the assurances not been given, would have been alien to or inconsistent with the law of the main proceedings.
Taking that view, the Administrators applied to the Court in April, as I have mentioned. The applications before me (both on 6 th June and, earlier, in April) directly concern only the 10 companies that are listed at the head of this judgment. Each of them has funds available for distribution...
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