Cryptocurrency: A guide for the rest of us

Robert Amey looks to the BTI 2014 LLC v Dispute Resolution: Sequana SA [2019] A new beginning? future: cryptocurrency, EWCA Civ 112: the The Hon Paul Heath Twilight Zone cryptoassets and QC on INSOL, cross- ‘ownership’ disputes Richard Fisher reviews border mediation and the Court of Appeal’s opportunities for the decision future

A regular review of news, cases and www.southsquare.com articles from South Square barristers Contents 3

In this issue 14 18 64

Cryptocurrency: BTI 2014 LLC v Sequana SA [2019] Dispute Resolution: A new beginning? a guide for the rest of us EWCA Civ 112: the Twilight Zone The Hon Paul Heath QC on INSOL, Robert Amey looks to the future: Richard Fisher reviews the Court of cross-border mediation and cryptocurrency, cryptoassets and Appeal’s decision opportunities for the future ‘ownership’ disputes

ARTICLES REGULARS Obituary: Gabriel Moss QC 06 Bermuda: Back to the Future 69 From the Editor 04 Chambers honours the life and Alex Potts QC of Kennedys, News in Brief 86 work of Gabriel Moss QC, our Bermuda, looks back 5 years South Square Challenge 92 friend and colleague later at his August 2014 Diary Dates 94 predictions Reflections on Gabriel Moss QC 10 CASE DIGESTS Felicity Toube QC and Daniel Legal Eye: Helena Normanton: 72 Bayfield QC offer their personal A woman of many firsts Editorial 32 memories of Gabriel Rose Lagram-Taylor reviews the Banking & Finance 34 legacy of one of the trailblazing Civil Procedure 36 Corporate Insolvency in the Channel 22 women in law Commercial Litigation 41 Islands: what you need to know Company Law 45 Mourant’s Stephen Alexander and South Square Story: 74 Corporate Insolvency 48 Abel Lyall compare and contrast Cyril Salmon’s Chambers ‘The set is highly Personal Insolvency 55 the insolvency regimes of Jersey in the second world war Property & Trusts 56 and Guernsey Simon Mortimore QC continues Sport 57 his history of Chambers with Case Summary Special 28 regarded internationally, the arrival of Claude Duveen Toby Brown reviews the Cayman Islands Court of Appeal decision to

uphold the dismissal of claims in South Square Digest Disclaimer with barristers regularly Primeo v HSBC Company/Insolvency set The content of the Digest is provided to you for of the year, winner 2017 Remedies for Unfair Prejudice 58 information purposes only, and not for the purpose David Alexander QC and Adam of providing legal advice. If you have a legal issue, you should consult a suitably-qualified lawyer. The appearing in courts CHAMBERS BAR AWARDS Goodison look at the remedies Digest content of the represents the views of the available to the Court when it is authors, and may not represent the views of other Members of Chambers. Members of Chambers satisfied that an unfair prejudice Insolvency set of the year, practice as individuals and are not in partnership petition is well founded with one another. around the world.’ shortlisted 2017 CHAMBERS UK LEGAL 500 BAR AWARDS

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From the editor

as a barrister in England (going on Outside Chambers, as the Digest was negotiate the comparative added to the circulation list, please to become the first female King’s going to press, England had just won insolvency regimes in the Channel send an email to williamwillson@ Counsel, along with Rose Heilbron, the cricket World Cup final, a double- Islands; Kennedy’s Alex Potts QC looks southsquare.com or kirstendent@ in 1949). Progress was initially slow. tie decided on the basis of England’s back into his 2014 crystal ball to see if southsquare.com and we will do our In 1954, women made up 3.5% of the 26 boundaries scored to the Kiwis’ he is Bermuda’s answer to Mystic Meg; best to make sure that you will get practising Bar (fewer than in 1939). meagre 17 (surely a law the draftsmen David Alexander QC and Adam Goodison the next and all future editions. By 1970, of 24,407 solicitors holding never thought would be tested). Boris look at unfair prejudice remedies; and It goes without saying that if you practising certificates, only 803 were Johnson was set to become Prime Simon Mortimore QC (now captain of have any feedback to give us in women. It was not until 1988 that Dame Minister, having won the popular vote Royal St George’s Golf Club, Sandwich relation to the Digest – positive or Elizabeth Butler-Sloss became the amongst the Conservative Party’s – see page 91) continues his history of negative – we would be delighted to first woman appointed to the Court of 160,000 membership. Another Boris Chambers, with the onset of WWII and hear from you. Many thanks to all for Appeal; Lady Arden the first female (Becker) was about to auction off his the arrival of Claude Duveen. Finally, we their contributions. As always, views Chancery Division in 1993; and Patricia trophy collection (see page 86), having have the South Square Challenge, set by expressed by individual authors and Scotland the first woman Attorney just watched his former ward, Novak Charlotte Cooke. Please enter: there is contributors are theirs alone.  General in 2007. However, in October Djokovic, beat Roger Federer in the a magnum of champagne (and a South 2018, the Supreme Court sat, for the longest Wimbledon final in history. Square umbrella!) waiting for the first time ever, with a female majority, lucky winner. WILLIAM WILLSON Elsewhere in this edition, we have William Willson Lady Hale, Lady Arden and Lady Black a thought-provoking leading article I hope you enjoy this edition of the outnumbering Lords Carnwath and by Robert Amey, on cryptocurrency, Digest (and preferably that you are Lloyd-Jones. In 2018 50.1% of solicitors Bitcoin and their possible effect on enjoying it somewhere nice on holiday). Welcome to the summer 2019 holding practising certificates were the future legal landscape. Mourant’s And if you find yourself reading women. To mark 100 years of women Stephen Alexander and Abel Lyall someone else’s copy and wish to be edition of the South Square Digest in the law, Rose Lagram-Taylor recounts the life and ground-breaking achievements of Helena Normanton in This edition is dedicated to our friend What stood out was the universal our regular “Legal Eye” feature and colleague, Gabriel Moss QC, who acknowledgment of Gabriel’s kindness. (page 72). we lost on 15 March. Gabriel had been Two were from solicitors who had first As we draw to the end of the summer my next or opposite door neighbour met him at very early stages in their term, Chambers continues to be my entire career in Chambers. We had careers. Both had ‘difficult’ partner involved in diverse and high-profile spoken that morning for a good 20 supervisors, both had come to South litigation. A raft of challenges to retail minutes on all manner of topics: in no Square to hear learned Leading Counsel. CVAs (Arcadia and Debenhams, to particular order, tardy contributors to Both praised Gabriel for making them name but two) promise to keep many Rowlatt on Principal and Surety; recent feel at ease (even when one poured him of us busy over the vacation period. But appointees to the Supreme Court; the wrong drink, not once, but twice). will the Landlords Strike Back? There Gabriel’s certainty that he had won his To commemorate Gabriel, this edition is a heavy commercial arbitration in (what turned out to be last) case before includes an obituary, as well as two Hong Kong (a reminder that South the Privy Council (he was right: see shorter reflections from Felicity Toube Square is not just all about insolvency/ Case Digests at page 53); and his recent QC and Daniel Bayfield QC, both of restructuring law), several large classical music tastes (which I shared whose careers owe a huge amount trials next Michaelmas already under by default, through the thinness of our to him. preparation (such as Lehman Waterfall party wall). As ever, he was generous- This edition also marks the 100th V and Cyrus Capital) and a raft of other spirited, effortlessly intellectual and anniversary of Women in the Law. contentious and advisory matters at subversively funny. When I received In 1919 the Sex Disqualification all levels in Chambers. Toby Brown the email from our Heads of Chambers (Removal) Act was passed, allowing (page 28) reviews the recent Cayman to announce the terrible news, it was women to enter the legal profession Islands Court of Appeal decision in hard to believe. Within 48 hours the for the first time. One week later, Ada Primeo v HSBC (in which five members emails started arriving in my Inbox Summers became Britain’s first female of Chambers appeared), and which will from solicitors, barristers, judges, magistrate. In 1922 Helena Normanton now be appealed to the Privy Council accountants and other lay clients. became the first woman to practice on reflective loss. SOUTH SQUARE DIGEST July 2019 www.southsquare.com Obituary: Gabriel Moss QC 7

hambers was shocked and saddened to hear of the sudden Cdeath of our friend and colleague Gabriel Moss QC on Friday 15 March 2019. Gabriel was a leading light of the Bar and a titan of the insolvency and restructuring world.

He was born Gabriel Mosonyi in Hungary in 1949. His parents IPs/lawyers) played a part in shaping. This did not abate met during the Nazi occupation of Budapest in the ghetto the short-term fury of the BCCI depositors, many of whom hospital, where his father was a doctor. Having survived turned up to Court on 12 July 1991 to hear the winding up both Nazi and Soviet occupation, the family left after the petition. As his junior at the time recalls, Gabriel was chased, Hungarian Uprising in 1956, initially planning to move to after Court, down Fleet Street, by a group of angry depositors. the United States, but eventually taking refuge in the UK. As with his turn of phrase, Gabriel is reported to have shown an equally impressive turn of speed. Once in the UK, the family moved frequently in northern England, and Gabriel attended over a dozen schools during Gabriel continued to build his reputation tackling the most his primary/secondary education, eventually taking his significant insolvency cases. He was instructed not only for A-levels in Bradford. his understanding of all facets of insolvency law, which was second to none, but also for his creativity and imagination. After finishing school, Gabriel worked at a magistrates’ court He was particularly valued by clients for his ability to come before attending St Catherine’s College, Oxford University, up with novel solutions to difficult problems, which led from which he graduated as an Honorary Scholar with a BA to his involvement in a great many cases before courts at in Jurisprudence with First Class Honours in 1971, followed by the highest level, in doing so playing an important role in a BCL in 1972. He only discovered his Jewish identity around shaping the law as we know it. In short, Gabriel had what is the age of 21. the rarest combination of skills: a fierce intellectual ability, Gabriel was called to the bar in 1974, having been awarded the matched by a practical approach to advocacy. prestigious Eldon Scholarship on leaving Oxford University, However, Gabriel’s practice became ever more wide-ranging, as well as Hardwicke and Casell Scholarships from Lincoln’s encompassing banking law, company law, financial services, Inn. In 1975 he undertook his pupillage in Hare Court. Having commercial chancery, off-shore law, and litigation, as well been denied a tenancy, he briefly practised from Chambers as, of course, insolvency and restructuring. In the latter in Mitre Court, where he appeared in magistrates’ courts and field, in particular, he was pre-eminent, a fact all the more the family courts. In late 1976 Gabriel came to the attention impressive in light of his confession in a 2016 podcast for of Lord Bingham (who was then at Fountain Court) who told OUP promoting the third edition of Moss, Fletcher and Isaacs, Edward Evans-Lombe QC (as he then was) and Muir Hunter The EC Regulation on Insolvency Proceedings that he had come QC, the Head of Chambers, about a clever young man who to specialise in insolvency rather by accident and had been could not find anywhere from where to practice. And so it attracted to a career in law in part by “silly things” like the was the Gabriel joined 3 Paper Buildings, which later became popular British TV series of the 1950s and 60s “Boyd QC”. South Square. Gabriel took up occupation of an underground room in the Chambers “annex” in 4 Kings Bench Walk, with Reflecting the international reach of his practice he was David Marks, where the two enjoyed a mutual love of chess, later admitted to practice in Gibraltar and before the as well as the law. This resulted in the revival, in 1981, of Eastern Caribbean Supreme Court generally, and in Rowlatt on Principal and Surety, which had been out of print for Bermuda, the Cayman Islands, Hong Kong and the Isle over 40 years. Having been in practice from 3 Paper Buildings of Man for specific cases. for about a year, Gabriel changed his name to “Moss”. He took Silk in 1989, sat as a deputy judge in the High Court From the annex in 4 Kings’ Bench Walk, Gabriel started to (Chancery Division) from 2001, and was elected as a Bencher forge a strong insolvency practice, fortified by the coming of Lincoln’s Inn in 2003. into force of the 1986 Insolvency Act, and the publication of In the last few years, Gabriel acted as Leading Counsel in the first edition of Lightman and Moss on Receivership in 1986. many major Supreme Court and Privy Council cases involving Obituary: His insolvency practice took on an international flavour with insolvency, banking and commercial chancery matters: the onset of the first cross-border insolvencies of the early Heritable v Landsbanki; Rubin v Eurofinance; New Cap Reinsurance 1990s. in 1991, BCCI went into liquidation, and the liquidators v Grant; BNY Corporate Trustees Services v Eurosail; Re Nortel; Re were faced with having to manage separate liquidations Lehman Brothers; Re Kaupthing Singer & Friedlander; Perpetual Gabriel Moss QC in each country in which the debtor company had assets. Trustee Co v BNY Corporate Trustee; PWC v Saad Investments The shortcomings of this process laid the groundwork Co Ltd; Singularis Holdings Ltd v PWC; LBI hf v Merrill Lynch for the forging of an international spirit in insolvency International Ltd; Works Council of Nortel Networks SA v Liquidator law, manifested in the UNCITRAL Model Law and the EU of Networks SA and the Joint Administrators of the Nortel Group; Regulation, both of which Gabriel (and other leadings UK and Re Olympic Airlines. SOUTH SQUARE DIGEST July 2019 www.southsquare.com Obituary: Gabriel Moss QC 9

witty and generous teaching style, to The Board wishes to pay tribute to his intellect and share with students his unparalleled knowledge of substantive law, and to humanity and acknowledge his unrivalled contribution debate with them questions of policy, no doubt shaping the next generation to corporate insolvency law as a practitioner, author of insolvency lawyers. His support for young lawyers was also reflected in and university teacher his support for scholarships, thesis Lord Hodge on behalf of the Privy Council examinations and advising on course structure. In 2016 he was awarded the Distinguished Friend of Oxford Award, which recognises individuals who have acted as exceptional volunteers for the benefit of the university.

He also gave guest lectures around the world, including the Universities of Florence, Milan, Vienna, Leiden, Cologne and Leipzig, Brooklyn Law Recently Gabriel had been acting as said that: “While this judgment was In this vein, Gabriel was and continued School at the University of Bologna, Leading Counsel to funds managed being prepared the Board received the to be involved in many of the major the Max Planck Institute, Luxembourg by Franklin Templeton, trying to very sad news of the untimely death of cross-border insolvency cases across and NYU. He also gave a number of prevent the International Bank of Gabriel Moss, who so skilfully presented the EU. He was counsel to the Italian lectures to French, Belgian and other EU Azerbaijan (IBA) from obtaining a the case for the liquidators. The Board special administrator of Parmalat insolvency judges. He was a regular face permanent moratorium in the English wishes to pay tribute to his intellect subsidiary Eurofood before the CJEU at international legal conferences and courts that would prevent the funds and humanity and acknowledge his in the mid-2000s, which led to a developed many international friends pursuing claims based on their English unrivalled contribution to corporate controversial CJEU precedent in 2006 and colleagues over the years as a result law governed debt. In December, he insolvency law as a practitioner, author that an Irish court had jurisdiction of his work. successfully persuaded the Court of and university teacher”. to commence main insolvency Gabriel Moss QC, drawn by staff member Ewa Podgorska Appeal that relief offered under the proceedings for an Irish Eurofood Gabriel was as prized for his friendship These words have been echoed by UNCITRAL Model Law in the Cross- entity, rather than an Italian court as for his intellect. He was supremely other members of the bench who have Border Insolvency Regulations should where its parent’s insolvency was damages in lieu of injunction); Nexus and Pensions and Business Innovation approachable and humble, kind and written to South Square to share their only extend for as long as the relevant pending. Other notable EU insolvency Communications v Lambert (doctrine of and Skills House of Commons Select thoughtful (as well as having a dry, condolences (and their fond memory of foreign proceeding continued. The cases of Gabriel’s include: Elektrim election); Macepark v Sargeant (rights Committees relating to the BHS inquiry and occasionally subversive sense of his propensity to rely on and refer to his matter, which has seen the challenge (UK/Poland); Enron Directo (UK/Spain); of way); Shepherd v Legal Services and the Carillion inquiry (regarding humour). No matter how busy he may own cases in submissions). to the century-old ‘rule in Gibbs’ that Daisytek (UK/France/Germany); Eurodis Commission (bankruptcy); Parker v C.S. both of which he acted pro bono), as have been, he always stopped working, debt can only be compromised in the As his ongoing cases continue, opposing (UK/Netherlands); Stojevic (UK/Austria); Structured Credit Fund Ltd (disclosure well as the FA Disciplinary Panel (for listened to your problem and came jurisdiction of the law it is governed by, Counsel continue to acknowledge him Quinn (UK/Ireland) O’Donnell (UK/ and freezing injunctions); Official insolvency matters). up with suggestions that you hoped is currently subject to an application for as somebody “who is not appearing Ireland) and McNamara (UK/Ireland). Receiver v Zwirn (disqualification you understood. Over the years a Gabriel wrote extensively, with his permission to the Supreme Court. today […] but had a profound influence He also provided expert evidence for of directors) and Blight v Brewster steady stream of South Square tenants books invariably leading the field, on several of those appearing […] today cases in jurisdictions including France, (execution against pension). negotiated the precipitous piles of He also retained his busy offshore including the seminal text on the EC […] a profound influence on the law Germany, Australia, Denmark, Greece, books and papers stacked across his practice, having appeared in the Grand Gabriel’s expertise also led to a number Insolvency Regulation – Moss, Fletcher […] whose passing has left the legal the Netherlands, Italy, Iceland, Poland, room to “borrow his brain” and ask if Court of the Cayman Islands in Re of advisory appointments, which and Isaacs on the EU Regulation on professional greatly diminished”. Portugal, and Switzerland. He was they could “run a quick point past you”. Abraaj Holdings in late 2018, as well as in the aforementioned podcast he Insolvency Proceedings. both saddened and puzzled by Brexit, appearing in the Privy Council in UBS AG Gabriel was a true European. He had a described as a way to give back to an Gabriel’s interests included tennis, but determined to forge creative legal Gabriel was a natural and generous- New York (& Ors) v Kenneth Krys & Ors in holiday home on the coast of Southern industry that had given him so much. theatre, cinema and travel. He solutions to deal with its consequences. spirited teacher who was as much February 2019 (on appeal from the Court France and frequently travelled to The Treasury, the FSA and the FSCS all especially enjoyed spending time in loved by his students as he was by of Appeal of the British Virgin Islands). other European destinations. In As a Deputy High Court Judge, Gabriel sought Gabriel’s advice, as did financial his and Judith’s home in the South those whom he taught more informally the book-shelf in front of his desk gave judgments in a range of cases, regulators in Gibraltar, Guernsey, of France. The latter was his final case, heard only in Chambers. Over the years he was in Chambers, there was an array of extending well beyond the insolvency Hong Kong and Bermuda. Between a matter of weeks before his death, appointed as a part-time lecturer and He also greatly enjoyed opera and European dictionaries: French, Italian, sphere, including Internet Broadcasting 2007 and 2013 he was a member of the and playing perfectly to his appellate tutor at St Edmund Hall, a lecturer in concerts, regularly playing (amongst German, Spanish (not to forget a Latin Corp (t/a Nettv) v Marr LLC (exclusion Financial Markets Law Committee of advocacy strengths and cross-border law at the University of Connecticut Law others) Mozart, Schubert and Dvorak dictionary, reflecting his great interest clause and fundamental breach) the Bank of England and involved in the expertise. Praised in the judgment School and, most recently, a Visiting in his room in Chambers. in Roman law, which he was not shy to Enviroco v Farstad Supply A/S (meaning Working Groups on Property Interests for his “powerful submissions”, his Fellow at St Catherine’s College, Oxford. refer to and cite in his cases). He also of “affiliate” and “subsidiary”); in Investment Securities, on Building He leaves a wonderful legacy, but we respondent client was successful, In 2011 he was appointed Visiting continued to speak fluent Hungarian, The Governors of the Peabody Trust v Society and Incorporated Friendly will miss him immensely.  and the appeal dismissed. In a rare Professor in Corporate Insolvency Law and was proud of his European roots. Reeve (right of unilateral contract Society Set-Off, and on Financial tribute at the end of the judgment, at Oxford University, an appointment Written by William Willson variation, unfair contract terms); Collateral. He was also appointed as Lord Hodge (on behalf of the Board) which enabled him, through his and Charlotte Cooke Tamares v Fairpoint (right to light and a specialist legal advisor to the Work SOUTH SQUARE DIGEST July 2019 www.southsquare.com Reflections on Gabriel Moss QC 11

“We have always known Reflections on Gabriel as an unfailingly courteous man and an “The insolvency world has immensely clever lawyer. lost one of its really great Gabriel Moss QC Respected by all and feared figures, and we have all by opponents for his sharp lost a good friend and intellect and creative ideas, colleague. He worked whether on his feet or on tirelessly to advance the paper. In the realm of cause of international On 15 March 2019, I got a call from the Gabriel was the person who practically international insolvency “A true great of our clerks. Did I have the mobile phone invented COMI shifting to the UK and restructuring law and and recognition issues he profession - fiercely number for Judith Moss, Gabriel’s wife? he was a true European at heart. He practice and was truly a Gabriel had suffered a bit of a turn, and was very troubled by Brexit, and could in particular was the man intelligent and yet so they were trying to reach her. Within not quite believe that we were going towering intellect, but you wanted on your team approachable and kind.” two hours we had lost him. The shock to divorce ourselves from such a rich unfailingly courteous and waves reverberated around Chambers. tradition, and such a brilliant source first … there can be no The grief was extraordinary. We were all of work for lawyers in this country. kind to those around him.” MARK FENNESSY, greater compliment to a devastated, and we were desperately sad Mostly, of course, he was irritated by Proskauer Rose (UK) LLP for Gabriel’s family. Every member of the lack of planning and thought, MR JUSTICE SNOWDEN professional in his field Chambers who was in the country and but he was starting to look for the of ex pertise.” not in court was at his funeral. There loopholes and angles if it was really was a palpable sense that someone going to happen. great had passed. We knew that we KEN BAIRD, He was always busy at work; always were all the poorer for his loss. on behalf of the Partners and in demand. And yet he had time for Restructuring Team at Freshfields FELICITY TOUBE QC Gabriel Moss QC was my mentor and everyone. If you had a particularly my friend. He was in almost every way knotty problem, you could always pop responsible for my career, bringing to his room, as I did on many occasions, me in on cases as his junior from the in order to ask him to “borrow his brain first time I arrived in Chambers (as for a moment”. Of course, you always he had always done, and continued to had to stand, because the only chair do for every junior in Chambers). He was herded into a corner where it could got me involved in publication after survive for a few days amongst the piles publication, particularly when he and piles of books, papers, files. If you Gabriel was the calmest man I knew. local coffee shops. If the phone rang at events and cultural happenings. He It is impossible to discovered my inability to say no to had an odd moment, you could engage He was never stressed by work. He was about 4pm and it was Gabriel, I knew was interested and interesting. And him. Even after I took Silk, he continued in a mild archaeological dig, where the never bothered by intense questioning that it was time for a walk. I often no matter how junior you were, in conceive of a world recommending me to clients for cases striations of time passing would be from the Court. He was never cowed joined him on his perambulations, Chambers or at the client, he was when he was unavailable. Quite a lot marked by the files of authorities that by attacks. He had an equanimity that chatting about work and family. He unfailingly gentle. You got the wrong without Gabriel of what we achieve as barristers comes lined his shelves. we would all like to emulate – and the knew that I didn’t drink tea or coffee end of the stick? No problem, he would from the luck of being in the right place skin of a rhino. If he was asked a tricky and was trying to avoid the tempting guide you in the right direction with Those sanity checks kept us all sane – at the right time, and Gabriel made it question, he took his time to make cakes in the shops, but he offered to no judgment. You had no idea what you or as near as is possible in the world in possible for me – and for so many other a note – in his spidery writing and buy me them anyhow, every time. He were talking about? No problem, he which we operate. He never said no. Not people in Chambers – to be situated in usually in green or red ink – and then was always a little bemused when I would help you to understand. The only to his fellow members of Chambers, to the best place to make our own luck. he would answer it. And the answer was said that I was really just coming with thing he had no time for was a lack of employees, to clients, to anyone who always right. Or even if it wasn’t, it just him to enjoy his company. My greatest loyalty. If you let him down, he would There is no doubt that Gabriel had a wanted his help. The only hesitation sounded right. regret is that the last time he asked me, (in an understated way) never let you particularly fine legal mind. He could came if you wanted him to travel I declined because I was trying to finish find yourself in a position where that find the loopholes and the analogies – abroad to speak or to represent a client Although being a barrister was never an advice for a client. If I had known, if could happen again. But if you were and if he couldn’t find them, he created in court. In those cases, the first step “just a job”, it was also not something I had only known, that it was the last there for him, he was always (and I them so that they existed for all time. was for him to check at home: “I need that defined his life. He was an avid opportunity to walk with him, I would mean always) there for you. His words were so measured that you to ask Judy”. That was as it should be. tennis player, until his initial heart have delayed my work for those twenty couldn’t help agreeing with them, His wife and daughter were paramount problems made him give it up a few It is impossible to conceive of a world minutes and spent them with him. even when some little alarm was going to him. As I told them when I spoke to years ago. My favourite little known without Gabriel. When my phone rings off in your mind that suggested they them after Gabriel’s untimely passing, fact about him was that he and Judy The overwhelming comment we at 4pm, I still for a moment think that might (just might) not be right. Judges it might have felt that Gabriel worked then took up Israeli dancing. heard on Gabriel’s death was that he it is him. When I need wise counsel, and opponents came under his sway; a lot, and that he was away from home was a gentleman. He was courteous I have to stop my steps from going He continued to exercise even after he following him like he was the Pied for so many hours, but his family was and honourable. He was kind and towards his room on autopilot. He was had to give up playing tennis, including Piper (although without the rodent/ always with him, in his thoughts and thoughtful. He was always interested a kind, generous, brilliant man. We will the afternoon constitutional walks to child association). in his heart. in those around him, and in current all miss him.  SOUTH SQUARE DIGEST July 2019 www.southsquare.com Reflections on Gabriel Moss QC 13

“If I may, I should like to add an anecdote as a measure Reflections on of the esteem in which Gabriel was held. During W/P negotiations with the other side some years ago, I mentioned that we had been instructed by the client to Gabriel Moss QC brief the best cross-border personal insolvency barrister in England. My opponent asked, somewhat laconically, whether that meant we had briefed Gabriel Moss. I was delighted to confirm that we had. I then mentioned that Gabriel had read the evidence made by my opponent’s It was in March 2002 that I bumped into sometimes the judges get things wrong, client, the trustee, and Gabriel had asked me to mention “He was never without Gabriel, the doyen of the insolvency as Gabriel would put it – and we worked that he was very much looking forward to cross- charm or wit. I would think and restructuring bar, wandering back together on a case which rather deflated to Chambers from the Holborn Circus (okay, killed-off) the solvent insurance examiningthe witness. We settled, that afternoon, to he was the most influential branch of WHSmith, clutching the then schemes market. Almost 15 years later, my client’s advantage.” insolvency barrister of his newly released Legally Blonde DVD. He I am still smarting from that defeat but, had seen the film in the cinema with as with everything, Gabriel took it in time, and his enthusiasm his wife, Judith, and daughter, Debbie, his stride. SIMEON GILCHRIST, for insolvency (practice and and wanted to watch it with them again. EdwinCoe LLP Whether or not we were working Other members of Chambers might academic) was infectious. together or, latterly, against one have dismissed the film as drivel (surely another, Gabriel and I would regularly We were lucky to know him.” not?) or delegated the task of buying meet for a mid afternoon coffee or, it to a junior clerk – to avoid wasting since 2014, a mid afternoon “healthy precious, billable time – but it would not CHIEF ICC JUDGE BRIGGS drink”. I know that it was 2014 when have occurred to Gabriel to ask someone the change occurred, although I can’t else to go to Smith’s for him and the recall what prompted it, because I DANIEL BAYFIELD QC DVD was, after all, primarily a gift for typed “healthy drink” into the search Debbie, or so he told me. function in Outlook and it returned This memory, so mundane and yet pages of emails from Gabriel with so it was that, for the first 10 years or No matter the importance of the case his intellectual prowess, the depth of for me so unforgettable, captures the “healthy drink?” as the subject, the so of my career – it may well have been or the difficulty of the arguments he his knowledge of insolvency law or his essence of Gabriel. Despite his ferocious oldest being from July 2014. I would substantially longer but clients will be was making, we would amble down to love for it. And it will be a long and, I intellect, he was utterly down to earth collect him from his room and, at the reading this – it would be Gabriel that court with Gabriel as relaxed as if we fear, ultimately fruitless battle for me, and his long and glittering career merest hint of sunshine, Gabriel would I went to for a sense-check or because were popping to Catalyst for a “traffic like Gabriel, to meet Kipling’s challenge did not alter him. Wherever he was, insist on donning his “shades” before I had no idea where to start to find the light drink”. I will never forget those of treating the imposters of triumph whoever he was with, whatever he was we set off on the short walk to one of answer to something. Gabriel always occasions on which Gabriel made the and disaster just the same. But what I doing, Gabriel was the same warm, the numerous coffee shops which came had an answer – often found in a book courtroom feel more like a lecture shall strive hardest of all to follow is humble and thoroughly decent man. and went over the course of this near 20 he had written or in a case in which theatre. On issues of law, his authority, his quiet example of treating everyone I It was in March He addressed the Supreme Court in year long ritual. It took me the first 10 he had appeared – and whether or not expertise and knowledge often led to have dealings with just the same. the same relaxed and affable manner or so years to stop Gabriel from talking it ended up being the answer, it was his submissions coming across as a Gabriel did not want to retire. He in which he spoke to colleagues and about his cases the second we set off. always immensely valuable. masterclass. Gabriel was the lecturer 2002 that I bumped looked at me as if I was mad when I friends. No act was put on and there It was meant to be a break from work. and the rest of the courtroom, the Gabriel’s humility was never false questioned whether he intended still were no sides to Gabriel. However busy, Thereafter, our topics of conversation judge or judges included, his body of into Gabriel... and it didn’t prevent him from taking to practise in 2025 when TFL’s “Cleaner Gabriel would take time to get to know ranged from Chambers gossip – which keen students. On complicated issues great pride in his work. Quiet and Vehicle Discount” is due to be removed mini-pupils and new members of staff. is usually thin on the ground – through of insolvency law, particularly those clutching the then softly spoken he undoubtedly was but – Gabriel had filed a written objection He put people at ease, had time for the congestion charge exemption for with an EU angle, there was no-one Gabriel took immense pleasure, inside to that proposal. He died far too soon everyone and enjoyed company and the electric and hybrid cars (a personal better. His ability to explain away newly released and outside of the courtroom, from but doing what he loved. Being a full- opportunity to discuss work and other favourite of Gabriel’s since the inconsistent or unhelpful authorities relying on judgments in cases he had time barrister and a part-time teacher, matters, particularly work. acquisition of his prized Tesla), to my, was remarkable. Gabriel would identify Legally Blonde DVD argued and from getting the better academic and legal commentator was still uncompleted, odyssey of a property a common thread and make it good, Gabriel and I spent a lot of time together of opponents and judges. He was not, his calling. search and whatever else was on our turning numerous confusing judgments over the years. I was his junior in many unlike many of us, beset by intellectual minds. I would often leave him amused into a body of law underpinning the At South Square, Gabriel will always cases. We were often triumphant, self-doubt. On the contrary, Gabriel’s and somewhat bemused, Gabriel central argument he was advancing. be remembered as a brilliant lawyer amongst other things, successfully intellectual self-belief was the source of putting down much of what I said to It is no overstatement to refer to Gabriel but he will also be remembered as a defending the “Football Creditors Rule”, his unrivalled creativity in approaching “a young man’s humour”. as having been, for decades, a titan of liberal, non-judgmental, kind and bringing down a CVA which sought to problems and legal or other obstacles. If the profession. He was a lawyer and gentle soul, whose easy companionship strip away parental guarantees for no Notwithstanding the mountain of work one argument was rejected, there would advocate of the very highest order. and generosity of time and spirit will be value and creating a quasi-bar date Gabriel invariably had to get through, always be countless more where that sorely missed.  mechanism for administration expense he was never in a rush, never panicked came from. As a mentor, Gabriel taught me so claims. But one cannot win every time – and never refused a plea for help. And much. I could never dream of matching SOUTH SQUARE DIGEST July 2019 www.southsquare.com Cryptocurrency: a guide for the rest of us 15

Cryptocurrency: a guide for the rest of us

This creates obvious difficulties for the lawyer who in 2013 referred to a bitcoin owner who had 1. Bitcoin is usually capitalised when wants to know what legal rights and obligations accidentally thrown away a “hard drive containing referring to the attach to a bitcoin,1 or for the liquidator who wants bitcoins worth £4m”.4 This is not entirely accurate. technology generally, while the individual unit to know what to do with cryptocurrency that falls The hard drive did not actually contain bitcoins, is not capitalised. within the estate. The problem is compounded by rather, it contained the keys which would enable 2. This assumes that the fact that the whole concept of cryptocurrency the ‘owner’ to make a new entry on the ledger, the bitcoin is being held directly. Many is in its infancy compared to other types of asset and sell his bitcoins to others. investors do not have a which lawyers and IPs typically come across. The wallet of their own, and What does the ‘owner’ of a bitcoin instead invest indirectly first bitcoin transaction, for example, occurred just actually ‘own’? through bitcoins held over 10 years ago. A further source of confusion in the wallet of a bitcoin exchange. is the fact that different cryptocurrencies might If a person owns a physical banknote for, say, £10, rely on wildly different underlying technology, she has a property right which the courts will 3. Although this may sound old-fashioned, such that the analysis applicable to one will enforce. A thief who steals that banknote will it is reportedly the not necessarily be applicable to the other. This method used by the be liable both to a criminal sanction and to civil Winklevoss twins to article focusses on Bitcoin, the best-known action at the suit of the victim. If the owner of the avoid their bitcoins falling into the hands of cryptocurrency, but the analysis in relation to banknote stores her banknote in a safe deposit box hackers: https://www. other cryptocurrencies may well be very different. at the local bank, and the bank subsequently enters independent.co.uk/life- style/gadgets-and-tech/ an insolvency process, the owner of the banknote What is a bitcoin? news/bitcoin-cameron- is nonetheless entitled to get her banknote back. tyler-winklevoss- cryptocurrency-shared- It is impossible to discuss the legal incidents If, on the other hand, a person deposits a £10 investment-key- of Bitcoin without some explanation of what it cut-a8120301.html banknote into a cash account at a bank, then he actually is. It is perhaps easiest to explain what a 4. https://www. typically acquires a chose in action against the bank bitcoin is by describing (avoiding jargon without, theguardian.com/ – a legally enforceable debt payable by the bank to technology/2013/nov/27/ as far as possible, sacrificing technical accuracy) hard-drive-bitcoin- the depositor. Unlike the person who has a physical how they are held and transferred. To receive a landfill-site. There are banknote in her hand, or the person who has numerous similar stories bitcoin, one must first create a ‘wallet’.2 This is of early Bitcoin users stored her physical banknote in a safe deposit box losing bitcoins which, easily done by appropriate software, which will which she alone controls, the bank accountholder at today’s prices, would generate two ‘keys’, which are simply strings of be worth an eye- does not have a property right. If the bank becomes watering sum. letters and numbers. One of these keys is intended insolvent, the accountholder has no right to enter to be public, and is a sort of ‘address’ to which the bank and take back the £10 note he previously others can send bitcoins. The other should be kept handed over. He nonetheless has a claim against private, and is the secret key which the wallet the bank which the law will recognise. ‘owner’ uses to transfer bitcoins out of the wallet and into the wallets of others. So what does the owner of a bitcoin have? As noted above, bitcoins are transferred by making The language of wallets, however, is apt to mislead. entries on a ledger. In the modern world, all sorts Nothing is actually stored in the ‘wallet’. The of valuable assets are traded simply by making ‘wallet’ simply consists of the two ‘keys’. These entries on electronic ledgers. To take a simple keys can be stored on a computer, or they can be example, a person who wishes to invest in gold printed on a physical piece of paper.3 The ‘keys’ might choose to invest through an account at a enable users to add entries to a ledger, which brokerage. The physical gold itself might be held records the transfer of bitcoins. This ledger is not in storage somewhere many miles away, and the stored in any central location. Instead, multiple rticles about Bitcoin and other cryptocurrencies tend to fall at investor might never see it. Instead, the investor’s copies are distributed across the network (making one end or other of a spectrum. At one extreme are the articles holding will simply be recorded on a ledger held by A unauthorised interference practically impossible), the broker. If the investor wishes to sell her gold to so heavy with the technical jargon of ‘consensus algorithms’, and a new entry can only be made by using the another, she will instruct the broker to make the ‘blockchain’ and ‘unspent transaction output’, that anyone lacking private key of the most recent recipient, the bitcoin necessary entries in the ledger. The physical gold a PhD in computer science will struggle to understand them. At the ‘owner’, and the public key of the new ‘owner’. stays exactly where it is. If the investor is asked other extreme are the descriptions given in the mainstream press, If the ‘owner’ of a wallet loses the keys, for exactly what it is that she is buying and selling, she which talk in loose language about ‘electronic money’ and ‘digital example if he loses the computer hard drive or will respond that she has the right to demand a currency’ without attempting to explain what these concepts piece of paper on which the keys are stored, then delivery of physical gold from her broker, and this actually involve. he loses the ability to add an entry to the ledger, right has value, even though she might have no making it impossible for him to transfer his intention of ever exercising it. ROBERT AMEY bitcoins. A headline in the Guardian newspaper SOUTH SQUARE DIGEST July 2019 www.southsquare.com Cryptocurrency: a guide for the rest of us 17

