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Authors Marcus Staff Common assistance and cross- border : from modified universalism to supra-territoriality KEY POINTS ––A court has a common law power to assist winding up proceedings taking place under 4. that it is consistent with the the supervision of a foreign court of insolvency jurisdiction so far as it properly can. substantive law and public policy ––A court has jurisdiction to order a third party to provide information to of the assisting court; foreign liquidators. 5. that where compulsion is involved, then as with other powers of compulsion, its INTRODUCTION MODIFIED UNIVERSALISM AND exercise is conditional on the applicant This article summarises and considers PUBLIC INTEREST being prepared to pay a third party’s nSingularis Holdings Limited v Lord Sumption explained, in essence, that reasonable costs of compliance [25]; PricewaterhouseCoopers [2014] UKPC 36, the principle of modified universalism 6. that the power is not to be used to make which was handed down on 10 November depends on the public interest in the ability good a limitation on the powers of the 2014. The decision is interesting, in of foreign courts exercising insolvency foreign court of insolvency jurisdiction particular, because: jurisdiction in the place of a company’s under its own law; and ––it confirms that the court has a common incorporation, to conduct an orderly 7. where the jurisdiction is invoked to law jurisdiction to assist winding up winding up of its affairs on a world-wide obtain documents or other information proceedings taking place under the basis, despite the territorial limits of that it should be the case that these things supervision of a foreign court of insolvency jurisdiction. The basis of that public interest cannot be obtained in some other way. jurisdiction. The scope of the jurisdiction is not only comity, but a recognition that is subject to local law and public policy in a world of global business it is in the The information under this and the and the assisting court can only act within interest of every country that companies with foregoing sub-heading represents a distillation the limits of its statutory and common law transnational assets should be capable of of principles laid down in connection with the powers. If there is no relevant statutory being wound up in an orderly fashion under development of the common law that occurred power, the ability to grant assistance will the law of the place of their incorporation in the case under review. These serve to depend on the common law, including any and on a basis that will be recognised and explain the parameters of and reasons behind proper development of the common law effective internationally. the jurisdiction to assist and provide strong [15 and 19]; and guidelines for liquidators wishing to persuade ––the judgments of the majority have CONDITIONS FOR ASSISTANCE the court to develop the common law under developed the common law by going According to the judgments of the majority, the jurisdiction in a new way. beyond what had previously been the court may exercise the jurisdiction understood to be the power of the to assist to give effect to the principle of JURIDICAL BASIS OF THE court to order a person to supply modified universalism if the following JURISDICTION TO ASSIST information [69]. In short, under the conditions are fulfilled: The whole juridical basis of the jurisdiction umbrella of the principle of assistance 1. the applicants for assistance are to assist is the right and duty of the assisting a court has power to order a third officers of the foreign court or equivalent court to assist the foreign court [17] and party to provide information to foreign public officers; Lord Sumption found the evidence for that liquidators in the public interest to give 2. that assistance is being sought to proposition in the reasoning in Norwich effect to a recognised legal principle, enable the foreign court to surmount Pharmacal Co. v Customs and Excise namely, modified universalism [22]. The the problems posed for a world-wide Commissioners [1974] AC 133. development was most closely articulated winding up of the company’s affairs by the Under the Norwich Pharmacal jurisdiction, in the judgment of Lord Sumption, with territorial limits of each court’s powers; a person comes under a duty to assist because which Lord Collins and Lord Clarke 3. that its exercise is necessary for he has, maybe innocently, become mixed up concurred, but from which Lord Mance the performance of the foreign office- in the wrongdoing of another and, unless and Lord Neuberger dissented. holder’s functions; he provides the information sought, the

