BAILII is celebrating 24 years of free online access to the law! Would you consider making a contribution?
No donation is too small. If every visitor before 31 December gives just £1, it will have a significant impact on BAILII's ability to continue providing free access to the law.
Thank you very much for your support!
 |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] | |
England and Wales High Court (Chancery Division) Decisions |
||
|
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Akkurate Ltd, Re [2020] EWHC 1433 (Ch) (04 June 2020) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2020/1433.html Cite as: [2020] EWHC 1433 (Ch), [2021] ILPr 11, [2020] 2 BCLC 619, [2020] BCC 748, [2021] Ch 73, [2020] 3 WLR 1077, [2020] WLR(D) 331, [2020] BPIR 1039 |
||
[New search] [Printable PDF version] [Buy ICLR report: [2020] 3 WLR 1077] [View ICLR summary: [2020] WLR(D) 331] [Buy ICLR report: [2021] Ch 73] [Help]
IN THE BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF AKKURATE LIMITED (IN LIQUIDATION)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Fetter Lane, London, EC4A 1NL |
||
B e f o r e :
____________________
| (1) GRAHAM STUART WOLLOFF | ||
| (2) LIAM ALEXANDER SHORT | ||
| (Joint Liquidators of AKKURATE LIMITED) | Applicants | |
| -and- | ||
| (1) CALZATURIFICIO RODOLFO ZENGARINI SRL | ||
| (2) ITALIAN LUXURY SRL | Respondents |
____________________
Mr Matthew Parfitt (instructed by Howard Kennedy LLP) for the Respondents
Hearing date: 19th May 2020
____________________
Crown Copyright ©
Covid-19 Protocol: This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to Bailii. The date and time for hand-down is deemed to be 10.30am on 4 June 2020.
Sir Geoffrey Vos, Chancellor of the High Court:
Introduction
i) Do section 236(3) and/or the 2000 Regulation give the court jurisdiction to make the orders sought?
ii) If so, how should the court exercise its discretion?
Factual background
"1. In relation to [Mr Richmond]
a) An account of the [respondents'] dealings with Mr Richmond in relation to the Trademarks and/or other Company business from 1 April 2015 to 31 December 2016; and
b) Copies of all correspondence with Mr Richmond from 1 April 2015 to 31 December 2016, including all letters, emails and attachments.
2. In relation to the New Trademark Owners
a) details of any payments made, or credits given, to any of them on account of the [respondents'] use of the Trademarks for Spring/Summer 2015, Fall/Winter 2015/16 and Spring/Summer 2016, including how much was paid, when and to whom;
b) copies of all licence or design agreements that the [respondents have] entered into with any of the New Trademark Owners, or any other party as licensor of the Trademarks, since November 2015; and
c) in relation to the above agreements:
(i) the total revenue and profits generated by the [respondents] to date; and
(ii) The total licence or design fees paid pursuant to such agreements.
3. In relation to payments to the Company under Article 2.4 of the 2014 Agreements
a) an account of the basis on which these payments were agreed between the parties, with supporting evidence;
b) an account of all communications with Mr Richmond or the New Trademark Owners concerning these payments, with copies of related correspondence; and
c) confirmation as to whether the [respondents have] made any payments (or given other forms of credit) to Mr Richmond or the New Trademark Owners that was the same or similar in nature and purpose to these payments, with details of any such payments made.
4. In relation to marketing activities in 2015 relating to the Trademarks:
a) an explanation as to why payments to Moschillo srl (a marketing company and a party to the 2014 Agreements) continued from April 2015 to July 2016 whilst no payments were being made to the Company; and
b) details of the products purportedly sold to the Company after the Company had been wound up, including in June, September and November 2015 under invoices 1565, 2363 and 2767, with documents evidencing who ordered the products, when and for what purpose.
5. In relation to alleged breaches of the 2014 Agreements:
a) an explanation as to why the [respondents] stopped payment licence fees to the Company in April 2015, before the Company had been placed in liquidation and long before the Company is alleged to have committed any breach; and
b) an account of the breaches the Company is alleged to have committed in 2015, on which the [Zengarini] relied in purporting to terminate the 2014 Agreements, with precise dates on which the breaches are alleged to have taken place.
