diffusion of the principle in cambridge gas: a sad and ...omar: a sad and singular deflation 575 5...

(2015) 3 NIBLeJ 31

Diffusion of the Principle in Cambridge

Gas: A Sad and Singular Deflation

Paul OMAR* Introduction

1 In 2006, the decision in Cambridge Gas,1 a case that was heard before the Privy Council, appeared to inaugurate a special treatment for orders and judgments in insolvency, particularly in the context of requests for cross-border assistance. The rationale was impeccable, drawing on a principle of “active assistance” that was articulated in an earlier case from the Transvaal.2 Under this principle, designed to promote the ideals of unity and universality in insolvency cases, judges would do their utmost to assist, subject to two conditions: where a domestic rule prevented them from doing so or where to do so would prejudice creditors. Where cross-border assistance provisions did not exist (whether domestic or international in origin) or were defective in their scope, such “judge-made” cooperation would fill the gap in legislative frameworks. 2 Judges have in fact been doing this since at least the 1700s,3 examples of assistance being known in a number of areas: recognition of instances and appointments, granting of title to assets and powers to act, ordering examinations, production of documents, injunctions and stays as well as approving reconstructions and the opening of ancillary proceedings destined to assist procedures elsewhere. Only in recent times, with the advent of cooperation provisions in domestic law, followed by the adoption of international texts, such as the UNCITRAL Model Law on Cross-Border Insolvency Proceedings 1997 and the European Insolvency Regulation 2000, has such judicial cooperation appeared to stagnate, becoming side-lined by the emphasis on and prominence given to statutory frameworks. Judicial intervention in such cases has extended solely to

* Paul Omar is Chair of International and Comparative Insolvency Law at the Nottingham Law School, Nottingham Trent University, Nottingham, the United Kingdom. 1 Cambridge Gas Transportation Corp v. Official Committee of Unsecured Creditors of Navigator

Holdings plc [2006] UKPC 26 (“Cambridge Gas”). 2 Re African Farms Ltd [1906] TLR 373 (“Re African Farms”). 3 Solomons v Ross (1764) 1 Hy. Bl. 131n; 126 ER 79; Sill v Worswick (1781) 1 H. Bl. 665.

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interpreting the permissible extent of cooperation under the law and to exercising any discretion to assist. 3 Cambridge Gas appeared to give new meaning and vigour to judicial assistance. Its reiteration of the principle of “active assistance” rapidly found an echo in the jurisprudence of the Commonwealth, both among countries which had the Privy Council at the apex of their judicial hierarchies as well as those for whom the court’s rulings were simply persuasive precedent. Cases proliferated in jurisdictions ranging from Australia,4 Bermuda,5 the Cayman Islands,6 Ireland,7 Jersey8 and New Zealand9 to the United Kingdom.10 4 In the way the case rapidly secured adherents, the Privy Council, in the person of Lord Hoffmann, appeared to have tapped into the zeitgeist in international insolvency matters, which required a solution to the problems experienced, particularly in some of the British overseas jurisdictions, when it came to securing assistance for the pursuit of information and funds to swell the estate for the benefit of creditors. The “active assistance” principle found its articulation in a number of diverse situations, ranging from the recognition and enforcement of foreign judgments non-compliant with traditional private international rules at common law,11 via the opening of domestic proceedings designed to further requests from jurisdictions absent an appropriate rescue procedure,12 to the extension of domestic litigation powers to assist an overseas office-holder despite no domestic proceedings being envisaged or possible.13

4 Bank of Western Australia v Henderson (No 3) [2011] FMCA 840 (obiter). 5 Re Founding Partners Global Fund Ltd (No 2) [2011] SC (Bda) 19 Com. 6 Re Lancelot Investors Fund Ltd (2008) (unreported), cited in S. Dickson, “The Quick March of Modified Universalism: Rubin v Eurofinance SA” (Mourant Ozannes Briefing, June 2010). 7 Fairfield Sentry Ltd (In Liquidation) & Anor v Citco Bank Nederland NV & Ors [2012] IEHC 81. 8 Re Montrow International Ltd 2007 JLR Note 40. 9 Williams v Simpson Civ 2010-419-1174 (12 October 2010) (High Court, Hamilton). 10 Rubin & Anor v Eurofinance SA & Ors [2010] EWCA Civ 895 (“Rubin CA”); New Cap Reinsurance

Corp Ltd & Anor v Grant & Ors [2011] EWCA Civ 971. 11 Idem., particularly Rubin CA. This line of jurisprudence has been disavowed in Re Flightlease

(Ireland) Ltd (In Voluntary Liquidation) [2012] IESC 12 (Ireland) and Conjoined Appeals in (1) Rubin

& Anor v Eurofinance SA & Ors and (2) New Cap Reinsurance Corp Ltd & Anor v Grant and others [2012] UKSC 46 (“Rubin SC”) (United Kingdom). See, by this author, An Irish Perspective on Insolvency Cooperation: The Re Flightlease Case (2013) 10 International Corporate Rescue 158; The Limits of Co-Operation at Common Law: Rubin v Eurofinance in the Supreme Court (2013) 10 International Corporate Rescue 106. 12 HSBC Bank v Tambrook Jersey Limited [2013] EWCA Civ 576. See, by this author, Visa Denied: An End to the Jersey Practice of Insolvency “Passporting”? (2013) 17 Jersey and Guernsey Law

Review 182; Passport Renewed: Extension of Rescue Proceedings to Foreign Companies under Section 426 of the Insolvency Act 1986 (2013) 10 International Corporate Rescue 310. 13 Re Phoenix Kapitaldienst GmbH, Schmitt v Deichmann & Ors [2012] EWHC 62 (Ch) (“Re

Phoenix”). See, by this author, The Resurgence of Cross-Border Recognition and Enforcement of Insolvency Judgments: The Re Phoenix Case [2013] 9 International Company and Commercial Law

Review 329.