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party claiming he has been wronged cannot the questioning of anyone, either because had, through its branch offices in Dubai, identify whom to sue and/or particular a foreign shows this might been the auditor of Singularis. The important information he needs to do so. assist him to identify or recover assets liquidators said there was a very large Obviously, that jurisdiction is ultimately anywhere in the world, a fortiori, because unexplained difference between what about the vindication of private rights it would enable him to understand the the company owed and the assets they because the applicant is seeking information company’s affairs, is new. Previously, such identified it had and wished to obtain he needs to claim to enforce those rights. an order could be made only where there information from PwC to assist them to There is a strong public interest in allowing is evidence: identify what, if any, assets the company him to do so: see, eg, Rugby Football Union v ––that the person ordered to provide the had or should have had. To obtain that Consolidated Information Ltd [2012] UKSC information or documentation has information they made an originating 55; [2012] 1 WLR 3333, per Lord Kerr at property belonging to the insolvent application to the Bermuda court at 3339A-B. company; or common law for them to be recognised Lord Sumption considered the basis ––of some wrongdoing by the person so there as foreign office-holders. They then of the duty to provide information under ordered; or applied for an order for PwC to produce the Norwich Pharmacal jurisdiction and ––of some wrongdoing by another person documents and information. They were observed that it is of a somewhat notional in which the person so ordered was or is recognised, and the production order kind, in that it is not a legal duty in the innocently mixed up [137, 147]. was granted at first instance but was ordinary sense of the term that would give overturned on appeal, whereupon the a right to an action, eg, for damages. It is a SUPRA-TERRITORIALITY liquidators appealed to the Privy Council. duty on the court, he said, to make an order The jurisdiction to assist enables a court to The Cayman liquidators accepted before necessary for the of justice. grant assistance even if the court assisted the board that the information which they This is achieved by satisfying the public would not have had territorial jurisdiction were seeking belonged to PwC and that interest in allowing the applicant to vindicate over the respondent and the assisting therefore it was properly excluded from the his legal rights. This enabled Lord Sumption court does not have insolvency jurisdiction order made by the Cayman court. Whether to explain that the juridical basis for the in any other sense, eg, ancillary winding the liquidators were right about that was not power to provide information to assist a up. Thus, the principle of assistance is in a point argued before the board. Therefore, foreign court of insolvency jurisdiction is the a sense supra-territorial. The theoretical although the board expressed doubts that same as the basis for the analogous power to justification for this arises out of the the information which PwC acquired solely order a person to provide information under juridical basis of the duty of the court in its capacity as the company’s auditors the Norwich Pharmacal jurisdiction [23]. to assist, detected by Lord Sumption in could be regarded as belonging exclusively In other words, when the court exercises the reasoning in Norwich Pharmacal. But to it, simply because the documents in the new power it is responding to its duty there are limits to this concept of supra- which it recorded that information were its to serve the ends of the due administration territoriality in the context of cross-border working papers and as such its property, the of justice by satisfying the public interest insolvency, eg, in Rubin v Eurofinance SA board decided the case on the basis that the associated with the principle of modified [2012] UKSC 46; [2013] 1 AC 236, the liquidators were right [30]. universalism. That analysis provides the majority considered that a change in the The Cayman court has a statutory basis for a larger proposition that when an law relating to foreign judgments to apply power to order any person who was a order to provide information is made under a different rule, removing the need for a professional service provider of the the Norwich Pharmacal jurisdiction, or under jurisdictional (viz, territorial) basis, in the company being wound-up to transfer the jurisdiction to assist a foreign court of context of insolvency, was a matter for the or deliver up documents to the liquidator, insolvency jurisdiction, the court is always legislature [77]. but this is limited to documents “belonging responding not to a private right but to a to the company”: Cayman Islands, species of public duty which exists because THE CASE UNDER REVIEW: FACTS Companies Law 2012 (revision), s 103. it is in the public interest for the order to be AND RESULT This limitation under Cayman law meant made. This shows that the whole juridical In Singularis Holdings Limited, the Cayman that the liquidators were unable to fulfil basis of the jurisdiction to assist is the right Islands court had made an order to the sixth condition for assistance (listed and duty of the assisting court to assist the wind up a company incorporated in that above) and for that reason the appeal was foreign court. jurisdiction (Singularis) and appointed dismissed (ie, if the order had been made, liquidators over it. PwC, a registered the power would have been used to make THE LAW TO DATE exempted partnership in Bermuda, good a limitation on the powers of the The power to order the disclosure of which was not subject to the in personam foreign court of insolvency jurisdiction information and documentation by, and jurisdiction of the Cayman Islands court, under its own law).