6. In relation to samples and unsold stock:
a) an account of what happened to all samples and unsold stock after the (purported) termination of the 2014 Licence Agreements, including details of who they were delivered to and copies of all related documents and correspondence;
b) an account of the 5% of 'Net Turnover' (as defined in the 2014 Agreements) or other proceeds generated from the sale of stock sold in 2016 or later".
i) Zengarini's failure to pay €736,642 in licence fees to Akkurate from April 2015 to July 2016, despite the continuation of the 2014 Agreements and Zengarini continuing to use the Company's trademarks during that period. This is said to indicate that Zengarini was the first to commit a serious breach of the 2014 Agreements. Even on Zengarini's case, Akkurate did not commit a serious breach that would have warranted termination until December 2015. The liquidators suggest that the issue will identify the party liable for early termination of the 2014 Agreements. Each side claims damages amounting to some €5 million.
ii) Zengarini's failure to account for its continuing liabilities to Akkurate in 2015 and 2016. Zengarini's conduct allegedly prevented the liquidators from claiming licence fees at the time, and contributed to their subsequent disposal of the Company's trademarks on unfavourable terms.
iii) Zengarini's continuing to do business with the directors of the Company in 2015 and 2016, when it should have been dealing with the liquidators in relation to the Company's business.
iv) Zengarini entered into licence agreements with the new owners of the Company's trademarks, including Fashioneast, the Arav Group and/or AM.VI srl (collectively "the New Trademark Owners"), and allegedly conferred benefits on them instead of Akkurate. The liquidators contend that this affects the question of Zengarini's entitlement to the €2 million credit it claims.
v) Zengarini's alleged failure to return samples, materials and unsold stock to Akkurate in 2016 in alleged breach of the 2014 Agreements.
vi) Zengarini's conduct in 2015 and 2016 generally, which allegedly suggests a level of collusion with Mr Richmond and/or Fashioneast in ensuring that the Company's trademarks were acquired by Fashioneast at an undervalue.
vii) Zengarini's claim for €3,790,000 in lost income from Akkurate on the basis that it lost the right to use the Company's trademarks in 2015, when in fact it has retained the right to use them, and continues to generate income from them under licence agreements with the New Trademarks Owners.
The IA 1986
"133 Public examination of officers
(1) Where a company is being wound up by the court, the official receiver or, in Scotland, the liquidator may at any time before the dissolution of the company apply to the court for the public examination of any person who—
(a) is or has been an officer of the company; or
(b) has acted as liquidator or administrator of the company or as receiver or manager or, in Scotland, receiver of its property; or
(c) not being a person falling within paragraph (a) or (b), is or has been concerned, or has taken part, in the promotion, formation or management of the company. …
(3) On an application under subsection (1), the court shall direct that a public examination of the person to whom the application relates shall be held on a day appointed by the court; and that person shall attend on that day and be publicly examined as to the promotion, formation or management of the company or as to the conduct of its business and affairs, or his conduct or dealings in relation to the company. …
134 Enforcement of s. 133
(1) If a person without reasonable excuse fails at any time to attend his public examination under section 133, he is guilty of a contempt of court and liable to be punished accordingly.
(2) In a case where a person without reasonable excuse fails at any time to attend his examination under section 133 or there are reasonable grounds for believing that a person has absconded, or is about to abscond, with a view to avoiding or delaying his examination under that section, the court may cause a warrant to be issued to a constable or prescribed officer of the court—
(a) for the arrest of that person; and
(b) for the seizure of any books, papers, records, money or goods in that person's possession.
(3) In such a case the court may authorise the person arrested under the warrant to be kept in custody, and anything seized under such a warrant to be held, in accordance with the rules, until such time as the court may order."
"236 Inquiry into company's dealings, etc
(1) This section applies as does section 234;[2] and it also applies in the case of a company in respect of which a winding-up order has been made by the court in England and Wales as if references to the office-holder included the official receiver, whether or not he is the liquidator.