Omar: A Sad and Singular Deflation 575

5 In the last of these situations, the particular spin given in Re Phoenix to the Cambridge Gas principle served as precedent for the development of a line of jurisprudence in 2013, first in the Cayman Islands14 and then Bermuda.15 In Re

Phoenix, the office-holder had wished to bring set-aside proceedings within the jurisdiction, although doubts were emitted about his power to do so, absent the opening of a local insolvency proceeding. In extending at common law the domestic statutory power to permit action by the office-holder, the judge held that:

(i) the common law contained powers to recognise and assist foreign office-holders; (ii) assistance (particularly “active assistance”) meant, in the instant case, doing

whatever the court could do in domestic proceedings; and (iii) insolvency proceedings were about collective enforcement for the benefit of all

creditors and necessarily included set aside proceedings, which were central to its purpose.16

6 The views emitted by the judge in the case were taken up in short order in the two jurisdictions concerned, with the precedent in Re Phoenix being used to authorise a foreign office-holder to bring set-aside proceedings in the Caymans and the issue of a discovery and examination order against a third party in Bermuda. Given the stakes in both cases, which arose out of the collapse of the Saad Group and the Madoff scandal respectively, the issues would undoubtedly have been appealed. When they were, the Bermudian appellate court held the expansive views of the judge at first instance to be simply wrong.17 7 By contrast, the Caymans appeal court reversed the findings of the first instance judge in part, holding that the domestic statutory provision the judge had dismissed as a source of authority could confer the powers the judge sought to provide at common law.18 The Caymans court stayed its decision on whether the judge also had the powers at common law, because by then a further appeal in the Bermudian case had been taken before the Privy Council and was to be heard in April 2014. Its outcome would of course also determine the issue of the extent of the common-law powers available, both cases relying heavily on the articulation in Re Phoenix of the Cambridge Gas principle.

14 Picard and Anor v Primeo Fund (In Official Liquidation) (unreported) (14 January 2013) (“Primeo”). See, by this author, Après Rubin: le Déluge? Thoughts on the Future of Common Law Insolvency Cooperation (2013) 10 International Corporate Rescue 356. 15 Re Saad Investments Company Ltd (In Official Liquidation) and Re Singularis Holdings Ltd (In

Official Liquidation) [2013] SC Bda 28 Com (15 April 2013) (“Re Saad and Singularis SC”). See, by this author, The “Empire” Strikes Back: Lessons for the Mother Country in Insolvency Cooperation [2013] 11 International Company and Commercial Law Review 411. 16 Re Phoenix, at paragraph 62. 17 Re Saad Investments Company Ltd (In Official Liquidation) and Re Singularis Holdings Ltd (In

Official Liquidation) [2013] CA (Bda) 7 Civ (18 November 2013) (“Re Saad and Singularis CA”). See, by this author, A Singular Tide in Insolvency Cooperation in Bermuda (2014) 11 International

Corporate Rescue 159. 18 Judgment in CICA 1/2013 and 2/2013 Appeals (16 April 2014). See, by this author, The Universe of Insolvency Cooperation and the Primeo Directive (2015) 12 International Corporate Rescue 32.


8 The Privy Council produced two related judgments in November 2014.19 In the first, it dealt with the authority for a third party to appeal a winding up order where the order had some impact on the party concerned. In the second, it covered the issue of whether powers existed to further the ability of the liquidators to seek discovery and production orders against the company’s auditors. It also took the opportunity to pronounce on the court’s earlier judgment in Cambridge Gas, which had already been determined as wrongly decided by the United Kingdom Supreme Court in Rubin SC. This article will mostly discuss the second judgement, which appears to have redrawn the boundaries of what is permissible in terms of judicial cooperation in cross-border insolvency matters. The Facts in the Case

9 The case involved two companies, Saad Investments Company Ltd (“Saad”) and Singularis Holdings Ltd (“Singularis”), incorporated in the Cayman Islands and which were later the subject of liquidation orders in that jurisdiction. A petition was brought for an ancillary liquidation in Bermuda in the case of Saad, which was granted on 14 September 2012.20 The liquidators in Bermuda then applied for orders in respect of the companies on 13 February 2013 for the production of documents held by the former auditors, PriceWaterhouse Coopers, as well as the examination of certain members of the auditing practice under the terms of section 195 of the Bermuda Companies Act 1981 (“section 195”). The liquidators of Singularis applied on 12 February 2013 for recognition and assistance at common law as well as for similar relief to that applied for in the case of Saad. Both cases were heard together for convenience,21 given that challenges were being brought on similar terms to the orders that had been granted on 4 March 2013.22 10 In the case of Saad, given the judge’s view that there could be no challenge to the basis on which the ancillary liquidation had been ordered and to which section 195 would undoubtedly apply, the resistance on the part of the auditors was to the granting of the order for examination and production of documents and its scope.23 In the case of Singularis, challenges were brought in respect of the same issues as well as whether the Bermudian court was able to invoke its inherent jurisdiction to provide the assistance sought, whether at common law or by applying the statute.24

19 PwC v Saad Investments Company Ltd [2014] UKPC 35 (“Re Saad PC”) and Singularis Holdings

Ltd v PwC [2014] UKPC 36 (“Re Singularis PC”). 20 Re Saad and Singularis SC, at paragraph 1. The article mentioned, above note 15, contains a more detailed account of the facts and reasoning, of which this section and the one that follows are a summary. 21 Ibid., at paragraph 2. 22 Ibid., at paragraph 3. 23 Ibid., at paragraph 4. 24 Ibid., at paragraph 5.


The Decisions Below

At First Instance

11 In summarising his approach to his decision,25 the judge at first instance26 stated there were four elements to his findings:

(i) Recognition might be validly forthcoming for the appointment of the liquidators in their jurisdiction and whom the court will assist at common law by the application by analogy of the statutory power contained in section 195 on the same terms as could be ordered under that provision in the case of a local or ancillary liquidation;

(ii) The principles in Cambridge Gas which militate for judicial assistance at common law have survived the repudiation of the case by Rubin insofar as the recognition of insolvency proceedings and the appointment of office-holders in another jurisdiction was concerned;

(iii) At the very least, the scope of the assistance that might be forthcoming to such office-holders would be governed by the inherent jurisdiction of the court together with any common law or equitable powers under the general law of Bermuda, without needing to invoke any statutes of particular application, although what could be done in a local liquidation will inform a court requiring to determine the extent of the assistance that may be forthcoming (what he called a “conservative demarcation”);

(iv) Alternatively, applying Cambridge Gas, particularly where it approved Re

African Farms, and the persuasive precedent in Re Phoenix and Primeo, the scope of assistance could be determined by the court’s inherent jurisdiction and the general law, to which would be added the statutory insolvency regime that would apply in a local primary or ancillary liquidation (what he called a “radical demarcation”).