The owner of a bitcoin, however, does it permits an operator to do something of confidential information, such as be, whether alienable or inalienable, not have the right to demand anything which would otherwise be unlawful. a private key? Rather than seeking to subject to be taken in execution, legal or from anyone. He has the ability This is what the court in Armstrong extend the law concerning property equitable, or not so subject, shall, with (through knowledge of the relevant recognised as intangible property. rights to bitcoins, a more fruitful the exception of some compassionate ‘key’) to make an entry on the ledger. There is nothing particularly novel exercise would be to apply by extension allowances for his maintenance, be But unlike the depositor at the bank, about this part of the analysis. English the existing law concerning breach appropriated and made available for the who has the right to demand cash from law has long recognised that a licence of confidence. payment of his creditors … It is apparent the bank, or the investor with the gold to do something which would otherwise from the terms of section 436 of the In 1987, a disaffected MI5 intelligence brokerage, who has the right to demand be prohibited might not fall within the Insolvency Act 1986 that the definition officer, Peter Wright, published an delivery of gold, the owner of a bitcoin traditional definition of achose in action, is to some extent circular but is not autobiography entitled ‘Spycatcher: does not have any right at all. but is nonetheless a form of intangible exhaustive. Further … it is hard to think of The Candid Autobiography of a Senior property, see for example the analysis a wider definition of ‘property’.”7 EU Carbon Emissions Allowances Intelligence Officer’. Unsurprisingly, the of export licences in Attorney-General of British Government sought to block On this analysis, the fact that Bitcoin Within the European Union, Hong Kong v Daniel Chan Nai-Keung [1987] its release in the UK. The attempt does not fit easily into our existing operators of carbon dioxide-emitting 1 W.L.R. 1339. ultimately failed because, by the time definitions of ‘property’ should not installations above a certain size are The owner of a bitcoin has no ‘real- the case reached the House of Lords, matter. It is obviously consistent with given an annual credit of EU Allowances world’ legal rights – he simply has a key the book had been published overseas the scheme of the insolvency legislation (EUAs), with each EUA permitting the which enables him to modify the ledger. and was readily available to anyone that an insolvency officeholder should emission of one metric tonne of carbon The decision in Armstrong to recognise who wanted to read it. However, the be able to realise bitcoins in the dioxide. Operators who have adopted EUAs as intangible property therefore judgments in Attorney General v Observer insolvent estate, regardless of whether greener technology can sell their EUAs does not necessarily mean that the Ltd [1990] 1 A.C. 109 make clear that they can be brought within some at a profit to other operators, who have same analysis will apply to Bitcoin. a person who comes into possession previously recognised category insufficient EUAs for their activities. of confidential information, however of ‘property’. The idea is to provide an economic Knowledge and confidential inadvertently, is under an obligation incentive for the introduction of information It appears that the criminal courts are not to misuse it. An injunction will be green technology. already taking this pragmatic approach. In Oxford v Moss (1978) 68 Cr.App.R. 183, available to restrain misuse, and the In R v Teresko [2018] Crim LR 81, a drug EUAs do not exist in physical form, and a crafty university student pinched an recipient may be liable to account for dealer’s house had been searched, exist solely as an entry on a register. In advance copy of an exam paper, copied any profit he makes as a result of the revealing a piece of paper containing a Armstrong GmbH v Winnington Networks it, and then replaced the original. misuse. There is no obvious reason why private Bitcoin key. The Crown applied Ltd [2013] Ch 156, the claimant’s EUAs Having replaced the original, he could these principles should not apply to a under the Proceeds of Crime Act 2002 had been ‘stolen’, and ultimately sold not be charged with theft of the physical person who obtains the private key to s.47 (which applies to ‘realisable through the defendant EUA trader to paper. But the Theft Act, as then in force, another’s Bitcoin ‘wallet’. property’) for an order permitting the an innocent third-party purchaser. The also prohibited the misappropriation Insolvency police to convert the bitcoins (around High Court held that the defendant was of “intangible property”. The student was £975,000 worth) into sterling. The order liable in knowing receipt. prosecuted for theft on the basis that he The ‘owner’ of bitcoins has, in the was granted. had stolen the university’s confidential eyes of the law, no more than a right to To some legally trained bitcoin information. The prosecution failed: prevent others misusing his private key. Conclusion enthusiasts, the decision is evidence confidential information is not What happens to this right when the of English law’s willingness to protect A debate rages between Bitcoin intangible property. owner becomes bankrupt? novel forms of intangible property. At enthusiasts, who are convinced that paragraphs 60-61 of his judgment, the The civil law takes an even more It has been held that a bankrupt’s cryptocurrencies will revolutionise deputy judge remarked that an EUA was 5. Haig v Aitken [2001] 9. See, for example, to reconcile with the established restrictive view of property than the personal correspondence does not form the international economy, and Ch. 110. United States v Murgio No. 5 not a chose in action (because it did not 15-CR-769 (AJN) (SDNY authorities on constructive trusts and criminal law. While the criminal law part of the estate, and nor does a right ceptics, who are convinced that the confer on its ‘owner’ any right which a 6. Shlosberg v Avonwick April 21, 2016), Securities knowing receipt. It remains to be seen recognises that intangible property to legal professional privilege.6 On this whole thing is a massive bubble, if Holdings Ltd [2017] Exchange Commission court would enforce), but nonetheless Ch. 210 v Shavers 4:13-CV-416, whether this first instance decision will (albeit not information) can be stolen, footing, a private Bitcoin key should not not a downright scam. United States District held that it should be recognised 7. In re Celtic Extraction be followed in other cases. But even if the civil law tort of conversion only fall within the estate. Court, Eastern District Regardless of who is right, cases as “intangible property”. If intangible Ltd [2001] Ch 475, 486 the result is correct in the context of applies to physical property: OBG v Allan of Texas, Sherman On the other hand, it has been said involving the tax treatment of 8. Skatteverket v Hedqvist Division (6 August 2013), property, which exists only in the form misappropriated EUAs, to apply the [2008] AC 1. 8 (C-264/14) [2016] United States v Ulbricht that the word ‘property’ used in the Bitcoin trading and the regulatory of an entry on an electronic ledger, is No. 15-1815, US Court of same reasoning to misappropriated S.T.C. 372 Nowadays, the misappropriation of Insolvency Act: implications9 have already made capable of protection, then so too (some Appeals for the Second bitcoins would be a considerable leap. Circuit (31 May 2017). bitcoins would likely be caught by their way before the court. It is argue) is Bitcoin. “is not a term of art but takes its meaning Although both EUAs and bitcoins the offences created by the Computer surely only a matter of time before from its context … that in bankruptcy The reality is less clear. The decision both exist only in virtual form, the Misuse Act 1990 and the Fraud Act disputes concerning the ‘ownership’ the entire property of the bankrupt, in Armstrong relies on novel and similarities end there. An EUA has legal 2006. But what consequences does of cryptoassets, and the impact of of whatever kind or nature it may unorthodox reasoning which is difficult consequences in the real world, in that the civil law provide for the misuse insolvency, come before the courts.  SOUTH SQUARE DIGEST July 2019 www.southsquare.com BTI 2014 LLC v Sequana SA [2019] EWCA Civ 112 19

BTI 2014 LLC v Sequana

SA [2019] EWCA Civ 112: As I observed in a previous Digest historic insurance policies and an payment of a dividend could amount article relating to the first instance inter-company debt due to it from S. to a “gift”, a “transaction” or “on terms decision, the existence of long- Based on matters of judgment by its that provide for the payee to receive tail contingent liabilities is an directors, A’s accounts made a provision no consideration”. the Twilight Zone unfortunately common feature of for these contingent liabilities in the The Court accepted the submission modern corporate groups. Actual and amount of circa £50 million (which of S that a dividend cannot amount contingent asbestos liabilities drove was considerably below the value of to a gift because rights are conferred the T&N group into insolvency. Other its assets). on shareholders regards dividends entities face liabilities for historical The provision was at a level that enabled by the terms of issue of the shares or acts that they committed themselves, A’s directors to form the view that A was by the articles, and it is pursuant to or as a consequence of successor solvent, such that it was able to effect a those rights that shareholders receive liability, which, despite the purchase reduction of capital and had sufficient dividends (at [41]). However, it rejected of insurance, continue to grow beyond distributable reserves in its accounts the argument based on the analysis anticipated levels and existing cover, so as to enable it to declare dividends of dividends in the tax case of Inland and require ever more demanding in two successive years to its parent Revenue Commissioners v Laird Group plc provisions in their accounts. company, S. [2003] 1 WLR 2476 that the transaction Two principal issues came before the pursuant to which a dividend is paid is S, shortly after receipt of the second Court of Appeal in Sequana: (i) whether not the resolution of the directors or dividend, sold A on terms which sought section 423 is capable of applying to declaration of the dividend but rather to ensure that it could have no possible the payment of dividends that are the antecedent contracts between the liability for any CERCLA indemnity. otherwise lawful (i.e. declared in company and its members (i.e. that However, in due course, the creditors accordance with the provisions of the in paying a dividend, the company is of A alleged that the provision in A’s Companies Act 2006); and (ii) when simply paying members what is already accounts for the indemnity liability was and in what circumstances does the theirs as a matter of right, so that it is manifestly inadequate. duty of directors to have regard to necessarily on terms that provide for the interests of creditors arise, and What remedies, if any, are open to the the payee to receive no consideration). can it ever arise if the directors creditors of Company A to challenge The correct analysis was said to focus are considering the payment of an the payment of the dividends to S? on whether or not the company was otherwise lawful dividend. parting with any property of funds On appeal, there was no challenge to beneficially owned by it in favour of Those issues are very important in the Judge’s findings at first instance its shareholders: if it was, and received the existing business environment. that the two dividends paid were lawful nothing in return, the dividend was on If the current business is being (in the sense of having been paid in terms that provide for the payee conducted profitably, and the accordance with the provisions of the to receive no consideration in the accounts demonstrate sufficient Companies Act 2006). However, in required sense. distributable profits, is it open to relation to the second dividend paid, directors of a company to pay there was a challenge to the Judge’s dividends to shareholders if they conclusion that (i) the dividend was have made a reasonable estimate of not paid in breach of duty; but (ii) did the potential liabilities faced by the amount to a transaction falling within relevant entity? Or is something Section 423 (i.e. to defraud creditors). more required? Should prudence The appeal and cross-appeal were prevail, and the monies be retained both dismissed. David Richards LJ has in order to cater for the possibility treated us to a comprehensive analysis that the contingencies will vest and of the principles in play in this area. The appellants liabilities exceed those estimates? Section 423 challenged whether a n February this year, the Court of Appeal dismissed an In Sequana, the issues arose in a Section 423 is a wide-ranging provision payment of a dividend Iappeal and cross-appeal against the decision of Mrs scenario which can be simplified as designed to protect actual and potential Justice Rose in BTI 2014 LLC v Sequana SA. In doing so, follows. Company A faced potentially could amount to a “gift”, creditors where a debtor takes steps the Court of Appeal provided welcome guidance on the huge liabilities to indemnify a third falling within the section for the a “transaction” or approach to directors’ duties in the twilight zone before party, B, for liabilities arising under purpose of putting assets beyond their insolvency, and the circumstances in which the payment the United States Comprehensive “on terms that provide reach or otherwise prejudicing their Environmental Response, for the payee to receive of dividends might constitute a transaction susceptible to interests. The notion of transactions Compensation and Liability Act challenge under Section 423 of the Insolvency Act 1986. extends to gifts and transactions on no consideration” 1980 (“CERCLA”). It had ceased to terms that provide for the payee to trade and had only these liabilities receive no consideration (Section 436). to deal with. Its assets consisted of a The appellants challenged whether a RICHARD FISHER capped investment contract, certain SOUTH SQUARE DIGEST July 2019 www.southsquare.com BTI 2014 LLC v Sequana SA [2019] EWCA Civ 112 21

That was not, however, conclusive as to automatically (applying Colin Gwyer In so concluding, the Court of Appeal whether or a not a dividend amounted v London Wharf (Limehouse) Ltd [202] reminded us that, at their heart, to a “transaction” in the required sense. EWHC 2748 (Ch)). If the directors could companies are vehicles for risk taking Absent mutual dealing, or some form have reasonably concluded that the (see [125] and [127]). It is for creditors of active engagement between the proposal in question should be approved to look after their own interests, company and recipient, could a dividend even if creditors’ interest were taken albeit there has been some statutory be a “transaction” The Court of Appeal into account, it may be that no breach intervention so as to ensure that certain concluded that it could. The definition occurs (see at [119]). transactions and conduct are regulated of “transaction” was inclusive and not and potentially subject to review in any The key battleground was when the exhaustive, and although a transaction ensuing insolvency. Any recognition duty actually arose. The two alternative is normally used to denote some at common law of a duty to take into camps were, on the one hand, “a real as bilateral activity it can be used to denote account the interests of creditors was opposed to remote risk of insolvency” or, an activity in which a single person very recent, as a masterful review of the on the other, “insolvency, or very close to is engaged i.e. a gift (at [58], applying authorities in this area demonstrated. insolvency”. obiter comments from Greenberg v IRC David Richards LJ emphasized that a [1972] AC 106 at 136).There was no good Upholding the Judge, David Richards real, as opposed to a remote, risk of policy reason for restricting the scope LJ confirmed that, as a matter of law, insolvency can arise even though the of Section 423 to exclude the payment there were no English authorities which company is not insolvent and may of a dividend or any other unilateral act established the proposition that the very well never become insolvent, and (albeit David Richards LJ also questioned creditors’ interests duty is triggered by that it is a much less demanding test at [61] whether a payment of a dividend anything short of actual insolvency, and than whether the company is likely to really was a unilateral act in light of the that that was for good reason. Any other become insolvent. pre-existing rights involved). approach would hinder appropriate risk The test promulgated by the Court of taking by directors and the economic So far, so good and unsurprising. It Appeal is getting close to the Section benefits of conducting business through would seem very strange if a decision apply as a matter of fact in each case. the prejudice of what had occurred. The where a there is a real, as opposed to 214 threshold. Quite how likely it is that companies. Where Parliament had to dividend out a large sum of money The Court of Appeal concluded that Court of Appeal upheld her decision in remote, risk of insolvency. Such a duty a breach of duty of the type considered intended that there is a restriction on could not, in principle, be reviewed there was no basis to disturb the judge’s this regard, taking particular account was said to arise under Section 172(3) of will occur absent circumstances that directors’ conduct where a company is under Section 423 IA 86 albeit whether finding of fact in this regard. What is of the fact that a subsequent settlement the Companies Act 2006 and that, even will also amount to wrongful trading is anything other than insolvent or near the required statutory purpose existed clear, however, is that the application of agreement had been necessary in where a dividend was technically lawful, difficult to predict, and something that to insolvency, it had done so through would be a question of fact in each case. the correct test is very sensitive to the no small part because the dividend could have been breached because of is likely to be tested in further disputes legislation (see at [202]-[213]). Having correct identification of the transaction had rendered A insolvent. Although the company’s financial position. in this area. In this regard, the Court reiterated that identified four potential points at which in issue and whether the transaction the Court could not have a trial of the purpose of a person in entering The argument had an obvious the creditors’ interests duty could arise The Court of Appeal decision (and that that deprives the company of value the hypothetical issues of what had into a transaction is a matter of the superficial attraction: remember that A (see at [213]), he concluded that the most of Rose J) provides a large degree of can be said to be one where there is happened, it should strive to grant relief subjective intention of that person: had ceased to carry on business. Its only appropriate formulation was that the comfort to those advising directors that evidence that the statutory purpose is which, insofar as possible, restored the what did he aim to achieve? Applying function was to run off its indemnity creditors’ interests duty would arise a commercial approach will be adopted. satisfied. In many cases, particularly of victim now to the position that it would the test from IRC v Hashmi [2002] BCLC liability and the dividend in question when the directors know or should David Richards LJ’s reminder that complex transactions entered into with have been likely to be in (see at [88]). 489 at [23], it suffices if itcan “ properly be reduced its assets by some EUR 135 know that the company is or is likely to companies are vehicles for risk taking, professional advice, that test will be described as a purpose and not merely as a Directors’ Duties million. Even if the estimate of the become insolvent (at [220]). and that creditors cannot expect too very difficult to satisfy. consequence, rather than something which provision needed for the contingent much outside the statutory scheme, is The second, and perhaps most On this basis, the Court of Appeal was indeed positively intended”. Finally, the Court reviewed the Judge’s liability was made in accordance with good news. However, caution is required: interesting, topic dealt with in the accepted that, in theory, a decision to approach to remedies. The Judge the directors’ statutory duties and there is an inherent conservatism that The line between something being “a judgment is the approach to directors’ pay dividends might on the right facts had concluded at [39] of her separate in compliance with the applicable suggests to most practicing in this purpose” even if not “positively intended”, duties. We have long been aware that, as amount to a breach of duty (see at [224]). judgment that, where significant time accounting standards, it was clear (and area that a dividend paid by a company but not a mere consequence, is rather a company moves closer to insolvency, However, there was no breach of duty on had passed between the transaction common ground) that it might well be that has ceased to trade, and faces difficult to draw, and in my view a there is a point at which the interests the facts of the case at hand, because A, and a successful challenge, and the wrong (and probably would be wrong). large potential contingent claims, is rather unhelpful distinction. I am of the members may have to give way the company, was not insolvent or likely relationships between the parties had inherently risky. The finding that not convinced that the distinction is to the interests of the creditors, being Much of what was recorded in the first to become insolvent at the point when changed, the Court was not limited to Section 423 IA was applicable to the really anything more than whether a those with the principal economic stake instance judgment had been common the dividend was paid. making an order that went no further dividend payment notwithstanding purpose (even if not the purpose, or the in the business. The question is when, ground, including that (i) the content than restoring the value of what was Interestingly, although left over for that it was legal under Part 23 of the main or predominant purpose) of the and whether any duty in that regard of the duty does not vary according to lost by the company at the time of the determination on another day, David Companies Act 2006 may have surprised person entering into the transaction really extends beyond the statutory the degree of risk of insolvency that transaction (which the judgment of Richards LJ indicated that, in his many. It will be necessary to test on the was to put assets beyond the reason of relief that may be granted where a has arisen, and (ii) that, if the court Sales J in 4Eng Ltd v Harper [2009] EWHC view, it was hard to see that creditors’ facts of a given case the true motivation a creditor or otherwise prejudice their director has engaged in wrongful, or decides that the duty to take into 2633 (Ch) at [9] had suggested). She interest could be anything other than for declaring a dividend. But Sequana interests. There must be some evidence even fraudulent, trading. account creditors’ interests has arisen concluded that if fairness to the victim paramount once the directors knew or is a lesson that, in the twilight zone, of subjective purpose in this sense but the directors did not in fact take required a wider order to be made, the The argument of the creditor was that ought to have known that the company anything can happen.  (rather than prejudice being a mere the interests of creditors into account, Court could carefully tailor the relief the directors owe a duty to consider was presently and actually insolvent consequence of the transaction). Be that that is not of itself a breach of fiduciary granted to the facts so as to minimize the interests of creditors in any case (at [222]). as it may, that is the test that we are to duty invalidating everything done SOUTH SQUARE DIGEST July 2019 www.southsquare.com Corporate Insolvency in the Channel Islands 23

Corporate Insolvency in the Channel Islands: The important global economic function of the liquidator in Guernsey. In Jersey, the liquidator 1. See, for example, the Guernsey Commerce Channel Islands and other offshore centres must be a member of a number of prescribed and Employment are well known. Investment structures in professional accountancy bodies, although the Committee, Discussion Paper “Options for these jurisdictions are (and have been) vitally liquidator does not need to be resident in Jersey Reforming Guernsey’s what you need to know important in raising aggregate investment by or to be a qualified insolvency practitioner. In Insolvency Regime” (December 2014). mitigating instances of double and triple taxation, common with other jurisdictions the liquidator 2. Part 21, Companies thereby often facilitating complex international is required to realise the company’s assets and (Jersey) Law 1991. transactions and enabling investment in both discharge its liabilities, before distributing any 3. Ibid. established and emerging markets. Corporate surplus to members. 4. Part XXII, Companies insolvency laws and procedures play an In addition to their statutory powers liquidators (Guernsey) Law, 2008. important part in the efficient functioning of may seek directions from the Court.5 The Courts 5. See section 426 such jurisdictions. The Jersey and Guernsey Companies (Guernsey) in both Jersey and Guernsey have shown a real insolvency legal frameworks provide adaptable Law, 2008. For the willingness to assist liquidators on such directions application of the and commercially focussed regimes, whose directions power in applications, taking a similar approach to the heart is the concept of the protection of creditors’ Guernsey see Re Huelin- assistance they give trustees. Renouf Shipping Limited interests, and the promotion of a “creditor [Royal Court 46/2015] and 1 Re DM Property Holdings friendly” approach. Compulsory Winding Up (Guernsey) Limited [Royal Court 1/2017]. In Guernsey and Jersey are not members of the EU Similar to provisions available under the UK Jersey, see for example, and do not have legislation giving effect to the Insolvency Act 1986, an application for the Re Malabry Investments Ltd 1982 JJ 117 and Hotel UNCITRAL Model Law on Cross-Border Insolvency. compulsory winding up of a Guernsey company Beau Rivage Company Ltd They do however have modern domestic may be made by the company, any director, v Careves Investments Ltd 1985-86 JLR 70. insolvency laws as well as well recognised member or creditor on a number of grounds 6. Section 408(1) of the procedures for assisting foreign officeholders. including where the company is ‘unable to pay its Companies (Guernsey) debts’ or where it is ‘just and equitable’ that the Law, 2008. In addition, Many of those procedures are broadly similar to, or the Guernsey Financial company be wound up. One notable departure is are derived from, English law principles and reflect Services Commission that such applications may also be made by any may apply to wind up any company on the the processes available in the UK and many other 6 ‘interested party’, which the court has interpreted grounds that doing Commonwealth jurisdictions. Yet the insolvency as requiring assessment as to whether a person so would be for the procedures of each Island have distinct features protection of the public has a “connection or association” with the or the reputation of the and some significant differences. This article will company that warrants the person taking steps to Bailiwick of Guernsey, explore some of the features of the insolvency see section 410. bring about its dissolution.7 regimes of each Island and how they are applied in 7. See Re Synergy Capital Limited (Guernsey Royal both domestic and foreign insolvencies. The company must be given notice of an Court, 20 July 2012), application for winding up before it will be heard para 80 – in that case an Formal corporate insolvency and by the Court, but there is no requirement for prior indirect beneficial owner restructuring procedures of shares in Synergy was advertisement. found to have a sufficient interest. Voluntary Winding Up There is no equivalent to the official receiver 8. As was the case Both Jersey and Guernsey permit the winding up in Guernsey, and normally the party making in recent high profile court appointments in of a company on the passing of a special resolution the application for a compulsory winding up relation to Joannou & by members. order will nominate the proposed liquidator. As Paraskevaides (Overseas) Limited (18 October 2018) with voluntary liquidations, there is no formal In Jersey, a solvent voluntary winding up requires and Elli Investments qualification for appointment, though the Court Limited (1 May 2019). the directors to confirm by way of a declaration is often more cautious to ensure liquidators have of solvency that the company has no assets or appropriate experience. The Court previously has liabilities, has assets but no liabilities or will be looked to have at least one office-holder located able to discharge all liabilities within six months within Guernsey, though this requirement appears of the commencement of the winding up.2 Where to have been relaxed in recent times.8 the company is insolvent a “creditors’ winding up” will occur.3 The winding up process is broadly The ability of a creditor to apply for the compulsory similar to a creditors’ voluntary winding up under winding up of a company in Jersey is more limited. the UK Insolvency Act 1986. Guernsey law does not The only available option for a creditor is the distinguish between a “solvent” and “insolvent” désastre. The désastre process arose out of the voluntary winding up, and the same process is customary law of Jersey and is unique to the Island. followed irrespective of the solvency position.4 Notwithstanding the different historical roots, désastres are, in substance, similar to compulsory On passing the winding up resolution, members liquidations in England and Wales or other may also appoint a liquidator to undertake Commonwealth jurisdictions. the winding up of the company. There is no STEPHEN ALEXANDER ABEL LYALL qualification or licensing requirement to act as Partner, Mourant Jersey Partner, Mourant Guernsey SOUTH SQUARE DIGEST July 2019 www.southsquare.com Corporate Insolvency in the Channel Islands 25

Guernsey applies a dual “cash flow” and “balance sheet” solvency test Insolvency in Jersey is determined on a “cash flow” basis

In granting a désastre, the Court must be Viscount’s duties have been discharged. satisfied that the applicant creditor has When the Viscount has realised all a claim for a liquidated sum in excess of the debtor’s property he must pay of £3,000.9 If the debt claimed in the whatever final dividend is due and demand is disputed by the company in supply all creditors with a report and good faith and on substantial grounds accounts relating to the désastre. then it cannot form the basis of a Administration Orders winding up petition. If, however, the Saint Peter Port, Guernsey debt claimed is a judgment debt, the In Guernsey, the Court may make company cannot legitimately dispute an administration order where the it, unless execution of the judgment company is unable or is likely to 9. Bankruptcy (Désastre) members’ scheme of The same flexible jurisdiction has also As in England, in neither Jersey nor liquidated sums to which there is no (Jersey) Order 2006. arrangement proposed in has been stayed by the court. become unable to satisfy the solvency administration. enabled in recent years the pre-packed Guernsey does the commencement of a reasonably arguable defence. test, and the making of the order 10. Bankruptcy (Désastre) sale of a distressed company’s business. creditors’ scheme of arrangement have Upon declaration of a désastre, an (Jersey) (Law) 1990, 18. Section 376(1)(b) Transaction avoidance claims would achieve one of the two statutory the effect of staying creditor claims. automatic stay of proceedings is Article 10. Companies (Guernsey) Schemes of Arrangement purposes – either the survival of the Law, 2008. Office holders in Channel Islands have effected.10 This means that no creditor 11. Bankruptcy(Désastre) Solvency test company as a going concern or the (Jersey) (Law) 1990, Part 6. 19. Section Schemes of arrangement are available a variety of statutory and common of the debtor has any remedy (other 527,Companies 15 ‘more advantageous realisation’ of the 12. Re Esquire Realty for use in both Jersey and Guernsey. Guernsey applies a dual “cash flow” law claims at their disposal, for the than a right to prove his claim) in (Guernsey) Law. company’s assets than on a winding Limited (Guernsey Royal The legislation is substantially the same and “balance sheet” solvency test.19 purposes of recovering assets of the respect of any debt that is provable in Court, 17 April 2014). 20. Regulated entities up. As in a UK administration, the will also need to meet any as that under the UK Companies Act, A company will fail the solvency test company for the benefit of creditors. the désastre against the property of the 13. Re OT Computers Ltd administrator assumes broad powers capital requirements that and courts in both islands regularly under section 527 of the Companies debt, nor may a creditor commence any (31st January 2002) JU 29, apply. Both Guernsey and Jersey have to operate the business of the company. 2002 JLR N10. adopt and apply English case law to Law where the company is either legal action or proceeding to recover the 21. Bankruptcy provisions to deal with wrongful and However unlike in the UK there is no 14. In re Collections Group issues under consideration.16 unable to pay its debts as they fall due amount of the provable debt nor, except (Désastre) (Jersey) (Law) fraudulent trading22 and unlawful “out of court” appointment process [2013] (2) JLR N [2]. 1990, Article 1(1). or the value of its liabilities is greater with the consent of the Viscount (who Schemes of arrangement can also preferences.23 A liquidator may also for administration. 15. Part VIII of the 22. See sections 433 than the value of its assets.20 For the is the Executive Officer of the Royal Companies (Guernsey) be used in conjunction with other bring a claim for misfeasance, though and 434, Companies purposes of a compulsory winding up, a Court of Jersey with responsibility for Administration has become a popular Law, 2008 and Part 18A of (Guernsey) Law, 2008. insolvency procedures. For example, recent authority held that such claims the Companies (Jersey) statutory demands process may be used administering désastres) or the Royal alternative to compulsory winding Law 1991. 23. See section 424 the Court in Guernsey has approved in Guernsey are limited to breaches of Companies (Guernsey) by serving a demand for a debt greater Court, can a creditor continue any up, with its potential to be used as a 16. The most authoritative schemes of arrangement proposed by fiduciary duty or other misapplication Law, 2008. than £750 on the registered office of the action or proceedings to recover rescue procedure and its lesser negative treatment of Schemes of a company in administration.17 of assets, rather than negligence.24 Arrangement in Guernsey 24. See Carlyle Capital company by Her Majesty’s Sergeant, an the debt. perception thought to be helpful with is in the Court of Appeal’s Corporation Limited It remains open to the liquidator or Moratoriums in formal insolvency official of the Court. There is no need asset realisations. Administration decision in Re Puma & Ors v Conway & Ors administrator to pursue directors for In a désastre all property and rights Brandenberg Limited (Guernsey Court of proceedings to obtain a judgment debt or to register in Guernsey has also been used in [2017] GLR 127, in which Appeal, 12 April 2019). breach of their common law duties and powers of the debtor over its a foreign judgment in Guernsey before conjunction with “pre-packaged” sales, the court of appeal upheld In Jersey, as noted earlier, an owed to the company. affairs (along with the capacity to take the Bailiffs decision to 25. Bankruptcy serving a statutory demand. with the court adopting as best practice deny sanction to the (Désastre) (Jersey) (Law) automatic moratorium is imposed proceedings for exercising such powers) proposed scheme. 1990, Article 17 and the Jersey has statutory provisions to deal the protections laid out in the ICAEW Companies (Jersey) Law upon declaration of a désastre. There Where a company fails to pay the vest in the Viscount. In effect, the with transactions at an undervalue25 Statement of Insolvency Practice 16.12 17. See Re Montenegro 1991, Article 176. is no such automatic moratorium in amount demanded or otherwise reach Viscount “steps into the shoes” of the Investments Limited while Guernsey does not at present (in Administration) 26. Re Esteem and the voluntary or compulsory winding agreement with the creditor within 21 debtor and takes over the powers of the At present there is no equivalent regime No.52 Trust [2002] JLR 53; have such provisions. Creditors do [2013] GRC 23, in up in Guernsey. The making of an days, it is ‘deemed’ to be unable to pay directors of the debtor. The powers and in Jersey. Instead, Jersey relies upon which the Guernsey Re Flightlease Holdings however have available to them in court sanctioned a (Guernsey) Limited administration order in Guernsey does its debts. duties of the Viscount in a désastre are the Court’s wide jurisdiction, under the [2005-6] GLR Note 11. both Islands what is known as the give rise to an automatic moratorium, principally to investigate, get in and, just and equitable winding up regime, Insolvency in Jersey is determined on Pauline action, by which they can seek but this is limited, specifically ultimately, liquidate the estate for the to supervise companies in liquidation a “cash flow” basis.21 The “cash flow” to set aside a transaction which was excluding right of set off and the benefit of the creditors who prove their which have been permitted to continue test turns on the ability of the debtor to undertaken for the substantial purpose claims of secured creditors.18 claims.11 Désastre proceedings will last to trade out contracts or sell stock to pay its debts as they fall due. Debts are of defrauding creditors at a time when as long as necessary to ensure that the maximise creditor returns.13 the company was insolvent.26 SOUTH SQUARE DIGEST July 2019 www.southsquare.com Corporate Insolvency in the Channel Islands 27

In addition, officeholders in both Islands may typically do so by sanctioning and registering bring disqualification proceedings against the appointment of the foreign office holder. directors and other officers of the company27 Such assistance is usually effected by way of a (and indeed may be obliged to do so where letter of request from the foreign court to the criminal conduct pertaining to the company is Jersey court. identified).28 Disqualification may be ordered if the Central to the Jersey courts’ discretion when Court is satisfied that the person’s conduct makes considering all applications for assistance are the him unfit to be concerned in the management of a welfare of the creditors, the extent to which the company and it is expedient to do so in the public request is consistent with, and not abhorrent to, interest. A disqualification order shall be for such Jersey domestic law and policy and is reflective of period not exceeding fifteen years, as the Court the underlying principles of comity.35 thinks fit.29 For requests from countries not covered by the Proof of debts and priority on winding up statutes, both Jersey and Guernsey will generally There is currently no formal ‘proof of debt’ extend assistance under common law principles. procedure in Guernsey. In practice liquidators will While recognition of an appointment is normally make contact with known creditors and advertise uncontroversial, the full extent of powers for for claims in relevant newspapers. Creditors will courts to assist foreign office holders under be asked to submit claims in the form of ‘proofs common law is subject to many of the same of debt’, but liquidators do not have the role of uncertainties as it is in other jurisdictions. In adjudicating such claims. Singularis36 , a majority held, inter alia, that there is a common law power to require persons subject to There is generally no time period within which the court’s jurisdiction to provide information to creditors must lodge their claims. Ultimately overseas officeholders, as long as similar orders it will be for a Commissioner appointed by the Corbiere Lighthouse, Jersey can be made in the officeholders’ home forum. Court (in a compulsory winding up) to approve This has proved controversial in Guernsey, at least distributions to creditors. Where there are (Désastre) (Jersey) Law 1990 priority is granted 27. See section 427 31. As well as other UK mechanisms available on each Island. In this in the context of personal insolvency, with the disputes over creditor claims these are referred Companies (Guernsey) office holders, along with to various types of creditors including amounts Law, 2008. In Jersey, those in Jersey or the Isle regard each Island has adopted a slightly Royal Court declining to follow the majority in to the Court for determination. owed to landlords, salaries and holiday pay disqualification of Man. different approach. Singularis, finding instead that the foreign trustee proceedings are brought In Jersey, the position is more codified. In adésastre owed to employees, unpaid tax and social by the Chief Minister, the 32. See for example in bankruptcy of a foreign debtor could not use Batty v Bourse [2017] Guernsey has had extended to it (with necessary every creditor is required to file their claim within security contributions. Jersey Financial Services information collecting powers in Guernsey.37 Commission or the GLR 54 where an amendments) section 426 of the Insolvency a time fixed by the Viscount and notified in the Attorney General (Article order was obtained The decision is yet to be considered in Jersey. 3. General unsecured creditors. applying English law on Act 1986 by means of the Insolvency Act 1986 Jersey Gazette. The date fixed for the filing of 78 of the Companies Importantly for secured creditors, there is (Jersey) Law 1991 and undervalue transactions. (Guernsey) Order, 1989 (the ‘1989 Order’). Proposals for law reform may follow reporting claims must not be less than forty nor more than 33. Article 49. no equivalent in Guernsey or Jersey to the of misconduct from Accordingly, Guernsey will extend recognition sixty days from the date of the declaration.30 In a Both Islands are working on reforms to further ‘prescribed part’ under the UK Insolvency the Viscount ( Article 34. Being UK, Guernsey, and assistance to an English office holder31 on creditors’ winding up, statute provides no express 43 of the Bankruptcy Jersey, Isle of Man, improve their insolvency regimes. Act, whereby a part of the assets that would (Désastre) (Jersey) the issue of a letter of request from the English period, and the matter is Finland and Australia. otherwise fall to the secured creditor is held (Law) 1990). court. The Guernsey Court has a duty to grant The Guernsey legislature has proposed a series left to the liquidator to determine the procedure. 35. Re Royco Investment in the estate for distribution to unsecured 28. Companies (Jersey) Company Ltd [1994] the assistance unless the request is oppressive or of reforms that are expected to be introduced The liquidator may well choose to follow the Law 1991, Article 184. creditors. Assets held as security do not form JLR 236. contrary to public policy. Importantly, in providing later in 2019. These reforms cover a wide area and procedure in a désastre as a guide to good practice. part of the assets of the company available for 29. Section 429, 36. Singularis assistance the Guernsey Court can apply the include the establishment of a rules committee The content and supporting evidence of such Companies (Guernsey) Holdings Limited v distribution to the general body of creditors. Law, 2008 and Companies Pricewaterhouse Coopers insolvency law of either Guernsey or England. This to prepare insolvency rules to cover issues such proofs is a matter to be assessed by the Viscount (Jersey) Law 1991, [2014] UKPC 36. can be particularly useful where, for example, a of proof of debt procedure, the introduction or liquidator. Any surplus on winding up will be distributed to Article 78. 37. Brittain (Trustee in foreign office holder wishes to use Insolvency Act of a power to wind up foreign companies, shareholders in accordance with their rights and 30. Bankruptcy Bankruptcy of X) v GTC The general principle of pari passu will apply in a (Désastre) Rules 2006, statutory powers, such as the power to conduct along with the extension of liquidator powers interests under the articles of association of the (Guernsey) Limited [2015] Guernsey or Jersey insolvency and creditors of the Article 3. GLR 248. Though in this private examinations of officers of the company including the ability to challenge undervalue and company. case it is not clear why 32 company share in the distributable assets of the the English Trustee in that may otherwise not be available. extortionate credit transaction as well as statutory company in proportion to the size of their claims Assistance to foreign office-holders Bankruptcy sought to investigative powers to examine directors and pursue an application Jersey has included a foreign assistance provision in the insolvency. This is subject to the interests officers of a company.38 While the Islands sit outside the framework of under the common law in its Bankruptcy (Désastre) (Jersey) Law 1990.33 It of secured creditors and payments to preferred when it could have been the European Insolvency Regulation, the Courts brought under the is less prescriptive than section 426, providing that The principle insolvency reform on the immediate creditors. In general, the order of priority after of Jersey and Guernsey both regularly extend 1989 Order. the Jersey courts may, at the request of a foreign horizon in Jersey is the widening of the creditors’ payment to secured creditors will be: recognition and assistance to foreign office 38. Insolvency Review court (from a relevant territory34), grant assistance winding up regime under the Companies (Jersey) – Amendments to the 1. Costs and expenses of the winding up: holders. The principles of comity and assistance Companies Law, States of to insolvency officers of that court where they Law 1991 to enable creditors to initiate those including the remuneration of the liquidator, are at the heart of the approach of the Court in Guernsey Committee for wish to take steps in Jersey or the relevant foreign proceedings, as an alternative to the désastre Economic Development, other reasonable costs, expenses and charges both islands to multi-jurisdictional insolvencies 19 February 2017. jurisdiction in relation to insolvency matters. This process. Following consultation within the that are incurred during the liquidation. and restructurings. assistance may be afforded even where there are industry, the amendment is expected to come concurrent bankruptcy proceedings in Jersey. into force within the next 12 months.  2. Preferred debts: under the Preferred Debts For an English office holder, the most common If the Jersey court grants assistance, it might (Guernsey) Law, 1983 and the Bankruptcy approach would be to use the statutory SOUTH SQUARE DIGEST July 2019 www.southsquare.com Primeo v HSBC 29

