Vol 16 (2019) - Issue 4

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The Singularis Work-around? Overcoming Limitations to the Common Law Power of Assistance for Foreign Insolvency Investigations

Synopsis

The decision of Singularis Holdings Ltd v PricewaterhouseCoopers ('Singularis') was a welcome development in cross border insolvency insofar as it resurrected the principle of ‘modified universalism’.
Prior to that decision, the principle suffered ‘something more than a setback’ at the hands of the United Kingdom Supreme Court in Rubin v Eurofinance SA. On 'one view, it was killed off; on another view, it was severely circumscribed.'
Nevertheless, it is clear from Singularis that the scope of foreign court assistance available in jurisdictions which must rely solely on the common law power to provide assistance has important limitations.
A key practical issue that arises is that Singularis identifies clear limits to the ability of liquidators to obtain foreign assistance for production of documents from third parties in such jurisdictions. For many offshore liquidations, this can be a significant obstacle to successfully conducting liquidators’ investigations.
The decision has broader significance to the offshore world as the issue which it determined has 'arisen largely in relation to those British colonies, dependencies, and overseas territories, such as Bermuda, and the Isle of Man, which do not have the statutory powers to assist foreign officeholders.'
Hong Kong is one such jurisdiction where the power to assist foreign courts is limited to the common law. Justice Harris of the Hong Kong Special Administrative Region Court of First Instance ('Hong Kong Companies Court') has applied the reasoning of Singularis on a number of occasions in determining what assistance the Hong Kong Companies Court can provide to a foreign winding up. He has observed that these applications are becoming not only increasingly more common, but increasingly more complex.
There may, however, be an innovative approach to overcoming this obstacle. Before seeking foreign assistance from a jurisdiction that is limited to common law powers, a liquidator could first obtain recognition of the liquidation under the UNCITRAL Model Law on Cross-Border Insolvency ('Model Law') or similar statutory recognition in another suitable (onshore) jurisdiction. Assuming relief that would give the liquidator access to Court powers to compel third party production, in such a jurisdiction could be obtained, then there appears to be a good argument available that a foreign assistance request for third party production of documents emanating from a Court in that recognised jurisdiction might be accepted in the 'common law only' jurisdiction.
For example, a Hong Kong or Bermudian Court would be unable to provide foreign assistance to a Cayman Islands Court seeking third party production of documents for a local liquidation. But if the liquidator is first recognised as a foreign representative in Australia and granted relief including power to compel third party production, that liquidator arguably could succeed in obtaining the relevant assistance in Hong Kong or Bermuda via a request for assistance emanating from Australia.