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Case law update

An insolvency case law update prepared by Henry Glen, Associate Director at Manolete Partners PLC.


BUJ Architects LLP v Investin Quay House Ltd [2021] EWHC 2371 (Ch)

On 8 June 2020, the preliminary hearing of a winding-up petition against a Jersey company, Investin Quay House Ltd (“Company”), took place before ICC Judge Mullen in the High Court (“Court”) (“Petition”). 

Background:

The Company:

  • is registered in Jersey and its principal purpose was to develop a property in London (“Property”);
  • ceased trading in 2018 following the sale of the Property and the distribution of the sale proceeds; 
  • had been ordered to pay the petitioning creditor, BUJ Architects LLP (“Petitioner”), £354,000 by the Technology and Construction Court in November 2019, which debt was not disputed (“Judgment Debt”); and
  • was placed into voluntary liquidation in Jersey in June 2021. 

The Petition was presented on 27 July 2020, seeking the winding up of the Company under the Insolvency Act 1986. 

Mr Downer, the Company’s director (“the Director”), had obtained permission from the Royal Court in Jersey to bring an application on the Company’s behalf to injunct the Petitioner from pursuing the petition. The Royal Court declined to grant an injunction on an interim basis and Judge Mullen declined to adjourn this hearing to abide the outcome of the proceedings in Jersey, which were due to take place in August 2021.  

Issues before the Court:

The Company opposed the Petition on the basis that:

  • Coronavirus had a financial effect on it such that the Court may not make a winding-up order by reason of Schedule 10 of the Corporate Insolvency and Governance Act 2020 (“CIGA”); and
  • The Court has no jurisdiction to make a winding-up order as the Company’s centre of main interests (“COMI”) for the purposes of the recast EU Regulation on Insolvency Proceedings (“EU Regulation”) is in Jersey. 

The decision

The Judge rejected the Company’s arguments and listed the Petition for hearing on the basis that:

  • it is likely that the Court will be able to make a winding-up order having regard to the coronavirus test prescribed by paragraph 8 of the Insolvency Practice Direction relating to CIGA (“Coronavirus Test”); and
  • he was satisfied that the Court has jurisdiction to wind up the company.    

Reasoning 

Coronavirus Test

The Director gave evidence on behalf of the Company claiming that the pandemic had affected his other business interests so that he was unable to put the Company in funds for it to satisfy the Judgment Debt. The Director said that he had previously settled debts of the Company, however, Counsel for the Petitioner pointed out that there was no evidence of the Director having settled any debts of the Company previously.

The Judge found the Director’s claim that he would have funded the Company “remarkably lacking in particularity” and commented that he had made “improbable assertions” that could not “simply be accepted at face value in circumstances where the [Judgment Debt] went unpaid for some time prior to the advent of lockdown”.  The Judge considered the Director’s evidence to be “purely speculative” and stated that:

“It would be necessary for the Company to show prima facie evidence of a prospect that monies would have been provided to it by a third party if coronavirus had not intervened. In this case, that would require at least some evidence of genuine proposals to make such funds available”. [Para. 25]

Jurisdiction

Noting that:

  • the EU Regulation as incorporated into UK law and amended applies to the Petition;
  • Jersey is not a member of the EU and is not a Member State for the purposes of the EU Regulation; and
  • the COMI of a company is determined objectively and must be ascertainable by third parties, particularly its creditors,

the Judge decided that there was “limited weight” that could be put on the fact that the Company held board meetings in Jersey or certain terms of its contract with an English company that provided it with advisory services/administrative functions. Instead, the Judge found that factors that are ascertainable to third parties all pointed to its COMI being in England, including that the Company’s:

  • purpose was to develop a property located in England (and the development project is held out as a project on the website of “Investin plc”, which gives an English address at the foot of the page);
  • contracts were governed by English law and subject to the jurisdiction of the Courts of England and Wales; and
  • head office functions were carried out at offices in England.

In any event, the Judge was also satisfied that the Court has jurisdiction to wind up the Company as an unregistered company, there being: a sufficient connection with the jurisdiction; a reasonable possibility that a winding-up order (if made) would benefit the Petitioner; and the Court being able to exercise jurisdiction over persons interested in the distribution of the Company’s assets.