Primeo v HSBC: oby Brown reports on the decision of the Cayman Islands T Court of Appeal to uphold the dismissal of the claims in Primeo Fund (in Official Liquidation) v. Bank of Bermuda Cayman Islands Court (Cayman) Ltd and HSBC Securities Services (Luxembourg) SA. Tom Smith QC, Richard Fisher, William Willson, Toby Brown of Appeal dismisses and Robert Amey appeared at first instance and on appeal. appeal in Madoff On 13 June 2019, the Cayman Islands in particular that (a) BBCL failed to company enforced its rights against Court of Appeal (“CICA”) handed properly determine Primeo’s Net Asset the defendant. down a 184-page judgment following Value per share and (b) HSSL breached The Rule has been broadly applied what was then reportedly the longest its duties regarding the appointment by the English courts. For example, feeder fund claim appeal heard in Cayman (recently and supervision of BLMIS as sub- the English Court of Appeal in Carlos surpassed by Saad Investments v AHAB). custodian and was also strictly liable for Sevilleja Garcia v Marex Financial Ltd In a combined judgment, Beatson, Birt BLMIS’ wilful default. Herald and Alpha [2018] EWCA Civ 1468 (“Marex”) and Field JJA held that Primeo’s claims also had ongoing claims in Luxembourg confirmed that the RL Rule applied to were completely barred by the rule against HSSL for losses allegedly claims by unsecured creditors who are against recovery of reflective loss. The suffered from investing with BLMIS, not shareholders, though an appeal was CICA ruled (albeit obiter) on various totalling US$2 billion and $346 million heard by the Supreme Court on 8 May other matters ranging from breach of respectively, with supplementary 2019, with judgment reserved. contract to contributory negligence. proceedings later served seeking $5.6 billion and $1.2 billion respectively. The CICA proceeded to analyse the Background policies which justify the RL Rule: Following a lengthy trial, Jones J More detailed background may be found handed down judgment on 23 August • First, the need to avoid double in the September 2017 South Square 2017 dismissing the claims. Whilst he recovery by the shareholder and the Digest. In brief, Primeo was a Cayman found that the defendants had breached company from the defendant. The fund established in 1993 which invested certain of their contractual duties, he CICA considered this is important through Bernard L Madoff Investment held that: (a) the claims were barred by but not the primary concern, and the Securities LLC (“BLMIS”). From 2003, the rule against recovery of reflective RL Rule may apply even where there Primeo also invested indirectly with loss (“RL Rule”), (b) Primeo failed to is no prospect of double recovery, for BLMIS via shareholdings in other establish causation, (c) Primeo suffered example because the company has Madoff feeder funds, “Alpha” and no loss for which HSSL was strictly declined to bring a claim. “Herald”. In May 2007, Primeo switched liable, (d) any causes of actions accruing all of its direct investments in BLMIS • Second, causation, in the sense that six years after the claim was issued for a shareholding in Herald (“Herald if the company chooses not to claim were statute barred, (e) even if a claim Transfer”), thereafter only investing against the wrongdoer or to settle had been made out against BBCL (but through Herald and Alpha. a claim for less than it might have not HSSL) damages would be reduced done, the claimant’s loss is caused Bank of Bermuda (Cayman) Ltd by 75% for contributory negligence. by the company’s decision not by the (“BBCL”) and HSBC Securities Services Primeo appealed against the dismissal defendant’s wrongdoing. The CICA (Luxembourg) SA (“HSSL”) were of its claims, and in response the noted that this consideration has appointed as Primeo’s administrator defendants issued a Respondents’ been criticised and there was more and custodian respectively under Notice which sought to affirm the to the matter than causation. an Administration Agreement and judgment on additional grounds. a Custodian Agreement. BBCL’s • Third, the public policy of avoiding administration duties were delegated to Reflective loss conflicts of interest, particularly HSSL, who was also sub-administrator if the claimant had a separate right The CICA’s judgment includes a detailed and sub-custodian to Alpha and to claim it would discourage the analysis of the English authorities on administrator and custodian to Herald. company or the wrongdoer from the RL Rule, which is derived from the making settlements. As Chadwick In December 2008, Bernard Madoff decision of the English Court of Appeal LJ noted in Giles v Rhind [2002] EWCA confessed to orchestrating a massive in Prudential Assurance Co Ltd v Newman Civ 1428, there is a “need to avoid Ponzi scheme through BLMIS, Industries (No 2) [1982] Ch 204, which a situation in which the [defendant] defrauding billions of dollars from was confirmed by the House of Lords in wrongdoer cannot safely compromise thousands of investment clients Johnson v Gore Wood & Co (a firm) [2002] the company’s claim without fear that over decades. 2 AC 1. In short, a shareholder may not he may be met with a further claim recover loss which is merely reflective In 2013, Primeo issued a claim in the by the shareholder in respect of the of loss suffered by the company i.e. Grand Court of the Cayman Islands company’s loss”. loss which would be made good if the TOBY BROWN seeking c. US $2 billion, alleging SOUTH SQUARE DIGEST July 2019 www.southsquare.com Primeo v HSBC 31

• Fourth, the need to preserve which is separate and distinct cannot because it would bar its claim and (b) Limitation company autonomy and avoid change and become reflective just the defendant will not do so because it First, the CICA rejected the suggestion prejudice to minority shareholders because the plaintiff later becomes would amount to admitting liability of that the strict liability claim was an and other creditors. In Johnson v Gore a shareholder. However, it follows the company’s claim. action based upon fraud under s. 37(1)(a) Wood, Lord Bingham considered that from the authorities (which focus on Accordingly, the CICA upheld the of the Limitation Law, given authorities “the court must respect the principle of whether the loss would be made good) Judge’s conclusion that Primeo’s claims such as Beaman v ARTS Ltd [1949] 1 KB company autonomy, ensure that the that whether the loss is reflective were barred by the RL Rule. The appeal 550 that an action is only “based on company’s creditors are not prejudiced must be determined in light of the was therefore dismissed. The CICA fraud” where fraud is an essential by the action of individual shareholders circumstances when the claim is also expressed their conclusions on element of the cause of action. and ensure that a party does not recover made. Moreover, the very nature of the the following other grounds since compensation for a loss which another Herald Transfer provides an additional Second, the CICA, following Applegate they had been argued by Primeo and party has suffered”. The CICA added explanation for why the loss before v Moss [1971] 1 QB 406, held that the the Respondents. that where the company is in or May 2007 ceases to become separate concept of an “agent” extends to an near insolvency, the prejudice that and distinct. This conclusion was Custody claim independent contractor and therefore would result if unsecured creditors supported by the third and fourth BLMIS’ concealment extended time The CICA found that the Judge was could sue directly would be a breach policy justifications set out above, in respect of the strict liability claim entitled to conclude on the evidence of both the principle of collective given the possibility of Primeo under s. 37(1)(b) of the Limitation Law. that Primeo (not HSSL) had appointed insolvency and the pari passu rule. “scooping the pool” before Alpha/ BLMIS as its custodian for the period Third, the CICA held that the Judge The CICA considered that this fourth Herald’s claims, thereby prejudicing 1993 to 2002, but that from 2002 to 2007, was correct to conclude that a reckless factor was the primary justification other shareholders and creditors and the Sub-Custody Agreements were breach of duty does not constitute for the RL Rule. impacting on the Respondents’ effective to constitute BLMIS as sub- deliberate commission of breach of duty ability to settle those claims. Against this useful exposition, the CICA custodian, for whom HSSL was strictly under s. 37(2) of the Limitation Law, as considered a number of issues by which Fourth, the CICA rejected the liable under the Custodian Agrement. supported by Cave v Robinson Jarvis & Primeo sought to argue its claims were suggestion that the administration The CICA held that the loss suffered Rolf [2002] UKHL 18. Accordingly, the not barred by the RL Rule. Five main claim against BBCL could not be by Primeo was the relevant loss for limitation defence was applicable to issues are addressed below, the first reflective because Herald has no claim which HSSL was liable, finding per the negligence claims. In any event, three of which relate to the against BBCL. Under the delegation Nykredit Mortgage Bank Plc [1997] 1 WLR the finding of gross negligence against Herald Transfer. agreement, HSSL would be liable to 1627 that loss was suffered each time it BBCL did not equate to recklessness. BBCL for performing its delegated transferred cash to BLMIS. First, the CICA considered whether for Contributory negligence duties negligently, and so Primeo’s the RL Rule to apply, the plaintiff must However, the CICA did not determine claim against BBCL would in substance Finally, the CICA rejected the assertion in substance be claiming in its capacity that Primeo was entitled to any be passed through to HSSL, competing that the defence of contributory as a shareholder (or a creditor) for a damages on the strict liability claim, with Herald’s claim by potentially negligence was not available where a diminution in the value of its shares in directing the issue be remitted “scooping the pool” at the expense of professional is engaged to carry out (or claim against) the company. in the event that the reflective loss other shareholders and creditors. The skilled activities. Conversely, the CICA finding is overturned by the Privy Although the CICA acknowledged there CICA also referred to the effect of accepted that the defence should be Council. On the negligence claim, were some references in Johnson v Gore delegation by Alpha’s custodian and available to HSSL, on the basis that its the CICA concluded that the Judge’s Wood to a shareholder “suing in that administrator to HSSL, which would contractual duties were co-extensive evaluation of the position was capacity”, this was merely a description have the same effect of passing liability Bernard Madoff in tort and thus fell within “category reasonably open to him, concluding of the typical scenario in which the RL onto HSSL. 3” according to Forsikringsaktieselskapet that the custodian was negligent given Rule applies rather than a condition. Vesta v Butcher [1989] AC 852. Fifth, the CICA held that for the RL that BLMIS’ uniquely risky model of NAV by relying on a single source of his own had erred in applying the It is clear that the RL Rule extends Rule to be engaged, the company’s combining investment management, information, in circumstances where, balance of probabilities standard to As to the appropriate apportionment, beyond diminution in share value claim must have a realistic prospect brokerage and custody was not from 2005, Primeo’s auditors EY were the hypothetical actions of Madoff and applying Jackson v Murray [2015] to all payments which a shareholder of success, rather than be “likely to addressed by normal procedures. relying on custody confirmations EY. Rather, applying Allied Maples [1995] UKSC 5, the court has regard to both might have obtained from the company, succeed”. The latter test would lead given by HSSL, rather than on audit 1 WLR 1602, the hypothetical actions the blameworthiness of each party including qua employee. Administration claim to a number of significant practical procedures supposedly conducted by of a third party ought to have been and the relative importance of each Second, the CICA rejected the argument difficulties. The merits would have to First, the CICA upheld the Judge’s BLMIS’ auditor, Friehling & Horowitz. addressed on a loss of a chance basis. party’s act in causing the damage. The that the RL Rule could not apply be determined in a trial within a trial rejection of the claim that BBCL was In addition, the CICA overruled the CICA considered that since BBCL was Causation because Primeo’s causes of actions to which the company is not generally grossly negligent from 2002 to 2005. Judge’s finding that Primeo would have performing a professional service, but accrued before it was a shareholder. a party, which would be particularly The CICA commented that Mance J’s First, the CICA considered the Judge’s reinvested monies withdrawn from bearing in mind Primeo’s “keenness to Lords Bingham and Millett’s speeches difficult where (as here given Alpha dicta in Red Sea Tankers [1997] 2 Lloyd’s rejection of the causation case in BLMIS into another feeder fund. invest wholly in BLMIS”, BBCL’s conduct in Johnson v Gore Wood focused on the and Herald’s ongoing claims), the Rep 547 regarding serious disregard or relation to 2002, holding the finding was equally blameworthy as that of The CICA did not, however, quantify the loss claimed and whether the plaintiff shareholder’s claim comes before the indifference to the obvious risk are“ of was reasonably open to him, including Primeo, and thus assessed contributory loss of chance, but directed that this would be “made whole” or “made good” court before the company’s claim is assistance [but] should not be treated as because there was equivalence of negligence at 50%. would need to be remitted to the Grand if the company had enforced its rights particularised and evidenced. ifin a statute”, and gross negligence knowledge between the parties of the Court in the event that reflective loss Conclusion against the defendant wrongdoer. This “means simply ‘very great’, ‘extreme’ consequences of the BLMIS model, and A further practical difficulty is that was overturned. Further, causation being the object, the position had to or ‘flagrant’ negligence”. Primeo had not tendered evidence from As summarised above, the Court of the court may have little assistance would be subject to determination of be assessed at the time the plaintiff’s any of the decision makers. Appeal dismissed Primeo’s appeal. because the parties will have no Second, the CICA also upheld the the defence that Primeo would have claim is made. Shortly before the Digest went to press, incentive to argue the company’s claim Judge’s finding that the administrator Second, in respect of causation as at been unable to withdraw its assets Primeo was granted leave to appeal as Third, related to this, the CICA accepted is likely to succeed because (a) the was grossly negligent from 2005 to 2005 and 2007, the CICA considered because BLMIS would have collapsed. of right to the Privy Council.  that the nature of the loss sustained claimant shareholder will not do so 2008 in the determination of Primeo’s that the Judge through no fault of SOUTH SQUARE DIGEST July 2019 www.southsquare.com Case Digest 33

Case Digest Editorial

Adam Goodison South Square & Mourant t a Chancery Bar implied term in the relevant estate immediately payable. But the subject matter Regarding the other digests that follow, agency agreement. When the Court of of the sale, and the date of time at which readers will see that members of South Joint Litigation Forum AConference Workshop Appeal decision was issued, it carried payment is to be made, are not subject to Square have been busy litigating both analysing the decision of considerable weight because of Lewison terms expressed in words. All the essential in the core areas of South Square, LJ’s distinction in contract law (his terms other than price have been agreed and wider specialisations, including Thursday 19 September 2019 Rose J in BTI v Sequana, the seminal work is “The Interpretation of by conduct, in the context of the encounter shareholder disputes in the British 12:30pm | Registration & lunch Workshop was playfully Contracts”). Nevertheless, on appeal between the parties at the householder’s Virgin Islands (see David Alexander to the Supreme Court, the SC Justices front door.” QC’s case regarding alleged unfair 1:30pm | Conference start How to defraud decided that the majority in the Court prejudice in Wai Fong v Wong Kie Yik entitled “ “60. So it is with the contract in issue in the of Appeal had been wrong, and on page 47), further fall out from the your creditors without being present case. All that was proved was that 5:30pm | Networking drinks overturned the Court of Appeal Madoff frauds (UBS AG v Fairfield Sentry there was a short telephone call initiated in breach of duty judgment. The Supreme Court held Ltd in the Supreme Court on page 53 ”. by Mr Devani, who introduced himself as 7:00pm | Event close (in summary) that even though the where the late Gabriel Moss QC, Tom an estate agent, and Mr Wells, who Mr important terms were not expressly Smith QC and Henry Phillips acted), the In summary, Rose J’s judgment had Devani knew wanted to sell the outstanding spelt out, they had nevertheless been Court of Appeal judgment in Box Clever decided that dividends had been flats. Mr Devani offered his services at an We hope you can join us for the annual South agreed by words and conduct. In case at page 54 (with Mark Arnold QC having lawfully declared, despite a large expressly stated commission of 2% plus VAT. Square and Mourant Joint Litigation Forum anyone ever suggests that Supreme acted), the decision of ICC Judge Burton potential pollution liability, but It was known to both of them that Mr Wells Court Justices do not live in the real on Toisa Ltd regarding the time when which, once again, will be held at Landing Forty nevertheless one of the dividends was was looking for a buyer or buyers so that he world, a short read of the judgment COMI requirements are required to be Two of The Leadenhall Building on Thursday 19 held to be a transaction made under could sell the flats, and it was plain from the of Lord Briggs in this case will give a established for recognition purposes September 2019. s 423 of the Insolvency Act 1986 and context, and from the conduct of the parties flavour of the everyday occurrences at page 51, disciplinary proceedings thus was to be set aside. The Court of towards each other, that Mr Devani was that occur in the life of a Supreme in South Square’s sports practice in Appeal has now determined that Rose offering to find one or more buyers for those Court Justice. He held at 59 – 61: respect of Birmingham City FC at page J was broadly correct in her analysis flats. The express reference by Mr Devani The forum, co­chaired by David Allison QC of 57 (where Daniel Bayfield QC acted), and and judgment, with the Court of Appeal “59. Lawyers frequently speak of the to the 2% commission was, in the context, South Square and Jessica Rowland of Mourant, British Steel Ltd with Snowden J making (David Richards LJ, Henderson LJ and interpretation of contracts (as a preliminary clearly referable to the price receivable by will cover tops such as Economic Tort Actions, a winding up order, and an urgent Longmore LJ) upholding her judgment. to the implication of terms) as if it is Mr Wells upon any sale or sales of those flats Carillion type special managers order Reflective Loss and, of course, an Insolvency The Court of Appeal decision is digested concerned exclusively with the words used achieved to a person or persons introduced just before 10am on 22 May 2019, and Focus. For a full list of speakers and additional within this edition’s work at page 45 expressly, either orally or in writing, by by Mr Devani. Furthermore it was evident issuing his judgment in writing a few details, please see our website. by Edoardo Lupi of South Square, and the parties. And so, very often, it is. But from the fact that nothing further was said hours later, the same day, to assist the is both of great importance in the there are occasions, particularly in relation before the conversation ended that there Official Receiver in carrying forward determination of when the “creditors to contracts of a simple, frequently used was an agreement, intended to create legal the liquidation of one of the last steel  Landing Forty Two interest duty” triggers, (as well as of type, such as contracts of sale, where the relations between them, for which purpose plants in the UK (where Lloyd Tamlyn interest in the determination of when context in which the words are used, and nothing further needed to be negotiated.” The Leadenhall Building acted for the company, and I acted for a company can pay dividends), and the conduct of the parties at the time when 122 Leadenhall Street “61. The judge decided the case by reference the Official Receiver and the proposed Edoardo’s summary saves the long read the contract is made, tells you as much, or London, EC3V 4AB to implied terms. But it follows from what special managers). through 59 pages of the Court of Appeal even more, about the essential terms of I have set out above that I would, like Lord decision (for summer reading, the the bargain than do the words themselves. The various case Digests this month Kitchin JSC, have been prepared to find that decision is on the BAILII website). Take for example, the simple case of the have been compiled by South Square a sufficiently certain and complete contract door to door seller of (say) brooms. He rings members Stefanie Wilkins, Rose Also in this edition’s case digests, at had been concluded between them, as a the doorbell, proffers one of his brooms to Lagram-Taylor, Madeleine Jones, page 41, Madeleine Jones summarises matter of construction of their words and the householder, and says “one pound 50”. Edoardo Lupi, Ryan Perkins, Lottie the important decision of the Supreme conduct in their context rather than just The householder takes the broom, nods and Piper, Andrew Shaw and Robert Amey.  Court regarding implied terms in by the implication of terms, such that, by reaches for his wallet. Plainly the parties contracts of Wells v Devani [2019] UKSC introducing a purchaser who did in fact have concluded a contract for the sale of 4. Lewison LJ in the Court of Appeal complete and pay the purchase price, Mr  +44 (0)20 7696 9900 | [email protected] | www.southsquare.com the proffered broom, at a price of £1·50, had held that there should be no Devani had earned his agreed commission.” SOUTH SQUARE DIGEST July 2019 www.southsquare.com Case Digest 35

Case Digests

Winterbrook, the claimant, was the law, and the Banco de Portugal interpretation set out in Wood v Capita Insurance Services Ltd such an obligation. Thirdly, if the State’s proposed construction beneficial owner of certain notes (“the confirmed in a December 2014 Decision [2017] UKSC 24, [2017] AC 1173, several factors pointed to the were accepted, there would be various inconsistencies in the Notes”). It had sought a declaration that that it had not, in fact, been transferred. conclusion that negative interest would not accrue. First, the remainder of the document. Finally – and more generally – an Event of Default had occurred under The Supreme Court had, in unrelated background materials indicated that ISDA did not contemplate the CSA as a whole did not indicate that negative interest was the terms of the Notes, enlivening its proceedings, already held that as a that negative interest would be payable. Secondly, paragraph contemplated. The appeal was therefore dismissed, in the power to request the trustee to take matter of Portuguese law, the Oak Loan 5(c)(ii) contained no reference to negative interest, although Bank’s favour.  steps to accelerate and enforce the never transferred to Novo Banco, and that paragraph would have been the most obvious source of Notes. The asserted Event of Default was that this point was settled unless and a failure by Espirito Santo, which was until a Portuguese Court annulled the the original Guarantor of the Notes, to December 2014 decision. perform obligations under an (otherwise Chudley v Interpretation of Contracts (Rights on to argue that “reasoning which Marcus Smith J observed that, as a result, unrelated) agreement referred to as of Third Parties) Act 1999. satisfies the first of these requirements on and after 3 August 2014, Espirito Santo Clydesdale Bank Plc “the Oak Loan”. The Notes provided cannot, of itself, satisfy the second”. had held the liability under the Oak Loan, Section 1(1) of that Act provides relevantly that such a default by the (t/a Yorkshire Bank) but the liability under the Guarantee had relevantly that a third party to a contract The Court of Appeal explained that, Banking Guarantor would be an Event of Default. transferred to Novo Banco. His Lordship [2019] EWCA Civ 344 (Longmore, Flaux and may nevertheless enforce a term for his on the contrary, the very same term and Finance NB Finance (the Issuer) and Novo Banco therefore concluded that any default by Moylan LJJ) 6 March 2019 own benefit if “(a) the contract expressly of a contract could satisfy both the (the current Guarantor), who were the Espirito Santo in respect of the Oak Loan provides that he may”; or “(b)… the requirements of s 1(1)(b) and s 1(3). Digested by Stefanie Wilkins Interpretation of Contracts (Rights of Third first and second defendants, applied was not an Event of Default, because term purports to confer a benefit on Flaux LJ (with whom Moylan LJ agreed) Parties) Act 1999 to have the claim form and particulars it was not a default by the Guarantor him” (subject to an exception which was explained that when the LOI was struck out on the basis that it had no (which was now Novo Banco). The claim, The claimants (the appellants before the irrelevant on the facts). It was s 1(1)(b) interpreted as a whole, the instruction prospect of success. The question for therefore, had no prospects of success, Court of Appeal) had invested money which was said to be engaged in the case to open “a client account” was such a Marcus Smith J was whether Espirito and was struck out. in Arck LLP, which was to develop a at bar. Section 1(3) goes on to provide term – it identified both the class (i.e. Santo’s default was by, or attributable to, resort. Arck had, in turn, provided a that “The third party must be expressly clients of Arck), and conferred a benefit Finally, his Lordship accepted that if the the Guarantor. signed letter of instruction (“LOI”) to identified in the contract by name, as on them, in that the LOI was primarily December 2014 Decision were overturned the defendant bank to open a segregated a member of a class or as answering a intended to protect investors. Longmore In short, Espirito Santo had encountered in Portugal, the position might alter. client account with investment monies. particular description”. LJ also agreed, and explained in greater financial difficulties in mid-2014, and But that was irrelevant for the present The principal questions on the appeal detail that the name of the account in on 3 August 2014 the Banco de Portugal application, because the consequences The question arose whether the were whether there was a binding itself indicated for whose benefit the – the designated Resolution Authority of any decision were uncertain, and a requirements of s 1(1)(b) and s 1(3) Winterbrook Global contract in terms of the LOI, and whether account was opened, and the class of for the purpose of the European Bank matter for the Portuguese court, and it could be satisfied by the same term the claimants’ loss was caused by the beneficiaries was expressly identified. Opportunities Fund v NB Recovery and Resolution Directive was undesirable for the English court to of the contract. On this point, the bank’s breach of that contract. Notably, – published a Deliberation which speculate about their effect.  current edition of Chitty on Contracts The appeal was allowed, although Finance Limited & Others in resolving these questions, the Court of transferred Espirito Santo’s assets and states (uncontroversially) that the the trial judge’s reasoning on this [Tom Smith QC, Daniel Bayfield QC Appeal provided important clarification [2019] EWHC 737 (Ch) (Marcus Smith J) liabilities to Novo Banco. This served to requirements are cumulative, but goes point was upheld.  and Ryan Perkins] on the interpretation of s 1 of the 1 April 2019 transfer to Novo Banco the obligations of Espirito Santo under the guarantee and, Application under CPR 3.4 and/or 24.2 – it was thought, the Oak Loan. whether there was an Event of Default by the Guarantor – recognition of foreign But subsequent investigations revealed Libyan Investment Authority v namely before April 2012. The evidence showed that C had legal determination that the Oak Loan was not eligible to be JP Morgan Markets Ltd & Ors either known or could have discovered the facts necessary to transferred as a matter of Portuguese plead its claims before then. Further, the Commercial Court [2019] EWHC 1452 (Comm) (Bryan J) 10 June 2019 Guide Appendix 9 required C to draw attention to any features which might weigh against making the order and otherwise Fraud – service out comply with the duty of full and frank disclosure. C had known Netherlands v Deutsche Bank AG Although the standard CSA provided for collateral to be posted D3 and D4 to a claim for fraud and money had and received when applying for service that the Ds would raise a limitation by either party, the State and the Bank had agreed to a bespoke applied for service out to be set aside. The LIA (“C”) claimed D3, defence and that it would need to rely on section 32. That was [2019] EWCA Civ 771 (Sir Geoffrey Vos C, Longmore and Asplin LJJ) term, which provided that the Bank was the sole Transferor allegedly an associate of the Gaddafi regime, had fraudulently a matter which indisputably might reasonably be thought to 2 May 2019 and the State was the sole Transferee. Under the CSA, interest helped arrange a US $200 million derivative transaction, and weigh against the making of the order. The claimant had also Interpretation of CSA to ISDA Master Agreement – whether was payable by the Transferee on the collateral, with the had allegedly agreed to accept $6 million commission, which failed to highlight the evidence relevant to limitation which negative interest accrued on cash collateral interest rate being the Euro Over-Night Interest Average had been routed via D4. C said that it had become aware of demonstrated that relevant information had been available to (“EONIA”) minus 0.04%. From 2014, the interest rate calculated the facts giving rise to the allegations during proceedings it before April 2012. The failure to give full and frank disclosure The judgment concerned the construction of the Credit in this manner fell below zero. The State accordingly sought the “SocGen Proceedings” (which had settled in 2017). C in relation to limitation was an egregious breach of duty and Support Annex (“CSA”) to the ISDA Master Agreement. The a declaration that negative interest could accrue in its favour. issued this claim in April 2018 and, at an ex parte hearing, required permission to serve out to be set aside. Had service not State of Netherlands (“the State”) and Deutsche Bank (“the Paragraph 5(c)(ii) – the critical provision – provided only for the obtained permission to serve out on D3 and D4. Held that, C been set aside, C could have claimed for the sum of the bribes, Bank”) had executed the CSA in its 1995 form (with a 2010 payment of interest by the Transferee to the Transferor. had to demonstrate that it had a real prospect of obtaining but if it wished to claim for further sums then any loss had to amendment) as part of its contractual arrangements for the an extension under Section 32 of the Limitation Act 1980 to be pleaded and proved. Its claims for more than the amount State’s derivative trading. The Court of Appeal considered that the proffered the usual six-year limitation period by showing that it could of the bribes did not have any real prospect of success. Service interpretations of both the State and the Bank were available. The question for the Court was whether negative interest not with reasonable diligence have discovered the alleged would also have been set aside for that reason.  But following the conventional approach to contractual accrued on cash collateral posted under the terms of the CSA. concealed fraud more than six years before issuing its claim, SOUTH SQUARE DIGEST July 2019 www.southsquare.com Case Digest 37

Takhar v Gracefield In reaching their judgment, the Court the first court approached and came to fraud-based claims. Per Lord Briggs, a fact-intensive evaluative approach to Developments Ltd & ors of Appeal had relied on Henderson v its decision), and (iii) the question of the appeal turned on the outcome of whether lack of diligence in pursuing Henderson (1843) 3 Hare 100 which was materiality of the fresh evidence is to a “bare-knuckle fight” between two a case in fraud in the first proceedings [2019] UKSC 13 (Kerr, Sumption, Hodge, authority for the principle that parties be assessed by reference to its impact long-established principles of public ought to render a claim to set aside Lloyd-Jones, Briggs, Arden, Kitchin JJSC) must normally advance their total case on the evidence supporting the original principle, first that fraud unravelled an abuse of process. Lord Sumption, 20 March 2019 on the first bout of litigation. It was decision. Applying these principles all, and second, that there had to come however, expressed his opinion that not open to them, save in exceptional to the current matter, the appeal was an end to litigation. Whilst on the facts such a flexible approach would introduce Res judicata – setting aside a circumstances, to raise a point which accordingly allowed. of the instant case the fraud principle an unacceptable element of discretion judgment – fraud should have been raised and which prevailed, Lord Briggs was of the opinion into the enforcement of a substantive Whilst the judgment of Lord Kerr was The Supreme Court was required to could, with reasonable diligence, have that there should not be a “bright-line right, meaning whilst the standard agreed with, certain disagreement determine whether an action to set been discovered and canvassed at the boundary” between the types of case of proof for fraud was high, once it is was voiced between Lord Sumption aside an earlier judgment on the basis first trial. However, Lord Kerr, in giving where one principle should prevail. satisfied, there are no degrees of fraud Civil Procedure and Lord Briggs on the best approach of fraud should be allowed to proceed. the leading judgment in the Supreme Instead, a more flexible basis was which can affect the right to have the Digested by Rose Lagram-Taylor going forwards for other similar Court, determined that Henderson v preferred where the court could apply judgment set aside.  The dispute had arisen about the terms Henderson did not speak to two subjects on which the appellant had transferred which were critical in the present case: properties to the first respondent. (i) whether the rule applies where the Proceedings were issued on the new point was not in issue between the BNP Paribas SA v Trattamento Rifiuti principles on the approach a court should take when basis that those properties had been parties in the first trial, and if it had determining the scope of competing jurisdiction clauses; (i) transferred as a result of undue influence Metropolitano SpA been and evidence had been obtained, a where the parties’ overall contractual arrangements contain or other unconscionable conduct. The different outcome might have ensued, [2019] EWCA Civ 768 (Hamblen, Flaux, Asplin LJJ) 7 May 2019 two competing jurisdiction clauses, the starting point is that a claim was rejected. A significant item and (ii) whether the rule requires jurisdiction clause in one contract was probably not intended of evidence in the hearing had been a Conflict of laws – jurisdiction clauses – foreign experts – modification or disapplication where the to capture disputes more naturally seen as arising under a written profit share agreement which declaratory judgments – ISDA new issues raised an allegation of fraud, related contract (Trust Risk Group SPA v Amtrust Europe Ltd provided for the claimant to receive by which, it is claimed, the original The issue on appeal was whether the judge at first instance was [2015] EWCA Civ 437), (ii) a broad, purposive and commercially- £300,000 as deferred consideration for judgment was obtained. correct to conclude that claims for declaratory relief fell within minded approach is to be followed (Sebastian Holdings Inc the properties, as well as 50% of the the exclusive English jurisdiction clause contained in a swap v Deutsche Bank [2011] 1 Lloyd’s Rep 106), (iii) where the profits of the sale of each property. Lord Kerr pointed to the basic principle transaction between the parties, and not within an Italian jurisdiction clauses are part of a series of agreements they However, the claimant denied signing that the law does not expect people to jurisdiction clause contained in a financing agreement. should be interpreted in the light of the transaction as a whole, the agreement and claimed she had not arrange their affairs on the basis that taking into account the overall scheme of the agreements and seen it until the dispute arose. Although others may commit fraud. The judgments At first instance, the judge recognised that the dispute reading sentences and phrases in the context of that overall the claimant had made an application to of Owens Bank Ltd v Etoile Commerciale on jurisdiction turned on the application of Article 25 of scheme (UBS AG v HSH Nordbank [2009] EWCA Civ 1740), (iv) obtain a report on a handwriting expert, SA [1995] 1 WLR 44 and Owens Bank Ltd Regulation (EU) 1215/2012 (the “Regulation”), which provided: it is recognised that sensible business people are unlikely to disputing the validity of her signature v Bracco [1992] 2 AC 443, as relied on by “If the parties, regardless of their domicile, have agreed that a intend that similar claims should be the subject of inconsistent on the agreement, this had been refused the Court of Appeal were not followed, court or the courts of a Member State are to have jurisdiction jurisdiction clauses (Deutsche Bank AG v Savona [2018] because it had not been made until the the Supreme Court holding that these to settle any disputes which have arisen or which may arise in EWCA Civ 1740), (v) the starting presumption will therefore trial was imminent. During the trial, the judgments were not authority for the connection with a particular legal relationship, that court or be that competing jurisdiction clauses are to be interpreted claimant gave evidence that she could proposition that, in cases where it was those courts shall have jurisdiction”. It was accepted that the on the basis that each deals exclusively with its own subject not say the signature on the agreement alleged that a judgment was obtained by relevant test to determine if the court did have jurisdiction matter and they are not overlapping, provided the language was not hers, but she was unable to fraud, it could only be set aside where was which party had “much the better of the argument”. and surrounding circumstances so allow (Deutsche Bank AG explain how it had got there. Following the applicant could demonstrate that In determining that it was the Bank who had the better v Savona [2018] EWCA Civ 1740), and (vi) the language and the trial, the claimant obtained a report the fraud could not have been uncovered argument, the judge considered that the two jurisdiction surrounding circumstances may, however, make it clear that from a handwriting expert. The expert with reasonable diligence in advance clauses did not in fact conflict, as each applied to a different a dispute falls within the ambit of both clauses. In that event concluded that the claimant’s signature of the judgment (and that if those part of the parties’ relationship. The claim brought by the the result may be that either clause can apply rather than had been transposed onto the agreement judgments had that effect, they should Bank involved the relationship between the parties as to the one clause to the exclusion of the other (Deutsche Bank AG v from another document. The claimant not be followed). swap transaction, and not the financing agreement, and so Savona [2018] EWCA Civ 1740). therefore issued proceedings to have the the English jurisdiction clause was the relevant one for the Instead, Royal Bank of Scotland Plc judgment set aside on the basis of fraud. purposes of the claim. The judge was particularly influenced Given the use of foreign experts in the case, the Court of v Highland Financial Partners LP The defendant asserted that this would by the fact that the parties had used ISDA documentation for Appeal also confirmed that the role of such experts in relation [2013] EWCA Civ 328 as relied on at be an abuse of process. This was tried their swap transaction which “signaled the parties’ interest to contractual interpretation is a limited one and is confined first instance, correctly summarised as a preliminary issue. At first instance, in achieving consistency and certainty in this area of financial to identifying what the rules of interpretation are. The Court the principles governing applications the court concluded that the second transacting.” The judge expressed, where commercial parties categorically stated that it was not the role of an expert to to set aside for fraud: (i) first there action was not an abuse of process and use ISDA documentation, “they are even less likely to intend express opinions on what a contract means, that task being the had to be conscious and deliberate should be allowed to proceed. However, that provisions have one meaning in one context and another task of the English court. As the Company’s expert did express dishonesty in relation to the relevant the Court of Appeal concluded that meaning in another context.” views on how the Italian court would interpret the relevant evidence given, or action taken, the claimant had to establish that the jurisdiction clauses, the Court of Appeal found this evidence to statement made or matter concealed, In upholding the decision at first instance, the Court of Appeal evidence of fraud was not available at be irrelevant and inadmissible.  which is relevant to the judgment now gave the following guidance, summarising the established the time of the first trial, and could not sought to be impugned, (ii) second, the have been discovered with reasonable relevant evidence, action, statement or diligence, finding in favour of the concealment must be material (material defendants. meaning that the fresh evidence would have entirely changed the way in which SOUTH SQUARE DIGEST July 2019 www.southsquare.com Case Digest 39

