Roy Bailey and Keiran Hutchison (as foreign representatives of Sturgeon Central Asia Balanced Fund Ltd)

JurisdictionEngland & Wales
CourtChancery Division
JudgeMrs Justice Falk
Judgment Date17 May 2019
Neutral Citation[2019] EWHC 1215 (Ch)
Docket NumberCase No: CR-2019-002136

[2019] EWHC 1215 (Ch)





Royal Courts of Justice

Rolls Building, Fetter Lane, London, EC4A 1NL


Mrs Justice Falk

Case No: CR-2019-002136

Roy Bailey and Keiran Hutchison (as foreign representatives of Sturgeon Central Asia Balanced Fund Ltd)

Joseph Curl (instructed by Clyde & Co LLP) for the Applicants

Hearing date: 8 th May 2019

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.

Mrs Justice Falk Mrs Justice Falk

This is an application by the provisional liquidators (the “Liquidators”) of Sturgeon Central Asia Balanced Fund Ltd (the “Company”), seeking recognition in Great Britain of the Company's liquidation as a “foreign main proceeding” under the Cross-Border Insolvency Regulations 2006 (“CBIR”). The application first came before ICC Judge Burton on paper on 29 March 2019, who considered that the matter should be considered by a High Court judge because it gave rise to an important point of law.


The point is simply stated but rather less simply answered. The question is whether or not CBIR recognition must be granted to an indisputably solvent company that is subject to a court ordered winding up on just and equitable grounds, under a law based on the Companies Act 1948 (see now section 122(1)(g) of the Insolvency Act 1986).


I had the benefit of helpful submissions from Mr Curl, Counsel for the Liquidators, both orally and in the form of subsequent written submissions which addressed a number of questions that I had raised.

The factual background


The Company was incorporated under the laws of Bermuda in March 2007, to act as a closed-ended investment company. It was aimed at Japanese investors wishing to invest in Central Asia. It was listed on the Irish Stock Exchange, but its shares were apparently never traded on it. The Company had a Bermudian corporate company secretary and its administration was carried out there under a corporate services agreement. It had three directors at the time of its liquidation, one in Japan, one in the UK and one in Kazakhstan. A London based investment manager has management of the majority of its assets.


The Company has a small number of management shares with voting rights but no material economic rights. Its share capital principally comprises participating shares which are held on behalf of investors. Of a total of 7.6 million such shares (ignoring shares held in treasury), Capital Partners Securities Co. Ltd (“CPS”), a licensed Japanese securities company, is the nominee for over 7.2 million shares and holds most of the remainder in its own right.


Under the original bye-laws of the Company there was a provision allowing participating shareholders to pass a resolution in 2014 to wind it up from the end of 2015, subject to a deferral of up to two years. At the AGM in 2014 the management shareholder adopted amended bye-laws which had the effect that the participating shareholders lost their power to wind the Company up, without being given notice or permitted to vote. There was an alternative structure under which the Board could allow participating shares to be redeemed, but this was very restricted and under the proposed timetable it would take 40 years for shareholders to redeem in full, and on terms that involved a discount to net asset value.


CPS petitioned for the Company's winding up on just and equitable grounds, contending that there had been a serious breakdown in the basis on which the Company was set up and investors were being denied their rights. There was no suggestion that the Company was insolvent, and that remains the case.


At first instance relief was refused by the Chief Justice, but the Court of Appeal for Bermuda reversed this and ordered the Company to be wound up. Clarke JA concluded as follows:

“What has happened here is that in 2014 the Participating Shareholder had its fundamental right to procure the winding up of the company by a Special Resolution at the 2014 AGM wrongly taken away from it and, in the absence of relief from the court, irretrievably lost…I would regard the fact that the Board and the Company both denied the Participating Shareholder the right and, at the same time, by amendment to the Bye-Laws, removed it as giving rise to ‘a justifiable lack of confidence in the conduct and the management of the company's affairs’.”