(2) The court may, on the application of the office-holder, summon to appear before it –
(a) any officer of the company,
(b) any person known or suspected to have in his possession any property of the company or supposed to be indebted to the company, or
(c) any person whom the court thinks capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the company.
(3) The court may require any such person as is mentioned in subsection (2)(a) to (c) to submit to the court an account of his dealings with the company or to produce any books, papers or other records in his possession or under his control relating to the company or the matters mentioned in paragraph (c) of the subsection.
(3A) An account submitted to the court under subsection (3) must be contained in — (a) a witness statement verified by a statement of truth (in England and Wales) …
(4) The following applies in a case where—
(a) a person without reasonable excuse fails to appear before the court when he is summoned to do so under this section, or
(b) there are reasonable grounds for believing that a person has absconded, or is about to abscond, with a view to avoiding his appearance before the court under this section.
(5) The court may, for the purpose of bringing that person and anything in his possession before the court, cause a warrant to be issued to a constable or prescribed officer of the court—
(a) for the arrest of that person, and
(b) for the seizure of any books, papers, records, money or goods in that person's possession.
(6) The court may authorise a person arrested under such a warrant to be kept in custody …
237 Court's enforcement powers under s. 236 …
(3) The court may, if it thinks fit, order that any person who if within the jurisdiction of the court would be liable to be summoned to appear before it under section 236 or this section shall be examined in any part of the United Kingdom where he may for the time being be, or in a place outside the United Kingdom".
The 2000 Regulation
"Article 3 International jurisdiction
1. The courts of the Member State within the territory of which the centre of a debtor's main interests is situated shall have jurisdiction to open insolvency proceedings. In the case of a company or legal person, the place of the registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary…
Article 4 Law applicable
1. Save as otherwise provided in this Regulation, the law applicable to insolvency proceedings and their effects shall be that of the Member State within the territory of which such proceedings are opened, hereafter referred to as the "State of the opening of proceedings".
2. The law of the State of the opening of proceedings shall determine the conditions for the opening of those proceedings, their conduct and their closure. It shall determine in particular …
(c) the respective powers of the debtor and the liquidator …
Article 16 Principle
1. Any judgment opening insolvency proceedings handed down by a court of a Member State which has jurisdiction pursuant to Article 3 shall be recognised in all the other Member States from the time that it becomes effective in the State of the opening of proceedings …
Article 18 Powers of the liquidator
1. The liquidator appointed by a court which has jurisdiction pursuant to Article 3(1) may exercise all the powers conferred on him by the law of the State of the opening of proceedings in another Member State, as long as no other insolvency proceedings have been opened there nor any preservation measure to the contrary has been taken there further to a request for the opening of insolvency proceedings in that State …
3. In exercising his powers, the liquidator shall comply with the law of the Member State within the territory of which he intends to take action, in particular with regard to procedures for the realisation of assets. Those powers may not include coercive measures or the right to rule on legal proceedings or disputes.
Article 25 Recognition and enforceability of other judgments
1. Judgments handed down by a court whose judgment concerning the opening of proceedings is recognised in accordance with Article 16 and which concern the course and closure of insolvency proceedings, and compositions approved by that court shall also be recognised with no further formalities. Such judgments shall be enforced in accordance with Articles 31 to 51, with the exception of Article 34(2), of the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, as amended by the Conventions of Accession to this Convention".
Issue 1: Do section 236(3) and/or the 2000 Regulation give the court jurisdiction to make the orders sought?
Tucker
"(1) The court may, on the application of the official receiver or trustee, at any time after a receiving order has been made against a debtor, summon before it the debtor or his wife, or any person known or suspected to have in his possession any of the estate or effects belonging to the debtor, or supposed to be indebted to the debtor, or any person whom the court may deem capable of giving information respecting the debtor, his dealings or property, and the court may require any such person to produce any documents in his custody or power relating to the debtor, his dealings or property.
(2) If any person so summoned, after having been tendered a reasonable sum, refuses to come before the court at the time appointed, or refuses to produce any such document, having no lawful impediment made known to the court at the time of its sitting and allowed by it, the court may, by warrant, cause him to be apprehended and brought up for examination.
(3) The court may examine on oath, either by word of mouth or by written interrogatories, any person so brought before it concerning the debtor, his dealings, or property.