Civil Procedure

Calonne Construction Ltd rate of interest to be charged after the proceedings in order to make a Part Khandanpour v Chambers The appeal was allowed. On appropriation the Court of Appeal end of the relevant period rendered the 36 offer. Such a consequence would be relied on Parker v Guinness (1910) 27 TLR 129 which held that v Dawnus Southern Ltd [2019] EWCA Civ 570 (Males LJ, Sir Timothy Lloyd) 4 April 2019 offer invalid. contrary to the policy behind both Part a debtor’s intention to appropriate a payment to a particular [2019] EWCA Civ 754 (Hamblen, Flaux, 36 and Part 20 of the CPR. Appropriation – default costs certificate – late payments – relief debt could be inferred from the circumstances known to both The Court of Appeal, in dismissing the Asplin LJJ) 3 May 2019 from sanctions parties. As per Leeson v Leeson [1936] 2 KB 156, what matters appeal, considered the two questions of On the second question, Asplin LJ gave is that in the light of all the circumstances, and viewing the Part 36 offers – costs (i) whether the offer was invalidated by five reasons for upholding the decision This judgment concerns an appeal from an order by which matter objectively, there should be no doubt about the debtor’s the inclusion of the counterclaim which that the inclusion of an interest term it was held that the appellant had failed to make a payment The Court of Appeal has confirmed that intention. The Court of Appeal were satisfied that in the had yet to be pleaded, and (ii) whether after the end of the relevant period does which was required to be made as a condition for setting aside a defendant’s Part 36 offer would not be present case, it was obvious from the circumstances known the inclusion of a term of interest after not render a Part 36 offer invalid; (i) there a defaults costs certificate, and in which relief from sanctions rendered invalid simply by reason that to both parties that the second payment was intended to be the end of the relevant period rendered is nothing in Part 36, and specifically was refused. The appellant accepted that the payment was it was made in respect of both the claim a part payment of the sum required to be paid as a condition the offer invalid. CPR r.36.5 which precludes the inclusion not made on time but appealed against the refusal from relief against it and a proposed counterclaim of setting aside the default costs certificate: the time of receipt of terms as to interest in a Part 36 offer from sanctions. that had yet to be pleaded. A Part 36 On the first question, Asplin LJ in giving was such that instructions must have been given the previous which are intended to apply after the offer would also not be rendered invalid the leading judgment considered that By way of background, the respondent had obtained a judgment day, the total amount paid was the full amount required, if the relevant period has expired, (ii) there in circumstances where a provision for it did not matter that the counterclaim debt and costs order against the appellant. As the appellant second payment was not intended to represent the balance is nothing which expressly precludes interest to accrue at a particular rate was had not been “formulated or pleaded” failed to pay the judgment debt, the respondent took steps there would have been no point in making the first payment the inclusion of terms in addition to the included in the offer. because of the application of CPR to enforce it and also to have his costs assessed. As the on time the previous day, and serving the points of dispute on requirements in CPR 36.5(2), and CPR r.36.7, and r.20.2 and r.20.3, which as appellant had failed to engage with the process, a default costs time only made sense if the appellant had intended to fulfil The underlying claim concerned a 36.2(2) expressly preserves the ability the defendant had argued meant that certificate was given to the respondent. On applying to have the payment condition. In seeking to appropriate the second dispute over certain building works to make an offer to settle in whatever the counterclaim was to be treated as the certificate set aside, the appellant was successful on the payment as they did, the respondent’s solicitors were taking carried out by the respondent. The way the party chooses. If, however, a separate claim. Pursuant to r.36.7, a condition that he pay to the respondent £10,000 on account advantage of what they regarded as a slip by the appellant, parties fell into dispute following delays r.36.5 is not complied with the offer will Part 36 offer can be made at any time, of costs by 4pm on 15 June 2017 as well as file points of dispute and whilst they may have been frustrated by the appellant’s to and defects with the work and a claim not have the costs consequences set including before the commencement of on the bill of costs. The appellant filed the points of dispute failure to pay the full balance on time, they knew that their was issued by the claimant seeking out in that section, (iii) if a party could proceedings. The Court was persuaded on time, but struggled to raise the requisite money himself, purported appropriation was contrary to the appellant’s declarations as to the sums due under not provide for interest to run after the by the judgment of AF v BG [2009] EWCA arranging for two others to pay the sum on his behalf. Whilst obvious intention. the contract. Before serving a defence end of the relevant period, it would not Civ 757 in which the Court of Appeal had the two people gave instruction to their bank for payment to and counterclaim, the defendant had be compensated with interest for any As to relief from sanctions, by reference to the Denton decided obiter that an offer was a valid be made, only one payment was received before the deadline. made a Part 36 offer to settle both the delay between the end of that period principles, the seriousness of the breach was minor given Part 36 offer relating to both the original The second payment was received the following morning. The claim and its anticipated counterclaim. and a subsequent acceptance, (iv) there the delay was short and had no effect on the conduct of the claim and a proposed counterclaim. solicitors for the respondent accepted that the first payment The offer stated that it was inclusive of are at least two ways to prevent the litigation. The appellant’s previous conduct did not make The Court was not minded to follow was received in compliance with the set-aside order, but interest until the expiry of the 21 day effect of offers containing unreasonable the breach more serious. Although conduct had been taken the decision in Hertel & Anr v Saunders apportioned the second payment towards the judgment debt by “relevant period” under CPR r.36.3(g), rates of interest under such terms, e.g. into account in British Gas Trading Ltd v Oak Cash and Carry [2018] EWCA Civ 1831; [2018] 1 WLR 5832 reason that the set-aside order had not been complied with. At and that thereafter interest would be 25% or 200%. First, an offeror might Ltd [2016] EWCA Civ 153, that case concerned the breach of (handed down after the decision of first first instance, the judge declared that the appellant had failed added at 8% per annum. The offer was find that the judgment was not more an unless order, whilst the instant appellant had not been instance) where it was held that the to make the required payment in compliance with the order on not accepted and so the respondent advantageous than the offer containing in breach of any previous order as to costs. It would have inclusion of a counterclaim which had time, and refused relief from sanctions, determining that the served its defence and counterclaim, the the exorbitant interest rate, and been disproportionate and unjust to deprive the appellant of yet to be pleaded was fatal to the validity respondent’s solicitors were entitled to appropriate the second claim proceeding to trial. accordingly, the costs consequences of an opportunity of challenging the default costs certificate. of a Part 36 offer because that decision payment towards the judgment debt because the appellant had Part 36 would not apply. Secondly, as Accordingly, relief from sanctions were allowed.  At first instance, the judge rejected the had not made reference to AF v BG and not given sufficient indication of his intention that the second interest after the end of the relevant two main submissions of the claimant was deemed to be primarily concerned payment should be treated as part of the sum required by the period is ignored for the purposes of the which it was said rendered the offer with CPR r.36.10(2) (a provision which set-aside order. CPR 36.17 assessment, it should also be invalid for the purposes of Part 36. has now been reversed). Asplin LJ also ignored for the purposes of determining First, the judge rejected the argument expressed that she was fortified in her whether the Part 36 offer is valid, and (v) that the inclusion of the offer in the decision because it could not be correct if the offeree found the particular clause counterclaim which had yet to pleaded that a defendant must go to expense of SPI North Ltd v Swiss he is unable to admit or deny, but which based on his own knowledge. In the unpalatable, it could make its own Part rendered the offer invalid. Second, the pleading a counterclaim, and if necessary he requires the claimant to prove”. The case of a corporate defendant, the 36 offer in the same terms but without Post International (UK) judge rejected the argument that the obtaining permission in relation to it, question for the court was whether non-admissions are based on corporate the offending provision.  addition of a provision relating to the or alternatively having to issue separate Ltd & Anor r.16.5(1)(b), properly construed, required a knowledge. Permission to appeal was defendant to make reasonable enquiries granted, the judge at first instance [2019] EWCA Civ 7 (Lewison, Henderson of third parties before it could be said observing that there is no authoritative LJJ) 17 January 2019 that he was “unable” to admit or deny a decision on the issue, and whilst, in Defences – admissions – strike out particular allegation. construing r.16.5, a court is required to applications – Civil Procedure Rules have regard to the overriding objective At first instance, the judge answered this on CPR r.1.2, the Court of Appeal may This appeal concerned a refusal of an question in favour of the defendants, weigh the various elements of the application for an order striking out determining that as a matter of principle, overriding objective differently from the defendant’s defence, unless it was a defendant is not required, before the way the court of first instance had amended to comply with CPR r.16.5(1)(b). being able to make a non-admission, to weighed them. That rule specified that a defendant must have made reasonable inquiries, and is state in his defence “which allegations able to properly make a non-admission SOUTH SQUARE DIGEST July 2019 www.southsquare.com Case Digest 41

Civil Procedure

The issues before the Court of Appeal personal or corporate knowledge does information which the defendant had Davey v Money v Texas Keystone Inc (No.2) [2017] 1 getting access to justice by arranging were accordingly; (i) whether a defendant not permit them to admit or deny an readily available to him during the short WLR 2221), it contended that its total funding from an outside source. In [2019] EWHC 997 (Ch) (Snowden J) was obliged to make reasonable enquiries allegation. period afforded by the rules for the filing liability should be limited to the overall the case of the latter, the priority is 17 April 2019 of third parties before pleading that it of the defence. Further, if an admission maximum of the funding that it provided ordinarily that a successful unfunded However, the Court of Appeal was not was unable to admit or deny an allegation or denial was based on information Costs – litigation funding – non-party to the claimant, namely £1,275,166.34 party should be able to recover his convinced of this argument. Instead, under r.16.5(1)(b), and (ii) the meaning of obtained from a third party, this could costs orders because of the application of the “Arkin costs and not have to bear the expense it was held that a number of factors “unable” in that context. create difficulties for verifying, in the cap” which, it was contended, was a of vindicating his rights. Snowden J pointed towards the conclusion that a This judgment principally concerned statement of truth, that the contents principle meaning that the total liability therefore held that neither Dymock, nor In arguing for a positive answer to the defendant is “unable to admit or deny” the application of the so-called “Arkin of the defence were based on the of a funder should be limited to the Arkin which followed this, should be defendant’s obligations, the claimant an allegation where the truth or falsity cap”, derived from Arkin v Bochard Lines defendant’s own knowledge. Accordingly, overall maximum of the funding it taken as having prescribed a rule to be emphasised the structure and language of the allegation is neither within his Ltd (Costs Order) [2005] EWCA Cov 655, the appeal was dismissed, with the Court had provided. followed in every subsequent case. As of r.16.5(1) and asserted that the purpose actual knowledge, nor capable of rapid which operates to limit the liability of of Appeal confirming that the wording of Snowden J explained, the Court of Appeal of statements of case was to narrow ascertainment from document or other commercial funders for adverse costs. In reaching judgment, Snowden J made r.16.5(1)(b) does not import a duty to make in Arkin merely indicated that this was the scope of factual disputes to enable sources at his ready disposal. There was reference to the Privy Council decision in reasonable enquiries of third parties The application itself arose following an approach that could be commended the issues to be identified which would no general obligation to make reasonable Dymocks Franchise System (NSW) Pty v before putting the claimant to proof of the success of the defendants in an to other judges when exercising their save time and costs and promote enquiries of third parties at this early Todd [2004] 1 WLR 2807 which was relied an allegation which the defendant is action involving serious allegations of discretion in the future. As Lord Brown the overriding objective. The clear stage of litigation. Instead, the purpose on by the court when reaching a decision “unable to admit or deny”.  breach of duty and improper conduct had pointed out in Dymock, the ultimate implication of this, it was submitted, of the defence was to define and narrow in Arkin. In Dymocks, Lord Brown first tantamount to dishonesty. As a result, question for the court to answer was was that parties must make reasonable the issues between the parties in general established that the imposition of a the claimant was ordered to pay each what was just in all the circumstances of enquiries before they can say that their terms, on the basis of knowledge and third party costs order was ultimately of the defendants’ costs to be assessed a particular case. Accordingly, Snowden a matter of discretion to be exercised on the indemnity basis amounting to J concluded that the “Arkin cap” was on the basis of what is just in all the a combined amount of £3.9 million. At not a rule or guidance to be applied circumstances of the case. He explained the same time as the costs orders, the mechanistically in every case involving Cathay Pacific Airlines Limited v in which they have been incurred avoids the need for any that there was generally a distinction defendants sought a non-party costs commercial funders. It was merely an currency conversion calculation to be carried out or approved in approach between (i) cases in which Lufthansa Technik AG order under section 52 of the Senior approach which the court had envisaged by the court, and (iii) it appeared to be fair under CPR r.1.1(2)d) the funder does not take a stake in Courts Act 1981 against the claimant’s might commend itself to other judges [2019] EWHC 715 (Ch) (John Kimbell QC) 25 March 2019 for the risk of any currency fluctuation in the period between the outcome of the litigation, and (ii) commercial funder. Whilst the funder exercising their discretion in a similar the making of a costs order and the date of actual payment to cases in which the funder does have Costs orders – foreign currencies – overriding objective accepted that a non-party costs order case. The instant case was an example of be borne by the paying party rather than the receiving party as a financial interest in the outcome of should be made against it on the same when it would be inappropriate to apply The High Court held that it has jurisdiction under section 51 of the paying party had the power to eliminate the risk by paying the litigation. In the case of the former, indemnity basis as the costs order the “Arkin cap”, and so the application the Senior Courts Act 1981 and CPR r.44.2 to make a costs order the costs awarded quickly. priority is ordinarily given to the public made against the claimant (following for an uncapped third-party costs order in a foreign currency. The judgment provides confirmation that interest in enabling a party who would In the absence of anything to the contrary it was therefore the decision in Excalibur Ventures LLC was granted.  in appropriate circumstances, a party domiciled outside the not otherwise be able to afford to litigate concluded that the overriding objective supported an jurisdiction will be able to seek its costs in the foreign currency interpretation of the word “amount” in CPR r.44.2(1)(b) and in which it has incurred and paid legal costs in connection with r.44.2(6)(b) as including a sum expressed in a foreign currency. proceedings in England. Although, the court must ultimately determine which currency The case arose in circumstances where the defendant had truly reflects the claimant’s loss and therefore the currency in Wells (Respondent) v a 2% commission. The transaction prevailed at a summary judgment hearing and sought its costs. which it is most appropriate to compensate the receiving party completed, but Mr Wells refused to pay The defendant’s solicitors had accounted for their time and for the costs which it has incurred. Devani (Appellant) any commission. generated their invoices in euros. The defendant accordingly The judge also gave guidance to parties seeking costs awards [2019] UKSC 4 (Wilson, Sumption, sought its costs in euros. Had there been a sufficiently certain in a foreign currency. Paragraph 9.1 of Practice Direction 16, Carnwath, Briggs, Kitchin JJSC) agency agreement under which the In the absence of any binding authority or guidance from which sets out various requirements where a claim is for a sum 13 Feb 2019 commission was due? specialist practitioner texts on the matter, the judge asserted of money expressed in a foreign currency, does not expressly Contracts – certainty – implied terms – that the overriding objective, contained in CPR r.1.2, was apply when a party to an existing set of proceedings seeks a At first instance, the judge found estate agents a necessary point of reference. This requires the court to costs award. However, a party seeking a summary assessment there had been: although the term give effect to the overriding objective whenever it exercises of costs in a foreign currency ought to provide information on The Supreme Court considered whether regarding commission had only any power under the CPR or interprets any rule. The judge (i) the claim being for payment in a specified foreign currency, a commission was due to an estate agent been communicated after the sale considered that in circumstances where a receiving party and (ii) why payment is being claimed in that currency, as part upon the sale of several flats. The estate had been agreed, and although it domiciled outside the jurisdiction had incurred substantial of the ordinary course of persuading the court to exercise its Commercial agent, Mr Devani, contacted Mr Wells did not make clear the event which costs in a foreign currency in connection with proceedings discretion. There is no need to be prescriptive about the form about the flats which Mr Wells was triggered the payment of commission, in England, an order providing for those costs to be paid in which the information ought to be provided, but in most Litigation selling. Mr Devani introduced himself it was necessary to imply a term that in the foreign currency was consistent with the overriding cases it will be by a combination of the form N620, submissions Digested by Madeleine Jones to Mr Wells by telephone and the trial commission was due upon a sale objective in three respects; (i) it was consistent with ensuring in writing and, in appropriate cases, a witness statement. A judge found as a fact that he made clear completing into the agreement reached the parties are on equal footing under CPR r.1.1(2)(a) because sterling equivalent of the sum claimed would also be useful to he was acting as an estate agent and during the telephone conversation. foreign parties would be able to claim costs in the same way provide to allow the court to assess the reasonableness of the for a 2% commission. Subsequently On appeal, the Court of Appeal, Arden that domestic parties have always done, (ii) it was expeditious sums claimed.  Mr Devani found a buyer for the flats. LJ dissenting, found there had been within the meaning of CPR r.1.1(2)(d) and saved costs as per CPR He then sent Mr Wells his written no binding agreement. Lewison LJ r.1.1(2)(b) because making a costs award directly in the currency terms, which contained reference to SOUTH SQUARE DIGEST July 2019 www.southsquare.com Case Digest 43

Commercial Litigation

held that implication of terms was not uncertain to be enforced where it is Lewison LJ in the Court of Appeal Finally, there was nothing in the CSA read as a whole that gives a tool for creating a contract where found that the parties had the intention had been wrong to consider there the impression that negative interest was contemplated or there would not otherwise be one. of being contractually bound and have was a general rule that it is in general intended. There was no unfairness in excluding negative rates: Identification of a trigger event for the acted on their agreement. impossible to imply terms into a this is just a function of what was actually agreed and payment of commission was essential unilateral contract, on the ground not agreed.  Lord Kitchen, with whom Lord Wilson, for the creation of legal relations. that this would impose a contractual Lord Sumpton, Lord Carnwath and Without such an identification there obligation before the contract had in Lord Briggs agreed, found “It is true was therefore no contract, as it is wrong fact come into existence by acceptance. that, as the judge found, there was no Astra Asset Management claimed to have provided to the Bank. a term. There had therefore been no in principle to turn an incomplete Where parties intend to create legal discussion of the precise event which breach of any obligation to negotiate in bargain into a legally binding contract relations and act on that basis, a (UK) Ltd v Co-Operative The Bank applied for strike out of and/or would give rise to the payment of that good faith. by adding expressly agreed terms and term may be implied into a unilateral summary judgment on Astra’s claim. commission but, absent a provision to Bank plc implied terms together. contract where it is necessary to do so Astra worked to resolve and did resolve the contrary, I have no doubt it would The exclusivity agreements contained to give the agreement business efficacy [2019] All ER (D) 62 (Apr) (Andrew Henshaw difficulties with Standard Life, with In the Supreme Court, Lord Kitchen, naturally be understood that payment the words “subject to contract”; in the or the term would be so obvious that QC, sitting as a Deputy High Court judge) the result that the value of the rights with whom Lord Wilson, Lord Sumption would become due on completion and absence of any waiver or evidence of “it goes without saying”, and where, 10 April 2019 rose. The judge found that there was on and Lord Carnwath agreed, overturned made from the proceeds of sale” (para contrary intention, these words were without that term, the agreement the evidence an arguable case that the the Court of Appeal’s judgment. The 19). This was supported by authority Contractual relations decisive and negative contractual would be regarded as incomplete or too Bank did encourage and facilitate this law on whether a binding agreement on the commissions of estate agents. intention. The agreements also uncertain to be enforceable. The Co-Operative Bank plc (the “Bank”) work. He noted that the law on unjust has come into being is set out in RTS The fact that there are no special rules contained reference to due diligence, sought a buyer for certain rights (the enrichment is in a state of uncertainty, Flexible Systems Ltd v Molkerei Alois governing the interpretation of estate The Supreme Court therefore prohibitions with engagement with rival “Rights”), including a debt secured on a lacking a clear general principle. He Müller GmbH [2010] UKSC 14 para 45 per agency contracts does not change this overturned the judgment of the Court potential purchasers in the exclusivity property in Leeds (the “Property”). Astra further observed that there may well be Lord Clarke. It depends upon whether outcome. There was no need to imply a of Appeal but upheld the trial judge’s period and consequences of the Asset Management (UK) Ltd (“Astra”) a significant difference between cases on an objective assessment the parties term as the circumstances made clear ruling that Mr Devani’s entitlement transaction not being completed. These came forward as a potential purchaser. where the defendant has received a clear “intended to create legal relations and what condition was intended and the should be reduced by one third as he were inconsistent with a deal having The parties entered into preliminary benefit, and cases where the claim is had agreed upon all the terms which contract was therefore sufficiently had provided his written terms after already been completed. The words negotiations and agreements as follows: merely for costs or losses incurred by the they regarded or the law requires as certain and complete. Had it been entering into the agency agreement, “subject to contract” also governed the (1) an exclusivity agreement and non- claimant, it is possible that a claim will essential for the formation of legally necessary, Lord Kitchen would have contrary to s. 18 of the Estate Agents basis of the telephone conversations in disclosure agreement in January 2017; lie where the defendant has received an binding relations.” Courts are reluctant held the term Mr Devani argued for was Act 1979.  February 2017 and in these it was agreed (2) a telephone conversation in January incontrovertible benefit even without to find an agreement is too vague or to be implied for commercial efficacy. that Astra would provide a written 2017 in which Astra sought an extension having actually requested or freely offer to be approved by the Bank’s to the exclusivity period; (3) telephone accepted it and it might be sufficient Strategic Asset Review committee. conversations in February 2017 in which that the defendant has encouraged or Correspondence following the calls made the parties discussed issues arising from facilitated the claimant’s performance clear that nothing was agreed until the Netherlands v Deutsche Bank transactions makes no reference to negative interest being Standard Life’s interest in the property; of the work that produced the benefit. formal documentation was completed. provided for. Best Practice Guidance published in 2011, 2013 (4) a second exclusivity agreement in Relevant factors may include the [2019] EWCA Civ 771 (Sir Geoffrey Vos, C, Longmore, Asplin LLJ) The February calls therefore also did not and 2014 suggested that the parties should reach express February 2017 extending the exclusivity circumstances in which the anticipated 2 May 2019 create contractual relations. No binding agreement about the handling of negative interest rates. period to 17 March. The Bank increased contract did not materialise, including agreement had come into effect. ISDA Credit Support Annex - construction Although these Best Practice guides were published after the asking price for the Rights and whether they include ‘fault’ on the the transactions were entered into, the Court had some Astra terminated the second exclusivity The Judge also found that no obligation defendant’s part (or - perhaps more The Court of Appeal considered the interpretation of an regard to them. agreement. The Bank sold the Rights to to negotiate in good faith could be relevantly - something outside the scope ISDA Credit Support Annex. The Dutch State Treasury Agency a third party. spelled out from a recital stating that, of the risk undertaken by the claimant entered into a number of derivatives transactions with Secondly, the place in the CSA where one would most expect “The Buyer and the Seller are entering at the outset), and whether a defendant Deutsche Bank under an English law ISDA Master Agreement to find reference to negative interest if it were intended Astra sued the Bank for breaching an into this agreement in good faith and who has received a benefit has behaved and CSA. Under the CSA DB had to provide cash collateral to (paragraph 5(c)(ii)) referred only to positive interest. alleged contract for sale of the rights are relying on its terms…” and that any unconscionably in declining to pay for it. cover any credit risk to which the DSTA was exposed. The to it by selling them to the third party, Thirdly, Interest Amounts were excluded from both the obligation to negotiate in good faith was derivatives were in the money for DSTA and so DB was holding breach of an alleged express or implied On this basis, the application for strike Minimum Payment Amount of €1 million to be paid into inconsistent with the subject to contract a large amount of cash as collateral. Under the CSA, DSTA had agreement to negotiate in good faith to out and/or summary judgment failed in the Delivery Account, whereas the interest provision at nature of the agreement. There was to pay interest on this cash collateral at the rate of EONIA less conclude such a transaction, restitution respect of the unjust enrichment claim.  paragraph 5(c)(ii) required all amounts to be paid. Furthermore, no arguable ground for implying such four basis points. This rate was negative. The Court of Appeal in unjust enrichment, for services Astra the rounding provisions apply to all amounts in the CSA considered whether DSTA could become entitled under the except Interest Amounts. These provisions would create an CSA to “negative interest” accruing in its favour. inexplicable disparity between the way in which positive and Hildyard J in Re Lehman Brothers (No 8) [2016] EWHC 2417 negative interest would be accounted for. Ang v Reliantco Investments Ltd termination, loss of profit on her open Bitcoin positions or (Ch) at [48] had given guidance on the interpretation of ISDA restitution of funds invested. Reliantco challenged the English Fourthly, one would have expected, if the parties had negative [2019] EWHC 879 (Comm) (Andrew Baker J) 12 April 2019 Master Agreements, which the Court followed. Giving the Court’s jurisdiction. Reliantco’s standard terms and conditions interest in mind, that paragraph 11(f)(iv), which imposed a judgment of the Court the Chancellor held that on a proper Jurisdiction – operating as a consumer provided that the courts of Cyprus were to have exclusive penalty on DB for transferring to the wrong account, to construction of the CSA, DSTA was not entitled to negative jurisdiction over “all disputes and controversies arising provide for the reduction of interest to the lower of zero or Ms Ang made leveraged investments in Bitcoin futures through interest, for five reasons. out of or in connection with” her customer agreement, and a negative rate. It was no answer to say that default interest an online trading platform operated by Reliantco Investmens Reliantco therefore relied on Art. 25 of EU Regulation 1215/2012 Firstly, the Chancellor noted that the User’s Guide published might be payable, because the provision must have a free- Ltd, a company incorporated in Cyprus (“Reliantco”). Reliantco on jurisdiction, under which a contractual stipulation as to in 1999 and available to both parties when they entered the standing effect. terminated her account, and Ms Ang sued for wrongful SOUTH SQUARE DIGEST July 2019 www.southsquare.com Case Digest 45

Commercial Litigation

jurisdiction is determinative. Ms Ang relied on Art. 18(1), which a private individual and is not exclusively a business activity. holds as an exception to Art. 25 that, “A consumer may bring That means… that it will be a fact-specific issue in any given proceedings against the other party to a contract either in the case whether a particular individual was indeed contracting courts of the Member State in which that party is domiciled or, as a private individual to satisfy that need, i.e. as a consumer, regardless of the domicile of the other party, in the courts for or was doing so for the purpose of an investment business of the Lower Fox River in Wisconsin USA. As to the statutory purpose under s, the place where the consumer is domiciled.” hers (existing or planned)” [63]. On the facts, Ms Ang was not AWA in turn was liable to indemnify 423(3), this was essentially a question operating any investment business and was operating as a the Claimant for the monies it had paid of fact. It was a matter of the subjective The Court considered whether Ms Ang, a private individual consumer. Reliantco’s challenge to jurisdiction was dismissed. out for these purposes. AWA’s accounts intention of the relevant person. David committing capital to speculative currency transactions in Had Reliantco’s challenge succeeded, the English Court would made provision for the company’s Richards LJ held that there was no basis the hope of making investment gains, was a consumer for the still have had jurisdiction in respect of claim for breach of liability to the Claimant during the to dispute Rose J’s clear findings as to purpose of the Regulation. It found that, “the investment by a the General Data Protection Regulation 2016/679, thanks to relevant period. the statutory purpose. Accordingly, private individual of her personal surplus wealth (i.e. surplus to the provision on jurisdiction in Art. 79. The Court was not the substantive appeal in respect of her immediate needs), in the hope of generating good returns At first instance, Rose J held that impressed with an attempt to argue Ms Ang was not bound by s. 423 was dismissed. The Court of (whether in the form of income on capital, capital growth, the Dividends were (i) not paid the standard terms because they were not available for her to Company Law Appeal allowed Sequana’s appeal on or a mix of the two), is not a business activity, generally in contravention of Part 23 of the read: they had been so available.  Digested by Edoardo Lupi the narrower point of the appropriate speaking. It is a private consumption need, … to invest such Companies Act 2006; (ii) the decision to starting point from which rate of wealth with such an aim, i.e. that is an ‘end user’ purpose for pay the Dividends was not a breach by interest ran. the directors of their fiduciary duties to AWA, in particular the duty to act in the As to BTI’s cross-appeal against the best interest of creditors, because the dismissal of its claim that the payment Deutsche Bank AG downward trend in 6M USD LIBOR at the The burden lay squarely on Unitech duty had not arisen at the relevant time; of the May Dividend was a breach of and others v Unitech time of the trade. Furthermore, DB was to establish its misrepresentation and (iii) the May Dividends contravened the creditor duty, BTI contended that said to have made a number of implied defence. It had not done so. There was s. 423 of the IA 1986 as a transaction directors owe a duty to consider the Global Ltd and another misrepresentations about LIBOR and no evidence, for example, to support BTI 2014 LLC v defrauding creditors. Sequana appealed interests of creditors in any case where a company; Deutsche Bank DB’s role in setting LIBOR. Unitech’s allegation that any express the decision in respect of (iii), whilst proposal involves a real, as opposed to a representation had been made. That Sequana SA BTI cross-appealed the dismissal of its remote, risk to creditors. However, UL advanced no evidence in AG v Unitech Ltd would still leave an analysis of whether breach of duty claim under (ii). support of these defences. The burden [2019] EWCA Civ 112 – Court of Appeal David Richards LJ considered a large representations were to be implied. [2019] All ER (D) 43 (May) (Knowles J) was on UL to establish the defences. (David Richards, Henderson, Longmore As to (iii), Sequana appealed on the volume of authority. His Lordship However, there was no value in 15 April 2019 There was no evidence to support LJJ) 6 February 2019 grounds that a dividend is not a rejected BTI’s case on the relevant embarking on that analysis, because the express representations alleged. “transaction at undervalue” within trigger point for the duty. A real as Misrepresentation – standard of proof - the misrepresentation claim had to fail Breach of fiduciary duty – dividends – Nor was there any evidence that any the meaning of s. 423(1). Second, the opposed to a remote risk of insolvency reliance on the grounds of lack of reliance: there transaction defrauding creditors representation, express or implied, May Dividend was not paid with the was a significantly lower threshold than was no evidence that any of the alleged Deutsche Bank (“DB”) and other was actually understood or appreciated In its judgment in BTI v Sequana, the purpose of putting the dividend monies being either on the verge of insolvency representations had been actually claimants lent funds to the first by UL at the time and hence relied Court of Appeal has provided important beyond the reach of BAT or otherwise or likely to become insolvent. At [220], understood or appreciated by Unitech at defendant, Unitech Global Limited on. In the absence of any evidence of guidance as to the point at which the prejudicing BAT’s interests within the David Richards LJ said as to the correct the time (see [41], [42] of the judgment). (“UGL”), pursuant to a credit agreement reliance, there was no point considering fiduciary duty of company directors to meaning of s. 423(3). trigger point: and entered into an interest rate swap whether the evidence supported any Even assuming that the have regard to the interests of creditors Giving the unanimous judgment of the “Judicial statements should never with it. The second defendant, Unitech implied representations. The defences misrepresentation defence had not in proximity to insolvency arises. David Court, David Richards LJ held that the be treated and construed as if they Limited (“UL”), UGL’s owner and one therefore failed. The judge also critised failed at an earlier stage of the analysis, Richards LJ reviewed the authorities payment of a dividend was within the were statutes but, in my judgment, of India’s largest real estate investment UL for advancing allegations of fraud Unitech had adduced no evidence that on this issue comprehensively. The scope of s. 423(1) as a matter of linguistic the formulation used by Sir Andrew and development companies, guaranteed and then simply leaving, as opposed anyone at Unitech had been aware; is now the leading authority on the analysis of that section and of the Morritt C and Patten LJ in Bilta v Nazir UGL’s obligations under the credit to withdrawing, them where it did not that they actually had understood vexed question of the trigger point for definition of “transaction” under s. 436 , and by judges in other cases, that the agreement and the swap. The claimants intend to attend trial to attempt to that DB had been making the alleged the creditor duty. Further, the Court (1). Even assuming that payment of a duty arises when the directors know or sought judgment against UL under substantiate them. suitability recommendation or the of Appeal also considered certain dividend was a unilateral transaction, should know that the company is or is its guarantee and indemnity for the alleged representations about LIBOR. requirements of s. 423 of the Insolvency Whether the claim succeeded. there was no reason of policy to exclude likely to become insolvent accurately amounts outstanding on the loan As to the latter, it was of note that Act 1986 in some detail. Unitech first claimed that DB had such a unilateral transaction from the encapsulates the trigger. In this context, and swap. the communications with DB had not made various express and/or implied The directors of AWA (“D2”) resolved to ambit of the s. 423. In any event, it was “likely” means probable, not some lower concerned the LIBOR process. In the UL claimed it had relied on express and/ misrepresentations that the swap pay two interim dividends in the sum not right to characterise a dividend as a test such as that adopted by Hoffmann absence of such evidence, Unitech’s or implied misrepresentations made had been suitable for UGL as a hedge of €443 million and €135 million to its unilateral act of a company. A dividend is J in construing the statutory test for the claim had to fail. Moreover, to the extent by DB before entering into the relevant of its liabilities under the credit parent company, Sequana, respectively paid pursuant to and in accordance with making of an administration order: see that it was possible to draw inferences agreements, claiming that DB had agreement. Second, Unitech contended in December 2008 and May 2009 (the the rights of the shareholders under the Re Harris Simons Construction Ltd [1989] from the surrounding circumstances, expressly or impliedly represented that that DB had made various implied “Dividends”). Prior to the payment of articles. It is a return on an investment, 1 WLR 368” (emphasis added) those circumstances did not help Unitech the swap and the credit agreement, misrepresentations about LIBOR, and the Dividends, AWA effected a reduction and not “merely a disposition of money (see [44], [45] of the judgment).  Accordingly, the Court of Appeal which hedged the swap, were suitable for about DB’s involvement in the LIBOR of capital by special resolution supported which results in one part’s money dismissed BTI’s cross-appeal.  UL. However, it alleged, the swap was not setting process, upon which Unitech by a solvency statement in order to free landing up in the bank account of the a suitable product for UL for a number of had relied when entering into the up distributable reserves. The claimant other” (citing George Bompas QC’s reasons, including an alleged mismatch credit agreement and the guarantee was liable for a series of expenses words in Re Hampton Capital Ltd [2015] with the credit agreement and an alleged and indemnity. referable to the clean-up operation of EWHC 1905 (Ch)). SOUTH SQUARE DIGEST July 2019 www.southsquare.com Case Digest 47