12 The radical interpretation which suggested itself to the Bermudian judge in the last of these elements was to directly apply the local law which permitted discovery and examination, rather than a common-law palimpsest of its contents, which would inevitably rely on the court’s view of its own inherent powers and extent of judicial cooperation feasible. The judge termed this approach “more principled” than any other that would serve in this case.27 Referring to Re Phoenix, in which the judge’s own journey of discovery between Re Kingate28 and Re Founding

Partners29 was the subject of mention, the judge noted the conclusion in that case to the effect that

25 Ibid., at paragraph 8(a). 26 Coram Kawaley J (now CJ). 27 Re Saad and Singularis SC, at paragraph 49. 28 Re Kingate Global Fund Ltd (in liquidation) et al. [2011] Bda LR 2. 29 Above note 5.


“…assistance includes doing whatever the English court could have done in the case of a domestic insolvency”.30

13 This conclusion rested on the statement in Cambridge Gas, in very similar language, which authorised the

“…domestic court [to] at least be able to provide assistance by doing whatever it could have done in the case of a domestic insolvency”.31

14 However, a crucial element in relation to the latter statement was that it was made in a context that presupposed the statutory provision referred to could be used. For the judge, it would be a “very generous reading indeed” to transplant that statement into a context where local insolvency provisions would not apply and where an ancillary winding up would be a legal impossibility.32 However, some comfort was provided for precisely this step by the Cayman case of Primeo, where the judge’s findings were that applying the local avoidance provisions was

“…an incidence of recognition and… consistent with the statutory objective”.33 15 The Bermudian judge agreed, holding that assistance was an integral part of recognition.34 Support for this position was found in Re African Farms, where an ancillary liquidation has also been unavailable. Yet, in that case, the court held that assistance could be given to allow the foreign office-holder to deal with local assets as if these were within the jurisdiction of the foreign court, subject to any conditions necessary to protect local creditors or where local law mandated some requirement, language also adopted as part of the reasoning in Cambridge Gas. The reason for this assistance was firmly based in comity, despite the fact that the foreign and local insolvency systems were not identical in all respects, which mandated recognition on the basis of principle and convenience.35 16 Re African Farms also decided matters on the basis of an analogy with the recognition of foreign judgments. The court stated that it would not re-examine matters decided by a competent court, but would treat the subject matter of the judgment as a “new and independent obligation” which the court would, as a matter of justice and expediency, recognise and enforce.36 This offered to the judge in the instant case the opportunity to consider the parallels that could be drawn with the enforcement of personal money judgments at common law.

30 Re Saad and Singularis SC, at paragraphs 50-53, citing Re Phoenix, at paragraph 62. 31 Ibid., at paragraph 53, citing Cambridge Gas, at paragraph 22. 32 Ibid., at paragraph 54. 33 Ibid., at paragraph 57, citing Primeo, at paragraph 41. 34 Ibid., at paragraph 58. 35 Ibid., at paragraphs 59-63, citing Re African Farms, at 377 and 381-382. 36 Ibid., at paragraph 64, citing Re African Farms, at 391-392.


17 Referring to a summary of the position in Bermuda,37 the judge noted the willingness of the courts to enforce a foreign judgment provided it were final and conclusive and not impeachable for want of compliance with any of the common law’s requirements in relation to jurisdiction, procedural fairness, public policy or natural justice. For the judge, the fundamental aim of such proceedings was to achieve recognition on a summary basis without a full trial, which would result in a final local judgment which could be enforced using any and all of the available local procedural mechanisms. The aims of common law enforcement of a foreign insolvency order, which may include recognition of the status and/or capacity of a foreign office-holder, were “broadly similar”.38 18 In this light, the judge asked a simple question: by declaring in an action that a foreign office-holder had been validly appointed in foreign proceedings, was the local court not “effectively domesticating” the foreign order? As such, would the result not be to declare that the recognition carried with it recognition of the same status as the foreign office-holder would have under the law of the principal insolvency? Furthermore, would this not enable the foreign office-holder to act as an office-holder within the jurisdiction of the recognising court?39 Answering all these questions in the affirmative served as a “trigger” to bring into play the general law of Bermuda as well as, in addition, the statutory insolvency regime, provided this did not result in any distortion of the purposes of the statutory provisions nor any conflict with domestic public policy.40 19 For the judge, it would be absurd that the recognition process would not result in making all relevant Bermudian law available to the foreign office-holder, including, as in the instant case, provisions facilitating examination and production of documents.41 However, the “domestication” of the order might not go so far as to apply the local insolvency regime in “such a comprehensive way” as to create ancillary proceedings in substance.42 This might be “a bridge too far”.43 Short of this, though, it would accord with both “principle and pragmatism”, as well as the view in Re African Farms, that a recognition order should enable the foreign office-holder to take advantage of local general and insolvency law.44

37 Ibid., at paragraph 65, citing Muhl v Ardra [1997] Bda LR 36. 38 Ibid., at paragraph 66. 39 Ibid., at paragraph 67. 40 Ibid., at paragraph 68. 41 Ibid., at paragraphs 69-70. The point is also made that application of the relevant conflict of laws rules would lead to the use of the lex fori, here Bermudian law, and the natural extension of the rules that are part of that legal order. 42 Ibid., at paragraph 74, where the judge also makes the observation that his judgment should not be interpreted as affording foreign office-holders automatic access to transaction avoidance provisions on the same terms as in Re Phoenix and Primeo. 43 Ibid., at paragraph 71. 44 Ibid., at paragraphs 72-73.


