Vol 4 (2007) - Issue 2

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The Empire Doesn’t Strike Back

Introduction

The Court of Appeal decision in Re HIH Casualty and General Insurance Ltd & ors [2006] EWCA Civ 732 [2007] 1 All ER 177 (‘the HIH case’) included some consideration of the three main legislative systems for international insolvency cooperation under English law, namely section 426 of the Insolvency Act 1986, the EC Regulation on Insolvency Proceedings (Council Regulation 1346/2000) (‘the EC Regulation’) and the Cross-Border Insolvency Regulations 2006 SI 2006/1030 (‘The 2006 Regulations’).1 The leading judgment of the Vice-Chancellor also makes brief reference to the recent advice of the Privy Council in Cambridge Gas Transport Corp v Official Committee of Unsecured Creditors of Navigator Holdings Plc & ors [2006] 3 All ER 829 (‘Cambridge Gas’) on the assistance which may be granted under the English common law, hence outside of those three legislative systems.

Background facts and law

The HIH case concerned four insurance companies, all incorporated in Australia. The primary operations of each of them was located in Australia. Three of the four were authorised to carry on insurance business in the United Kingdom under the Insurance Companies Act 1982. Each was insolvent. On 15 March 2001, the boards of each of the companies applied for the appointment of provisional liquidators in Australia, and on 27 August 2001 winding-up orders were made in Australia and the provisional liquidators appointed liquidators (‘the Australian Liquidators’). Provisional liquidators (‘the English JPLs’) of the companies were appointed in England ultimately in winding-up petitions presented in England and pursuant to a letter of request from the Australian courts. The English JPLs were given broad powers to realise the assets of the companies in England (and those relating to an English branch of one of the companies), and to consider and if thought fit to draft and implement a scheme of arrangement between the companies and their creditors under section 425 of the Companies Act 1985. The aim of both the Australian Liquidators and the English JPLs was to propose such schemes of arrangement to creditors under section 425 and the Australian equivalent. No winding-up orders had been made in respect of the companies in England.
Significant realisations had been made by the English JPLs. On 4 July 2005, the Supreme Court of New South Wales, on the application of the Australian Liquidators, issued a further letter of request whereby the English court was asked, inter alia,

‘to assist and act in aid of and be auxiliary to [the New South Wales court] by hearing and determining an application by the Australian Liquidators for directions
to [the English JPLs] to pay over to the Australian Liquidators all sums collected, or to be collected, by them in their capacity as English Provisional Liquidators, after paying or providing for all proper costs, charges and expenses of [the English JPLs] … so that such sums may be applied in due course of the winding- up of the Company under the provisions of [the relevant Australian legislation]…’

On 4 July 2005, the Australian Liquidators applied under section 426 of the 1986 Act seeking determination of the issues raised by the letter of request.
The primary issue in the HIH case was whether the English JPLs could or should be directed to transfer the realisations which they had made to the Australian Liquidators. The issue was particularly controversial