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Common Law Assistance and Cross- Border INSIGHT Authors Marcus Staff Common law assistance and cross- border insolvency: 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 Corporate Rescue and Insolvency February 2015 3 Insight INSIGHT 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 liquidator 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 administration 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.
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