Winding up was ordered under section 161 of the Bermuda Companies Act 1981. This is based on section 222 of the Companies Act 1948. It provides for winding up by the court on a number of different bases, including insolvency:

“Circumstances in which company may be wound up by the Court

161. In addition to any other provision in this or any other Act prescribing for the winding up of a company a company may be wound up by the Court if–

(e) the company is unable to pay its debts;

(g) the Court is of the opinion that it is just and equitable that the company should be wound up.”


Permission to appeal to the Privy Council was refused, and the stay that had previously been imposed was lifted. The provisional liquidators were appointed by the Supreme Court of Bermuda on 22 January 2019, and the recognition application was made to this court on 25 March. The statement of affairs as at 22 January 2019 shows net assets of just under US $39 million. As already indicated, the majority of the assets are managed in England. I was informed by Mr Curl that although steps have been taken to terminate the investment management agreement, no acknowledgement or other response has been received from the English manager.

The CBIR and the Model Law


The CBIR gives force of law in Great Britain to the Model Law on Cross-Border Insolvency adopted in 1997 by the 30 th session of the United Nations Commission on International Trade Law (“UNCITRAL”). The Model Law relevantly provides for the recognition of certain proceedings (“foreign proceedings”) in relation to a person, referred to as “the debtor”, in which a “foreign representative” has been appointed in a court of another jurisdiction. Where the proceeding is recognised as a “foreign main proceeding” the effects include, under Article 20, a stay on the commencement or continuation of actions or proceedings concerning the relevant entity, a stay of execution against its assets, and a suspension of the right to dispose of its assets.


The Model Law as applied in Great Britain by the CBIR is set out at Schedule 1 to those regulations. Regulation 2(2) CBIR provides as follows:

“Without prejudice to any practice of the courts as to the matters which may be considered apart from this paragraph, the following documents may be considered in ascertaining the meaning or effect of any provision of the UNCITRAL Model Law as set out in Schedule 1 to these Regulations—

(a) the UNCITRAL Model Law;

(b) any documents of the United Nations Commission on International Trade Law and its working group relating to the preparation of the UNCITRAL Model Law; and

(c) the Guide to Enactment of the UNCITRAL Model Law (UNCITRAL document A/CN.9/442) prepared at the request of the United Nations Commission on International Trade Law made in May 1997.”


Article 8 of both the UNCITRAL Model Law and the version included in Schedule 1 to the CBIR, provides:

“In the interpretation of this Law, regard is to be had to its international origin and to the need to promote uniformity in its application and the observance of good faith.”


The UNCITRAL Model Law includes the following preamble, which does not appear in Schedule 1:

“The purpose of this Law is to provide effective mechanisms for dealing with cases of cross-border insolvency so as to promote the objectives of:

(a) Cooperation between the courts and other competent authorities of this State and foreign States involved in cases of cross-border insolvency;

(b) Greater legal certainty for trade and investment;

(c) Fair and efficient administration of cross-border insolvencies that protects the interests of all creditors and other interested persons, including the debtor;

(d) Protection and maximization of the value of the debtor's assets; and

(e) Facilitation of the rescue of financially troubled businesses, thereby protecting investment and preserving employment.”


In reaching my conclusions, I have considered relevant parts of each of the documents identified by Mr Curl as falling within regulation 2(2). One potentially important aspect of this that is worth noting at this stage is that the version of the Guide to Enactment referred to in regulation 2(2)(c) is the original Guide dating from May 1997. This is now not readily available, although Counsel managed to find it because it is included as an Annex in a quite different guide, the UNCITRAL Legislative Guide on Insolvency Law, published in 2005. Instead, the version of the Guide to Enactment that appears under that description on the UNCITRAL website was adopted in 2014. This more recent version was the version considered by Judge Burton, and it was commentary in that version of the Guide that caused her particular concern. In reaching my decision I have considered both versions. The written submissions that I requested following the hearing included a comparison between the two versions.


As will be apparent from the discussion that follows, and bearing in mind Article 8, I have considered not only case law in this jurisdiction but from other jurisdictions. UNCITRAL maintains a record of relevant case law on a system known as CLOUT (Case Law on UNCITRAL...

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