(4) If any person on examination before the court admits that he is indebted to the debtor, the court may, on the application of the official receiver or trustee, order him to pay to the official receiver or trustee, at such time and in such manner as to the court seems expedient, the amount admitted, or any part thereof, either in full discharge of the whole amount in question or not, as the court thinks fit, with or without costs of the examination.
(5) If any person on examination before the court admits that he has in his possession any property belonging to the debtor, the court may, on the application of the official receiver or trustee, order him to deliver to the official receiver or trustee such property, or any part thereof, at such time, and in such manner, and on such terms, as to the court may seem just.
(6) The court may, if it thinks fit, order that any person who if in England would be liable to be brought before it under this section shall be examined in Scotland or Ireland, or in any other place out of England".
"I look, therefore, to see what section 25(1) is about, and I see that it is about summoning people to appear before an English court to be examined on oath and to produce documents. I note that the general practice in international law is that the courts of a country only have power to summon before them persons who accept service or are present within the territory of that country when served with the appropriate process. There are exceptions under R.S.C., Ord. 11, but even under those rules no general power has been conferred to serve process on British subjects resident abroad. Moreover, the English court has never had any general power to serve a subpoena ad testificandum or subpoena duces tecum out of the jurisdiction on a British subject resident outside the United Kingdom, so as to compel him to come and give evidence in an English court. Against this background I would not expect section 25(1) to have empowered the English court to haul before it persons who could not be served with the necessary summons within the jurisdiction of the English court….
Finally, and to my mind conclusively, by section 25(6) the court is given a power (the scope of which will have to be considered on the respondent's notice) to order the examination out of England of "any person who if in England would be liable to be brought before it under this section." This wording carries inevitably, in my judgment, the connotation that if the person is not in England he is not liable to be brought before the English court under the section.
Thus the words which I have quoted from subsection (6), "liable to be brought before it under this section," must mean "liable to be brought before it by summons under this section." Subsection (6) thus confirms that a person who is not at any relevant time in England, and so cannot be served with a summons of the English court in England, cannot be examined by that court under subsection (1). His period in England may be very brief, and if he is served in England with an appropriate summons during a brief visit, that will be enough, since, as Lord Esher M.R. observed in In re Bradbrook, Ex parte Hawkins (1889) 23 QBD 226, 227, in relation to the predecessor of section 25 in the Act of 1883, the moment the summons was served the requirements of the section would be fulfilled. If, however, he has never been in England at all at any relevant time, then he is outside section 25(1) and cannot be examined in England".
The trilogy of inconsistent cases
"23. Where a statutory provision is re-enacted in substantially the same terms, it is a principle of construction that the re-enactment is intended to carry the same meaning as its predecessor. No doubt the principle could be displaced, for example, if new provisions in the new legislation showed that the re-enacted provision was intended to have a different meaning. The principle is particularly in point if the earlier provision has been the subject of authoritative decision. In such circumstances, it is presumed that, if substantially the same words are used in the new provision, Parliament did not intend to change the meaning as held by the court. [Tucker] is clearly an authoritative decision on the lack of extraterritorial effect of section 25 of the Bankruptcy Act 1914 and, although it was decided after the enactment of the Insolvency Act 1986, it is a binding interpretation of section 25 which will apply equally to the successor sections in the Insolvency Act 1986, unless the context of the new legislation shows that the meaning must be taken to have changed".
"[t]he conclusion that the provisions for private examination did not have extraterritorial effect was distinguished on the grounds that the persons who could be the subject of a public examination under section 133 were more narrowly confined, being limited to officers of the company and persons who have been concerned or taken part in its promotion, formation or management, whereas under section 236(2)(c) an order for private examination can be made against any person whom the court thinks capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the company. Secondly, while section 25(6) which Dillon LJ considered to be conclusive was re-enacted in section 237(3), no similar provision applies in relation to section 133".