4 February 2015 Corporate Rescue and Insolvency INSIGHT Biog box Marcus Staff is a barrister practising from XXIV Old Buildings, Lincoln’s Inn, London. Insight He appeared for the successful appellant in Rubin v Eurofinance SA [2013] 1 AC 236. Email: [email protected]

POINTS TO APPRECIATE where legislation in the court of insolvency put, or information or documentation It is important to appreciate that the jurisdiction does not provide for relevant sought, will be scrutinised with a view to power in question is entirely a common law assistance to a foreign office-holder, the identifying assets, in whatever form, even power. It was not, therefore, a consideration legislation of the assisting court should if these consist only of potential claims relevant to its exercise that where a company be applied by analogy “as if” the foreign for maladministration or negligence is being wound up in Bermuda, the court has insolvency were a local insolvency. All the [blurring the distinction, if there be one]; a statutory power at any time to summon members of the board were in agreement ––there is a “step leap” between enforcing any person to produce books or papers in that this argument involved a fundamental rights to identifiable assets and his custody or power relating to the misunderstanding of the limits of the obliging third parties to assist with company: Companies Act 1981, s 195. The judicial law-making power. The most documentation and information in existence of that statutory power was not detailed criticism of it is contained in the order to discover a company’s assets (or, a reason to suppose there is a legislative judgment of Lord Collins, who said that still more widely, to enable insolvency policy in Bermuda adverse to assisting the adoption of the argument would have practitioners to understand a company’s foreign courts of insolvency jurisdiction: involved judges in a development of the affairs). This means that the development it simply reflects the limits of the ambit of law and their law-making powers which of the new common law power to the Act, and it does not exclude the use of would have been wholly inconsistent assist by ordering the production of the common law power in relation to other with established principles governing the information is extravagant; companies which lie outside the scope of the relationship between the judiciary and ––there is no reason in principle why statute altogether, such as companies like the legislature and therefore profoundly liquidators should occupy a better Singularis for reasons given in para 41 of the unconstitutional [108]. The precise reasons position in relation to the obtention judgment [28]. why the argument by analogy was held to be of information than other claimants Because the juridical basis of the misconceived are not explored in this article: who would like a facility to gather jurisdiction to assist does not depend on it is mentioned only to note that it was information to discover or trace assets. the vindication of a private right but on the resoundingly rejected. Attempts to use the new jurisdiction fulfilment of a duty that exists solely to serve to obtain information (a precious the public interest (viz, a public duty), the THE DISSENSION OF LORD MANCE commodity) in the context of domestic absence of a private right in the liquidators The liquidators’ subsidiary argument on the insolvency or outside the context of or the company should not be a bar to appeal was that there exists a common law insolvency altogether are bound to obtaining assistance. And so, while in the power to order information (otherwise then occur; and judgment under consideration the liquidators’ by analogy with local statutory powers). ––the Norwich Pharmacal jurisdiction is in right to assistance was blocked because the The response of the majority on that issue and of itself an exceptional jurisdiction information sought did not belong to the is identified above. However, in a detailed which should not be used to avoid company, it was not the absence of that right judgment, Lord Mance said that he cannot wide-ranging discovery or the gathering which led to the dismissal of the liquidators’ advise that the new power to grant assistance of evidence and is strictly confined to application but resort to the broader principle to make an order for information is necessary information. However, a that assistance cannot be obtained to make permissible or appropriate and would reject distinction drawn by Lord Sumption good a limitation under the powers of the that element in the liquidators’ subsidiary between “information”, which it is foreign court. Accordingly, if the liquidators argument. This was for reasons including: permissible to seek under the new power of a company incorporated and being wound ––the scope of the proposed jurisdiction and “evidence” which is not, is likely to up in Bermuda made a request at common is uncertain because at one point Lord prove to be illusory. n law similar to the one made by the Cayman Sumption speaks of the common liquidators, the absence of a proprietary right law power to assist a foreign court of in the company to the information would insolvency jurisdiction by ordering Further reading have been utterly irrelevant because s 195 of the production information as being ––What’s left of the golden thread? the Bermuda Act does not contain the same a means to assist in “identifying or Modified universalism afterRubin and limitation as s 103 of the Cayman Act. locating assets” and in another of New Cap [2012] 11 JIBFL 675. “enabling [foreign] courts to surmount ––When will a court not assist a foreign REJECTION OF APPLICATION OF the problems posed for a world- insolvency proceeding? Recent experi- LEGISLATION BY ANALOGY wide winding up of the company’s ence in England, the US and Germany The primary way in which the case was put affairs by the territorial limits of each [2013] 3 JIBFL 159. by the liquidators was that the common court’s powers”. A problem with this ––Lexisnexis RANDI blog: R & I – pick law should be developed by a principle that uncertainty is that any questioning of the cases in 2014.

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