Company Law

Austin Michael Waldron, Gerard Dermot HHJ Eyre QC preferred the approach of the Hong Kong Court Whatever the precise ambit of the SPA, and the implication of a term, both judgment. D1 contended that C2 had Waldron, Marian Waldron v Patrick of Appeal in Re Yung Kee Holdings Ltd [2014] 2 HKLRD 313 Duomatic principle, C1 could not lawfully of which were to the effect that the suffered no loss from any fraudulent on this issue to that of Fancourt J in Estera Trust Ltd v Singh. do what D1 had procured it to do and the additional consideration was not payable. misrepresentation alleged against it in James Waldron, Westshield Limited The crucial question is whether there are any equitable assent of all its members could not alter relation to the SPA, in circumstances The third matter, related to no-transfer considerations arising from the dealings between the that. Having considered other objections where C3 was the assignee of rights [2019] EWHC 115 (Ch) (HHJ Eyre QC) 15 February 2019 obligations under the SPA relating to shareholders which call for restraint over the exercise of strict by D1, Mr Justice Knowles concluded that under the SPA and had become the various facets of C1’s business, which Unfair Prejudice – quasi-partnership – equitable constraints legal rights on the particular facts of the case. The existence summary judgment should be granted in ultimate owner of C1. Mr Justice Knowles D1 contended had been contravened. of third-party rights and of third-party involvement in and respect of the offshore payments. rejected that the law on this point was The case concerned a petition under s. 994 of the Companies The Claimants relied on an implied membership of a company can be very significant in deciding clear. His Lordship did not accept at an Act 2006 for unfair prejudice brought against the managing The second matter related to the earn- term which was said to exclude the whether such equitable considerations are present, but they are interlocutory stage that a party cannot director “R” of a family-owned Company. The petitioners out arrangements under the SPA, which application of the no-transfer obligation not without more determinative of the question. show loss where it incurred and retained (respectively, “P1”, “P2” and “P3) and R were siblings. P3 had provided for additional consideration in circumstances where the divestment liability under a purchase transaction, ceased to work for the Company for some time before the In light of this conclusion on the law, the Judge held that in to be payable to D1. D1 counterclaimed in question was required by law. Again, and the purchase price was paid on its conduct complained of and had minimal involvement with the circumstances of the case, the presence of third parties and sought summary judgment from Mr Justice Knowles was not prepared behalf by another. Accordingly, D1’s the Company thereafter. with rights in relation to the Company did not automatically C2 in respect of a sum under the earn- to rule out the existence of such an application for strike of the deceit claim remove the constraints flowing from the understanding out arrangements. Mr Justice Knowles implied term. The petitioners alleged that R breached his fiduciary duties was dismissed.  between the family members. Accordingly, the equitable considered that C2 had a real prospect by procuring a company (“T”) which he wholly owned and Finally, D1 applied to strike out C2’s claim restraints remained in place and were effective to constrain of success in relation to its contentions controlled to purchase certain assets from a third-party in deceit, or alternatively for summary R from seeking to exclude P1 and P2 without due cause, and based on both the construction of the company in administration (“DCT”). In turn, T had made also applied to R’s conduct at the time T had acquired the charges to the Company in respect of assets it had acquired assets of DCT. from DCT. R claimed that he had acted with the prior agreement of the petitioners and that his actions benefited the The Judge found that P had procured T to purchase assets from Company. Following an incident P1 and P2 had requested an IT DCT when P1 and P2 had been given the impression that it Katherine Ma Wai Fong v 1. On an application under the BVI Insolvency Act on the consultant to grant them access to R’s email account, they were would be the Company doing so, and that R had not obtained Wong Kie Yik and Ors just and equitable ground, once a member of a company dismissed by R as employees of the Company. They claimed their prior agreement. R had acted in breach of his fiduciary satisfied the Court that it is just and equitable to appoint a that their exclusion from involvement in the business was duties and his conduct was accordingly unfairly prejudicial. (Webster, Nelson SC and Mendes SC JJA) 27 March 2019 liquidator for any of the reasons recognised by the decided unfairly prejudicial. However, P1 and P2 had known about the position in respect of cases, he can ask the court to appoint a liquidator. A Unfair prejudice – section 181 BVI Business Companies Act T’s acquisition of the DCT assets within a very short time of the member applying under section 184I of the BC Act for the The petitioners argued that where there had been an 2004 – conversion of non-voting preference shares - purpose of relevant events taking place. This amounted to acquiescence appointment of a liquidator must satisfy the court that he understanding between the members of the Company giving conversion – directors’ duties – just & equitable winding up – late in R’s conduct which precluded them from obtaining the has been unfairly prejudiced or discriminated against to rise to equitable considerations restricting the exercise of amendment discretionary relief they sought. get just and equitable relief to wind up a company. In this R’s strict legal powers, in other words, that this was a quasi- Katherine Ma Wai Fong (“Ma”) brought proceedings under case, Ma was seeking to move from having to prove unfairly partnership type situation. R contended that even if there was As regards R’s dismissal of P1 and P2, the Court found that the Section 181I of the BVI Business Companies Act 2004 (“the BC prejudicial or discriminatory conduct to get a winding up or had been such an understanding between some members dismissal arose due to the latter’s attempt to obtain access Act”) alleging oppression, unfair discrimination and/or unfair order on the just and equitable ground, to one where she of the Company, the fact that there were other members who to R’s emails, and not some other motivation on their part. prejudice in relation to the conversion of non-voting preference does not have to prove such conduct only that it is just were not party to the understanding meant that the Company A director is not entitled to see all emails in the course of a shares held by a BVI company. On the last day of the trial Ma and equitable to wind up the company. If the proposed could not be regarded as a quasi- partnership. R relied in company’s business, and particularly the emails of a managing sought to amend her claim to bring independent claims for amendments were to be granted, Ma would achieve this particular on obiter dicta of Fancourt J in Estera Trust Ltd v director. Further, P1 and P2 had sought access to R’s email not the appointment of a liquidator of the BVI company under transition without adequate notice to the Respondents Singh [2018] EWHC 1715 (Ch), where his Lordship had expressed to perform their duties but because of their dispute with R. Section 159(1) and 162 of the BVI Insolvency Act on the just and and to the BVI company, and without complying with the doubts as to whether the relevant equitable restraints could That was behaviour which justified their removal from further equitable ground. The Judge refused to allow the amendment. statutory regime in the insolvency legislation. The judge arise where there were shareholders who were not parties to involvement in the management of the Company even in the He also dismissed the unfair prejudice proceedings. However, was correct to recognise the differences in the procedures the underlying understanding. context of the family arrangements. Accordingly, the dismissal he went on to order that the Respondents should nevertheless and in exercising his discretion to refuse the application. of P1 and P2 did not constitute unfair prejudice.  buy-out Ma’s shares in the BVI company. 2. An appellate court is rarely justified in overturning findings

Ma appealed against both the refusal to allow the amendments of fact which turn on the credibility of a witness as the trial and the dismissal of her claim. The main appeal concerned judge would have had the benefit of hearing and seeing the Auden McKenzie C2 had entered into a share purchase The first matter for Mr Justice Knowles the validity of the conversion. This was primarily an appeal witnesses give their evidence and would be in a far better agreement with the Defendants to to consider was C1’s summary judgment (Pharma Division) against the Judge’s findings of fact. In addition, Ma alleged that position than an appellate court to assess their credibility acquire the shares in the holding application against D1 for the sum of the conversion contravened Section 121 of the BC Act in that and make findings of fact. However, the appellate court Limited v Amit Patel company of C1 for the initial £13 million odd on the basis that D1 had it was said to be for an improper purpose and that it breached may interfere if it is satisfied that the Judge did not take consideration of £323.5 million. The procured C1 to make offshore payments [2019] EWHC 1257 (Comm) (Knowles J) certain shareholders’ and/or family agreements and/or that the proper advantage of having seen and heard the witnesses. underlying litigation to the applications to accounts owned or controlled by the 17 May 2019 conversion should be set aside because it breached Section 175 In this appeal the Judge made several findings of fact which included claim in deceit by C2 and C3 Defendants. D1 relied on the principle in of the BC Act and Section 59 of the Malaysian Companies Act led to the conclusion that Ma was not unfairly treated Share Purchase Agreement – summary (the assignee of C2’s rights under the Re Duomatic, allowing for the approval 1959 (“MC A”). and the guiding principles relating to assessing a judge’s judgment/strike out – deceit – Duomatic SPA) in relation to representation made of all members of a company to ratify a findings of fact apply: Watt (or Thomas) v Thomas [1947] by the Defendants about the financial breach. As to this, Mr Justice Knowles The BVI Court of Appeal dismissed the appeal in relation to the The parties made various applications 1 ALL ER 582 applied; Mark Byers and Mark McDonald circumstances of C1 prior to entry into said that the payments offshore were amendments and the main appeal and affirmed the orders of for summary judgment and strike out (as liquidators of Pioneer Futures Company Ltd) v Chen the SPA. procured dishonestly in a way that the judge. In doing so the BVI Court determined, among other in proceedings which related to a Share Ningning BVIHCVAP2015/0011, 12 June 2018, followed; dishonestly evaded tax consequences. things, that: Purchase Agreement (“SPA”). SOUTH SQUARE DIGEST July 2019 www.southsquare.com Case Digest 49

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Central Bank of Ecuador v Conticorp [2015] UKPC 11 applied; 5. Ma was not unfairly prejudiced by any of the other • The test is therefore an objective • For the purposes of the objective include a charge for credit in the Jan Harb v Prince Abdul Aziz Bin Fahd Abdul Aziz [2016] allegations (e.g. non-payment of dividends, withholding one, and the terms of the fixed fee test under section 245(6) of the 1986 form of compensation for delay EWCA 556 considered. of information or breach of any shareholders or family agreement should be disregarded. Act, the words “in the ordinary in payment. agreement). There was also no basis to interfere with the Indeed, the whole concept of course of business” are intended 3. The Judge erred in not giving reasons for his finding on the The matter was therefore remitted judge’s decision that the BVI company was not operated as providing services for a fixed fee to insulate the valuation of the expert evidence of Malaysian law. The CA, in its discretion, to the High Court so that the value of a quasi-partnership, and there was no breakdown of trust is incompatible with the exercise services actually provided from any made its own finding. The reasoning and conclusions of the the services actually supplied by the between the alleged quasi-partners.  which section 245(6) requires increase in the supplier’s normal Respondent’s expert was preferred. In any event, a breach solicitors to the company on or after 21 to be performed. That exercise charging rates or any special terms of Section 59 of the MCA would not be unfairly prejudicial to [David Alexander QC] October 2015 could be valued on the basis is retrospective, and requires of business attributable to the risk Ma in her capacity as a member of the BVI company. set out above.  a valuation with the benefit of of non-payment by the recipient of 4. The exercise of a contractual right to convert shares was not hindsight of the work which has the services. Further, the calculation [Felicity Toube QC, Stephen Robins] a sale or other disposition of more than 50% in value of the actually been done. of value under section 245(6) cannot assets of the BVI company so there was no breach of Section 175 of the BC Act. The conversion was also not made outside the usual or regular course of the BVI company’s business.

The company had fallen into arrears under section 245 save to the extent of Lady Moon SPV SRL v Petricca & Co with its solicitors. On 21 October the value of the legal services supplied Capital Ltd 2015, the solicitors entered into an to the company on or after 21 October agreement with the company for the 2015. The issue related to the valuation [2019] EWHC 439 (Ch) (Mr Murray Rosen QC, sitting as a Deputy continued provision of legal services. of those services. The solicitors argued Judge of the High Court) 12 March 2019 The agreement provided for a fixed fee that the services should be valued at Recast Judgment Regulation – forum non conveniens – of £3.8 million secured by a floating £3.8 million, being the contractua lis alibi pendens charge. In February 2016, the company fixed fee. At first instance, that entered into liquidation in the BVI. argument succeeded. The Court of The defendant was an English company which carried on from its scope. The “dovetailing” principle, which states The liquidation was recognised as a Appeal allowed the appeal and business as the manager of an investment fund. The fund that there is no gap between the Recast Insolvency foreign main proceeding in England rejected the solicitors’ analysis. was established under contracts governed by Italian law and Regulation and the Recast Brussels Regulation, did not under the Cross Border Insolvency regulated by the Italian financial authorities. The contracts The Court of Appeal held as follows: have any application in relation to collective investment Regulations 2006. establishing the fund provided that the liabilities of the undertakings. • It was wrong for the judge to focus defendant (as asset manager) could only be realised from the Section 245(2) of the Insolvency Act 1986 on the question of what sum was fund’s assets. The claimant was a creditor of the fund under • Since the proceedings fell outside of the Recast Brussels provides: “Subject as follows, a floating contractually due from the company various defaulted loans which were secured over assets in Italy. Regulation, the Court was entitled to consider the issue Corporate charge on the company’s undertaking to its solicitors in return for the It had issued enforcement and attachment proceedings against of forum non conveniens. The defendant’s overwhelming or property created at a relevant time relevant services. That question was the defendant in Italy. The defendant maintained that the fund connection was with Italy rather than England. The Insolvency is invalid except to the extent of the relevant only to the extent of the was solvent and that creditors and unitholders would be best unitholders and creditors must have contemplated an Digested by Ryan Perkins aggregate of – (a) the value of so much solicitors’ claim in the liquidation as served by active management of the fund’s assets. Italian forum and not a winding-up process in the English of the consideration for the creation of an unsecured creditor. The relevant court. The claimant’s claim as a secured creditor over the the charge as consists of money paid, It was expected that the Italian proceedings would take some issue was the extent to which the fund’s Italian properties overlapped with, if not duplicated, or goods or services supplied, to the time to conclude. Accordingly, the claimant issued a parallel solicitors were entitled to enforce the the Italian proceedings. The claim in England should company at the same time as, or after, Part 8 claim in England under for directions under CPR Part floating charge under section 245(2) therefore be stayed. the creation of the charge ...” 64 to wind up the fund. The claim was predicated on the (a). For that purpose, what had to be proposition that the fund was a trust as a matter of English • Even if that was wrong and the Recast Brussels Regulation Section 245(6) provides: “For the ascertained was the value, calculated law. The defendant applied for an order that the Court had no applied, the English claim should be stayed under Article 29 purposes of subsection (2)(a) the value in accordance with section 245(6), of jurisdiction or should not exercise its jurisdiction under the of the Recast Brussels Regulation (lis alibi pendens) due to Re Peak Hotels and of any goods or services supplied by way the services actually supplied by the Recast Judgments Regulation (1215/2012). the overlap with the Italian proceedings.  Resorts Ltd of consideration for a floating charge is solicitors to the company during the the amount in money which at the time relevant period. That is the measure The Court granted the defendant’s application, and held [Tom Smith QC, Riz Mokal] [2019] EWCA Civ 345 (Underhill, Henderson they were supplied could reasonably laid down by Parliament to ensure a as follows: and Moylan LJJ) 8 March 2019 have been expected to be obtained fair balance between the interests • The claim was a civil and commercial matter within Article for supplying the goods or services in of a chargee, on the one hand, and Floating charges – section 245 – 1(1) of the Recast Judgments Regulation. However, it fell the ordinary course of business and the interests of the general body of services supplied within the exception under Article 1(2)(b), as it involved on the same terms (apart from the unsecured creditors on the other proceedings relating to the winding-up of insolvent consideration) as those on which they hand. It has nothing whatever to companies, and so the Recast Judgments Regulation did were supplied to the company.” do with the commercial fairness, not apply. Neither did the claim fall within the Recast as between the company and the On any view, the floating charge granted Insolvency Regulation (2015/848), because the fund was solicitors, of the contractual terms of in favour of the solicitors was invalid a collective investment undertaking which was excluded the fixed fee agreement. SOUTH SQUARE DIGEST July 2019 www.southsquare.com CaseSection Digest title 51

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Re Lehman Brothers Income Tax Act 2007 and was therefore money. These characteristics made it determination of Deutsche Bank’s International (Europe) subject to withholding tax. It was held impossible to treat statutory interest as appeal in England without recourse that statutory interest under rule 14.23(7) anything other than “yearly interest”.  to issues of German tax law which [2019] UKSC 12 (Reed, Carnwath, Hodge, is a form of compensation for creditors’ were to be decided in the GTA [Daniel Bayfield QC] Briggs and Black JJSC) 13 March 2019 loss of use of their money, analogous to proceedings.  interest payable as a result of a judicial Statutory interest – withholding tax decision. The period for which interest [Gabriel Moss QC, Tom Smith QC, The Supreme Court held that the is calculated commenced with the date Daniel Bayfield QC, Richard Fisher, statutory interest payable to creditors of of the administration order and ended Adam Al-Attar, Andrew Shaw] the company (LBIE) under rule 14.23(7) with the payment of creditors’ debts in of the Insolvency Rules 2016 was “yearly full, that being the period during which interest” under section 874 of the creditors had been kept out of their Re Toisa Ltd for recognition, and not the time of the original local foreign insolvency filing. She held this approach was consistent with (ICC Judge Burton) 29 March 2019 Re Core VCT plc application on the former liquidators, but mistakenly told the the wording of the Model Law, which utilised the present tense judge that the registrar of companies had been notified of that Cross Border Insolvency Regulations - COMI in Articles such as Art 17 (2)(a) (“if it is taking place in the State [2019] EWHC 540 (Ch) (Mr Jeremy Cousins QC, sitting as a Deputy fact. The former liquidators contended that the restoration where the debtor has” its COMI), repeated by the present tense Judge of the High Court) 15 March 2019 Toisa Ltd (“Toisa”) was registered in Bermuda. Chapter 11 orders should be set aside for breaching the duty of full and used in Art 17 (2)(b) as regarded an establishment (along with proceedings were commenced in the Southern District of Restoration to the register – full and frank disclosure frank disclosure. other passages in the Model Law using similar wording), and New York on 29 Jan 2017 in respect of Toisa. In March 2019, the thus it was appropriate to construe the Model Law as allowing The former liquidators of three dissolved companies applied The Court accepted that the applicants for restoration had a foreign representative, appointed by the US Bankruptcy Court, the English Court to recognise foreign proceedings even where to set aside orders restoring those companies to the register. duty of full and frank disclosure, but rejected the allegation applied for recognition to the ICC Court in London under the the COMI or establishment was not at the place of the local Restoration had previously been ordered by the Court on the that the applicants had breached that duty and refused to Model Law. There was a potential question on the evidence process upon the opening of proceedings, but was in place by application of various minority shareholders. The purpose set aside the restoration orders. The essential ground for the filed as to whether the COMI of Toisa was in the USA when the the time of the recognition application. This approach was of restoring the companies to the register was to enable the decision is that the former liquidators of the company did not Chapter 11 filing took place in 2017, albeit it was clear that the also sensible, bearing in mind a Chapter 11 process in New appointment of new liquidators to investigate an allegation have any interest in the restoration applications, and they COMI of Toisa was in the USA at the time of the application for York could be started without the need for the COMI to be in that the former liquidators had acted in breach of duty. At had no entitlement to participate in or be heard at the hearing recognition in London in March 2019. New York, and it would be unfortunate if the Chapter 11 could the hearing of the restoration applications, the applicant of those applications. That being so, any failure of disclosure The facts established that after the Chapter 11 filing, there was not be recognised in England and Wales because of this. The shareholders informed the judge that they had not served their could not have been material.  no doubt that the affairs of Toisa (an international shipping Court also took account of the decision of the Second Circuit company) had been managed from New York, to the knowledge in Re Fairfield Sentry Ltd, Morning Mist Holdings Ltd v Krys of relevant third parties and creditors. As at the time of the 714 F 3d 127 (2nd Circuit, 2013), where it was held that the Bundeszentralamt v Heis The company rejected both proofs, and received substantial distributions. Chapter 11 filing, it was likely, but not absolutely certain, that debtor’s centre of main interests for the purposes of Chapter the creditors appealed. The creditors This reduced the concerns arising the COMI or an establishment was in New York. 15 should be determined at the time the Chapter 15 case [2019] EWHC 705 (Ch) (Hildyard J) then applied for a stay of their appeals from delay. was commenced.  22 March 2019 Upon consideration of the facts, and the application, and in order to allow the determination of In relation to Deutsche Bank, Hildyard J upon considering whether an applicant for recognition must [Adam Goodison] Appeal against rejection of proof – stay of various issues by the German courts. relied on the following factors (inter alia) establish COMI in the local jurisdiction at the time of the proceedings Hildyard J granted a stay of the GTA’s in support of his decision to refuse a stay opening of the foreign proceedings, or whether it was sufficient This case deals with the principles appeal, but declined to grant a stay of of the appeal: if the COMI was in place in the local jurisdiction at the time of governing the grant of a stay in the Deutsche Bank’s appeal. In relation the recognition application: held by ICC Burton on 29 March • It was arguable that part one of context of an appeal against the rejection to the GTA, Hildyard J relied on the 2019 that for Cross Border Insolvency Regulations purposes, Deutsche Bank’s claim was barred of a proof of debt. following factors (inter alia) in support of the time at which the COMI or establishment of the requesting by the rule against double proof his decision to grant a stay of the appeal: entity should be determined was the time of the application The company had rejected the proofs (although no such bar would apply lodged by two creditors: the German tax • There was a risk of inconsistent to the other part of Deutsche Bank’s authorities (the “GTA”) and Deutsche judgments as a result of the parallel claim). Bank. The GTA’s claim was for the legal proceedings in England and • If the GTA withdrew its proof, then recovery of withholding tax refunds paid Germany which involved broadly the Re Strand Capital Ltd Administration Regulations 2011 (the of Part 5 of the Investment Bank Special Deutsche Bank would be entitled to to the company prior to its entry into same issues. “IBSA Regulations”). The plan was Administration (England and Wales) re-submit its proof (to the extent [2019] EWHC 1346 (Ch) (Henry Carr J) administration. It was contended by the supported by the FSCS (and not objected Rules 2011. • The issues of German law were that it had previously been barred 2 April 2019 GTA that the refunds had been obtained to by the FCA). fundamental and of systemic by the rule against double proof) Strand operated principally as a by the company on a false basis which Special administration – client assets – importance. Other things being and any distribution attributable to This is the fourth (known) distribution discretionary investment fund manager, was contrary to the applicable German distribution plan equal, it would be preferable for the withdrawn proof would become plan to be approved under the IBSA in the course of which it held client tax legislation. Deutsche Bank’s claim such issues to be determined by the payable to Deutsche Bank. On 2 April 2019, Henry Carr J sanctioned Regulations, following that sanctioned assets and client money. The plan was was for an indemnity from the company German courts. a distribution plan for the return of client in Re Beaufort Asset Clearing Services proposed as a procedure pursuant on the basis that it had acted as the • There were not yet any parallel assets held by Strand Capital Limited, Limited [2018] EWHC 2287 (Ch). The to which client assets – having an company’s agent when submitting the • Although a stay would result in proceedings against Deutsche an entity in special administration distribution plan was formulated and indicative (aggregate) valuation of claims for tax refunds and was therefore a delay to the conclusion of the Bank in Germany. Moreover, there under the Investment Bank Special proposed in accordance with Chapter 3 approximately £248 million – could be at risk of a claim by the GTA. administration, creditors had already was a possibility of enabling a SOUTH SQUARE DIGEST July 2019 www.southsquare.com CaseSection Digest title 53

Corporate Insolvency

returned to clients who are entitled to governing the allocation of the overall rateable charge by reference to the should be in a position to recognise main proceeding” where there is • The answer to this question lies them. The asset classes comprised both costs associated with returning client value of assets in each account).  a foreign proceeding where it does uncontradicted evidence before in the fact that the Bermudian electronically-held securities (held via assets were fair. As to the cost allocation not know the precise extent of the the court that the entity is (at least legislation can be described as a [Georgina Peters] a number of third party custodians) and methodology (into which the FSCS had entity’s financial problems, and in currently) solvent, and/or where it is “law relating to insolvency”, since it physically-held bond certificates. significant input), the Judge accepted particular does not know whether it clear that the purpose, or principal includes other grounds for winding- that, as a matter of principle in this is in fact insolvent. purpose, for which liquidation is up which require proof of insolvency. The Judge was persuaded that the terms particular case, it was fair to allocate the sought is not to realise assets for On that basis, a just and equitable of the plan represented a fair, reasonable • The fundamental question is Objective 1 costs (within the meaning of creditors but instead to distribute winding-up of a solvent company and efficient means of returning client whether the Court can recognise the IBSA Regulations) amongst clients on surplus assets to shareholders. can be treated as a “foreign main assets: in particular, that the terms a foreign liquidation as a “foreign a fixed, per capita basis (as opposed to a proceeding” under the Regulations. 

Yuri Rozhkov v Larisa Markus On hearing the recognition application, Marcus Smith J granted recognition, applying the jurisdictional requirements in the [2019] EWHC 1519 (Ch) (Marcus Smith J) 10 May 2019 UBS AG v Fairfield Sentry Ltd The Privy Council dismissed the appeal and held as follows: CBIR (Re Agrokor [2018] EWHC 348 applied). The judge also Fraud – Cross Border Insolvency Regulations 2006 – ancillary relief considered applications for information/documents under [2019] UKPC 20 (Reed, Hodge, Briggs, Arden and Kitchin JJSC) • On its true construction, section 249 did not preclude a Article 21(1)(d), Schedule 1 of the CBIR against two firms of 20 May 2019 foreign court from granting relief. It was a Yuri Rozhkov (“YR”), the Russian financial manager and solicitors, Dallas & Co (“D&C”) and Jaffe Porter Crossick (“JPC”), question for the relevant foreign court whether it could bankruptcy trustee of Larisa Markus (“LM”) applied for Anti-suit injunctions – cross border insolvency – declaratory relief both of which had been involved in the sale of a substantial grant assistance to the BVI court by applying section 249 or recognition of LM’s bankruptcy in England under the CBIR property in Knightsbridge, which had completed only 2 This is another case arising out of the Madoff fraud. The otherwise. 2006 (“CBIR”), and associated relief. LM was the founder, days before the orders of Arnold J. The judge granted this company was being wound up in the BVI and had operated shareholder and president of Vneshprombank, a Moscow- • The application for an anti-suit injunction was further relief on the basis that it was a paradigm case where as a feeder fund within the Madoff empire. The liquidators based bank (“the Bank”). In 2017 she pleaded guilty to a £1.3 misconceived. Such an injunction would be contrary to a court should exercise its discretion in favour of a foreign of the company were taking steps to recover payments that billion fraud on the Bank and was sentenced to 8.5 years’ comity and would undermine the enforcement of the BVI’s representative.  had been made to certain investors prior to the collapse of the imprisonment. YR had been granted Chapter 15 recognition in insolvency regime overseas. Ponzi scheme. These payments were sought to be recovered as the US in February 2019. In March 2019 a £1.3 billion fraud claim [William Willson] voidable transactions under section 249 of the BVI Insolvency • The application for declaratory relief was likewise was issued in London against LM’s brother, Georgi Bedzhamov Act 2003, which empowers “the court” to grant appropriate misconceived – both for the reasons set out above, and for (“GB”) in the Business and Property Court, Business List (ChD). relief after setting aside a voidable transaction. The liquidators the additional reason that the BVI court did not have the A worldwide freezing order and a wide-ranging search order commenced proceedings in the USA against a number of role of giving an advisory opinion to the US court at the was granted by Arnold J, as well as provisional relief under the defendants and sought to obtain relief from the US court in request of a defendant in the US proceedings, particularly in CBIR. YR applied for further interim relief against GB under the the exercise of its jurisdiction to assist foreign insolvency circumstances where the US court treated foreign law as a CBIR and against GB/the Bank under r 31.22 of the CPR. proceedings. In particular, the liquidators argued that the US matter of law rather than a question of fact.  court had the power to apply BVI law and award relief under [Gabriel Moss QC, Tom Smith QC, Henry Phillips] section 249 of the BVI Insolvency Act 2003. Re Sturgeon Central Asia The obvious potential difficulty is that greater certainty and fair and The appellants were defendants to the actions brought by Balanced Fund Ltd a just and equitable winding-up is not efficient administration of cross- the liquidators in the US. They argued that the proceedings predicated on the financial position of border insolvencies. There is however ought to have been brought in the BVI rather than the US. This [2019] EWHC 1215 (Ch) (Falk J) 17 May 2019 the company, and is often initiated for a specific reference to “financially argument was founded on the proposition that section 249 companies that are entirely solvent. troubled businesses”, a term which only conferred powers on the BVI court – not the US court. On Cross Border Insolvency Regulations 2006 Thus, the issue was whether a just is not defined but may include that basis, the appellants sought an anti-suit injunction to – definition of “foreign main proceedings” and equitable winding-up of a solvent businesses that are not necessarily restrain the proceedings in the US and/or a declaration as to the – just and equitable winding-up company can be commenced “pursuant insolvent. meaning of “the court” in section 249. Under the Cross-Border Insolvency to a law relating to insolvency”. • It is also clear from the UNCITRAL Regulations 2006, a “foreign main Falk J answered that question in travaux that there was a deliberate proceeding” is defined as “a collective the affirmative and recognised the choice to focus on the question of judicial or administrative proceeding to ensure that the winding-up could appropriate to dispense with the usual Bermudian winding-up as a foreign whether the relevant proceeding Re British Steel Ltd in a foreign State, including an interim commence as quickly as possible, the formalities under the Insolvency main proceeding under the Regulations. was commenced pursuant to a law proceeding, pursuant to a law relating [2019] EWHC 1304 (Ch) (Snowden J) Court dispensed with the requirement Rules 2016.  In reaching that conclusion, Falk relating to insolvency, rather than to insolvency in which proceeding 22 May 2019 for advertisement and other formalities J considered the travaux and the using the concept of an insolvency [Lloyd Tamlyn, Adam Goodison] the assets and affairs of the debtor under the Insolvency Rules 2016. This authorities in some detail. She stated proceeding or even defining Winding-up petition – appointment of are subject to control or supervision approach was recently adopted in the as follows: insolvency. The latter alternative special managers – “Carillion” order by a foreign court, for the purpose of Carillion insolvency, and the judgment was rejected by UNCITRAL as not reorganisation or liquidation”. The issue • It is clear from the preamble to In this case, the Court made a winding- follows that approach. Special managers being feasible. in the present case was whether a just the UNCITRAL Model Law that its up order in relation to British Steel. had previously been an obscure part of and equitable winding-up of a solvent focus is on cross-border insolvency. • Even in the context of financially The Official Receiver was appointed insolvency law. The judgment explains company under the law of Bermuda fell The objectives are clearly set out, troubled businesses, it was clearly as liquidator, and partners of EY were the basis for the appointment of special within that definition. including increased cooperation, intended that a recognising court appointed as special managers. In order managers and the reasons why it was SOUTH SQUARE DIGEST July 2019 www.southsquare.com CaseSection Digest title 55

Corporate Insolvency

Granada UK Rental & Retail Ltd & Holdings and (i) the Trio and (ii) TUK, had been severed at TUK and the intermediate holding companies between behalf. That being so, each of the intermediate holding others v (1) The Pensions Regulator that time, so as to sever the Targets’ own association with it and Box Clever Holdings did not sever the association. companies remained in control of TUK for the purposes them. The Targets argued that the association had been The approach adopted in Unidare was disapproved as it of s 435(10)(b). So too did Box Clever Holdings and, with it, and (2) Box Clever Trustees Ltd severed because: “conflates entitlement ‘to exercise … voting power’ and the Targets too. entitlement to ‘control the exercise of … voting power’”. [2019] EWCA Civ 1032 (Patten, Newey and Males LJJ) 20 June 2019 • In the case of the Trio, the right of Box Clever Holdings Permission to appeal to the Supreme Court has been refused While the latter may be judged by reference to the to direct how the shares in the Trio should be voted by the Court of Appeal.  Pensions Act 2004 – moral hazard – associated companies position as between the registered shareholder and the terminated automatically on the occurrence of a declared controller of the voting power, the former naturally falls [Gabriel Moss QC, Mark Arnold QC] The Box Clever group of companies was established between default, without the need first for notice to be served by to be determined by reference to the position between 1999 and 2000 as a joint venture between the Granada group the debenture-holder (the Debenture issue). the registered shareholder and the company itself. The of companies (Granada) and the Thorn group. The joint • Alternatively, in the case of the Trio, and also in relation fact that it would doubtless have been the Administrative venture was formed against a background of a decline in the to TUK, notice was given by the debenture-holder in Receivers who would have decided how the shares in market for rented televisions, and the decline was viewed as the terms of its demand made on guarantors (the Notice TUK should be voted was neither here nor there: they likely to continue. The acquisition by the joint venture of the issue). would have been voting in the parent’s name and on its TV rental businesses of Granada and Thorn (for £980m) was financed in large part by a loan secured against the assets • In the case of TUK only, the association was severed Gabriel Moss QC appeared in the Upper Tribunal for the of the companies in the Box Clever group pursuant to the because the intermediate holding companies between Pensions Regulator, for whom Mark Arnold QC appeared in terms of a debenture. The joint venture did not prosper and Box Clever Holdings and TUK had been placed in the Court of Appeal. administrative receivers were appointed to a number of the administrative receivership and remained so on 31 Box Clever companies in September 2003 and thereafter. At December 2009 (the Administrative Receivership issue). that time, the Box Clever pension scheme had a deficit of The Targets relied by analogy on In re Kilnoore Ltd, Unidare some £25m, which has since increased to £115m. plc v Cohen [2006] Ch 489 (Unidare), which decided that it was necessary to look to the economic reality of the case, In September 2011, the Pensions Regulator issued a Warning such that a registered shareholder who holds shares on a Notice to various Granada companies (the Targets) specifying bare trust under which he is required to cast his vote in a look-back date of 31 December 2009, followed by its accordance with the directions of the beneficial owner determination to issue a Financial Support Direction (FSD) on Simon Matthew specific statutory exceptions, in order to is not to be regarded as having control of the company 21 December 2011. enable it to be distributed to creditors. for the purposes of s 435(10)(b). So here (it was argued) Gwinnutt (as the First The Targets made references under section 103 of the control was vested in the Administrative Receivers, or the Respondent’s Trustee in It was therefore held that, even though Pensions Act 2004. The case raises very interesting issues security agent for the debenture-holder, TUK’s parents the barrister had no contractual right relating to the retrospective effect of the FSD provisions having no control in any real sense. Bankruptcy) v Nicholas to recover his fees, nor any means of of the Pensions Act 2004, as well as the reasonableness of Personal legal enforcement, he still had more The Upper Tribunal (Tax and Chancery Chamber) rejected the Frank Raymond George, issuing an FSD in circumstances where the circumstances than a mere hope that he would be paid. Target’s objections for the reasons fully stated in its decision relied on were said to pre-date the time the Pensions Act Insolvency Michael Ryan The court considered that, in reality, a reported at [2018] UKUT 0164 (TCC), but granted permission to came into force. Digested by Lottie Pyper solicitor would consider himself under appeal on all issues to the Court of Appeal. [2019] EWCA Civ 656 (Newey, Singh and more than a purely moral obligation to Relevantly for the purposes of this summary, however, the Baker LJJ) 12 April 2019 The Court of Appeal has now dismissed the Targets’ appeal. pay the barrister, and in the majority Targets contended (amongst other things) that there was no Its reasons for rejecting the appeal on the Association Issue Barristers – fees - legitimate expectation - of cases would do so. Further, the jurisdiction to issue an FSD because, as at 31 December 2009, were, in summary, as follows: trustees in bankruptcy - vesting solicitor himself had a right to sue the they were not “connected” or “associated” with the Box client to recover his fees, including Clever employers for the purposes of s 43(6)(c) of the Pensions • The Debenture issue: On the true construction of the Barristers used to be prevented from any payments made to counsel. The Act, applying (by virtue of s 51(3)) s 435(7) and (10)(b) of the relevant clauses of the Debenture, the right of Box Clever entering into a contract with solicitors, court also noted that the barrister was Insolvency Act 1986 (the Association Issue). Holdings to direct how the shares in the Trio were to be and instead worked on a non-contractual not entirely without remedy, as he voted did not terminate automatically on the occurrence honorarium with no right to sue for their Section 435(7) provides that a company is an associate of could add the solicitors’ name to the of a declared default. Its right to do so would terminate fees. This case required the court to another person “if that person has control of it …” Bar Council’s ‘Withdrawal of Credit’ only upon the service of notice. Accordingly, the consider whether fees due to a barrister Scheme. It was therefore held that the Section 435(10)(b) provides that: “For the purposes of this association with the Trio was not severed automatically pursuant to an honorarium vest in a fees are ‘property’ within the Insolvency section a person is to be taken as having control of a company upon a declared default. trustee in bankruptcy upon the making Act 1986, and so vest in the trustee in if … (b) he is entitled to exercise, or control the exercise of, of a bankruptcy order. The question was • The Notice issue: On its true construction, the demand bankruptcy, and that any other result one third or more of the voting power at any general meeting whether the fees due to the barrister fell made on the guarantors did not constitute notice that would be entirely anomalous. of the company or of another company which has control of within the definition of ‘property’ such the debenture-holder thereby assumed (in place of Box it …” that they were caught by section 306 of It was also noted, obiter, that, as Clever Holdings) the right to direct how the shares in the the Insolvency Act 1986. barristers would likely have a ‘legitimate The Box Clever employers comprised a trio of companies (the Trio should be voted. In the absence of such notice, the expectation’ of being paid their fees, Trio) and TUK Holdings Ltd (TUK). The parent company of the association with the Trio had not been severed. There The court noted that the definition it was likely that the barristers fees Trio and (indirectly) TUK was Box Clever Holdings Ltd. being no such notice, the association with TUK was not of ‘property’ for the purpose of the pursuant to an honorarium fell within severed either. Insolvency Act 1986 was deliberately The Targets accepted that they were associates of Box the definition of ‘possessions’ for the wide, and that the public policy Clever Holdings at the relevant date, 31 December 2009. The • The Administrative Receivership issue: The fact that purpose of the European Convention of underlying the act was to divest a question was whether the association between Box Clever administrative receivers remained in office in respect of Human Rights.  bankrupt of all of his property, save for SOUTH SQUARE DIGEST July 2019 www.southsquare.com Case Digest 57