Before the Court of Appeal

20 The main judgment of the Court of Appeal45 summarised the appellants’ case and the grounds on which they relied.46 In connection with the extension of powers question, the appellants’’ contention was that the court at first instance had no jurisdiction to make the orders in the case of Singularis, whether at common law or on grounds analogous to section 195, as the judge was wrong to hold that Rubin SC did not fully disavow Cambridge Gas. Thus, the court should have, where the Privy Council decision had thus been disapproved, followed the earlier case of Al-

Sabah,47 with which Cambridge Gas was in conflict. 21 Furthermore, the court below was wrong in particular to rely on the decisions in Re African Farms, Re Phoenix and Primeo.48 A further contention was the argument in the alternative that, even if the powers existed to enable the court to do as it did, the powers could not extend beyond those available to the liquidator in his home jurisdiction, the understanding here being that the Cayman Islands equivalent would not have permitted discovery in relation to certain documents, i.e. those “relating” to the company, as opposed to those that were the company’s property.49 22 On the first contention, whether the powers were available to the office-holder in the way the judge at first instance contemplated, the Court of Appeal states the essential question is whether it should consider itself to be bound by the Privy Council authority in Cambridge Gas or whether, in light of the decision in Rubin

SC, the earlier decision in Al-Sabah should prevail. In that context, the appeal court noted that Al-Sabah was also a decision of the Privy Council where the panel included Lord Hoffmann, architect of the judgment in Cambridge Gas.50 23 The appeal court recited the essential facts involving an application under a Letter of Request from a Bahamian court for the setting aside of two trusts established under Cayman Islands law, to which the Cayman court acceded, holding that it had the power under the relevant statute and also as a matter of the court’s inherent jurisdiction to enable the trustee to enjoy powers to apply to set aside the trusts.51 This position was confirmed at appeal and by the Privy Council. However, the judgment, in dealing with the position at common law, though accepting that an inherent jurisdiction might have been available to assist, considered it limited and, in any event, not to permit the exercise of powers under a domestic provision in

45 Coram Zacca P, Auld JA and Bell AJA. 46 Re Saad and Singularis CA, at paragraph 4 (per Bell AJA; Zacca P concurring with this judgment). The article mentioned, above note 17, contains a more detailed account of the facts and reasoning, of which this section is a summary. 47 Al-Sabah v Grupo Torras [2005] 2 AC 333 (“Al-Sabah”). 48 Re Saad and Singularis CA, at paragraph 6. 49 Ibid., at paragraph 7. 50 Ibid., at paragraph 29. 51 Ibid., at paragraph 30.


circumstances not falling within its terms i.e. inherent powers cannot go beyond the boundaries of any domestic provision and are more limited in scope. This, the appeal court noted was the appellants’ argument “in a nutshell”.52 24 On Cambridge Gas,53 the appeal court highlighted the observations of Lord Hoffmann to the effect that the arguments put forward about submission to jurisdiction did not appear to be in keeping with economic reality given the submission of other parts of the group.54 It also referred to his statement on the purpose of bankruptcy proceedings, namely as a mechanism for collective execution. It then recited Lord Hoffmann’s reliance on the statement in Re African

Farms as to the meaning of active assistance,55 which the appeal court noted he adopted by means of the proposition that the domestic court must be able to do all it could otherwise have done in the case of a domestic insolvency, with the purpose of recognition being to avoid the office-holder or creditors from having to begin parallel proceedings by affording them the remedies they would have been entitled to had the proceedings in fact taken place before the domestic forum.56 25 This statement, though objected to by the appellants, who contended that Re

African Farms was simply a case of enforcement, was at the basis of the adoption by the judge at first instance of the view that there was little doubt as to the court’s jurisdictional competence to grant the remedies sought.57 26 Before dealing with these observations, the appeal court reviewed the decision in Rubin SC,58 noting the leading judgement by Lord Collins which it says succeeds on conflict of laws grounds.59 As to the relationship between Rubin SC and Cambridge Gas, the appeal court noted Lord Mance’s otherwise concurring judgment did not subscribe necessarily to Lord Collins’ “incidental observation” on the status of Cambridge Gas.60 It also referred to Lord Mance’s statement that, notwithstanding any views on the validity of Cambridge Gas, the decision did not “cover or control” the facts of the appeal in Rubin SC.61 A similar view was expressed in Lord Clarke’s dissenting judgment holding that, at the very least, Cambridge Gas was distinguishable, though not wrongly decided.62

52 Ibid., at paragraph 31. 53 Ibid., at paragraph 32. 54 Ibid., at paragraph 33. 55 Ibid., at paragraph 34. 56 Ibid., at paragraph 35. 57 Ibid., at paragraph 36. 58 Ibid., at paragraph 37. 59 Ibid., at paragraph 38. 60 Ibid., at paragraph 39, referring to Rubin SC, at paragraph 178. 61 Ibid., at paragraph 40, referring to Rubin SC, at paragraph 188. 62 Ibid., at paragraph 41, referring to Rubin SC, at paragraph 192.


27 Interestingly, the appeal court analysed Lord Collins’ own repudiation and was of the view that the rejection of Cambridge Gas appears to be uniquely from a conflict of laws’ perspective,63 citing his other views in support of the position in Re Impex64 and Lord Hoffmann’s otherwise “brilliantly expressed opinion” in Cambridge Gas.65 Reiterating the appellants’ position that Rubin SC had disapproved of Cambridge Gas,66 the appeal court’s essential query was whether Lord Hoffmann’s statement on the purpose of recognition could be regarded as the ratio of Cambridge Gas and if, as such, it had subsequently been disapproved of by Rubin SC. 28 For the appeal court, the arguments that Rubin SC disapproved of Cambridge

