Vol 7 (2010) - Issue 5

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Byers v Yacht Bull Corporation Ltd & Ors [2010] EWHC 133 (Ch)

Overview
If property falling within an English company's liquidation estate is seized in breach of the statutory stay applicable under English law and its right to that property disputed by the seizing party, is that breach of the statutory stay (and any matter incidental to that) to be determined in England and Wales or another Member State?
In part the answer turns on the interplay of Council Regulation 1346/2000 on insolvency proceedings (the 'Insolvency Regulation') and Council Regulation 44/2001 on the recognition and enforcement of judgement in civil and commercial matters (the 'Judgments Regulation') but, significantly, the answer turns on how the issue is characterised.
The question set out above is how the issue in Byers v Yacht Bull Corporation Ltd & Ors [2010] EWHC 133 (Ch) was characterised by the Joint Liquidators ('JLs') appointed to Madoff Securities and International Limited ('MSIL'). By contrast Financiere Meeschaert ('FM') had asked whether a proprietary claim against an asset situated and seized in France by a French company and asserted by the JLs on the basis of a purchase money resulting trust was to be determined in France or in England and Wales. On this characterisation the interference with the English liquidation estate and the breach of the English law statutory stay were incidental issues to the logically prior issue of equitable ownership.
The Chancellor accepted that FM's characterisation was correct notwithstanding that a party interfering with assets within an English liquidation estate now only has to dispute the title of the English company to require all issues to be determined in another Member State.
The purpose of this article is to explore some of the implications of the Chancellor's decision.

Background
MSIL was the English company within Bernard Madoff 's web. Bernard Madoff Investment Securities LLC ('BMIS') was the New York company. BMIS was the principal engine of the fraud perpetrated by Bernard Madoff and which received funds from investors. MSIL by contrast was a proprietary trading company active in the London and pan European market.
Following the revelation of the fraud in relation to BMIS, MSIL's board of directors applied for the appointment of joint provisional liquidators on 19 December 2008. The making of a temporary restraining order in relation to Bernard Madoff and BMIS by the United States District Court for the Southern District of New York on 12 December 2008 and its notification to MSIL's banks, in particular, to Barclays Capital, who acted as MSIL's prime broker, had rendered MSIL cashflow insolvent. MSIL was subsequently held to be balance sheet insolvent upon the admission of a claim by BMIS under US law.
The joint provisional liquidators took steps to secure the physical assets and other assets of MSIL in particular to secure a Leopard 27m Sport Yacht known as 'the Yacht Bull' registered in the Cayman Islands in the name of the Yacht Bull Corporation ('YBC') and purchased with monies provided by MSIL.
The joint provisional liquidators' arrest of the Yacht Bull in Antibes was pre-empted by a matter of hours by the arrest of the same by FM at 10.25 am on 3 April 2009. FM had arrested the Yacht Bull in support of its alleged tort claim under French law against BMIS.