"32. In the absence of authority and in the absence of what is now section 237(3), there would in my view be a good deal to be said for concluding that section 236 was intended to have extraterritorial effect, leaving it to the discretion of the court to keep its use within reasonable bounds. But it is in my judgment impossible to overlook the authoritative standing of the decision in [Tucker] the re-enactment of the earlier private examination provisions in substantially the same terms and the presence of what is now section 237(3). I conclude that section 236 does not have extraterritorial effect and that therefore an order cannot be made under it against LCH France".
"I am satisfied that s.25 of the 1914 Act conferred a power on the court to order the production of documents which was merely ancillary to, and dependent upon, the principal power conferred by s.25, which was to summon a respondent falling within the scope of the section to attend for examination before the court. In other words, the power to order the production of documents was ancillary to, and dependent upon, the power to summon an individual to attend for examination before the court. That is not the way in which s.236 is structured. By subs.(2), the court may summon any of three categories of person to appear before it. By subs.(3), the court may require any such person to submit to the court an account of his dealings with the company, or to produce any books, papers or other records in his possession or under his control relating to the company or the matters mentioned in s.236(2)(c). I am satisfied that s.236 is structured differently to the former s.25 of the Bankruptcy Act 1914, and that it confers a freestanding power, independent of the power to summon a person to appear before the court for examination, to submit to the court an account of dealings and to produce books, papers and records".
Other relevant cases on jurisdiction
"19. I accept that the existence of a close connection between a subject matter over which this country and its courts have jurisdiction and another person or subject over which it is suggested that they have taken jurisdiction will be relevant in determining whether the further jurisdiction has been taken. It will be a factor in construing, or ascertaining the grasp and intendment of, the relevant legislation or rule. Mr Layton submits that in the present case the connection between the judgment obtained in the proceedings against CCIC and Mr Khoury is weak: no or little stronger than that which exists between the court in ongoing proceedings and a witness who could give important evidence that would assist the court to resolve issues of liability or quantum. He cites [Tucker]".
"23. The present case stands between [Tucker] and [Seagull]. The category of persons embraced by CPR Pt 71 is confined to "an officer" of the company or other corporation—on the face of it probably only a current officer at the time of the application or order, whereas section 133 extended (unsurprisingly since it deals with a company being wound up) to past officers and some other closely connected persons. There is in the context of CPR Pt 71 no equivalent of the provision in section 25(6) which was for Dillon LJ "conclusive" in [Tucker]. On the other hand, CPR Pt 71 is concerned with obtaining information in aid of the enforcement of a private judgment. The public interest that "those responsible for the company's state of affairs should be liable to be subjected to a process of investigation and that investigation should be in public" [Seagull at page 354] is absent. The universality of a winding up order, in the sense that it relates at least in theory to all assets wherever situate, is also absent. Private civil litigation is different. A fair and efficient legal system is of course a cornerstone of the rule of law, and it can also be said that there is a public interest in a court getting to the bottom of litigation and ensuring that parties have the means of obtaining full information to enable it to do so. Yet the parties have no right to ask the court to summon witnesses from abroad for that purpose. …"
24. In my view Dillon LJ's observation in [Tucker at page 157] that "eyebrows might be raised" at the notion that Parliament had in 1914 or 1883 given jurisdiction to any bankruptcy court to summon anyone in the world before it to be examined and produce documents has weight also in the context of CPR Pt 71. The historical origin of CPR Pt 71 consists in an amendment of the Rules in 1883 made in the light of the decision in Dickson v Neath and Brecon Railway Co LR 4 Ex 87 in 1869. The Court of Exchequer there held that the pre-existing power to order oral examination of a judgment debtor did not enable examination of the company's three directors, about whose presence within the jurisdiction there was clearly no doubt. The Rule Committee in 1883 is likely to have been focusing on domestic judgments and domestically based officers. If it thought at all about foreign judgments, which might be enforced in England, it is unlikely to have contemplated that a judgment creditor, having come here for that purpose, would then need assistance abroad to make the enforcement effective. The extreme informality of the process by which the rules enable an order for examination to be obtained continues to point towards a purely domestic focus. An application for an order may under CPR Pt 71 be made without notice, may be dealt with ministerially by a court officer and will lead to the automatic issue of an order (albeit with the general safeguard of the right to apply to set aside which exists under CPR r 23.10 in the case of any order made without service of the relevant application notice). These considerations all tend to point against the application of CPR Pt 71 to company officers outside the jurisdiction.