Gas were not convincing, given the contents of the majority judgment and the indications, by reason of the statements in both the concurring and dissenting judgments, that the issue of whether Cambridge Gas was wrongly decided might not even have been argued before the Supreme Court. Interestingly, the appeal court inclined to the view that Lord Hoffmann’s statement was not in fact the true ratio of the case and thus could not bind the appeal court.67 29 In dealing with the apparent conflict between Rubin SC and Cambridge Gas, the court stated, perhaps surprisingly, that consideration should be given to the context in which those statements were made, that in fact they were qualifications on the application of the principles in Re African Farms and were aimed at elucidating the limits on the assistance that could be offered at common law if statutory powers were not available. The reference to the purpose of recognition so as to avoid the commencement of parallel proceedings thus did not apply in the instant case because of the impossibility of opening those proceedings within the jurisdiction.68 Similarly, the statement in Al-Sabah on the inherent jurisdiction of the court to set aside a trust was not really a statement on the assistance to be granted to an office-holder of the type present in the instant case.69 30 Dismissing much of what had been relied on by both sides in the case, the court sought to ascertain on what basis it might be said that section 195 could apply where its parent statute had no application. Further, in the absence of that application, the appeal court doubted that its application by way of analogy, to use the “principled approach” the Chief Justice suggested, had any basis at common law. As such, Re Phoenix and Primeo could have no bearing on determining what the position was at Bermudian common law.70 Thus also, the statement in

63 Ibid., at paragraph 42, referring to Rubin SC, at paragraph 132. 64 Re Impex Services Worldwide Ltd [2004] BPIR 564 (“Re Impex”). 65 Re Saad and Singularis CA, at paragraph 43, referring to Rubin SC, at paragraphs 33 and 92. 66 Ibid., at paragraph 44. 67 Ibid., at paragraph 45. 68 Ibid., at paragraph 48. 69 Ibid., at paragraph 49. 70 Ibid., at paragraph 50.


Cambridge Gas on which much reliance had been placed was not the true ratio of the case and was thus not binding on the court.71 31 Finally, the fact a winding up order had been made in the Caymans in respect of a Cayman company with its sole link to Bermuda being that it was audited by the Dubai office of a Bermuda exempted partnership would not found jurisdiction for an application using the pretext of cross-border insolvency assistance for a section 195 order in circumstances where the office-holders would be unable to obtain an equivalent order in their own jurisdiction. In the court’s view, this would be “unjustifiable forum shopping” that would be grounds for an appeal.72 The Case before the Privy Council

32 Given the interests at stake and the issues aired, it was not surprising that the case was further appealed to the Privy Council, which thus had the opportunity to pronounce on the apparent conflict between its own decisions in Al-Sabah and Cambridge Gas, as well as the conflict between the latter and the decision of the United Kingdom Supreme Court in Rubin SC. The judgment was keenly anticipated for that and many reasons, not least whether the scope of active assistance would be decided in a narrow or wide way. 33 Heard in April 2014, judgment was not rendered till 10 November of that year, although, given the composition of the panel,73 the betting was that the approach of the Privy Council would somewhat mirror that of the Supreme Court in Rubin SC. When the judgment was published, it is an understatement to say that it caused a storm in the common-law world. Within the judgment, extensive views were expressed by Lords Sumption, Collins and Mance, the last two of whom had emitted contrasting views in the Rubin SC case on the issue of whether Cambridge

Gas was to be regarded as good law. 34 Turning to the first of the individual judgments, Lord Sumption begins by asserting that, while Bermudian common law is in all material respects identical to English common law, the relevant statutory framework to permit the winding up of unregistered companies which forms the basis of the ancillary liquidation doctrine is absent from Bermudian statute.74 The difficulties this generates is the need to determine what powers the court has to assist in the absence of a facility to conduct an ancillary liquidation, particularly to be able to use local powers as a means of

71 Ibid., at paragraph 51. 72 Ibid., at paragraph 52. 73 Coram Lords Neuberger, Mance, Clarke, Sumption and Collins (the last 4 of whom were also members of the bench that had heard Rubin SC). 74 Re Singularis PC, at paragraph 9.


collective enforcement and to enable the variation of rights and the liquidator to locate assets and to assert the rights of the entity.75 35 Nonetheless, Lord Sumption asserts it would still be possible, as a matter of private international law, for recognition of the vesting of the assets of the company in an “agent or office-holder” appointed under the law of the jurisdiction of incorporation.76 As such, the decision in Re African Farms is “significant”, given that it permitted the exercise of remedies equivalent to the company being in ancillary liquidation despite the absence of a local power to do so.77 36 Pointing out the way in which Re African Farms was interpreted in Cambridge

Gas, Lord Sumption summarises the propositions in the latter case as being three-fold: the aspiration of modified universalism as the fount for the common law power to assist “as far as it can do so”; this power being the source of jurisdiction, with the result that the common law rules on in rem and in personam jurisdiction are no longer relevant; and, the extension, as a consequence, of the court’s powers normally found in a domestic insolvency, subject to the limitations of law and public policy.78 37 Re HIH, however, revealed a difficulty in that some of the bench were happy to follow Cambridge Gas and use the common law assistance power as the authority to remit funds to Australia, while others of the panel doubted the common law could override the statutory authority of the distribution rules, but found that the statutory cooperation provision in section 426 of the Insolvency Act 1986 gave the court the choice to apply whether local or foreign law, an election for the foreign law thus permitting the override to occur.79 38 Turning to Rubin, Lord Sumption discusses the Supreme Court’s disapproval of Cambridge Gas, particularly in light of the Al-Sabah decision which had doubted the ability of a court to assume jurisdiction simply on the basis of its power to assist. While the existence of a statutory power might influence the development of policy at common law, the assumption that such a power exist cannot be made automatically, albeit there might be no objections on public policy grounds to its existence.80 This weakens the second and third propositions in Cambridge Gas, but leaves the first (modified universalism) intact, its application being subject to local law and public policy. 39 Nonetheless, a court must remember that it can only act within the limits of its statutory and common law powers. Where statute is silent, the common law would 75 Ibid., at paragraph 11. 76 Ibid., at paragraph 12. 77 Ibid., at paragraph 13-14. 78 Ibid., at paragraph 15. 79 Ibid., at paragraph 17. 80 Ibid., at paragraph 18.