Promontoria (Chestnut) Ltd v Bell & Bell debt the respondents owed under the guarantee. Held that “Security in respect of the debt” in rule 6.1/6.5 of IR86 should [2019] EWHC 1581 (Ch) (Zacaroli J) 20 June 2019 be given the same meaning as the phrase “security for the Statutory Demands – meaning of “Security” debt” in Section 383 of IA86. Applying long-standing principle (see White v Davenham Trust [2011] EWCA Civ 747), the The appellant appealed against the setting aside of statutory definition of secured creditors could extend to circumstances demands it had served against the respondents. The such as the instant case, where the creditor held security in respondents were shareholder/directors who entered a personal respect of another party’s debt. The security and the guarantee guarantee in respect of a loan facility the company obtained liability were rooted in the same debt. If the appellant gave up from a bank, limited to £170,000. The loan facility was also its security, that would augment the respondents’ estates if secured over company property. In addition, the respondents they became bankrupt. The fact that recourse to the security executed third-party mortgages over properties they owned over the respondents’ property would discharge the personal to secure the facility. The appellant sent demand letters to debt owed by them was a powerful indication that the third- Sport the respondents demanding £170,000 under the personal party charges were security “for” or “in respect of” the Digested by Robert Amey Breaches of the Championship In its initial response to the allegations, guarantee, and then statutory demands. The demands were guarantee debt. In terms of the liability under the guarantee Profitability and Sustainability Rules – the Club had blamed its managers for set aside on the basis that the appellant held some security being less than the amount of the company’s debt, the appropriate sanction the overspending. However, the Club in respect of the debt and, contrary to rule 6.1(5) of IR86, it did appellant would be entitled to participate in the bankruptcy later accepted that the Club’s owner had not specify the nature and value of the security. The appellant A football club wishing to gain a of the respondents to the extent of the shortfall between the agreed the transfer budgets available to submitted that the security it held over the respondents’ competitive advantage might be debt owed by the company and the value of the security over the managers, with no controls imposed properties by way of the third-party mortgages was in respect tempted to spend excessive amounts the guaranteed property.  on the salary terms which could be of the company’s indebtedness and did not secure the personal on player acquisitions and employee offered to new players. benefits in order to attract ‘star players’. The English Football If this spending went unchecked, other In determining sanction, the League v Birmingham clubs would either suffer a competitive Commission held that it was This was an application by the trustees The trustees argued that the disadvantage, or would have to spend unnecessary for the EFL to prove that in bankruptcy of Mr Karl Watkin against presumption of advancement should be City Football Club similar amounts which they might the overspending had conferred a Mr Watkin’s daughter, Kate Watkin restricted to minor children or, if it did be unable to afford in the long-term. “measurable sporting advantage”. EFL Disciplinary Commission, in relation to three properties. These apply to children over 18, it only applied Ultimately, the long-term viability Any substantial overspending was, in 22 March 2019 properties had been purchased by Kate to those who were still financially and sustainability of club football principle, detrimental to the interests Watkin in her sole name. The trustees dependent on their parents. The judge Breaches of the Championship would be threatened. Accordingly, of other clubs which comply with the alleged that at all material times, Mr rejected these submissions, holding that Profitability and Sustainability Rules – financial fair play rules restrict the rules, and therefore unfair. According Watkin had been the sole beneficial while the presumption of advancement appropriate sanction extent to which clubs can overspend to the sanctioning guidelines, the owner of these properties “on resulting might be weaker (i.e. more readily and operate at a loss. starting point in this case (where trust principles” by reason of his having rebuttable) in the case of an adult child the Club had exceeded the threshold In the case of clubs competing in the provided the purchase moneys. who was financially independent, it by around £9 million) was a points English Football League, the EFL’s would still apply. deduction of 7 points. Property and The judge found that the properties were Profitability and Sustainability (P&S) purchased with the benefit of moneys The trustees also argued that the Rules prevent clubs from incurring losses The Commission then took into account Trusts from an account in the joint names of Mr presumption of advancement between over a particular threshold. Birmingham various aggravating factors. The Club Watkin and this wife, Jill Watkin. It was parent and child was very weak in City Football Club (the Club) was accused had given inconsistent accounts of Digested by Andrew Shaw submitted by Gabriel Moss QC, acting modern times, relying on Lavelle v of exceeding the relevant threshold over how the breach came to take place, for Kate Watkin, that a presumption of Lavelle [2004] EWCA Civ 223. The judge a monitoring period comprising seasons and was found to have committed a advancement had arisen in Kate Watkin’s rejected this submission, distinguishing 2015/16, 2016/17, and 2017/18. serious, intentional breach, which had favour such that the presumption of Lavelle v Lavelle on the grounds got progressively worse over time. In the Club’s case, the relevant threshold a resulting trust was displaced by the that it concerned a presumption of The Commission therefore imposed a was £39 million, but the aggregate loss presumption of advancement. advancement in relation to matrimonial deduction of 9 points for the 2018/19 over the monitoring period was over £48 property. She held that Shepherd v season, noting that this was equivalent The judge reviewed the law on million, most of which had been incurred Cartwright [1955] AC 431 remained to 3 wins in competition.  resulting trusts and the presumption toward the end of the monitoring period. Wood v Watkin good law. of advancement. She noted that the This was mainly accounted for by the [Daniel Bayfield QC] [2019] EWHC 1311 (Ch) (ICC Judge Barber) starting presumption is that if A The trustees also maintained that the expensive acquisition of players in the 24 May 2019 purchases a property for a stranger, presumption had been rebutted in the January 2017 and summer 2017 transfer B, with his own money then there is present case. On analysis of the facts, windows. In January 2017 the manager Resulting trusts – presumption a presumption that B will hold the the judge held that the presumption Gianfranco Zola had signed four new of advancement property on trust for A. However, of advancement applied in the case of players at a total cost of £7.45 million. if B is the wife, daughter or son of A, two properties and in the case of the In the summer 2017 transfer window then the presumption of resulting third, there was clear contemporaneous the new manager Harry Redknapp trust may be displaced by a evidence that Mr and Mrs Watkin did not had made 9 permanent signings and presumption of advancement i.e. intend to retain any beneficial interest. brought in 5 loan players at a total cost that a gift was intended. She dismissed the application.  of £23.75 million. SOUTH SQUARE DIGEST July 2019 www.southsquare.com Remedies for Unfair Prejudice 59

Remedies for

Unfair Prejudice avid Alexander QC and Adam Goodison consider Dthe remedies available to the Court when it is satisfied that an unfair prejudice petition is well founded and, in particular, share purchase orders.

In the last edition of the Digest, company by other members or by 3. The discretion must be exercised we reviewed the unfair prejudice the company itself and, in the case judicially and on rational principles: legislation in England and Wales. of a purchase by the company itself, O’Neill v Phillips [1992] 2 BCLC 1. In this article, the remedies for unfair the reduction of the company’s 4. Where unfair prejudice is prejudice are set out in more detail, share capital accordingly.” established, the court must with particular emphasis on share A number of matters are consider the whole range of possible purchase orders and the many other worth highlighting: remedies and choose the one which, matters which a court may have to on its assessment of the existing decide when making such an order. 1. There must be a finding of unfair state of relations between the prejudice or there is no power to If the court is satisfied that an unfair parties, is most likely to remedy grant relief at all: Re Bird Precision prejudice petition presented pursuant the unfair prejudice: Grace v Biagioli Bellows Ltd [1986] Ch 658; Re a to Section 994 of the Companies Act [2006] 2 BCLC 70 at [73]-[74]. Company (No 007623 of 1984) [1986] 2006 (“the 2006 Act”) is well founded it BCLC 362 at 368b; Re a Company (No 5. The remedy must be proportionate may make such order as it thinks fit for 004175 of 1986) [1987] 1 WLR 585 at to the unfair prejudice: Re Phoenix giving relief in respect of the matters 588G-H. Office Supplies Ltd[2003] 1 BCLC 76; complained of: Section 996(1) of the Re Neath Rugby Club (No 2) [2007] 2006 Act. 2. Once there has been a finding EWHC 2999 (Ch) at 246; VB Football of unfair prejudice the court’s Section 996(2) of the 2006 Act then Assets v Blackpool Football Club [2017] remedy is a discretionary one. In provides a non-exhaustive menu of EWHC 2767 (Ch) at [447]. that respect the court has a wide remedies. For it provides that power as to what, if any, relief is to 6. The Petitioner should specify in the “without prejudice to the generality of be granted: Re Bird Precision Bellows petition the relief sought: Re Antigen subsection (1), the court’s order may- Ltd [1986] Ch 658 at 669D-E where Laboratories Ltd [1951] 1 All ER 110 Oliver LJ said that the effect of the (“From the prayer of the petition… a) regulate the conduct of the equivalent predecessor section “is it is impossible to know what the company’s affairs in the future; to confer on the court a very wide petitioner wants…The Prayer...must b) require the company – discretion to do what it considered …contain enough to leave no doubt fair and equitable in all the what the petitioner desires the i) to refrain from doing or circumstances of the case …” and court to do”) . The petition should continuing an act complained Profinance Trust SA v Gladstone[2002] also include a prayer for such other of, or 1 WLR 1024 at [18]. The court even order as the court thinks fit: Re ii) to do an act that the petitioner has power to grant no relief at all: J E Cade & Son Ltd [1992] BCLC 213 has complained that it has Re Hailey Group Ltd [1993] BCLC 459 at (at 223). The court is not, however, omitted to do; 473h; Amin v Amin [2009] EWHC 3356 limited to granting the relief which (Ch) at [587]; Re Full Cup International the petitioner has sought: Hawkes c) authorise civil proceedings to be Trading Ltd, Antoniades v Wong [1995] v Cuddy, Re Neath Rugby Ltd [2009] brought in the name of and on 2 BCC 682 at 694C-D; Re Sunrise Radio 2 BCLC 427 at [88]-[91]; VB Football behalf of the company by such Ltd [2010] 1 BCLC 367 at [10] “...it Assets v Blackpool Football Club [2017] person or persons and on such does not follow even where unfair EWHC 2767 (Ch). terms as the court may direct; prejudice is established, that the 7. The relief sought must be d) require the company not to make court will necessarily grant relief. appropriate to the conduct of which any, or any specified, alterations There will be cases where the court the petitioner has companied: Re J E in its articles without the leave of concludes that the unfair prejudice Cade and Son Ltd [1992] BCLC 213. the court; is not sufficiently serious to justify its intervention …”. 8. The court will consider the e) provide for the purchase of the appropriate relief at the time of DAVID ALEXANDER QC ADAM GOODISON shares of any members of the SOUTH SQUARE DIGEST July 2019 www.southsquare.com Remedies for Unfair Prejudice 61

the hearing of the petition not as Brentfied Squash Racquets Club Ltd [1996] for a buy-out, a company’s share capital at the time when the petition was 2 BCLC 184. But that is “comparatively will be valued at its market value: Wann presented: Re Hailey Group Ltd [1993] unusual”: Brentfiledat 190h-1. The v Birkinshaw [2017] EWCA Civ 84 at [37]. BCLC 459; Re Little Olympian Each- court can make a share purchase order Minority Discount Ways Ltd (No 3) [1995] 1 BCLC 636. even where the company in question has subsequently become insolvent: The question of any discount is a 9. In deciding what order to make, Re Hailey Group Ltd [1993] BCLC 459 question of law to be decided by the the court is entitled to look at the (where an administrative receiver court: Re Bird Precision Bellows Ltd overall situation, past, present and had been appointed by the hearing of [1984] Ch 419. future: Grace v Biagoli [2002] BCLC 70 the petition); Re Via Servis Ltd, Skala v at [73]. In a company which was a quasi- Via Servis Ltd [2014] EWHC 3069 (Ch) partnership, it would “not merely be 10. In deciding upon the relief to be (where the company appears to have fair but most unfair” for the petitioner granted the court is not limited to entered into some form of insolvency to be bought out on the fictional basis putting right the conduct which proceedings in Austria). applicable to a free election to sell justifies the order. The court should Buy-Out Orders: Valuation his shares in accordance with the seek to put matters right for the company’s articles, or on any other future, not just to sanction for When the court makes a share purchase basis that involved a discount price. In what has happened before: Re Bird order, further critical questions still such a case the right valuation is one Precision Bellows [1986] Ch 658; Grace have to be answered by judicial decision, which fixes the price pro rata according v Biagioli [2006] 2 BCLC 70. agreement or an independent valuer. to the value of the shares as a whole The overriding requirement is clear: 11. The court can grant relief to a and without any discount, that being “the valuation should be fair on the petitioner even if the petitioner has the only fair way of compensating an facts of the particular case”: Re London for the most part failed: Re Elgindata unwilling vendor of the equivalent of School Electronics [1986] Ch 211. However [1991] BCLC 959 at 1005. a partnership share: Re Bird Precision by what method is the valuation to be Bellows Ltd [1984] Ch 419. See also 12. The court is not, however, permitted reached? Should the shares be valued Strahan v Wilcock [2006] 2 BCLC 555. to substitute a different agreement on the basis of there being no discount to that which exists between the to be applied for the fact that the In other cases, a minority shareholding parties simply because the court petitioner’s shareholding is a minority is often to be valued for what it is – a takes the view that such is fairer: one? Should it be on the basis that the minority shareholding, unless there is Re J E Cade and Son Ltd [1992] BCLC 213. petitioner’s shareholding is only a good reason to attribute to it a pro- minority one? As at what date is the rata share of the overall value of the The most common order that a court valuation to be carried out? Should it company: Strahan v Wilcock [2006] 2 makes, at least in relation to small be the date when the petitioner was BCLC 555. As Blackburne J put it “Short private companies, where there has excluded from participating? Should it of a quasi-partnership or some other been a finding of unfair prejudice, be the date of the presentation of the exceptional circumstance, there is no is that the majority shareholders unfair prejudice petition? Should it be reason to accord to it a quality which it purchase the minority’s shares: Grace the date of the trial of the petition? lacks”: Irvine v Irvine [2007] 1 BCLC 445. v Biagioli [2006] 2 BCLC 70 at 96 (“In Should it be the date of the Order? However, there is no rule of universal most cases, the usual order will be Should it be some other date? Should application excluding an undiscounted one requiring the respondents to buy interest be awarded? valuation where there is no quasi- out the petitioner at a price to be fixed partnership: Re Sunrise Radio [2010] by the court. This is normally the Method 1 BCLC 367. most appropriate order to deal with The court will usually value a company intra-company disputes involving Date of Valuation on a going concern basis rather than a small private companies” per Patten break up basis in circumstances where There is no general rule as to which J). The reason for that is because it the purchaser intends to continue the date is picked by reference to which a means that the petitioner can leave business: Parkinson v Eurofinance Group valuation is carried out. As with the the company, with the petitioner Ltd [2001] 1 BCLC 720 at [99]-[100]; CVC/ question of remedy as a whole, the taking a fair share of the company’s Opportunity Equity Partners Ltd v Demarco overriding requirement is that the business and assets. At the same Almeida [2002] 2 BCLC 108 at [38] where valuation should be fair on the facts of time the company will be able to Lord Millett said “…it is difficult to see the case in question: Profinance Trust continue without the petitioner being a any justification for adopting a break SA v Gladstone [2002] 1 WLR 1024. The shareholder (thereby eliminating future up or liquidation basis of valuation starting point is usually taken to be the difficulties between shareholders). where the purchaser intends to carry date on which the shares are ordered In rare cases the court can order the on the business of the company as a to be purchased: Re London School of minority purchase the majority’s going concern”. In the absence of a clear Electronics [1986] 1 Ch 211 (“Prima facie shares: Re a Company (No 00789 of 1987) indication to the contrary in an order an interest in a going concern ought to ex parte Shooter [1990] BCLC 384; Re SOUTH SQUARE DIGEST July 2019 www.southsquare.com Advert 10% discount 63 Butterworths Insolvency Law Handbook

Dates which courts have suggested or selected Twenty-first Edition Edited by Glen Davis QC and Marcus Haywood other than the date on which the shares were Butterworths Insolvency Law Handbook is the most comprehensive single ordered to be purchased include (1) the date of collection of statutory source material and practice directions relating to expulsion from the company: Croly v Good [2011] BCC 105; Re Via Servis, Skala v Via Servis Ltd [2014] insolvency law in England, Wales and Scotland. It is the essential reference EWHC 3069 (Ch); In Re Foundry Minatures [2017] 2 source for lawyers, accountants, insolvency practitioners, regulators BCLC 489 (2) another date prior to the presentation and students. of the petition: In Re Blue Index [2014] EWHC 2680 (Ch); Wann v Birkinshaw [2017] EWCA Civ 84 (3) the Why Insolvency Law Handbook? date of the petition: Re Cumana Ltd [1986]; In Re • Have it all covered with the most important statutes, statutory instruments London School of Economics [1986] 1 Ch 211; BCLC and European legislation 430; Profinance Trust v Gladstone SA [2002] 1 BCLC 141; (3) the most recent date for which reliable • Advise clients with confidence as legislation is printed as currently in force figures were available: Re Macro (Ipswich) Ltd [1994] with all amendments, repeals and revocations 2 BCLC 354. However the court cannot select a date prior to the time when the unfair prejudice started. • Save time with detailed, technical annotations regarding commencement as well as cross-references to other legislation, commencement tables and Interest forms tables Where the Court picks a date earlier than the date on which the shares are ordered to be purchased, • Work more efficiently with a user-friendly, chronological and industry Prima facie an interest in a going the court has power to award the equivalent of recognised layout concern ought to be valued at interest. However the court’s power to award this should be exercised with great caution and only What’s New? where it was necessary to achieve a just result: the date on which the shares are Now in its 21st edition, this essential reference source for lawyers, accountants, Profinance Trust SA v Gladstone [2002] 1 WLR 1024. insolvency practitioners, regulators and students is fully brought up to date to ordered to be purchased See also Re Blue Index Ltd; Murrell v Swallow & Ors [2014] EWHC 2680 (Ch). April 2019 to include all recent amendments and new legislation including: Other Matters • Relevant provisions of the European Union (Withdrawal) Act 2018, the Insolvency (Amendment) (EU Exit) Regulations 2019, and the Credit As part of the valuation exercise, and so as Institutions and Insurance Undertakings Reorganisation and Winding Up to ensure fairness, the court can order that adjustments be made to the value of the (Amendment) (EU Exit) Regulations 2019 are included in a new Part 18 petitioner’s shares: Re Macro (Ipswich) Ltd [1994] 2 • The Education Administration Rules 2018 and the Further Education BCLC 354 at 409-410 so as to reflect wrongs which Bodies (Insolvency) Regulations 2019 have been done to the company, for example, by way of the diversion of business from the company, • The Housing Administration (England and Wales) Rules 2018 and the sums taken from the company, excessive Insolvency of Registered Providers of Social Housing Regulations 2018 remuneration, excessive management fees, excessive consultancy fees, excessive expenses • The Insolvency (Scotland) (Receivership and Winding up) Rules 2018 and even one off items. Similarly the court can and the Insolvency (Scotland) (Company Voluntary Arrangements and order that a valuation be carried out on assumed Administration) Rules 2018, which replace the Insolvency (Scotland) factual assumptions, for example that no unfair Rules 1986 prejudice had happened. • The Bankruptcy Fees (Scotland) Regulations 2018 A share purchase order can be made despite the fact that a respondent does not have the money • Practice Direction on Insolvency Proceedings (July 2018) be valued at the date on which it is ordered to be to pay: Re Cumana Ltd [1986] BCLC 430 where purchased”: per Nourse J); Re Sunrise Radio [2010] Lawton LJ said that “The fact that a wrongdoer is 1 BCLC 367. This, of course, reflects the value of impecunious is no reason why judgment should Publication details: For more information: what the shareholder is actually selling. not be given against him for the amount of compensation due to his victim”. See also Re Ghyll Publication scheduled: May 2019 www.lexisnexis.co.uk/insolvency21 However other factors present in a particular Beck Driving Range Ltd [1993] BCLC 1126 at 1134 and Formats available: case might point to another date being the most [email protected] Re Regional Airports Ltd [1999] 2 BCLC 30. • Print (paperback): ISBN: 9781474311328 – Price: £189.99 £170.99 appropriate. An earlier date might be more • Ebook: ISBN: 9781474313773 – Price: £189.99 + VAT £170.99 + VAT 0330 161 1234 appropriate where, for example, the company Where a court has found unfair prejudice and has been deprived of its business or there had ordered the shares of a company to be purchased • Print + Ebook: ISBN: Z000050820808 – Price: £237.49 + VAT £213.74 + VAT When placing your order, please quote your unique code 101494 been a major change in the company’s business by the petitioner, the trial judge has a broad or there had been a general fall in the market discretion to determine the basis on which the post presentation of petition: Profinance Trust purchase should be made and on appeal the SA v Gladstone [2002] 1 WLR 1024. Similarly the Court of Appeal will be slow to interfere with the acceptance or refusal of offers before or during the exercise of that discretion: Re Cumana Ltd [1986] The Future of Law Since 1818 proceedings can be relevant. BCLC 430. 

RELX (UK) Limited, trading as LexisNexis®. Registered office 1-3 Strand London WC2N 5JR. Registered in England number 2746621. VAT Registered No. GB 730 8595 20. LexisNexis and the Knowledge Burst logo are registered trademarks of RELX Inc. © 2019 LexisNexis SA-0519-051. The information in this document is current as of May 2019 and is subject to change without notice. SOUTH SQUARE DIGEST July 2019 www.southsquare.com Dispute resolution: A new beginning? 65

Dispute resolution: here are various means by which disputes arising in the course T of insolvency or restructuring may be resolved, wholly or in part, through involvement from the private sector. One example is A new beginning? the process of mediation. Another is the use of arbitration, in cases where there is no need to appoint representatives for particular classes of creditors. A third is the use of a less rigid adjudication regime where, for example, resolution might be achieved subject to court consent. In addition to the likelihood of bringing a more swift and cost-effective end to disputes of this type, in cases where that is not achieved there remains the advantage of potentially narrowing issues for court determination.

INSOL International has been negotiating a means by which particular Recommendations of the exploring ideas to promote mediation debt is restructured, or priorities are Working Group (in its broadest sense) to assist in the compromised. That may, for example, The Working Group reported to the resolution of cross-border claims. take the form of active negotiations or Executive Committee of INSOL on The purpose of this article is to draw a report to a court designed to narrow 21 December 2018. Recognising that attention to INSOL’s work, areas in issues. Using the notion of “mediation” its mandate was directed to the use which further consultation is necessary, in that broader context is not dissimilar of “mediation”, the Working Group and the possibility of enlarging the from the appointment of persons recommended: scope of its project to encompass other to act as agents for courts to craft a forms of dispute resolution. protocol to enable proper discussions a. The existing INSOL “College of to take place before a court is asked to Mediation” should be disestablished approve any proposed compromise or in its present form. Working Group 22 restructuring. b. A new panel of mediators should be In late 2018, as part of its “Toward I was asked to chair Working Group 22. established by INSOL, on the basis 2021” Task Force, INSOL formed I was fortunate to have a distinguished that it is marketed as a group of Working Group 22. The Working group of practitioners, judges and accredited persons whom INSOL is Group’s mandate was to review the bankers to consider the issues raised. prepared to hold out as capable of operation and performance of the The late Gabriel Moss QC was a member facilitating the resolution of cross College of Mediation that INSOL had of the Working Group. As everyone border insolvency disputes. previously established, and to make would expect, he was able to provide recommendations about the way in c. INSOL should take primary many constructive comments for which it could encourage mediation of responsibility for the accreditation development of the Group’s thinking. cross border insolvency or restructuring function, appointment mechanisms At the end of this article, I add a short disputes. Before discussing the and the preparation of standard personal tribute to Gabriel. mandate given to Working Group 22 form agreements and orders to assist and its recommendations, I explain the In addition to Gabriel Moss and myself, parties in the use of mediation as a various types of processes that might the Working Group comprised Mr dispute resolution tool. fall under the rubric of mediation. Justice Alastair Norris of the High d. To ensure that the panel meets Court of England and Wales; Hon “Mediation” can mean different things market needs: Allan Gropper, a retired Judge of the to different people. Some regard that US Bankruptcy Court for the Southern i. The underlying ideas should be term as denoting a formal process District of New York; Hon Anselmo presented to judicial, academic, under which an independent person Reyes, a retired Judge of the High financiers’ and regulators’ meetings. is appointed by all parties, on strictly Court of Hong Kong and (presently) an defined terms, to facilitate resolution ii. After feedback from those groups International Judge of the Singapore of disputes among them. But, the has been received, further market International Commercial Court; Mr concept can go wider than that. In the research should be undertaken Justice Geoffrey Kiryabwire, of the insolvency and restructuring context, through organisations such as Court of Appeal of Uganda; Mr Justice the idea of an independent facilitator, G36, INSOL’s small to medium size Ian Kawaley, of the Grand Court of the perhaps one appointed by a court of enterprise taskforce, and the African Cayman Islands; Mr Mark Robinson, competent jurisdiction to sound out Round Table. a past president of INSOL from stakeholders as to their intentions Sydney, and Mr Mark Sutton, of the iii.The final terms of the panel and needs in a confidential manner, Commonwealth Bank of Australia, now accreditation and appointment and to assist in reaching agreement, based in Melbourne. Mark Sutton is processes should be fixed after that HON. PAUL HEATH QC is likely to enhance the possibility of the Chair of INSOL’s Financiers’ Group. consultation has taken place. SOUTH SQUARE DIGEST July 2019 www.southsquare.com Dispute resolution: A new beginning? 67

The “College of Mediation” is holding out the applicant as refer later. That Convention opens for someone competent and experienced signature in Singapore on 7 August 2019, By way of background, some years to carry out the necessary work. and provides a mechanism whereby ago INSOL created its “International courts in different states may enforce College of Mediation” in an endeavour b. As an appointor, in cases where mediated outcomes in much the same to fill what was perceived to be a the parties cannot agree on who way that the New York Convention market void in relation to the use of should be the mediator and seek operates to ensure multi-jurisdictional mediation in cross border insolvency appointment by an independent enforcement of arbitral awards. or restructuring. The nature and third party in whom they repose purpose of the appointment of panel confidence. A court may also use Allied to our impression that the members was set out in a document INSOL as the appointor in certain reason for the moribund state of the called “College of Mediation Panel circumstances. College of Mediation is a need to focus Appointment,” which remains on more directly on disputes to which the c. As a body responsible for preparing INSOL’s website. parties would not necessarily appoint standard form appointment someone of their own choosing. It is In short: agreements (referable to specific important for the INSOL Financiers’ governing law or more widely a. Application was to be made by Group, and G36 Members (such as expressed), mediation agreements individual INSOL members for South Square) to be prepared (in that set out the proposed structure appointment to the panel. During appropriate cases) to embrace the use of the mediation and a standard the period of his or her appointment, of the mediation model and promote it form of order that a court could the mediator was entitled to describe within their own spheres of influence. make to give effect to an agreed himself or herself as an “INSOL The support of financial institutions facilitated settlement. International Mediator”. that are likely to have debt recovery Some of the work in which INSOL is problems in multiple jurisdictions is b. An INSOL International Mediator’s involved is directed towards capacity important. Consultation with those role was focussed on work arising building for the judiciary of developing groups will be progressed soon. out of cross-border insolvency countries. The aim is to provide proceedings or restructuring, or We did not consider that there was information from experienced judges otherwise involving insolvency law, any reason to restrict the number of and practitioners from other countries regulation or practice. panel members from any particular to enable judges in those countries jurisdiction. Often a person from a c. Appointed mediators were required to deal with cross-border insolvency neutral jurisdiction, in the sense that to agree that they would not accept proceedings efficiently and effectively. it has no participant in the particular any appointment within that scope One opportunity is to encourage judges cross-border case, may be the best of work other than as an INSOL No empirical research has been that were not being met, to which c. In States where further assistance in such jurisdictions that have adopted appointee. INSOL’s unique selling point International Mediator. undertaken to ascertain why INSOL could usefully contribute. The may be required to make a mediation the UNCITRAL Model Law on Cross- is that it is regarded as a trusted neutral appointments have not been sought Working Group identified three specific panel attractive to the market, border Insolvency to use art 27 (or any d. The INSOL International Mediator in the area of cross-border insolvency from the International Mediation examples of opportunities for INSOL consideration should be given to enacted equivalent) to appoint a person was to pay to INSOL a commission and is known to promote multinational Panel. Some anecdotal evidence to promote a mediation service: INSOL entering into collaborative to be nominated by INSOL to undertake (in sterling) on fees received in solutions to problems in a principled was available, from members of arrangements with institutes that functions involving co-operation and respect of each appointment. a. The first involved (what was and cost-effective manner. INSOL the Working Group and beyond. We carry out roles in the accreditation direct communication under arts 25 perceived rightly or wrongly to be) a has the market gravitas to be taken e. INSOL agreed to publicise the concluded that the main reason for the and appointment of mediators. By and 26. In some cases, a court in a relative lack of support in civil law seriously in accrediting mediators and existence of the panel of mediators lack of market interest was the nature way of example only, such institutes developing country may choose to countries for mediation running in appointing them, whether working and to provide, on request, details of the disputes in which an INSOL may include organisations such as appoint one mediator nominated by parallel with court proceedings. alone or in collaboration with institutes of panel members, together with International Mediator might the Chartered Institute of Arbitrators INSOL and another local practitioner Greater education of the mediation of mediators in other jurisdictions who biographical information. be engaged. In cases involving large in the United Kingdom or the whom the INSOL appointee could assist process and the ways in which courts have experience in the accreditation multi-party insolvency/restructuring Arbitrators’ and Mediators’ Institute in gaining practical understandings f. The underlying principles under might assist resolution in parallel and appointment processes. disputes, the stakeholders will often of New Zealand. No approach has yet of the issues that arise. The need for which an INSOL International may be desirable. be able to identify an appropriate been made to any organisation of cross-border disputes to be resolved The types of dispute that might be Mediator was to perform his or person to facilitate negotiations, b. The second involved the need for that type. more efficiently and effectively by resolved by mediation are manifold. As her functions were “objectivity, without recourse to an INSOL panel. care in promoting a mediation judges and mediators working in indicated previously, in a restructuring impartiality and proportionality”. We identified three discrete functions At the other end of the scale, fees service in a State in which English tandem is something we considered case, whether appointed by a court or that INSOL could perform, either on Although the Working Group considered charged by someone with the standing is not the predominant language. ought to be promoted. not, an independent facilitator may its own or in collaboration with other that INSOL should maintain a mediation and experience of an INSOL panel Anselmo Reyes mentioned Japan as be able to move among stakeholders organisations: The idea that a standard form of court panel, it took the view that the “College mediator may have been too high for an example of a country in which the to facilitate discussion of the way order to enforce mediation agreements of Mediation” should be rebranded the amounts involved to bear. idea of mediation would be attractive, a. As a body responsible for the in which they will each participate, could be developed has some synergy (and its focus changed), so as to avoid but some work would need to be accreditation of mediators to either as a holder of debt or equity, in Opportunities for the future with the UNCITRAL Convention on undesirable linkages with a process that done to ensure that mediators with perform this type of work. In other a restructured company. In such cases International Settlement Agreements has not received market support. It did seem to the Working Group appropriate language and cultural words, by accepting an application it will be important that the facilitator Resulting from Mediation, to which I that there were other market needs skills were available. for appointment to its panel, INSOL seeks in advance and is given SOUTH SQUARE DIGEST July 2019 www.southsquare.com Bermuda: Back to the Future 69

A personal tribute to Gabriel Moss QC I first met Gabriel Moss in 1990. We Bermuda: were on the opposite sides of a Privy Council appeal, Elders Pastoral Ltd v Bank of New Zealand. Sadly, for me, The INSOL initiative to create Gabriel won! However, I admired the Back to the Future silky style of advocacy that he brought “Mediation Colloquium” comes to argument of the issues that arose and the way in which he had mastered at an opportune moment elements of unfamiliar (and, perhaps, uniquely) New Zealand law, dealing with a security interest over the progeny of sheep and the proceeds of their sale!

Over the following years, I had the privilege of speaking with Gabriel at a number of international conferences. The most notable of these were at the (confidentially) proper information that the efforts undertaken by INSOL INSOL Quadrennial Congresses in 2001 as to the aims of each participant meet the needs of its members and the (London) and 2017 (Sydney). At the first stakeholder and the opportunity to broader financial markets, and that of those, we jointly chaired a session discuss their concerns in advance they are supported by them. called “In My Judgment” in which we of a formal meeting at which all can interviewed in turn three eminent I emphasise that the name “Mediation attend with their advisers. Such judges. One was Lord Millett. When Colloquium” is not set in concrete. discussions would remain confidential starting his question on the issue of If it were decided that other resolution unless disclosure were authorised by conflicts of interest, Gabriel referred options, including arbitration, should the particular stakeholder. Even at a to the (then) recent Pinochet litigation. be considered, it is likely that the name plenary meeting, it may be necessary Gabriel commenced his questioning could change to “Dispute Resolution for separate meetings to be held with by saying to Lord Millett: “I gather one Colloquium”, or something similar. senior members of the participant of your colleagues [Lord Hoffmann, who entities and/or their lawyers to The INSOL initiative comes at an was in the audience] has had a spot of assess costs and risks of litigation, opportune moment. The General bother with this recently”. In Sydney, we so that the business people involved Assembly of the United Nations presented at a “Hot Topics” session. are encouraged to make pragmatic recently adopted the Convention on Gabriel took the lead in nominating economic decisions later, on the International Settlement Agreements me to become an associate of South basis of the risks identified. Resulting from Mediation. That Square, something for which I shall Convention will become known as INSOL initiatives always be grateful. I regard it as a the “Singapore Convention”. The privilege to be associated with South INSOL is to establish shortly a presence Singapore Convention concerns Square; Gabriel’s set. in Maxwell Chambers in Singapore, commercial mediation agreements to promote itself within the region. and provides a mechanism by which Last year, Gabriel spoke as a keynote Maxwell Chambers is the place from such agreements can be enforced speaker at our annual insolvency which the Singapore International internationally. Such a mechanism conference in Auckland, which is Arbitration Centre operates and is the may assist when, for example, a run by New Zealand’s affiliate of INSOL home to many chambers from London number of secured creditors dispute International. He presented a typically and beyond who are involved in both priority in an international insolvency. insightful paper. mediation and arbitration. Bankside It is different, however, from the types Gabriel was someone whom I respected Chambers in Auckland (the Chambers of dispute which may arise among greatly. His academic and practical of which I am a member in New stakeholders when deciding the form influence of the law in the area of cross- Zealand) has taken a room in of a reorganisation plan or scheme. border insolvency is unparalleled in proximity to the one to be occupied This adds a consensual dimension to common law countries. I learned a great by INSOL International. international enforcement regimes. deal from him and was saddened to n August 2014, I wrote an article for South Square Digest, It complements the more engrained INSOL has decided to create a hear of his tragic and sudden death. Iin which I tried to predict the sorts of disputes that recognition and enforcement “Mediation Colloquium” in order to I offer my condolences to Gabriel’s wife, would keep us busy in Bermuda over the next 5 years. mechanisms found under the New develop the Working Group’s ideas. Judith, and his family on their loss; as York Convention, for arbitration, and I even offered to report back to you in 2019 (five years I have been appointed as the Inaugural well as his colleagues at South Square.  various procedures for the reciprocal later) to reflect on the accuracy (or inaccuracy) of my Chair of that Colloquium. Soon, a enforcement of court judgments that predictions. co-chair will be appointed. I intend to Since writing this article Felicity Toube are in force in particular countries. ensure that representatives of INSOL’s has been appointed co-chair. If you wish There will be a need to promote Financiers’ Group and G36 are invited to comment on the proposals set at in this adoption of the Convention in to that Colloquium, the first of which article, do please contact us at individual jurisdictions. will be held in Cape Town, South Africa [email protected] or in March 2020. It is important both [email protected] ALEX POTTS QC SOUTH SQUARE DIGEST July 2019 www.southsquare.com Bermuda: Back to the Future 71

