Oiling the Wheels
A court is often willing to interfere on matters involving foreign courts, as in this case of Harms Offshore AHT and others v Bloom and others (as Joint Administrators of Oilexco North Sea Limited) and Oilexco North Sea Limited (in Administration).
The facts
Oilexco North Sea Limited ("Company") was a company incorporated in England. As a result of its financial difficulties Joint Administrators were appointed on 7 January 2009.
The creditors were companies incorporated in Germany. The Company owed them pre-administration debts of £583,987.70 and £595,203.65 in respect of time charter parties for two vessels. Following the appointment of the Administrators, the creditors brought an action under the admiralty and maritime jurisdiction of the US in the District Court of New York for sums due and an attachment of property sufficient to cover those sums. The writ did not disclose that the Company was in administration or that the contracts were governed by English law in the event of dispute. The New York court granted attachment orders and the Administrators then traded the Company. Post-administration payments for supplies were subsequently attached under the orders of the New York court. The attachment orders were not disclosed to the Administrators until these sums were attached.
At first instance
The Administrators brought proceedings in England seeking an order for release of the attachments on the basis that the Court in New York should recognise the English administration order.
On 15 May 2009 an order was granted:
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Requiring the creditors to release the two orders of attachment made by the New York court; and
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Restraining the creditors from taking any steps in proceedings they had commenced in the District Court seeking judgement for sums due to them.
The English Court of Appeal heard an urgent application by the creditors for review of that order.
The arguments
The Administrators argued that the English judge had been entitled to grant the order on the circumstances of the case because the action taken by the creditors interfered with the Administrator's powers.
The creditors argued that they had not breached any statutory restriction on legal proceedings being commenced as paragraph 43(6) of Schedule B1 to the Insolvency Act did not have extra-territorial effect. Comity required that no court shall interfere with the New York decision.
The decision
The Court of Appeal decided that:
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The deemed trust which operates to protect the assets of a company which is being wound up also operates where the insolvency proceeding is administration. In both cases the assets of the company are dealt with by an officer appointed by the Court in accordance with statutory duties. One of the duties of the administrators is to take custody or control of all of the property to which he thinks the company is entitled. This means property both within and outside the jurisdiction.
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The only right of the beneficiaries (i.e. the creditors) in the implied trust in a winding up was to have the assets of the company dealt with in accordance with that process. If the court has a jurisdiction to protect a company's assets from foreign attachments and executions when it is being wound up, then it has a similar jurisdiction in the case of a company in administration.
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The Court should exercise its powers so as to enable the administrators to exercise their statutory functions and to fulfil their statutory duties so far as necessary. The conduct of the creditor and the particular circumstances of the case may rebut the presumption against interference with the proceedings of a foreign court.
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The conduct of the creditors and the circumstances of the attachments brought it into an exceptional category in which the grant of relief was justified, notwithstanding the outstanding application of the Administrators in New York.
The appeal was refused.
The significance
This case illustrates the Court's willingness to interfere on a matter involving a foreign court. The Court was at pains to offer a remedy, and support to the office of administrator. Although the decision is on its facts alone (owing to the behaviour of the creditors), the Court's endorsement of the "implied trust" in administration may well have wider consequences.
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