apply and might still be developed, depending on the nature of the power the court is asked to exercise.81 The assumption that all statutory powers must, of necessity, have a common-law analogue that could be applied where statute is not otherwise available does not seem to the judge to be tenable. 40 In examining the scope of the power sought, to compel production, not for use in forensic proceedings, but to enable the office-holders to identify and gather in property, Lord Sumption ultimately holds there is a power (at common law) to assist by ordering the production of information. However, the use of such a power is subject to a considerable number of caveats, not least that it can only be used to assist foreign office-holders appointed by a court; it cannot, however, as a power of assistance, enable the office-holders to do something they are unable to do under the law of their place of appointment; and, in any event, is only available as necessary. Moreover, it cannot supplant other methods of obtaining evidence through discovery and like processes and is subject to the usual conditions of payment of the reasonable costs of compliance.82 41 Though Lord Sumption rejects PwC’s argument that the existence of a statutory power to compel information, not applicable in the present instance, rules out the possibility of a common-law power of wider scope being available,83 he states that the extension of a common-law power to cure a defect in the foreign law that did not permit the same information to be collected was an impermissible use, given that it would facilitate undesirable “forum shopping” by office-holders.84 42 In a lengthy speech, Lord Collins begins by agreeing with Lord Sumption’s propositions that the extension of a domestic power in aid of an international recognition application cannot be supported and that, where a power in aid exists, it cannot be used where the foreign jurisdiction could not invoke a similar power.85 43 For Lord Collins, the answer to the instant case rested on some essential propositions: that the common law does contain a power to recognise and grant assistance to a foreign proceeding; that the power can normally be exercised through use of the court’s existing powers, but that, through judicial law-making, these powers can be extended or developed. Nonetheless, the development of legislation by analogy does not permit judges to extend insolvency rules to cases

81 Ibid., at paragraph 19. 82 Ibid., at paragraph 25. 83 Ibid., at paragraph 28. 84 Ibid., at paragraph 29. Nevertheless, in paragraph 30, Lord Sumption casts doubt on the assertion that the documents sought fell outside the power of the Cayman court to compel production, given his view that the information in the working papers argued as constituting the auditors’ property was acquired “solely” in their capacity as the auditors of the company concerned. 85 Ibid., at paragraphs 32-33.


where they do not and are not intended to apply. As a result, the application of otherwise domestic powers to a foreign proceeding cannot stand.86 44 For Lord Collins, the issue was a practical one, but necessarily limited to those jurisdictions where the statutory powers either did not exist or whose use was not without controversy, Bermuda and the Cayman Islands being, respectively, examples of the issues identified.87 As such, it fell to consider the scope of assistance at common law in the case of international insolvencies. Referring to Rubin, there is no doubt in Lord Collins’ mind that a power to recognise and give assistance to foreign proceedings (the first proposition in Cambridge Gas) exists.88 45 The absence of a comprehensive international framework for cooperation does not, in the judge’s view, inhibit the courts from rendering what assistance they “properly” can through the application or extension of the court’s existing statutory or common law powers.89 Two categories exist where such assistance has historically been forthcoming, the first of these being in the use of common law and/or procedural powers for the granting of stays or enforcement of foreign judgments, of which Re African Farms is also authority. However, that case can be understood as a stay against enforcement by the secured creditor and the use of the Transvaal court’s powers to give that effect. It does not constitute, in Lord Collins’ view, authority for any proposition that local statutory law can be applied by analogy.90 46 The second group of cases to which the judge refers features the use of statutory powers in aid of a foreign insolvency, for example through the opening of an ancillary liquidation or the remittance, as in Re HIH, of funds to a foreign jurisdiction under the aegis of the statutory cooperation provision.91 47 In analysing the parties’ contentions, Lord Collins addresses the liquidators’ argument for the extension of the domestic power by analogy. For him, though the argument found favour with the trial judge, who based his view on the dictum of Lord Hoffmann in Cambridge Gas to the effect that the domestic court should be able to do whatever it could have in a domestic insolvency so as to avoid the need for the opening of parallel insolvency proceedings, Lord Collins agrees with the Court of Appeal in finding that the extension is

86 Ibid., at paragraph 38. 87 Ibid., at paragraph 42. 88 Ibid., at paragraph 51. 89 Ibid., at paragraphs 52-53. 90 Ibid., at paragraphs 54-56. In paragraph 57, the judge goes on to state that Re Impex is not good authority either as it does not articulate the basis for its reliance on common law for the granting of assistance. 91 Ibid., at paragraphs 58-59.


“impermissible legislation from the bench” and thus “a plain usurpation of the legislative function”.92

48 In a reasoned section, though conceding that the common law does develop to meet changing situations, “sometimes radically”,93 Lord Collins reminds the court of the finding in Rubin that a change to the jurisdiction rule in the context of insolvency was a matter for the legislature.94 Seen against that background, the office-holders’ proposition that the court should apply legislation, clearly inapplicable in the instant case, “as if” it applied, and despite being reminiscent of long-standing arguments on the application of the “equity of a statute”, was in fact even “more radical” than the change proposed in Rubin and thus to be resisted.95 49 According to Lord Collins, the methodology in Cambridge Gas of invoking the Manx statute, on grounds that it could have applied had proceedings begun there, in recognition of a not dissimilar arrangement under New York law, was erroneous.96 The Manx court was not entitled, the judge says, to apply domestic procedures by analogy at common law.97 In that light, cases relying on the second and third propositions in Cambridge Gas for “an impermissible application of legislation by analogy” are simply wrong, including Re Phoenix,98 Primeo99 and the decision in the instant case.100 50 In addition, the failure to follow the dictum in Al-Sabah and its admonition against applying insolvency law in cases not falling within its scope rendered the judgment at first instance at risk of a “profoundly unconstitutional” violation of “established principles” which carefully delineated the delicate relationship between judges and legislatures.101 51 The third lengthy speech in this case, that by Lord Mance, essentially summarises the argument as revolving around two axes: whether the power the court sought to use could have been used appropriately for the purpose and whether, if it existed, the power could be used in aid of foreign proceedings where the foreign court did not enjoy a similar power.102 Though the simple answer to the second question is, for the judge, to be answered in the negative, thus obviating an answer to the first becoming necessary,103 Lord Mance does agree that the second