For those readers who might not have such as jurisdiction, interim injunctive law disputes over the past few years, a actions in Bermuda (in the case of the August 2014 edition of South relief, confidentiality, and discovery number of which have made their way a Bermuda company that was in UK Square Digest readily to hand (or who obligations. to the Privy Council in London. administration). The Chief Justice might need to refresh their memory), subsequently changed the Rules of In the more traditional Bermuda In Mexico Infrastructure Finance LLC I am pleased to remind you that I had Court to make it easier for directors and insurance and reinsurance space, v The Corporation of Hamilton [2019] forecast that Bermuda would generate, officers of Bermuda companies to be there have been the usual sorts of UKPC 2, the Privy Council held that a and witness: sued in Bermuda on the one hand, while arbitration-related disputes on the issue guarantee granted by the Corporation of bringing some degree of procedural • An increase in claims and disputes of arbitrator bias (Halliburton Co v Chubb Hamilton (a Bermudian local authority order to the chaos of common law involving Insurance Linked Bermuda Insurance Ltd [2018] EWCA Civ responsible for the management of derivative actions on the other. Securities (ILS) and collateralized 817), third arbitrator appointments (S the main business district, the City of reinsurance products (in addition v T [2018] SC Bda 9 Civ), and anti-suit Hamilton), to support borrowing by a The restructuring of Bermuda- to traditional insurance and injunctions (Allied World & Inshore v MF private developer for a hotel project, incorporated Noble Group Ltd involved reinsurance coverage disputes); Global [2017] SC Bda 6 Com, [2017] SC was ultra vires and unenforceable. some creative litigation in Singapore, a Bda 7 Com). It is reassuring to note that The underlying hotel project (and the COMI-shift from Hong Kong to London, • An explosion in the number of arbitration agreements continue to project finance that went missing) has and the approval of a UK and Bermuda regulatory enforcement actions and provoke almost as much litigation as generated asset recovery and satellite Scheme of Arrangement: see In the commercial public law disputes; and they are designed to avoid! litigation in numerous jurisdictions, matter of Noble Group Ltd [2018] EWHC • An increasing number of high-value including the US, Bermuda, and the 3092 (Ch) and [2018] EWHC 2911 (Ch). Regulatory enforcement trusts disputes. UK: see, for example, Argyle UAE Ltd v actions and commercial In Capital Partners Securities v Sturgeon Par-La-Ville Hotel & Residences Ltd [2018] Back to the Future public law disputes Central Asia Balanced Fund Ltd [2018] CA EWCA Civ 1762, in which the English Trusts disputes Restructuring and Bda 5 Civ, the Bermuda Court of Appeal Was my five-year weather forecast As I guessed in August 2014, the Court of Appeal upheld the award insolvency disputes It did not take much imagination on took the unusual course of winding up correct? To a large extent, yes, I think it Bermuda Courts have dealt with a of summary judgment on an unjust my part to predict that the Bermuda South Square Digest readers will a solvent fund on just and equitable was: although not unequivocally so, and variety of regulatory enforcement enrichment claim. Courts would be (and have been) very be pleased to note that there have grounds, on appeal. Subsequently, the more by luck than by design. actions over the past five years, In Bermuda Bar Council v Walkers busy with high-value trusts litigation been a decent number of Bermuda Liquidators secured recognition in a reflection of the Bermuda ILS disputes (Bermuda) Limited [2019] UKPC 25, the and trusts restructuring applications restructuring and insolvency cases England and Wales under the Government’s strong desire to satisfy Privy Council held that the Bermuda over the past five years. At the risk of during the past five years: certainly Cross-Border Insolvency Regulations There have indeed been a significant international regulatory and tax Bar Council had been wrong to refuse disappointing you, dear reader, I will more than I had predicted there 2006, despite the notable absence of number of ILS-related disputes in the information co-operation standards Walkers’ newly established Bermuda not provide you with all of the various might be. any state of insolvency: see Re Sturgeon past five years, reflecting the growth in (while respecting commercial office a Certificate of Recognition, judgment citations, since most of Central Asia Balanced Fund Ltd (in the ILS market. confidentiality and the right to a fair The names of Bermuda-incorporated thereby restricting Walkers’ ability Bermuda’s reported trusts judgments Liquidation) [2019] EWHC 1215 (Ch). hearing, to the extent appropriate): but foreign-listed companies such as The main litigation activity in Bermuda, to practice Bermuda law through a have been anonymized to protect the see, for example, Minister of Finance v Up Energy Development, Energy XXI, In Kingboard Chemical Holdings Ltd v however, has not been triggered by corporate vehicle. The Privy Council’s private lives of the rich and famous. AD [2015] CA (Bda) 18 Civ, and Minister of Celestial Nutrifoods Ltd, Opus Offshore Annuity & Life Re [2017] CA (Bda) 3 Civ, catastrophic and unpredictable events ruling should prove to be a positive Finance v AP [2016] CA (Bda) 29 Civ. Most noteworthy, perhaps, is the Ltd, Z-Obee Ltd, C&J Energy Services the Bermuda Court of Appeal reversed of the sort that I had in mind. development for all local businesses pending (public) litigation in the Ltd, and Seadrill Drilling have all been the trial judge’s finding of minority The Bermuda Courts have also seen seeking to attract foreign investment Instead, it has been largely caused case of Wong, Wen-Young v Grand View added to the annals of the Bermuda oppression, and the appeal to the their fair share of commercial public and foreign talent to Bermuda. by predictable human behavior and Private Trust Company Limited, some Law Reports. Privy Council was not pursued. regrettable misunderstandings in the of the background of which has been In PwC v Saad [2014] UKPC 35 and PwC Conclusion workplace, resulting in the usual sorts published in an interlocutory judgment v Singularis [2014] UKPC 36, the Privy of claims for breach of directors’ duties, at [2019] SC Bda 1 Com. The 10-week Above and beyond the disputes of Council brought “clarity” to the scope breach of confidence actions, wrongful trial is scheduled to take place in 2020 the past five years, the Bermuda of the Bermuda Court’s common law dismissal proceedings, and claims (coinciding, strangely enough, with legal profession and the Bermuda powers to assist a foreign liquidator for breach of employees’ restrictive the 21st anniversary of the notorious judiciary have experienced significant or to wind up a foreign company. The covenants (often involving allegations Thyssen-Bornemisza trial of 1999). changes, on both a structural and Privy Council subsequently concluded of fraud and dishonesty). individual level. Bermuda trusts-related litigation has that the Bermuda-registered branch of Various claims and disputes of this Was my five-year weather forecast also stretched as far as Courtrooms PwC was not entitled to recover its costs Bermuda’s Government and the private sort have involved Bermuda companies in Canada, the USA and in the UK. In of compliance with disclosure orders sector continue to respond and adapt such as Athene Holding Limited, Markel correct? To a large extent, yes St. John’s Trust Co (PVT) Ltd v Evatt obtained by foreign liquidators, even to changing regulatory and economic Catco Investment Management Ltd, Tamine [2018] EWHC 3629, for example, though those disclosure orders were conditions, which present as many Hiscox Insurance Co (Bermuda) Ltd, the English High Court ordered a subsequently set aside: see PwC v Saad challenges as they do opportunities. and Karson Management (Bermuda) Ltd, former director of a Bermudian trust [2016] UKPC 33. Whatever else the future holds, I with proceedings having been brought company to deliver up property and In Majuro Investment Corp v Timis feel fairly confident (based on past in Courts and arbitration tribunals in documents belonging to the company. [2015] SC Bda 87 Civ, [2015] SC Bda performance) that the next five years Bermuda, the USA, and the UK. These No surprise, there. 88 Civ, the Bermuda Supreme Court will be busy ones for dispute resolution proceedings have resulted in the usual conducted a thorough analysis of the in, and involving, Bermuda. (extensive) skirmishing over issues common law relating to derivative Quo fata ferunt!  SOUTH SQUARE DIGEST July 2019 www.southsquare.com Helena Normanton:A woman of many firsts 73

LEGAL EYE:

Despite her application being rejected, her the front cover of the pamphlet queried whether prediction proved true, and only one year later, women should “be paid according to their sex or the Sex Disqualification (Removal) Act 1919 their work?”: a question that still dominates was passed allowing women to enter the legal society today. profession for the first time. Within just 48 hours In the same vein as the recently announced of the Act becoming law, Helena made a second reforms to divorce law, Normanton also fought and successful application to Middle Temple. hard to equalise and standardise the grounds on She was called to the Bar on 17 November 1922 (a which a petition of divorce could be brought. She few months after the non-practicing Ivy Williams argued that the cost of divorce and the limited had become the first woman to do so) and went on grounds on which a petition could be filed resulted to become the first practicing female barrister. in separated partners who could not divorce, who This was not Normanton’s only “first”. She was remained legally married, and who were forced the first woman to obtain a divorce for a client instead to form new relationships which could not (1922), she was first woman to lead a prosecution be recognised by the state. At the annual meeting in a murder trial (1948), she was the first female of the National Council of Women in October 1934, counsel to appear in the High Court of Justice her resolution to reform matrimonial law was (1922), the Old Bailey (1924), and the London strongly opposed by the Mother’s Union and was Helena Sessions (1926). She was the first woman to passed only with the addition of a clause which Normanton obtain the highest amount of damages in a case disallowed divorce during the first five years of involving a breach of promise (£1250 plus costs). marriage. As recorded in the Helena Normanton was a She was also the first woman to conduct a case Archive, she publicly declared that the inclusion trailblazer, in the United States (1925) and, along with Rose of this clause was a “cowardly capitulation to both as a Heilbron in 1949, she became the first female reactionary ecclesiastics, who would rather never King’s Counsel. see young people free to marry.” barrister and

And it was not only in the legal world where As a historian, who founded the Magna Carta a campaigner Helena Normanton was a pioneer. On 26 October Society and was a founding member of the for women’s 1921 Helena married Gavin Bowman Watson Horatian Society, Normanton is said to have rights. Her Clark. In doing so she refused to take her been convinced that the limitations and husband’s surname, wanting to maintain restrictions placed on the women of her day legacy continuity of identity in her professional career, were a recent phenomenon, often referring to certainly and became the first married British woman to women’s past achievements in her arguments lives on be given a passport in her maiden name (using supporting the extension of women’s rights. her passport to travel to the US to mentor a group Indeed, she urged women to “press forward to Helena Normanton of women campaigning for the same right). On open the Church, the Stock Exchange, the House being called to the Bar, the Lord Chancellor is of Lords, the Diplomatic and Consular Services, said to have tried to persuade her to take her the Press Gallery in the House of Commons, and husband’s name. Normanton again refused. the Overseas Civil Services to women”. We are (1882-1957): Of this, she wrote in the Yorkshire Post on 26 fortunate that such rallying cries were listened to. March 1954: “I could see that if a Lord Chancellor was It is sad to see that press coverage of her tour interested, I must have been exercising an important of America in 1925 focused on her appearance liberty…Anne Boleyn did not change her name even rather than her accolades – a trait that is often A woman of many firsts though she married the King. He at least had the still prevalent today – with a reporter for The decency to leave her with her own name even though World recording in an article dated 7 January: he took her head.” “Mrs. Normanton is tall and stout build. She is in every It will be no revelation to readers that Helena was respect the typical matron. Distinctly feminine in “I believe that the sex-exclusiveness of the legal profession a staunch advocate for female rights, especially appearance and manner and also in inclination, as was is doomed. Women won’t stand it, and men, who have been those of working women. She was a member of the proved when she left the group of reports cooling their learning a great deal lately about women’s capabilities, will Women’s Social and Political Union, described by heels in her hotel while she walked up and down Fifth not tolerate it either.” her niece Elsie Cannon as “a suffragette – though Avenue ‘to look at the shops’.” not of the ultra-militant kind.” Indeed, words were Nevertheless, Helena Normanton was a trailblazer, o were the words of Helena Normanton in her clearly her weapon (an unsurprising choice both as a barrister and as a campaigner for first application to be admitted to The Honourable for a member of the Bar), and in 1914 whilst S women’s rights. Her legacy certainly lives on. pursuing a teaching career in which she lectured, Society of the Middle Temple in 1918 following the Indeed, only earlier this year did Helena become predominantly in history, at both Glasgow and Representation of the People Act 1918 (which had given the first woman after whom a set of barristers has London universities, she published a pamphlet suffrage to property owning women over 30). been named: Normanton Chambers. And so, 100 entitled “Sex Differentiation in Salary”. Arguing years on, Helena Normanton is still a woman of that women should have equal pay for equal work, ROSE LAGRAM-TAYLOR firsts, paving the way for the rest of us to follow. SOUTH SQUARE DIGEST July 2019 www.southsquare.com South Square Story: Cyril Salmon 75

Blitzed crown office row and the shell of Inner Temple with Paper Buildings on the right South Square Story

Cyril Salmon’s Chambers In the first article, I said that Salmon’s clerk cases. Lord Morris would arrive in court to sit 1. This constituency, created in 1918, has must have given good service, because Salmon behind Salmon, wearing a morning coat and returned a Labour MP in regretted that he did not return after the War. At carrying a silk hat. every election, except for the 1976 by-election. the time the article was published I did not know Michael Weaver who this clerk was. Since then, Sir Anthony Evans 2 Dolores Ibárruri, in the second world war: 1895-1989. The daughter has kindly lent me the papers he used in writing Michael Weaver was born in the Wirral in 1912. He of a Basque miner, she the article about Lord Salmon in the Oxford was a tall, elegant man who had been educated at worked as a journalist under the name “La Dictionary of National Biography. These include Eton and Trinity College, Cambridge, where he had Pasionaria” (the passion destruction and renewal; the recollections of Colin Sleeman who had joined been captain of the University skiing team. In 1936 flower) and helped found the Spanish Communist the chambers in June 1939, having been one of he was called to the Bar and became a member Party in 1920. During the Spanish Civil War, she Salmon’s pupils. They give a vivid picture of life of chambers at 3 Temple Gardens. He had rather became famous for her in chambers and reveal not only the identity of wider social and political interests than could be passionate exhortations to the Spanish people to the arrival of Claude Duveen the clerk, but also another glamorous, but short- satisfied by a career restricted to the Bar. In 1936 resist the Fascist forces, lived, member of chambers. I will begin with he was adopted as Conservative party candidate declaring: “It is better 1 to die on your feet than to these discoveries. for Workington. His support for the Republicans live on your knees.” After in Spain and his concern about old age pensions Franco’s victory, she fled Albert W Heymer to the USSR and did not show him to be a man on the left of the party. In return to Spain It is very likely that one of the reasons why Salmon 1938, he travelled to Spain, where he witnessed the until 1977. left Walter Monckton’s chambers in 1933 was that latter stages of the Spanish Civil War from both 3 Like his letter of 20 December 1938, he had found an experienced clerk to manage his Franco’s Nationalist and the Republican sides. In about the courage of new chambers. This was Albert W Heymer, who Madrid he met La Pasionaria2 and experienced the Republican women, these were written had been clerk to Robert Wright KC, when he had aerial bombardment of that city by Franco’s forces. from 6 Crown Office been in practice at 2 Pump Court, and who had He returned to England in the autumn of 1938 as Row. Below his first long letter of 18 July, the followed his master to the King’s Bench, when a fervent supporter of the Republican cause. He editor of the Times wrote Wright was appointed a High Court judge. In spoke at public meetings in its support and helped in capital letters: “Very heavy pressure compels April 1932, Wright was appointed to the House of to arrange shipments of food to Spain. us to ask correspondents Lords and Albert, who was then nearly 60, wanted to write as concisely as By December 1938, Weaver had joined Salmon’s possible. Letters intended another clerking job. It was perhaps because for publication should be chambers at 6 Crown Office Row, but he does not Wright and Salmon were neighbours in Hornton typed or written on one seem to have developed much of a practice there. side only of the paper.” Street, London W8, that Salmon became aware Instead he continued with his political activities 4 Weaver may have that Albert was available. Lord Wright retained a and was commissioned as a Regular Army Reserve separated from his strong affection for Albert and would often call colleagues, because the Officer and became a second lieutenant in the 1941 Law List shows him in at 6 Crown Office Row to see his old clerk. This cavalry. In March 1939, he attended a reception at at 1 Crown Office Row, connection between Lord Wright and Albert seems but the others still at 6 10 Downing Street, given by the Prime Minister. Crown Office Row. to have led Sleeman to regard Lord Wright as the At meetings and in letters to the Times in July titular head of the chambers. 1939,3 Weaver urged the Government to increase Albert proved to be an excellent clerk who was the old age pension from the inadequate rate of 10 utterly dedicated to Salmon’s practice. Each shillings per week. morning Salmon would arrive at chambers by World War II: destruction and taxi, get out, leaving the cab door open, and march personal tragedy straight into his room. Albert would come out, collect Salmon’s brief case from the taxi and pay Destruction of the Temple the cabbie. As an experienced clerk, Albert knew Sometime after April 1940, the chambers at 6 how to manage and build Salmon’s practice. To Crown Office closed as the members of chambers prevent Salmon from feeling overwhelmed by the enlisted for active service. Salmon and Potter were volume of work coming into chambers for him, both commissioned in July 1940; Salmon in the he first article, tracing the history of the chambers now at South Albert would conceal the papers on their arrival Royal Artillery and Potter in the RAF Volunteer TSquare (Digest, March 2019, pp 74-86), ended in about April 1940, and produce two or three sets each day for Salmon when Cyril Salmon and the other members of chambers enlisted for Force. Weaver joined the King’s Dragoon Guards to take home and work on in the evening. 4 active service and closed their chambers at 6 Crown Office Row in as a second lieutenant. Barratt and Sleeman also the Temple. This article describes the devasting effects of the Second Albert was keen that Salmon should not become joined the army. known as a moneylending and bankruptcy World War on the Temple and its impact on the lives of Cyril Salmon Between 19 September 1940 and 11 May 1941, specialist and worked hard on expanding the the Temple was subjected to German bombing, and his colleagues. It goes on to describe how, at the end of the War, range of Salmon’s clientele. The sort of solicitor which destroyed the Inner Temple Hall, the Salmon re-established the chambers at 3 Paper Buildings. It also that Albert liked to see instructing Salmon was Parliament Chamber, the Library, the Master’s introduces Claude Duveen, who joined the chambers at the end of the Lord Morris, a partner at Blount, Petre & Co and an house and many other buildings including the War. The article ends with Salmon, as a new silk, and the other members old Cambridge friend of Salmon’s, who regularly whole of Crown Office Row. On the night of 26-27 of his chambers facing an uncertain future at the post-war Bar. briefed Salmon in insurance and personal injuries SIMON MORTIMORE QC September 1940, a bomb fell outside 5 Crown Office SOUTH SQUARE DIGEST July 2019 www.southsquare.com South Square Story: Cyril Salmon 77

Row, which smashed many windows somewhat obvious traits were a courage approved the letting to Salmon of the 5. David Salmon recalls that, in the years after and did much damage to the building. and determination, a kindliness, loyalty, four rooms on the ground floor south the War, his father often It uncovered the air raid shelter beneath and goodness that endeared him to all. His side of 3 Paper Buildings but required spoke of Weaver’s early death with great regret. the building and shattered the gas future at the Bar seemed full of promise. sureties. To satisfy the Inn, Salmon Had he lived, politics, however, would 6. Salmon told his son main, causing a furious blaze. On the turned to two of his friends, both that 12 Wilton Place had night of 16-17 October 1940, the Temple probably have proved a formidable rival members of the Inner Temple, to be his cost £1,500. was subjected to an even more serious to the law… His personal popularity guarantors: Major Walker Kelly Carter, 7. The rent was £158 p.a. bombing raid: a landmine, floating wherever he went, whether at home or who had been a colleague in 2 Harcourt This tenancy agreement was followed by one down on two parachutes, burst on abroad, whether in the company of the Buildings, and Major Aubrey Melford dated 12 August 1946, top of Elm Court (just to the north of most distinguished or the lowliest, was Stevenson, who took silk in 1943 and which increased the rent to £280 p.a., guaranteed Crown Office Row) and caused massive immediate and lasting. The future, no less would become one of the more colourful by Carter and Stevenson.

damage, including wrecking 1-7 Crown than his friends had need of him. I know of post-War High Court judges. They 8. The Army Act 1881, Office Row. Remarkably, the 25 people that he has gone to take an honoured agreed to be sureties and on 7 April s 12. who had been sheltering under Crown place among “the very brave, the very 1943 Salmon entered into a tenancy 9. Corps of Royal true”, that he has found a different and Electrical and Office Row all emerged unharmed. In agreement to take the chambers with Mechanical Engineers, January 1941, bombs rendered Harcourt more permanent kind of glory and effect from Christmas Day 1942. formed in October 1942 Buildings uninhabitable. The final blow self-fulfilment…” to repair and maintain Cyril Salmon as judge advocate the Army’s vehicles, to the Temple occurred on the night of weapons and equipment. Cyril Salmon’s family life and 10-11 May 1941, when it was subjected In 1943-44 Salmon joined the 8th personal tragedy 10. The Auxiliary to the most sustained bombing raids of Army, where he served at the staff Territorial Service, which was the the war. What had remained of Crown In 1929 Salmon, who was then aged 25 headquarters as a judge advocate, women’s branch of the Office Row was totally destroyed by two and a member of Barrington-Ward’s reaching the rank of major and being British Army during World War II. direct hits. After that massive raid, the chambers at 2 Harcourt Buildings, decorated for his services in Egypt 11. This would have been bombing stopped as the German air had married Rencie Vanderfelt, and Italy. According to his son, David, under s 40 of the Army force concentrated its efforts on the the 20-year-old daughter of a City Salmon rarely spoke about the war. He Act 1881, which provided that where a person Russian front. stockbroker. Their first home was at 40 complained that bivouacking in Italy subject to military Hornton Street, London W8, where they had been extremely uncomfortable. law was guilty of “any Salmon must have heard about these act, conduct, disorder, or had two children; Gai, born in 1933, and He also mentioned a court-marshal neglect, to the prejudice of disasters soon after they occurred, David, born in 1935. When War broke in which he presided over a case good order and military because with effect from 29 September discipline, on conviction by out, Salmon moved the family to the of desertion, which he found very a court-martial [he shall] 1940 he terminated his tenancy of the safety of a house near Godalming. disturbing, because desertion on active be liable, if an officer, to be chambers at 6 Crown Office Row. Until cashiered, or to suffer such service carried the death penalty.8 lesser punishment as by they returned to practice at 3 Paper By the second half of 1942, Britain’s this Act mentioned.” If an Buildings in 1945, Salmon, Potter prospects in the war looked much Salmon then returned to England. officer was cashiered, he was dismissed from the and Barratt used 2 Essex Court in brighter: the bombing of London In September 1944 he presided over HM’s service in disgrace. the Middle Temple as their appeared to have ceased, the Axis a court-marshal in Birmingham,9 The lesser punishments for officers under s 44 professional address. forces had been defeated at El-Alamein where Major Kenneth Elwyn Jones, were: dismissal from and, on the Eastern Front, the German the major in charge of a REME base HM’s service, forfeiture Death at Tobruk of rank and reprimand Sixth Army was bogged down in the near Birmingham, was charged with or severe reprimand.

On 17 October 1941, Weaver was killed disastrous battle of Stalingrad which 14 charges of misusing petrol and 12. Birmingham Daily in action at the age of 29. He had would lead to its surrender at the end War Department transport and one Gazette 14 September 1944. been serving with the King’s Dragoon of January 1943. Salmon decided to charge of improper association with Guards in its campaign to relieve plan for his family’s return to London ATS Sergeant EJ Hill (female),10 the the siege of Tobruk in Libya, which and for the resumption of his practice messing sergeant for his unit. Five of was ultimately lifted in November at the Bar. He bought an elegant new the misuse charges were proved. As 1941. On 26 November 1941, the Times home at 12 Wilton Place, Belgravia.6 But to the improper association charge,11 published a tribute to Lieutenant MH then Salmon suffered a great personal there was evidence that the Major and Weaver, written by “CS”, which is worth tragedy. On 9 October 1942, Rencie died the Sergeant had been seen kissing. recording for what it reveals about the at the age of only 33, leaving him to This was hardly surprising as the qualities of the fallen Michael Wheeler bring up their two young children. couple loved each other and would have and the writer, Cyril Salmon:5 married, if the Major had been free to Even so, Salmon was determined to do so. Major Salmon was unmoved by “…It is indeed hard to think of him as resume his practice at the Bar. He the emotional bond between the couple dead who was so vividly and gloriously approached the Inner Temple to rent and was rigorous in upholding military alive. I remember him so well when he rooms at 3 Paper Buildings, part of discipline in the mess when he said:12 first came to the Temple…The first things an early Victorian building which had one noticed about him were his good emerged unscathed from the bombing “However difficult it might be to define the looks, his infectious gaiety, and his quite of the Temple. On 14 December 19427 relationship which should exist between extraordinary charm. Underlying these the Inner Temple Estates Committee an officer and an ATS under his command, The wreckage of Crown Office Row SOUTH SQUARE DIGEST July 2019 www.southsquare.com South Square Story: Cyril Salmon 79

I suggest anyone would conceive it meant conduct Albert had retired and so his younger son Eric took prejudicial to the good order and military discipline if over the clerking. Since Salmon had taken silk, a commanding officer kisses the sergeant of the ATS there was room for another junior barrister and unit who happens to be in charge of the mess.” so Salmon invited his friend, Claude Duveen, to join. Colin Sleeman returned from the war after Return to practice Duveen had joined the chambers, but only stayed Towards the end of 1944, Salmon was released from for a couple of terms before moving to another war service. Since he would be 41 at the end of the chambers. It is not clear whether Geoffrey Barratt year, he decided to apply for silk even though the returned to active practice.14 prospects for work at the Bar in the aftermath of Duveen, like Salmon, came from a privileged the War were so uncertain. On 29 June 1945 he was background and in the pre-war years, although appointed a KC with, among others, Patrick Devlin, his practice may not have matched Salmon’s, another future law lord. In 1945, Potter, who had Duveen was involved in several cases which reached the rank of squadron leader (equivalent to received newspaper coverage; particularly ithe the rank of major in the army), was released from field of defamation. the RAF Volunteer Reserve. Claude Duveen’s family background and When they resumed practice at their new arrival at the Bar chambers at ground floor south, 3 Paper Buildings, Salmon and Potter found a much changed and Claude Duveen was born at 246 Finchley Road, shattered Inner Temple. The chambers themselves Hampstead on 6 April 1903, some eight months were the familiar arrangement of four rooms on before Cyril Salmon was born at 232 Finchley Road. either side of a narrow corridor at the end of which Claude’s parents were Louis Duveen, a younger was a cupboard. There was no internal lavatory, son of Joel Joseph Duveen, the founder of what was but communal facilities could be found at the then the largest firm of art dealers in the world, bottom of the stairs in the basement. Salmon’s and Helen Beatrice Salamon. large room was elegantly proportioned, with two Claude’s grandfather, Joel Joseph Duveen, was high windows, giving views over the Inner Temple born in Holland and came from a Sephardic gardens. But that was not the tranquil and graceful Jewish family which had a long history of dealing Venice, 1919 – Left to right: Sir Joseph Duveen, Miss Dorothy Duveen, Claude Duveen and Mr Heilbut view enjoyed today. Looking across the wrecked in antiques, works of art and other goods. In gardens, Salmon could see, immediately opposite 1877 Joel and one of his younger brothers, Henry his room, the broken ruin of Harcourt Buildings. winter months abroad in warmer climates, leaving following year Louis was no longer on speaking 13. Sir Frank Douglas Duveen, had formed Duveen Brothers to deal in MacKinnon’s Inner Looking to the right, there was an empty rubble- the London business under the control of Joe terms with Joe or his Uncle Henry. Eventually antique china, silver and works of art. Joel, who Temple Papers (1948, strewn space where his old chambers at 6 Crown and Louis. Joe had the entrepreneurial flair and a settlement was agreed, under which Louis republished 2003) p 233. had a 70% share, was responsible for the English Office Row had once stood. Walking to the Royal negotiating skill to drive the business forward, departed and was paid off. Not long afterwards 14. Colin Sleeman recalls and European side of the business, finding works Courts of Justice in the Strand, Salmon would pass Duveen, like while Louis ran the show rooms in Bond Street Henry died, leaving Joe Duveen in sole control of that at some stage of art and dealing with customers at its London Barratt became a clerk at the wreckage of the Inner Temple Library, where and acted as art historian and researcher, scouting the whole business, which by 1920 was generating the Old Bailey. show rooms, while Henry, who had a 30% share, Salmon, 45,000 books had been destroyed (although the for and advising on acquisitions. Under their net profits of over US$700,000 per year. For the went to New York to develop relationships with the came from 15. 8 Green Street, 56 most valuable ones had been removed to safety stewardship the business continued to prosper, next twenty years until his death in 1939, Joe Upper Brook Street and new breed of exceptionally wealthy American art 51 Berkeley Square. and survived), and the bombed-out shells of the a privileged tripling in volume in the five years up to Claude’s continued the successful operations of the firm collectors. By having partners on both sides of the Inner Temple Hall, the Parliament Chamber, birth in 1903 and opening a Paris showroom on the and made donations to the British Museum, Atlantic, able to communicate instantly through background the Master’s house, the Temple church and Place Vendome. In 1907, as Joel’s health worsened, National Gallery and Tate Gallery, which led to him cable or telephone, Duveen Brothers was uniquely several buildings which had accommodated and in the there was a dispute about the future ownership being knighted in 1919 and made a peer in 1933. well-placed to exploit a situation in which Europe barristers’ chambers. pre-war of the business which was resolved by Joe had plenty of art (much of which came on the The dispute between the brothers does not seem acquiring Joel’s interest and those of his brothers For the next ten years or so, Salmon and his market as land and grain prices fell) and America years was to have affected Joe’s affections for Louis’s family. who remained involved, including Louis, being colleagues would have to work among the noise had the money with which to buy it. The business There is a photograph, taken in 1919, which shows involved employed on generous salaries. In the following and dust of a major building site, as the destroyed was enormously successful and sold to American the sixteen-year-old Claude, dressed in a splendid in several year, shortly before he died, Joel was knighted buildings were rebuilt. To some, like Lord Justice collectors many of the great works of art that now checked bathing robe, sitting at the Lido in Venice in recognition of his philanthropy, including MacKinnon, who had thoroughly disliked the adorn the museums of the United States. cases which with his uncle Joe and cousin Dorothy. In the donating the room for the Turner collection at the old Victorian gothic style Inner Temple Hall following year Louis died unexpectedly. Two years Joel’s eldest son, Joseph Joel (Joe), later Lord received Tate Gallery. and Library, there was some benefit in their later, in 1922, Claude’s mother re-married and Duveen of Millbank, joined Duveen Brothers on destruction, since the new designs were for “far newspaper Two years after Claude’s birth, Louis Duveen and in 1925 the family, including Claude, moved to 26 leaving school and became a partner when he finer buildings, and more convenient, than those we coverage his family moved to Mayfair, where they lived in a Grosvenor Street, Mayfair. was 21. The partnership shares were adjusted so have lost”.13 The total cost of rebuilding the Inner succession of grand houses.15 Reflecting the rising that Joel had 50%, Henry 35% and Joe 15%. Claude’s Meanwhile, after Eton, Claude went to New Temple’s buildings was just over £1.5 million, of social status and wealth of the Duveen family, father, Louis, who was quieter and more academic, College, Oxford, where he decided on a career at which more than £1.4 million was recovered from Claude was educated at Eton College. continued his education at Oxford University the Bar. Claude was admitted to the Middle Temple the War Damage Commission, leaving the Inn to before joining the family business. From about Louis continued to play a key role in the business in November 1924. find the balance of over £100,000. 1891, Joel suffered from ill-health and spent the until about 1916 when he fell out with Joe. By the SOUTH SQUARE DIGEST July 2019 www.southsquare.com South Square Story: Cyril Salmon 81

Claude’s call to the Bar was delayed was not entirely plain-sailing, since company formed in England to sell or by illness until November 1927. His in January 1943 he was fined 10s in deal with tickets in a lottery in Ireland. call papers reveal that he was then Maidenhead Magistrates Court for The lottery was lawful under Irish law the pupil of Denis Pritt, the socialist riding his bicycle at night without but the sale of tickets in England would barrister, but that did not stop Claude lights. The Bench was so impressed be illegal. Since a company could not from pursuing a gilded social life. There by Duveen’s letter, explaining that it be formed for an unlawful purpose, the is a photograph of Claude at a charity had been a fine moonlit night and he Court of Appeal held that the registrar ball at the Gleneagles Hotel in October wanted to save irreplaceable batteries, had been right to refuse registration. 1927. He is standing behind three ladies that the Chairman asked the clerk to Lord Justice Scrutton conjectured that of impeccable pedigree with, among write to the Minister of Supply, urging the two gentlemen who wished to form others, John Foster, his friend from an increase in production of batteries. the company did so to avoid prosecution Eton and New College and later the At the end of the War, in 1946, Duveen under section 41 of the Lotteries Act distinguished international lawyer. was promoted to wing commander 1823,21 under which offenders were (equivalent to a colonel) and awarded liable to be punished as “rogues and A debauchee and DN Pritt an MBE. vagabonds”, which could not apply to DN Pritt was a remarkable figure. a company. dare-devil. Lover In 1930 Claude Duveen married Eileen After four years at Winchester Dora Schomberg with whom he had one Duveen at 10 King’s Bench Walk: College, spending time in Europe of animals but daughter. In 1930 he bought Foxleigh Hayley Morriss’s revenge learning languages and attending Grange, Holyport, near Maidenhead, London University, he was called to By 1932 Duveen had moved to chambers defiler of women which remained their home until his the Bar in 1909. By the time Claude at 10 King’s Bench Walk. In May of that death some 46 years later. Duveen’s Duveen became his pupil, Pritt had year he acted as junior to Roger Bacon, Who Was Who entry suggests that become an extremely successful another member of those chambers, he lived a quiet life, since his only barrister, specialising in commercial in a libel action brought by Hayley admitted recreation was “roses”. That law at Robert Wright KC’s chambers Eustace Morriss against the proprietor, can’t be entirely true, since he was a at 2 Pump Court. In 1927, after Wright publisher and printer of the Bristol member of the MCC, a keen cricketer, had become a High Court judge, and Times and Mirror. By 1932, Morriss and a passionate commentator on about the time when Claude was his had a somewhat tarnished reputation, the game. He is credited with being pupil, Pritt took silk. For the next 33 which added to the challenge of Pritt at Third Reich: Burning of the Reichstag - counter trial, London. party to a discussion with Walter years until he retired in 1960, Pritt DN Pritt is sitting second left at the back. winning for him substantial damages Monckton and Charles Russell in the appeared frequently in the Court of for libel. In the words of the Daily Temple one winter day in the early Appeal, House of Lords and Privy Express, he was “A debauchee and Union’s version of communism. He Duveen’s career and family life 1930s about organising some cricket 16. Richard Overy The 20. R v Registrar of Joint Council, often leading other silks or dare-devil. Lover of animals but defiler Morbid Age, p 289, Stock Companies, ex p More visited Moscow in 1932, when he was before World War II for fellow members of the Bar the juniors of great distinction. Initially, of women”.22 quoting from DN Pritt’s 1931 2 KB 197, CA. impressed by the “flowers, pictures and following summer. This discussion The Russian Legal System as a KC, he continued to be instructed Claude Duveen did not stay in Pritt’s in Twelve Studies in 21. Repealed by the 16 Betting and Lotteries photographs” in the prison cells, and led to the foundation in 1935 of the Hayley Morriss (1887-1962) was the Soviet Russia, edited by in commercial work, but as his Act 1934. By s 29 of the chambers. Between completing his Margaret Cole again in 1936, when he attended the Refreshers Cricket Club, for which Cyril younger son of Henry Morriss, a 1934 Act, a director increasingly extreme political views pupillage and leaving the Bar for war (London 1933). first show trial, whose procedures he Salmon occasionally played and which wealthy Shanghai-based bullion dealer. or officer of a body corporate was deemed became widely known, he was only service, he practiced in common law 19 17. In the 1930s he commended for their fairness. Pritt was continues to flourish. His elder brother Henry E Morriss was published The Zinoviev guilty of offences under retained for political and civil and crime at 5 Paper Buildings between the Act of which the Trial, Victor Gollancz a prolific writer in praise of the Soviet the owner of Manna which won the body corporate had been liberties cases. 1929 and 1931, at 10 King’s Bench Duveen at 5 Paper Buildings 1936; At the Moscow Trial, 17 convicted, unless he Union and other socialist causes; 1925 Epsom Derby by a record distance. 1937; Light on Moscow, Walk between 1932 and 1935, and at 2 proves that the offence Soviet Policy Analysed By the end of the First World War, indeed, George Orwell described him Duveen’s first appearance in the law Morriss worked in the family bullion , was committed without Garden Court from 1936. He joined the Penguin 1939. Pritt’s political journey had taken him as “perhaps the most effective pro-Soviet reports was in 1931 in a case in the Court dealing business in China until about his knowledge. By s 30 the court had power Midlands Circuit. 18. Kevin Morgan, from supporting the Conservative publicist in the country”. 18 However, of Appeal,20 which attracted a good 1921 when he returned to England and to impose fines as article on Pritt in punishment for offences Oxford Dictionary of Party to the Labour Party for whom he Pritt’s political enthusiasms did not At the end of 1939 or the beginning of deal of attention in the newspapers was divorced from his first wife. In 1922, under the 1934 Act. became an MP in 1935. He remained an prevent him from being friends with 1940, Duveen left the Bar for military in England and Ireland. He was led he bought Pippingford Park, a 1,000 National Biography. 22. Times, 15 May 1929. MP until 1950 but was expelled from an establishment figure like Walter service in the RAF Volunteer Regiment. by Gilbert Beyfus, at that time the acres estate on the edge of Ashdown 19. David Alexander QC and Marcus Haywood are the Labour Party in 1940 for failing to Monckton. A pupillage with Pritt In April 1940 he was commissioned leading expert on gaming laws, in an Forest in Sussex, from where he ran prominent members of condemn the Soviet invasion of Finland. would have been a stimulating but as a flight lieutenant (legal branch). unsuccessful attempt to challenge what was reputed to be the third the Refreshers. By the early 1930s he had become an bracing experience for someone of A year later he became a squadron the registrar of companies’ refusal to largest pig farm in the country. By enthusiastic supporter of the Soviet Duveen’s background. leader (legal branch). His war career register Irish Hospitals (Sweeps) Ltd, a 1925, Morriss was aged 37 and enjoying SOUTH SQUARE DIGEST July 2019 www.southsquare.com South Square Story: Cyril Salmon 83