25. Sir Anthony Clarke MR [said at [16]] that it would "defeat its object" if CPR r 71.2 were restricted to persons within the jurisdiction. That is, I think, to put matters substantially too high. Small though the world may have become, relatively few officers of companies are likely to contemplate, let alone be able to undertake, emigration or flight to a different country in order to avoid giving information about their company's affairs. For the same reason, the deployment in [Seagull] of the possibility of "deliberate evasion" by an officer removing himself from the jurisdiction seems to me a factor of greater forensic than real weight, although such weight as it may have may be greater after the calamity of compulsory winding up (when something has evidently gone wrong and may require embarrassing or even potentially incriminating investigation) than in the context of an unpaid judgment debt.
26. In my view CPR Pt 71 was not conceived with officers abroad in mind, and, although it contains no express exclusion in respect of them, there are lacking critical considerations which enabled the Court of Appeal in [Seagull] to hold that the presumption of territoriality was displaced and that the relevant statutory provision there, on its true construction and having regard to the legislative grasp or intendment, embraced a foreign officer. Although CPR Pt 71 is limited to officers of the judgment debtor company, I regard the position of such officers as closer to that of ordinary witnesses than to that of officers of a company being compulsorily wound up by the court. I conclude that CPR Pt 71 does not contemplate an application and order in relation to an officer outside the jurisdiction".
"The appellants' case is that the provision [in section 213 of the IA 1986 on fraudulent trading] has no extraterritorial effect and therefore no application to Jetivia which is domiciled in Switzerland or Mr Brunschweiler, who is domiciled in France. In effect the submission is that in subsection (2) "any persons" means only persons in the United Kingdom. In my opinion this argument is misconceived.
108. Most codes of insolvency law contain provisions empowering the court to make orders setting aside certain classes of transactions which preceded the commencement of the liquidation and may have contributed to the company's insolvency or depleted the insolvent estate. They will usually be accompanied by powers to require those responsible to make good the loss to the estate for the benefit of creditors. Such powers have been part of the corporate insolvency law of the United Kingdom for many years. In the case of a company trading internationally, it is difficult to see how such provisions can achieve their object if their effect is confined to the United Kingdom.
109. The English court, when winding up an English company, claims worldwide jurisdiction over its assets and their proper distribution. That jurisdiction is not universally recognised, but it is recognised within the European Union by articles 3 and 16 of [the 2000 Regulation]. In Schmid v Hertel (Case C-328/12) [2014] 1 WLR 633 ["Schmid"] the Court of Justice of the European Union considered these articles in the context of the jurisdiction of the German courts to make orders setting aside transactions with a bankrupt. It held not only that articles 3 and 16 applied to such orders, but that member states must be treated as having power to make them notwithstanding any limitations under its domestic law on the territorial application of its courts' orders.
110. Section 213 is one of a number of discretionary powers conferred by statute on the English court to require persons to contribute to the deficiency who have dealt with a company now in liquidation in a manner which has depleted its assets. None of them have any express limits on their territorial application. Another such provision, section 238 , which deals in similar terms with preferences and transactions at an undervalue, was held by the Court of Appeal to apply without territorial limitations in [Paramount]. Delivering the leading judgment in that case, Sir Donald Nicholls V-C observed (i) that current patterns of cross-border business weaken the presumption against extraterritorial effect as applied to the exercise of the courts' powers in conducting the liquidation of a United Kingdom company; (ii) that the absence in the statute of any test for what would constitute presence in the United Kingdom makes it unlikely that presence there was intended to be a condition of the exercise of the power; and (iii) that the absence of a connection with the United Kingdom would be a factor in the exercise of the discretion to permit service out of the proceedings as well in the discretion whether to grant the relief, which was enough to prevent injustice. These considerations appear to me, as they did to the Chancellor and the Court of Appeal, to be unanswerable and equally applicable to section 213".