92 Ibid., at paragraphs 61-64. 93 Ibid., at paragraph 65. 94 Ibid., at paragraph 72. 95 Ibid., at paragraph 78. 96 Ibid., at paragraph 83. 97 Ibid., at paragraph 93. 98 Ibid., at paragraph 98. 99 Ibid., at paragraph 102. 100 Ibid., at paragraph 94. 101 Ibid., at paragraph 108. 102 Ibid., at paragraph 117. 103 Ibid., at paragraph 118.


and third propositions in Cambridge Gas can no longer be supported, in light of the pronouncements in the earlier case of Al-Sabah as well as the analysis in Rubin.104 However, he goes on to disagree with Lord Sumption about the theoretical extent of any power to assist, were one to be recognised or further developed, particularly insofar as the ability to compel personal appearance or production is concerned. 52 For Lord Mance, the fact that this might be “useful” for the foreign liquidator is not sufficient grounds to transmute the power to enforce a right to assets into one to oblige third parties to assist with information and/or documents simply on grounds of convenience.105 For that reason, Lord Mance is not persuaded that the power should be extended beyond instances where the person to be compelled holds property belonging to the company or is involved in some wrongdoing, whether his own or that of another person.106 In the Aftermath of the Judgment

53 Academic commentary on the judgment was not tardy in appearing. The dominant theme of the various pieces centres on the redrawing of the boundaries of assistance in the decision and the “confusion” this generates. In commentary, swift to press after the judgment appeared, Rajak makes the point that even the obiter parts of the judgments are of “so profound a nature” that the development of cross-border insolvency will be affected.107 54 The distinction, vital in the case, between a common law principle owing nothing to a statutory provision and one that is sought to be developed by analogy, is subsumed into an overall discussion of the substantive content of the common law and its capacity to develop within the procedural framework of litigation, assisted by judicial willingness to push the envelope of cooperation further.108 55 For Rajak, the essence of the case is the tension between principles of natural justice and principles promoting the efficiency of proceedings (particularly those enabling recovery). While audi alteram partem is a fundamental principle of law, it should not serve to shield “fraudulent or dubious acts”.109 Otherwise legitimate procedural tactics such as not answering to summons or using legal vehicles to structure asset-holdings cannot, in the end, override the imperative to use “fairness

104 Ibid., at paragraph 134. 105 Ibid., at paragraph 135. 106 Ibid., at paragraph 147. 107 H. Rajak, “Between Scylla and Charybdis – The Increasingly Unwieldy World of Cross Border Insolvency” (2014), at 4, copy available at: <http://www.academia.edu/11836977/Between_Scylla_and_Charybdis_the_Increasingly_Unwieldy_World_of_Cross_Border>. 108 Ibid., at 5. 109 Ibid., at 8.


and common sense” so as to enable distribution of ingathered assets for the benefit of creditors.110 56 Though in the instant case, it seems as if natural justice has won the day, for Rajak, the guidance offered by the Privy Council, when it determines that the auditors could have been made parties to the original application and thus could have challenged its making, offers a litigation solution that balances the competing principles.111 57 Judicial responses were not slow in coming either, from judges involved in cases that had taken the Cambridge Gas principle further, including the Bermudian judge. An opinion from New Zealand pointed out that the decision of the Privy Council in Re Singularis PC raises “fundamental concerns” because it challenges the ability of a court to develop the law so as to assist a foreign office-holder to gather assets for the benefit of creditors.112 In jurisdictions that do not have “robust and modern procedures” or an international framework for managing cross-border cases, the development of the common law may be necessary to “legitimately fill [a] lacuna”.113 58 Some justification for this necessity may, according to Heath J, be found in the policy behind early attempts at structuring international cooperation within the British Empire, now Commonwealth, particularly the order in aid procedure.114 Although designed primarily for use in the personal insolvency context, Heath J sees no difficulty in applying the underlying rationale of the procedure to the case of insolvent entities, which would also prevent the (perhaps unintended) consequence that assets are likely to be shifted to those jurisdictions whose courts, as a result of the limitations in Re Singularis PC, may be prevented from offering the widest assistance consonant with the purposes of asset recovery.115 59 The Bermudian response begins with a statement that the common law is a “vital resource” in jurisdictions whose international insolvency law is less well-developed, but evidences a “sharp philosophical divide” between judges with a keen sense of the same creativity which characterised the beginnings of cross-border assistance in insolvency and those who see their role as being simply and limitedly to interpret and apply statutory provisions.116

110 Ibid., at 9. 111 Ibid., at 10. 112 Justice P. Heath, “The Waxing and Waning of the Tides: From the Isle of Man to Bermuda” (2015) 3 Nottingham Insolvency and Business Law e-Journal 9, at paragraph 31. 113 Ibid., at paragraphs 32-33. 114 Ibid., at paragraph 35. 115 Ibid., at paragraphs 51-52. 116 Chief Justice I. Kawaley, ““Relashio!”: Liberating the Common Law on Judicial Cooperation from its State of Arrested Development – The British Atlantic and Caribbean World” (2015) 3 Nottingham

Insolvency and Business Law e-Journal 10, at paragraph 6.