life at Pippingford Park which he shared with his months with hard labour. He also ordered Morriss girl, aged 18”, rather than having consensual sex 23. Under s 2 of the Criminal Law twenty-one-year old housekeeper, Madeleine to pay £1,000 towards the costs of the prosecution. with her. He complained that the other article, Amendment Act 1885, Roberts, (also known as Eliza Phyllis Thurston Morriss’s application for permission to appeal published just after he had been convicted, made it was an offence to procure or attempt Ward Roberts) several other employees, three against sentence was dismissed by the Court of him out to be “an odious hypocrite”, who, when he to procure any girl or Irish wolfhounds, eight puppies, and a fleet of cars, Criminal Appeal. The Lord Chief Justice said that was living in China, affected a religious“ devotion” woman under twenty- one years of age, not including a Rolls Royce. Morriss’s undoing arose “a more appalling case of this kind is not within the while making a habit of undertaking journeys into being a common from advertisements he and Madeleine placed for recollection of the court” and Mr Morriss’s crimes the interior for immoral purposes as a result of prostitute, or of known immoral character, to attractive young girls to come to work at the Park, merited a longer sentence if the legislation had which he was divorced by his beautiful European have unlawful carnal either indoors or outdoors as kennel maids. When permitted it.26 wife. The article also implied that Morriss was a connection, either within or without the the girls arrived, Morriss made indecent proposals coward for remaining at ease in China during the Queen’s dominions, a more appalling case of this kind is not Morriss served his sentence at Portsmouth, to which some of the girls yielded. Others did not Great War and not coming home to fight. It added with any other person Winchester and Pentonville Prisons. While in or persons. The 1885 and one reported Morriss’s conduct to the police. that when he returned to London after the end of Act was repealed by within the recollection of the court prison, Morriss learnt that, on her release, his wife the Great War, Morriss led a life which alternated he Sexual Offences In October 1925 Morriss and Madeleine were had had an affair at Pippingford Park with Walter Act 1956. between idleness in luxury hotels and frequenting arrested and charged with conspiracy to procure Dudley Wood, a detective with an address in Park 24. Section 5 of the disreputable places, such as nightclubs and cheap 1885 Act (defilement of young girls for immoral purposes.23 Later, Morris Lane. Morris petitioned for divorce on the ground dancehalls, where he made friends with girls he girls between 13 and 16 was also charged with carnal knowledge with girls of her adultery with Wood, from whom he claimed years of age) and s 52 met casually. Mr Justice Swift ruled that there of the Offences against under the age of 16 and indecent assault24 and damages for loss of his wife. At the trial before was no case to go to the jury regarding the report the Person Act 1861 Madeleine was charged with aiding and abetting Lord Merrivale, President, and a Special Jury, (indecent assault). of the committal proceedings. The defendants those offences. During the committal proceedings Morriss obtained his divorce and an order for costs 25. Times 11 (who were represented by Sir Patrick Hastings in Uckfield Police Court, Morriss and Madeleine against Wood, but no damages. In 1929 Morriss had December 1925. KC and Theobald Mathew) did not dispute that Roberts married. They were committed on bail to the satisfaction of bankrupting Wood for failing to 26. R v Morriss (Hayley) the other article was defamatory and so the only (1927) 19 Cr App R 75; Lewes Assizes to answer the charges. pay the costs. question for the jury was the amount of damages Times 2 February 1926. At the opening of the Autumn Assizes at Lewes On 21 July 1928, Morriss was released from prison to be awarded, if any. As to that, Mr Justice Swift 27. In April 1934 he applied to Uckfield on 10 December 1925, Morriss and Madeleine and returned to Pippingford Park to launch directed the jury that the fact that Morriss had magistrates under surrendered to their bail and heard Mr Justice a campaign of litigation to right the wrongs been convicted of sex offences did not mean that the Guardianship of Infants Act 1925 for Avory charge the Grand Jury with these words:25 he considered he had suffered at the hands of he had no reputation capable of being damaged. consent to marry Diana the prison governors and the newspapers and Turning to the offences for which Morriss had Violet Yates (aged 17 “Judging by the calendar here, and my recent experiences ½) but withdrew the periodicals which had published articles about been convicted, the judge observed (perhaps application. A few both at Maidstone and Guildford, there appears to be a him while he was in prison. In 1934, after the surprisingly): “Many people were convicted of that months later, in July recrudescence of crime in the country. Whether this is 1934, he married his conclusion of the campaign, he found a new sort of offence every year”.30 The judge went on to secretary, Marie Louise due to the growth of Communism or whether it is due, Ross (aged 25). In 1942 he young wife.27 He even managed to obtain indirect say that the jury might think that the article as sometimes appears to be the fact, that imprisonment divorced her for adultery revenge on Mr Justice Avory, who had died in did Mr Morriss an infinite amount of harm by with Captain Crawshaw, has not now the same terror for evildoers that it used to who was billeted at 1935, by recovering damages of £500 and three- giving people the impression he was a “thorough have, I will not conjecture.” Pippingford Park, after quarters of his costs from the publisher and author scoundrel” long before the offences for which he found the Captain in pyjamas under his These were not encouraging words for Morriss and of the judge’s biography for calling him a “rich he was convicted. With that guidance, the jury wife’s bed. seducer his young wife. Two days later her counsel applied ” and for a defamatory description of the awarded Mr Morriss damages of £2,500. 28. In Morriss v Victor for an adjournment because she was not well proceedings at the trial in 1925.28 Gollancz Ltd and Stanley The outcome of this case caused grave concern enough to stand trial. Mr Justice Avory regarded Jackson, Times 17 April Within days of obtaining his liberty, Morriss sued among the newspapers, because of the impact 1937. the application as a scheme to defeat justice and the prison governors for damages for wrongful the direction given by Mr Justice Swift about 29. Morriss v Winter [1930] rejected it. He also took the opportunity to revoke 1 KB 243, Horridge J. imprisonment, claiming that he was released a Morriss’s offences and the size of the damages Morriss’s bail. day late, because he had been denied 5 remission awarded might have on six other libel cases 30. Nottingham Evening Post, 10 May 1932. At the trial the following week, Sir Edward marks. The claim failed for many reasons,29 but at brought by Morriss, which were waiting to be Marshall Hall KC prosecuted. Roland Oliver KC, least it gave Morriss to explain in public the brutal tried. Sir Patrick Hastings immediately applied for leading St John Hutchinson (the father of Jeremy nature of his treatment in prison. Morris brought the defendants’ appeal to be expedited. Duveen Hutchinson QC), defended Morriss and Sir Henry many libel claims, of which by far the most appeared with Bacon to successfully oppose that. Curtis Bennett KC, leading Sir Travers Humphreys, successful was the Bristol Times claim for which The Court of Appeal’s refusal to expedite led to the defended Madeleine. The defendants did not give he instructed Claude Duveen and Roger Bacon prompt settlement of two other libel cases and the evidence and Mr Oliver said very little on behalf of and where he recovered damages of £2,500. In the withdrawal of the appeal in the Bristol Times case. Morriss. It took the jury 30 minutes to reach their other claims, decided before the Bristol Times case, Duveen at 10 King’s Bench Walk: verdict of guilty on all but a few of the charges. juries awarded him damages ranging between 50 A legal horsewhipping and other cases Mr Justice Avory sentenced Morriss to two years guineas and £500. imprisonment with hard labour for the offences In January 1934 Duveen had a watching brief in The case for which Duveen acted for Morriss concerning girls under the age of sixteen (the Bevir v Burton-White, a slander trial for which concerned two articles in the Bristol Evening maximum sentence he could impose) and a further ladies queued for places in the public gallery and Times and Echo. Morriss claimed that one article, one year’s imprisonment without hard labour for which filled columns of the nation’s newspapers. reporting on the committal proceedings, gave the the other offences, to be served consecutively. He Mr Bevir, a solicitor, sued Miss Dallas Burt-White impression that he had raped a “pretty Coulsdon sentenced Madeleine to imprisonment for nine for slander for saying that he had presented a SOUTH SQUARE DIGEST July 2019 www.southsquare.com South Square Story: Cyril Salmon 85

31. Although the 33. Re Rissik [1936] of Appeal with the words: “I can describe Acknowledgements offending words were Ch 68. Philip Sykes was this as an undefended action for libel, in spoken in a private the father of Richard Celia Pilkington, Archivist at the place and no damage Sykes QC and, like him, which the jury returned a verdict for the ensued, Mr Bevir had a a doyen of company law. Inner Temple, and Ben Taylor, Archive defendant” and asked for a new trial. good cause of action for Assistant, for making available the slander because Miss 34. Poliakoff v News The Court of Appeal was unimpressed Burt-White’s statement Chronicle [1939] 1 All ER Inn’s tenancy record books and tenancy that Mr Bevir’s intent 390, CA. with the logic of this submission; was blackmail imputed agreements, for providing a mass of 35. Presumably, contrary holding that the proper order would that he had committed to s 11 of the Road Traffic information about the Inn’s buildings a crime punishable by have been for nominal damages and Act 1930: “driving a imprisonment. and the effect of World War II on the motor vehicle on a road that there had been no miscarriage of Temple and photographs of the damage. 32. Montgomery Hyde, … at a speed … which is justice, since the plaintiff would not Sir Patrick Hastings, dangerous to the public”. pp 266-274. have beaten the payment into court. A Barnaby Ryan, Assistant Archivist few months later, Mr Poliakoff died in at the Middle Temple, for providing Paris at the age of 74. information about Claude Duveen

One relatively minor case in the For information about Lord Salmon Buckinghamshire Quarter Sessions and his family: Sir Anthony Evans, for perhaps demonstrates Claude Duveen’s providing his papers on Salmon; the early advocacy skills. In October 1938 he Hon David Salmon for his recollections secured the acquittal of Clive Churton and photographs; and Lord Brown Castle, a 30-year-old commercial of Eaton-under-Heywood, Michael traveller, who was charged with driving Anderson, Mary Morris and Adrian a motor car at a dangerous speed.35 The Thompson for their help in tracing the evidence was that the accused had Salmon family history. driven at over 80 mph on a derestricted For information about Claude Duveen road in Iver, Buckinghamshire, at and his family: Emma Duveen, a great night, overtaking buses and weaving niece, who clarified aspects of family through oncoming traffic. The jury did history and Sylvia Allen, the widow of not trouble to retire before returning Tony Allen, former clerk to chambers a verdict of not guilty, evidently between 1951-95, for her recollections impressed, at Duveen’s urging, by the of Duveen. accused’s evidence that his car was in Gleneagles Hotel, October 1927. Duveen is standing far right and John Foster on the left. good condition, its lights were on, he Bibliography knew the road and he did not think he Sir John Baker, An Inner Temple was driving too fast. divorce petition in order to blackmail against Miss Burt-White in order to Simmonds KC and Philip Sykes in to “prevent this Hitler propaganda coup Miscellany, 2004 her brother, Harold Burt-White, a humiliate her brother, regardless of making the bold but vain argument and expose the shameless treachery of Salmon KC’s chambers in the David Kynaston, Austerity Britain 1945- gynaecologist, who was named as co- the collateral damage to the reputation that interest was payable under s 33 of the proprietor”. The News Chronicle aftermath of war 51, Bloomsbury, 2007 respondent.31 The allegation exposed of his own wife. He regarded her the Bankruptcy Act 1914 on the surplus published an abbreviated version of At the end of the Second World War Mr Burt-White to being struck off the brother as a cad, fit to be horsewhipped. under a deed of arrangement to which that announcement under the heading Sir Frank Douglas MacKinnon’s Inner there were only three active members Medical Register, since it alleged that Accordingly, over 7 days Claude the 1914 Act did not apply.33 “Hitler’s Deal in France”, which the Temple Papers, 1948, republished 2003 of Salmon’s chambers: Salmon, Duveen Mrs Bevir had committed adultery Duveen had the opportunity to absorb plaintiff claimed showed him to Duveen 2 Garden Court and Potter, who were all born in 1903 H Montgomery Hyde, Sir Patrick with Mr Burt-White, while she was evidence of revenge, assignations in be “a base and despicable individual”, and called to the Bar in the years Hastings, his Life and Cases, one of his patients. Miss Burt-White hotels round the country and tapped Duveen remained in contact with DN particularly since he was Jewish. The 1925-28. To begin there was not much Heinemann, 1960 had uttered the offending words at telephone conversations and to watch Pritt KC who led him in Poliakoff v News News Chronicle accepted that its article work for barristers, but from 1947 work the home of Mr and Mrs Bevir on two Patrick Hastings KC (who appeared for Chronicle,34 a defamation case, which was defamatory but challenged the Richard Overy, The Morbid Age, Britain began to return to pre-war levels. Cyril occasions; once to Mrs Bevir in the the defendant with Valentine Holmes) turned on issues of procedure in libel plaintiff’s motive in bringing the claim Between the Wars, Allen Lane, 2009 Salmon KC became one of the busiest presence of her sister and a friend and deploy his cross-examination skills on trials, but which gives a tantalising against it, given that he had already silks at the common law Bar, appearing Oxford Dictionary of National the second time to one of Mrs Bevir’s Mr Bevir and his witnesses. In the end glimpse of the dark world of 1930s successfully sued other newspapers in in several important cases in the Biography: article on Sir John Foster by friends in the presence of Mrs Bevir the jury found for Mr Bevir and awarded Europe. The plaintiff, Vladimir France and the United States, which House of Lords. Claude Duveen began Miriam Rothschild; article on DN Pritt and another lady. By the time the him damages of £3,500. Duveen had a Poliakoff, a Russian, owned a French had reported the sale, but had delayed to receive instructions from Salmon’s by Kevin Morgan slander action came on for trial before watching brief on Miss Burt-White’s German language newspaper, Pariser in suing the News Chronicle. In his pre-war solicitors and developed a Mr Justice Horridge and a special jury, appeal, which was heard in June 1934. Tageblatt, which was the organ of anti- summing up, Lord Hewart, Lord Chief Meryle Secrest, Duveen, A Life in Art, reputation for bankruptcy work as well the Bevirs were reconciled and, on the In giving judgment dismissing the Nazi German refugees in France. In Justice, described the claim as “gold- University of Chicago Press, 2004 as for general common law cases. The complaint of Mr Bevir, Mr Burt-White appeal, Lord Justice Scrutton said: 1936, he sold the newspaper to the Nazi digging” and suggested that the jury practices and judicial careers of Salmon British Newspaper Archive had been struck off for, among other “I see no need for further comment German government, which promptly should ask itself: “What is he here for?” and Duveen and developments in things, having a secret and improper on this very unpleasant case or on supressed it. Before it was closed down, With that guidance and without leaving Times Archive chambers after the end of the war will relationship with one of his patients. the people concerned in it.”32 the editor and staff announced the the jury box, the jury gave judgment for be described in subsequent articles. Who Was Who These developments did not deter Mr sale in the newspaper and said that the defendants. That verdict enabled In 1935, Duveen took on the Bevir from pursuing the slander action they would start another newspaper DN Pritt to open the appeal to the Court Simon Mortimore © Wikipedia distinguished combination of Gavin SOUTH SQUARE DIGEST July 2019 www.southsquare.com News in brief 87

News in brief Re British Steel Limited

Square acted for the directors of British Georgina Peters speaks at COMBAR North American Steel in the application for immediate Meeting 2019 in New Orleans winding up. Adam Goodison of South Square acted for the Official Receiver in On 29 to 30 May 2019, Georgina Peters York). Supporting the motion were Joe the application for the appointment of attended and spoke at the COMBAR Smouha QC (Essex Court Chambers), special managers. North American Meeting 2019, which F. Paul Morrison (McCarthy Tétrault The application followed the collapse this year took place in the wonderful LLP, Toronto) and Steven Molo (Molo of negotiations with the British setting of New Orleans, Louisiana. Lamken LLP, New York). The debate Government for taxpayer support for On the second day of the conference, centred on themes such as the fallibility British Steel to continue its operations. Georgina took part in a highly of human memory (in light of evolving Mr Justice Snowden granted an entertaining debate on the motion psychological theory, as considered in immediate winding up order, timed at “This House believes that cross- the judgment of Leggatt J (as he then 9.51am on 22 May 2019. The judge also examination of factual witnesses merits was) in Gestmin SGPS SA v Credit Suisse made a special manager appointment, its central place in the trial process in (UK) Ltd [2013] EWHC 3560 (Comm)), appointing partners of Ernst & Young Africa Commercial commercial cases”. the continued validity of allowing a LLP as special managers with powers as Law Foundation judge to be the single arbiter of fact, and Georgina argued forcefully against specified in the special manager order to the ability of our current trial model Glen Davis QC has been appointed the motion, alongside Charles Béar QC assist the Official Receiver in his task as to function against the backdrop of an a Trustee of the Africa Commercial (Fountain Court Chambers) and Nicole liquidator. As has been widely reported explosion in the volume of available Law Foundation. The ACLF is Sullivan (White and Williams LLP, New At 9am on Wednesday 22 May 2019, was made by members of South Square. in the press, the Official Receiver now documentary evidence. established to support the practice Mr Justice Snowden presided over an An immediate winding up order was has a window of opportunity to attempt and development of commercial urgent application in respect of British requested, along with an application for to sell the business or otherwise attempt law across the African continent, Steel Limited (“British Steel”) in Court the appointment of special managers to realise assets. It is not expected in particular by researching, 8 in the Business and Property Courts to assist the Official Receiver as that unsecured creditors will receive analysing and publishing of England and Wales. The application liquidator. Lloyd Tamlyn of South anything other than the prescribed part. comparative information on African Commercial Law systems. Other trustees include Professor Christopher Forsyth of Cambridge INSOL International Channel University and Richard Gordon Mourant & South Square Islands Seminar QC, and the Director is Rebecca Litigation Forum Perlman, a corporate lawyer at Andrew Shaw and Hannah Thornley Herbert Smith Freehills. South Square and Mourant will be attended the annual INSOL holding their annual conference this International Channel Islands One Day ACLF’s first substantive project year on 19 September 2019 at Landing Seminar, which took place at the Duke is to support a commercial-law 42 in The Leadenhall Building, London. of Richmond Hotel on Guernsey on 20 module on AfricanLII, collating June 2019. Paul Heath QC, who is an and indexing commercial Image by David Castor A selection of speakers from both associate member of South Square, also judgments from a number of South Square and Mourant will be participated as a speaker. African jurisdictions and making covering sessions on ‘Economic Tort them available for free on-line. Record Year Actions’, ‘Reflective Loss’ and an The topics covered by the seminar The first phase of the project is Insolvency Focus. We do hope you included issues arising when the audit. The delegates were also treated currently being prepared, and can join us for what promises to be an criminal and civil proceedings arise out to a panel discussion of recent big cases will cover cases from Ghana, for the London Courts engaging and interesting seminar. Do of the same circumstances; innovative chaired by Mathew Newman, of Ogier, Nigeria, South Africa, Tanzania visit out website for further details alternatives to insolvency; offshore in which Andrew Shaw summarised and Uganda. More information The seventh annual Commercial Courts an increase of 63% on the previous (www.southsquare.com). adaptions to onshore changes (such the recent Saad litigation in the about ACLF can be found on ACLF’s Report, produced by communications year, with 1012 different litigants from as public registers); and the future of Cayman Islands. website at www.clfafrica.org, and consultancy Portland, was published 78 countries. Whilst 40% of litigants AfricanLII’s website (where the in May. The report, which analyses were from the UK, 60% were non-UK digested cases will appear in due judgements form the London based. Just behind the United States, course) is at www.africanlii.org. Commercial Courts to find trends Kazakhstan and Russia continued to Becker Bankruptcy The 82 items include trophies, such Republic as a sporting, cultural and over time – both who uses the Courts dominate. They were joined in the Auction Resumes as his 1989 US Open trophy, tennis humanitarian attaché to the European Glen is also the Chair of the Africa and how London measures up in an top 10 by Ukraine for the first time rackets, shoes and clothes that he wore Union, meant he could not be subjected Committee of the Commercial Three-time Wimbledon Champion increasingly competitive international since 2014. Despite the increased UK on the court and even a watch gifted to to legal proceedings. Mr. Becker Bar Association and has long Boris Becker is auctioning off items market – reveals that the London Government scrutiny of high-profile him by Novak Djokovic. has now dropped this claim and the taken an interest in the from his illustrious career to pay off Courts had a record year. Russian, Kazakh and Ukrainian trustees to the Becker estate hope to development of commercial law the debts he owes after being declared The sale, planned for last year, was nationals, London clearly remains the declare a dividend to creditors later (including cross-border insolvency The report states that the London bankrupt two years ago. postponed after Becker claimed that forum of choice for litigants from these this year. law) in African states. Commercial Courts heard 258 cases, his appointment by the Central African jurisdictions. SOUTH SQUARE DIGEST July 2019 www.southsquare.com News in brief 89

News in brief

Woodford’s Woes

Investors in Neil Woodford’s £3.5bn UK to satisfy redemption requests from Bolton Wanderers Equity Income fund continue to wait to investors. The decision to maintain the access their money, as Britain’s best- suspension reflects the fund’s inability One of the English Football League’s known stockpicker announced that to meet such requests while staying oldest members is on the brink of the fund’s suspension would continue below a regulatory cap on hard-to-sell collapse, following the appointment of indefinitely. illiquid assets in the fund. David Rubin and Partners to oversee its administration. A winding-up petition The suspension of Woodford Equity The fund’s suspension prompted against the club over unpaid taxes, Income on 3 June 2019 by Link, the firm investors to sell their holdings in other with the former Championship side that manages the fund’s governance, Woodford Investment Management still owing over £1m to HM Revenue & sparked the biggest controversy in funds. The group’s other open-ended Customs, has been suspended by the UK fund management for a decade, fund, Income Focus, has shrunk more High Court as a result. with hundreds of thousands of retail than 40% in the past month to £296m, investors unable to reclaim their while the share price of the closed- The news will not have come as a capital from a fund that has since been ended fund, Patient Capital Trust, has surprise to fans, as the club has been forced into a fire sale of its assets. dropped by a third. in financial turmoil for the duration of The suspension is designed to give Mr its current ownership. It was only able Mr Woodford has attracted widespread Woodford space to sell investments to avoid administration in September criticism for continuing to charge total so that he can raise cash and switch 2018 after an emergency loan of £5m management fees of at least £65,000 a into more liquid stocks. This is so that, by former owner Eddie David, just days day on the Equity Income fund during if and when Link decides the fund is before his death. its suspension. in a fit state to be reopened, it is able Hadlow College wins Bolton are far from the only club in the lower leagues in serious financial trouble, or which are struggling to Administrators visit Jamie’s Italian dubious honour pay wages. Morecambe FC, Oldham Athletic, Bury, Coventry City and KPMG have been appointed Southend United are in all in a similar administrators of Jamie Oliver’s In mid-May the Department for the start of February, Paul Hannan, situation. More than 23% of English restaurant group which includes the Education decided to end bailouts principal and chief executive, went on Championship clubs and 40% of those Jamie’s Italian chain, Barbecoa and to Hadlow College (which has been sick leave. It subsequently emerged that in the Scottish Premiership believe that Fifteen. In total 25 restaurants are engulfed in a series of financial both Hannan and Lumsdon-Taylor had their finances are in need of urgent affected by the move, of which 23 are irregularities since an investigation been suspended over allegations around attention, or are a cause for from the Jamie’s Italian chain which earlier in the year) which has led to it college funding. real concern. had run up £71.5 million in debt. Bailiffs having the dubious honour of becoming The Further Education Insolvency were seen clearing out the flagship site the first institution to be taken through The club have endured a miserable Regime came into force on 31 January near Piccadilly Circus days after the the new college insolvency regime. season both on and off the pitch, this year. The new legislation, similar chain’s collapse. being relegated after 2 years in the Investigations into the Hadlow Group to the measures introduced last year for Championship. Bolton begin next Jamie’s Italian was on the brink of (which includes Hadlow College private registered providers of social season in League One, with a 12-point collapse two years ago with the chef and West Kent and Ashford College) housing, will apply aspects of corporate deduction, the standard punishment revealing in an interview it had ‘simply were triggered after a request to insolvency law to colleges that are faced by footballing entities that enter run out of cash’ and run up millions in the Department for Education for statutory corporations. There will also into administration. debt. In 2017 Mr. Oliver had to close the restructuring funds. Accounting be a new special administration regime last of his Union Jacks restaurants, and irregularities relating to land sales known as education administration, As the DIgest went to press Bolton also shut down his magazine ‘Jamie’, within the group were revealed by the with a special objective to protect cancelled their friendly against which had been running for almost Further Education Commissioner and, learner provision for existing students Chester, citing players and coaching 10 years. at the end of January deputy principal, at an insolvent college. staff under ‘severe mental and Mark Lumsdon-Taylor resigned. At emotional stress’ having not been The chef himself has previously blamed paid for 20 weeks. his empire’s parlous state on Brexit, which he said was among the factors which caused a ‘perfect storm’, as Rococo Administration the business. All five Rococo stores are well as rental costs, local government Luxury chocolate retailer Rococo has still trading and no redundancies have rates and the increase in the minimum fallen into administration, making it yet been made. wage. Whilst many agree, Jamie’s yet another victim of the UK’s tough Italian in particular had suffered from According to Companies House, Jamie The business was founded in 1983 Licensing Limited and the international high street conditions. Insolvency poor reviews with the restaurant critic Oliver Holdings Ltd - the umbrella by Chantal Coady, then aged 23. She restaurant franchise business, Jamie’s specialists BDO were appointed as Marina O’Loughlin famously saying she company under which Mr Oliver runs has subsequently written five books Italian International Limited, will administrators towards the end of May would need to be paid to go back to the all his - turned over £32 million last and was awarded an OBE in 2014 for continue to trade as normal. this year, and are seeking a buyer for branch in Westfield, London. year. Jamie Oliver Limited, Jamie Oliver “services to chocolate”. SOUTH SQUARE DIGEST July 2019 www.southsquare.com News in brief 91

News in brief

Both judge and jury Glory on the Golf Course Top of the shops no longer Simon Mortimore QC has been appointed captain of Royal St George’s Sir Philip Green, no stranger to the Golf Club, Sandwich, for 2019/20. Simon News in Brief section of the Digest, Rise for High Court Judges is the first member of the Bar to be is no longer listed as a billionaire appointed captain of Royal St George’s ‘Your appeal for In a bid to stem the recruitment crisis in the Sunday Times Rich List, since Lord Salmon, the founder of our across the judiciary, eligible High Court published in May of this year. This Chambers, who was captain in 1972- refusal has been judges have been given a 25% pay boost, is the first time since 2002 that Sir 73. The only other barristers or judges and circuit and tribunal judges a 15% Philip and his wife Tina have failed to have been captain were Sir Muir rejected but you rise. The allowance will only be given to make the billionaire echelons. Mackenzie KCB, KC (1907-08), who to eligible judges – those eligible for The Times Rich List valued his among other things wrote the article could apply to the a new, less valuable pension scheme high street fashion empire, Arcadia about bankruptcy in Halsbury’s Laws introduced in 2015, which is currently Group as “worthless” as it struggles of England (1st ed), and Sir Henry resident judge’,but being challenged in the courts on the with pensions debt as well as Kekewich (1895-96), a judge of the grounds of age discrimination (Lord harassment and bullying scandals. I told them, ‘I am Chancery Division. Chancellor v McCloud and Mostyn This may be the least of Sir Philip’s & Ors [2018] EWCA Civ 2844). It will Royal St George’s will host the Open the resident judge’ woes, however. On 12 June his be retained only until the McCloud Championship in July 2020, the 15th retail empire staved off collapse, by litigation is complete, and will be time it will have done so. Apart from winning the backing of creditors, taxable, non-pensionable and non- helping in the preparation for the Open, including The Pensions Regulator, consolidated. Simon will be host for the Vagliano the Pension Protection Fund and Trophy, a women’s amateur match Judge Keith Cutler, resident judge The 25% rise replaces the temporary Landlords, for seven Company between Great Britain and Ireland and of Winchester and Salisbury, was recruitment and retention allowance of Voluntary Arrangements (CVAs). the Continent of Europe, played at Royal surprised earlier this year when he 11% that was introduced in 2017 and will The CVAs involve closure of at least St George’s in June of this year. He will received an official summons to sit as bring the annual salary for eligible High 23 stores, rent cuts on another attend the 2019 Open Championship at a juror in a case over which he was also Court Judges to £188,901 from October. 200 sites and are part of a wider Royal Portrush GC and the Walker Cup expected to preside. Circuit and tribunal judge salaries will restructure in which about 25 more at Royal Liverpool GC, Hoylake. His own rise to £140,289. These figures include UK stores will close as the property Speaking to a jury at Salisbury crown golfing exploits involve him in matches a permanent 2% salary rise given to arms of Miss Selfridge and Evans court, Cutler said he had to make against the R&A and Prestwick GC (the all judges. The increases, however, fall are put into administration. Further several attempts before he managed venue for the first Open Championship) short of the Senior Salaries Review UK stores could also close under to excuse himself from his public jury. and trips to Royal Liverpool for its Body’s recommendations of 32% for the deal as landlords subject to rent “I was selected for jury service here 150th anniversary celebrations and to High Court judges, 22% for Circuit cuts have 1 year in which they can at Salisbury crown court for a trial Valderrama, which is reputed to be the and Upper Tribunal judges, and 8% for replace Arcadia in favour of better- starting 23 April,” he said. “I told the finest golf course on mainland Europe. District and First-tier Tribunal judges. paying tenants. jury central summoning bureau that I thought I would be inappropriate, Three successive recruitment exercises The backing of The Pensions seeing I happened to be the judge and for High Court positions failed to Regulator and the Pension knew all the papers. They wrote back to fill all available vacancies, with 14 Protection Fund was obtained Down the plughole for Bathstore Patisserie Valerie arrests me. They picked up on the fact I was the posts unfilled last October and more after Lady Tina (the official owner Bathstore, the UK’s biggest bathroom Rival bathroom providers, On 18 June five arrests took place in judge but said ‘Your appeal for refusal vacancies due to arise this year. of Arcadia) agreed to put £100m specialist, has collapsed into Better Bathrooms, slumped into relation to the alleged accounting fraud has been rejected but you could apply into the scheme over a three year administration after failing to find a administration in March with the loss at Patisserie Valerie in a joint operation to the resident judge’, but I told them, period, alongside £285m in property buyer. The ailing business embarked of 325 jobs. The £1bn-a-year bathroom by the Serious Fraud Office and police. ‘I am the resident judge’. I had to phone assets and cash payments form the upon a turnaround plan last year with retail sector has been hit by the None of the arrests are thought to relate them up and they [eventually] realised company itself. its owner, American billionaire Warren slowdown in the housing market and to any current employees of Patisserie it was a mistake.” Stephens, providing a £15m loan and weak consumer confidence, with sales Valerie which was bought for £5m by extending the maturity of previous of big-ticket items particularly hard hit. Irish private equity firm Causeway London Legal Walk loans to the end of July 2019. However, Capital after in entered administration it is understood Stephens was unwilling in January of this year with debts valued Members and staff were proud to The money raised enables the to inject more cash into the ailing at £94m. take part in the London Legal Walk in centres to offer help to the homeless, business before rent day in June of support of the London Legal Support housebound, elderly, victims of Before the arrests Causeway revealed this year. Trust on Monday 17 June 2019. This is domestic violence, people trafficking that, before the buy-out, the patisserie an annual event where thousands of and many more. In 2018 a record Administrators BDO have been chain had been under such financial judges, barristers, solicitors, legal staff breaking £830,000 was raised by appointed and the business will pressure that managers had ordered and students cove one of two 10km 13,000 walkers. Donations for this year continue to trade for now in the hope it the puff pastry to be made form routes around London, raising much- are still be counted and can still be can be sold as a going concern. So far, margarine instead of butter in a bid needed funds through sponsorship made through the following website: no offers have been received. to cut costs. That order has now to support free legal advice centres. www.londonlegalsupporttrust.org.uk been reversed. SOUTH SQUARE DIGEST July 2019 www.southsquare.com South Square Challenge 93

Enter our August 2019 South Square Challenge SOUTH SQUARE and you could win a magnum of champagne! Our competition for this issue celebrates the 100 year anniversary of the 1919 Sex Disqualification (Removal) Act, following the 1914 Court of Appeal case of Bebb v Law Society which found that the entire female CHALLENGE gender failed to fall within the definition of ‘persons’. SET BY Your task on this occasion is to correctly identify each of the remarkable Charlotte Cooke women in the photographs below and then assign them not only to their ‘first’ but also the correct year in which that ‘first’ happened.

Please send our answers by e-mail to [email protected], or by post to Kirsten at the address on the back page. Entries to be in by 1 September 2019 please. Best of luck! UNCTAD Photo/ 01 Jean Marc Ferré 02 03

FIRST WOMAN TO … IN THE YEAR...

A. First female High Court Judge F. First woman appointed Attorney i. 1888 assigned to the Chancery Division. General for England and Wales and Advocate General for ii. 1892 04 05 06 Northern Ireland. B. First woman at Oxford University to sit the Bachelor of Civil Law iii. 1936 examinations. G. First woman to be appointed to the professional judiciary full-time. iv. 1945 C. First woman to be awarded a scholarship at Gray’s Inn. H. First woman to be awarded a scholarship at Gray’s Inn. v. 1965

D. First woman to gain a law degree, having previously been refused I. First woman Justice of the vi. 1974 permission to take the Law Supreme Court. Society’s exams to become vii. 1993 a solicitor. 07 08 09 J. First woman appointed High Court Judge, and also credited with viii. 2007 E. First female head of Chambers at bringing ‘Your Ladyship’ into legal 4 Brick Court, also known as ‘the vocabulary after years of being Monstrous Regimen of Women’. addressed as ‘My Lord’ in court. ix. 2009

MARCH CHALLENGE

The answers to the March 2018 challenge were:

1. Sir Colin Birss, Beekeeping 5. Sir Richard Snowden, Rugby referee The winner is Chris Chapman of Quayside Chambers, Wellington, 2. Sir Peter Gross, cross-country skiing 6. Sir Launcelot Henderson, Botany New Zealand to whom we send 3. Sir Andrew Longmore, Fell walking 7. Sir Antony Zacaroli, steam trains our congratulations, a magnum of champagne and a fabulous South 4. Sir Terence Etherton, Fencing 8. Sir Christopher Nugee, Tideway Square umbrella! (competing as part of the 1980 sculling Moscow Olympics team) 9. SOUTH SQUARE DIGEST July 2019 www.southsquare.com DatesDiary datesfor your diary 95

Diary dates

South Square members will be attending, speaking and/or chairing the following events Practice areas

Spring 2019 onwards Insolvency & Banking & Offshore 19 September 2019 18 November 2019 South Square also runs a programme Restructuring Finance Litigation South Square Mourant South Square/ of in-house talks and seminars – both in Chambers and on-site at our client Litigation Forum RISA Cayman Seminar premises – covering important recent decisions in our specialist areas of  Landing 42, The Leadenhall  The Ritz Carlton Hotel, Seven Mile practice, as well as topics specifically Building, London Beach, Grand Cayman requested by clients.

For more information contact

[email protected], or visit Commercial Litigation Company Civil 26–29 September 2019 15–18 March 2020 our website www.southsquare.com & Arbitration Law Fraud INSOL Europe Annual INSOL Cape Town Congress  Further details to follow

 Scandic Copenhagen Hotel, Copenhagen, Denmark 8–9 June 2020 International Insolvency 7 November 2019 Institute 20th Annual Sport Insurance Trusts & Property IWIRC Women in Conference Restructuring conference  Grand Hyatt, Hong Kong, SAR China Mediation  Painters’ Hall, London Members of Chambers have frequent experience of mediation and other forms of alternative dispute resolution, and a number have been trained as mediators 18 October 2019 and accept appointments. INSOL International Hong Kong One Day seminar

 Four Seasons Hotel, Hong Kong, SAR China Sectors

• Financial Services • Insurance • Sport • Banking • Manufacturing • Aviation • Energy • Professional Services • Technology & Communication • Government/ • Retail Regulation • Shipping

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Michael Crystal QC Tom Smith QC Charlotte Cooke Richard Hacker QC Daniel Bayfield QC Alexander Riddiford Mark Phillips QC John Briggs Matthew Abraham Robin Dicker QC Adam Goodison Toby Brown William Trower QC Hilary Stonefrost Robert Amey Martin Pascoe QC Lloyd Tamlyn Andrew Shaw Fidelis Oditah QC Richard Fisher Ryan Perkins David Alexander QC Stephen Robins Riz Mokal Glen Davis QC Marcus Haywood Madeleine Jones Barry Isaacs QC Hannah Thornley Edoardo Lupi Felicity Toube QC William Willson Rose Lagram-Taylor Mark Arnold QC Georgina Peters Stefanie Wilkins Jeremy Goldring QC Adam Al-Attar Lottie Pyper David Allison QC Henry Phillips

3-4 South Square I Gray’s Inn I London WC1R 5HP I UK

Tel. +44(0)20 7696 9900. Fax. +44(0)20 7696 9911. LDE 338 Chancery Lane. Email. [email protected] www.southsquare.com