"Article 3(1) of the [2000] Regulation itself states unequivocally that "The courts of the member state within the territory of which the centre of a debtor's main interests is situated shall have jurisdiction to open insolvency proceedings". Any other element is irrelevant to the determination of the competent court. Thus, the location of the debtor's assets is irrelevant, except in so far as it may be a factor to be taken into account in determining where the centre of the debtor's main interests is and/or whether secondary proceedings need to be opened under article 3(2). The place of residence of any potential defendant to an action which may (if necessary) subsequently be brought within those proceedings by the liquidator to set a transaction aside and recover additional assets for the benefit of the creditors is likewise irrelevant to the question of which is the competent court to open proceedings. Such an action comes within the jurisdiction of the court that has (already) opened such proceedings because it is an action that derives directly from such proceedings and is closely connected to them: see Seagon v Deko Marty Belgium NV (Case C-339/07) [2009] 1 WLR 2168; [2009] ECR I-767 ["Seagon"], paras 21 and 28, and also recital (6) in the Preamble to the [2000] Regulation".
Discussion
i) Lord Sumption's judgment in Bilta, where he said at [109] that "[t]he English court, when winding up an English company, claims worldwide jurisdiction over its assets and their proper distribution", and that jurisdiction is recognised within the European Union by articles 3 and 16 of the 2000 Regulation. The CJEU had held in Schmid that "member states must be treated as having power to make [orders setting aside transactions] notwithstanding any limitations under its domestic law on the territorial application of its courts' orders".
ii) The CJEU in Seagon held at [21] that article 3(1) of the 2000 Regulation conferred "international jurisdiction on the member state within the territory of which insolvency proceedings were opened in order to hear and determine actions which derive directly from those proceedings and which are closely connected to them" (see also Schmid at [30]).
Issue 2: How should the court exercise its discretion under section 236?
"I am therefore of the opinion that the power of the court to make an order under section 236 is not limited to documents which can be said to be needed 'to reconstitute the state of the company's knowledge' even if that may be one of the purposes most clearly justifying the making of an order.
At the same time it is plain that this is an extraordinary power and that the discretion must be exercised after a careful balancing of the factors involved - on the one hand the reasonable requirements of the administrator to carry out his task, on the other the need to avoid making an order which is wholly unreasonable, unnecessary or 'oppressive' to the person concerned. The latter was stressed by Bowen L.J. in In re North Australia Territory Co., 45 Ch.D. 87, 93: …
Such an approach was stressed more recently by Brightman J. in respect of oral examination in In re Bletchley Boat Co. Ltd. [1974] 1 W.L.R. 630 .
The protection for the person called upon to produce documents lies, thus, not in a limitation by category of documents ('reconstituting the company's state of knowledge') but in the fact that the applicant must satisfy the court that, after balancing all the relevant factors, there is a proper case for such an order to be made. The proper case is one where the administrator reasonably requires to see the documents to carry out his functions and the production does not impose an unnecessary and unreasonable burden on the person required to produce them in the light of the administrator's requirements. An application is not necessarily unreasonable because it is inconvenient for the addressee of the application or causes him a lot of work or may make him vulnerable to future claims, or is addressed to a person who is not an officer or employee of or a contractor with the company in administration, but all these will be relevant factors, together no doubt with many others".
1. In relation to [Mr Richmond]
(a) An account of each of the respondents' dealings with Mr Richmond in relation to the Company's trademarks and/or other Company business from 1 April 2015 to 31 December 2016; and
(b) Copies of all correspondence with Mr Richmond from 1 April 2015 to 31 December 2016, including all letters, emails and attachments in relation to the Company's trademarks and/or other Company business.
2. In relation to the New Trademark Owners
a) details of any payments made, or credits given, to any of the New Trademark Owners on account of each of the respondents' use of the Trademarks for Spring/Summer 2015, Fall/Winter 2015/16 and Spring/Summer 2016 (the "Seasons"), including how much was paid, when and to whom;
b) copies of all licence or design agreements that each of the respondents entered into with any of the New Trademark Owners, or any other party as licensor of the Trademarks in respect of the Seasons; and
c) in relation to the above agreements, the total licence or design fees paid pursuant to such agreements in respect of the Seasons.