60 In that light, the judge states that the advent of Cambridge Gas constituted “manna from heaven” for judges in jurisdictions whose day-to-day judicial toolbox contained no more than discretionary powers to cooperate and, though Lord Hoffman’s dictum was obiter, it was in keeping with existing Bermudian practice of recognising the primacy of proceedings elsewhere for the major restructurings occurring in commercial jurisdictions that involved Bermudian entities which conducted business elsewhere or which were part of a group structure operating outside Bermuda.117 The application of Cambridge Gas was thus “commercially pragmatic” and jurisprudence reliant on its authority helped develop the rules for recognition in like cases.118 61 Re Singularis PC is an important and complex case, the judge admits, although the issues at appeal appeared narrower, the liquidators apparently relying more on the argument seeking to uphold the application of the statutory provision by analogy, rather than the wider grounds of the inherent and general powers of the court that the judge had found at first instance could also be invoked.119 62 Developing this further, the judge is comforted by the fact that nothing in the Privy Council’s reasoning would limit the deployment of assistance to a foreign liquidator where the form of assistance can be grounded in the common law and/or statutory rules generally governing civil proceedings.120 Nonetheless, the subtlety of the majority position, which the judge describes as being to permit the deployment of a power where there is support in the general principles of law to so do, comes in for some criticism.121 63 The Bermudian judge is of the view that too principled an approach risks being “insensitive” to the needs of the courts to deliver “real world” justice, particularly where statutory frameworks are absent or defective. For the judge, enabling courts to craft remedies that are suitable for use is a better way of ensuring judges have clear and practical guidance for use in similar situations and would be far more “straightforward” than would an artificial exercise seeking to extend an inherent power by reference to a loosely defined principle of “active assistance”.122 64 In fact, the argument could be made that it would not be inconsistent with public policy for common law relief to be available which could correspond to the remedy provided by a statutory provision otherwise not applicable. Local law and public policy, as in Cambridge Gas, would continue to form the parameters of any such exercise, particularly as it is likely that courts would identify a broadly similar 117 Ibid., at paragraph 21. 118 Ibid., at paragraph 23. 119 Ibid., at paragraph 71. 120 Ibid., at paragraph 80. 121 Ibid., at paragraph 84. 122 Ibid., at paragraph 85.


general power before creating a specific application by analogy of the terms of the statute. Such a step would not, in the judge’s view, infringe the clear rule that the statute could not be applied in circumstances it expressed itself as clearly not applying.123 65 The judge also disagreed with the “forum shopping” argument, stating that there is no reason why relief sought in a court need correspond identically to relief available in the foreign court, as it is often impractical to conduct exercises comparing relief and establishing its parity in situations where local and foreign law will obviously differ.124 66 Other judicial views have also been expressed. For the Chief Justice of the Cayman Islands, Re Singularis PC was to be welcomed, not so much for its “public policy limitation” on the power of assistance, but for the fact it adopted and confirmed prior jurisprudence on the powers contained within the assistance framework, ensuring they continued to remain relevant and available to be called on.125 Its admonition against “improper forum shopping” also served as a clear contrast with the practice before other courts, the United States being cited as an example, where re-litigation of otherwise settled decisions could lead to uncertainty.126 67 Shortly after that paper was delivered, one of the panel in the Privy Council gave a lecture in the Cayman Islands in which reference was made to the role of the common law in insolvency jurisdiction.127 Lord Mance was of the view that Cambridge Gas had been “a step too far” in extending the principle of universality. The disavowal in Rubin, which held that a domestic court could not assist a foreign court by using the statutory powers available solely in a domestic insolvency, was correct.128 In that light, the “sw[i]ng back” of the pendulum in Re Singularis PC was also correct, albeit the majority did not concur with his view that the deployment of the power was “unprecedented and unprincipled”.129

123 Ibid., at paragraph 92. 124 Ibid., at paragraphs 96-97. 125 Chief Justice Hon. A. Smellie, “Forum Shopping is Bad: Choice of Forum is Good? The Investment Fund Perspective”, paper presented at the INSOL Judicial Colloquium, 21-22 March 2015, San Francisco, at 28. 126 Ibid., at 26-27, referring to the decision in Krys v Harnum Place LRC (In re Fairfield Sentry Ltd) (26 September 2014). 127 Lord Mance, “Jurisdiction and Justiciability” (The Fifth Annual Judicial Distinguished Guest Lecture), 31 March 2015, Cayman Islands. 128 Ibid., at paragraph 21. 129 Ibid., at paragraphs 22-23.


Summary

68 Within a decade after the decision in Cambridge Gas and despite the fervour with which it had been greeted in more than a few jurisdictions across the common-law world, three cases signalled the disavowal of the wide interpretation of the duty to assist that the 2006 case suggested be the correct way to further the ambitions of modified universalism. Re Flightlease and Rubin SC heralded the views of the Irish and British Supreme Courts, which the Privy Council then followed in the Bermudian appeal in Re Singularis PC. 69 While not binding on the courts outside its hierarchy, the views in Re Singularis

PC are likely to be closely studied across the Commonwealth as reflective of a trend of caution against too expansive a view of the courts’ inherent jurisdiction to assist. While useful in cross-border insolvency in particular, powers to assist at common law cannot, according to the Privy Council, simply be conjured ex nihilo without there being good reason and purpose for their existence as well as authority through the proper development of precedent for their creation. The concern reflected in the three cases mentioned is that the judges do not trespass beyond their prerogative and anticipate developments properly within the province of the legislator. 70 Yet, in an age when the domestic and international frameworks are incomplete and the legislator slow to act), while the texts that do exist exhibit lacunae that the judges naturally seek to fill, too cautious an approach may only serve to reduce the efficiency and effectiveness that is desired for the management of such cases. The impact may simply be that the reach of the courts to recover assets for the benefit of the collective is stymied. 71 As a result, certain jurisdictions may become perceived as optimal places in which to structure asset holdings, especially where assistance may not be forthcoming. This might, however, increase the pressure on these jurisdictions to adopt cooperation rules and perhaps also any international frameworks that are available and appropriate. 72 Until that point is reached, balancing the caution inherent in Re Singularis PC against the interests of creditors will not be an easy task. It may be the case that the more positive aspects of Re Singularis PC will be read and applied with acuity, while those less so will be distinguished, so that those courts that are keen to push the boundaries of international assistance further may find a way to do so.130

130 Recent cases such as Re X (A Bankrupt) (6 July 2015) (Royal Court of Guernsey) and Re

Northshore Mainland Services Inc and others (31 July 2015) (Supreme Court of the Bahamas), however, do not offer indications of any particular trend in this regard, given that Re Singularis PC was largely distinguished in its application to the facts.


73 The decade-old story of Cambridge Gas (and its influence on the jurisprudence of international insolvency) has not reached its end by any means, despite the strictures and limitations imposed by more recent pronouncements such as Rubin and Re Singularis PC. Thus far, it has been a more than interesting journey for those keen to observe the development of common law assistance. The further development of jurisprudence in this area will also undoubtedly generate debate and contention that will occupy commentators for some time to come.

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