Jersey's Royal Court has recently given guidance as to the manner in which it will exercise its discretion when being asked to issue a letter of request to the High Court of England and Wales seeking the appointment of an English administrator over a Jersey registered company.
In Harbour Fund II L.P. v ORB a.r.l. & Litigation Capital Funding  JRC 171, the Royal Court held that the applicant's (Harbour) application for a letter of request to be issued to the English High Court for an administration order with respect to ORB a.r.l. (ORB), a Jersey company, failed on two grounds; namely that (1) ORB did not have a substantial connection with England and Wales and (2) it could not be proven to be in the interests of the creditor that an English law administration order be made in favour of the Jersey bankruptcy process known as désastre.
Insolvency in Jersey
The English law process of administration allows, amongst other things, an insolvent company to be rescued as a going concern. Jersey law has no equivalent to the English law administration process but has its own bankruptcy process of désastre whereby the Viscount will be appointed to realise the assets of the insolvent company for the benefit of creditors. Nonetheless, the Royal Court does have the power, pursuant to its inherent jurisdiction and s 426 of the Insolvency Act 1986, to issue a letter of request to the High Court requesting that an English law administrator be appointed over an insolvent Jersey registered company, and it was upon this jurisdiction that Harbour sought to rely.
In determining whether to exercise its discretion to issue a letter of request, the Court must consider:
1. if it is in the interests of the creditors; or
2. if it is in the interests of the debtor; or
3. if it is in the public interest (albeit that this latter consideration is subordinate to the first two).
When applying this test, the Court was required to be satisfied that:
1. Harbour was a creditor of ORB with a liquidated claim; and
2. ORB was cash flow insolvent; and
3. ORB had assets within the jurisdiction of the High Court of England and Wales such that it could be said to have "a substantial connection with England".
The Court was satisfied on the first two points, namely that Harbour was a creditor of ORB and had a liquidated claim and that ORB was insolvent on the cash-flow basis. It was the third and final point that gave rise to problems.
ORB denied that the majority of its assets were in England and also denied that it had a substantial connection with that jurisdiction. In support of its application, Harbour provided the Court with evidence from an accountancy firm, identifying a number of properties in London; however, ORB's interest in those properties was not apparent and further, the majority of the assets listed by the accountancy firm were situated outside of England and Wales. As such, the Court was not satisfied that ORB had a "substantial connection" with England and Wales. The Court was also not satisfied that the interests of ORB's other creditors would be best served by the appointment of an English law administrator, particularly given the fact that the administrator would be required to ascertain the extent and precise location of ORB's assets in order to sell the same and that the administrator would likely be required to commence enforcement proceedings in other jurisdictions, including in Jersey. Harbour was not looking to rescue ORB as a going concern (if it were, the Court may have reached a different conclusion). Concerned to allow English administration to sneak in "through the back door", the Court concluded that an English administrator would be no better placed to realise ORB's assets than the Viscount in Jersey, if appointed under Jersey's domestic bankruptcy procedure. The application was therefore refused.
This was the first time that such an application had been refused by the Royal Court. In declining to exercise its discretion, the Royal Court has stressed the importance of considering domestic insolvency procedures before looking to apply a foreign process to a Jersey company. If there is no "substantial connection" with England, the Court has made clear that it is unlikely to issue a letter of request to the High Court for an administrator to be appointed in respect of a Jersey company.
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