3. In relation to payments to the Company under Article 2.4 of the 2014 Agreements
a) an account of the basis on which these payments were agreed between the parties, with supporting evidence;
b) an account of all communications with Mr Richmond or the New Trademark Owners concerning these payments; and
c) confirmation as to whether each of the respondents have made any payments (or given other forms of credit) to Mr Richmond or the New Trademark Owners that was the same or similar in nature and purpose to these payments, with details of any such payments made.
4. In relation to marketing activities in 2015 relating to the Company's trademarks:
a) an explanation as to why each of the respondents continued to make payments to Moschillo srl from April 2015 to July 2016 whilst no payments were being made to the Company; and
b) details of the products purportedly sold to the Company after the Company had been wound up, including in June, September and November 2015 under invoices 1565, 2363 and 2767, with documents evidencing who ordered the products, when and for what purpose.
5. In relation to alleged breaches of the 2014 Agreements:
a) an explanation as to why each of the respondents stopped payment of licence fees to the Company in April 2015, before the Company's winding up and before the Company is alleged to have committed any breach of the 2014 Licence Agreements; and
b) an account of the breaches the Company is alleged to have committed in 2015, on which each of the respondents relied in purporting to terminate the 2014 Agreements, stating when the breaches are alleged to have taken place.
6. In relation to samples and unsold stock:
a) an account of what happened to all samples and unsold stock in the possession of each of the respondents after the (purported) termination of the 2014 Licence Agreements, providing copies of all relevant documents.
Conclusions
i) Tucker is binding authority on this court for the proposition that section 236(3) does not have extraterritorial effect.
ii) On the current law, the decision in MF Global is, in my judgment, to be preferred to the decisions as to the extra-territorial effect of section 236 in Omni and Wallace (leaving issues arising from the 2000 Regulation on one side).
iii) The jurisprudence of the CJEU has made clear that the 2000 Regulation, where it applies, can and does extend the territoriality of purely domestic insolvency provisions (see Bilta at [109], Seagon at [21], and Schmid at [30]). I agree with the parts of the decisions in Willmont and Wallace, which held that the 2000 Regulation confers extra-territorial jurisdiction on the English court to make orders against EU resident parties under section 236.
iv) As a matter of discretion, I should make an order against each of the respondents for an account of their dealings and the documents listed in the draft order at [68] above.
Note 1 Even though new licence agreements were entered into in June 2016.
[Back] Note 2 Section 234(1) provides that it applies where the company enters administration, an administrative receiver is appointed, a company goes into liquidation, or a provisional liquidator is appointed. [Back] Note 3 See Law of Insolvency at paragraph 22-021ff, McPherson & Keay’s Law of Company Liquidation at paragraph 15-069ff, Lightman & Moss at paragraph 8-025ff, and 30-008 to 30-017, Totty, Moss & Segal at F1-05, Palmer’s Company Law at paragraph 15.329ff.
[Back] Note 4 At [31], David Richards J mentioned McIsaac and Wilson (Petitioners (Joint Liquidators of First Tokyo Index Trust Ltd)) [1994] BCC 410, where the Outer House of the Court of Session in Scotland had given extraterritorial effect to section 236. He said that neither party relied on it, agreeing that it was based on the mistaken belief that the United States fell within the definition of a relevant country or territory for the purposes of section 426(5) of the IA 1986. [Back] Note 5 Bennion on Statutory Interpretation, 7th edition, at paragraph 24.6 refers to the principle (or presumption of varying strength) arising from Barras v. Aberdeen Steam Trawling and Fishing Co Ltd to the effect that “... where a word of doubtful meaning has received a clear judicial interpretation, the subsequent statute which incorporates the same word or the same phrase in a similar context, must be construed so that the word or phrase is interpreted according to the meaning that has previously been assigned to it”. The principle is not directly applicable here because the judicial interpretation succeeded the second statute. [Back] Note 6 The Supreme Court of the Netherlands decided in Handelsveem BV v. Hill [2011] BPIR 1024 that an order under section 366 of the IA 1986 (the equivalent of section 236) was not be regarded as a coercive measure for the purposes of article 18(3) of the 2000 Regulation. [Back]
