Vol 9 (2012) - Issue 6

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Trillium (Nelson) Properties Limited v Office Metro Limited [2012] EWHC 1191 (Ch)

Introduction
Trillium (Nelson) Properties Limited v Office Metro Limited [2012] EWHC 1191 (Ch) is a decision of Mr Justice Mann on a winding up petition presented in respect of Office Metro Limited ('the Company') where the English Court was called on to interpret the term 'establishment' in the context of opening secondary proceedings under the EC Insolvency Regulation (No. 1346 /2000) ('the Insolvency Regulation'). Much of the previous case law on the Insolvency Regulation of course concerns the concept of a 'centre of main interests' ('COMI') in the context of the opening of main proceedings.
The winding up petition in issue was actually presented (on 5 October 2011) on the basis that the English winding up proceedings would be main proceedings as defined in Article 3 of the Insolvency Regulation. However, it then came to light that the Company was, in fact, already the subject of insolvency proceedings in Luxembourg (a Luxembourg liquidator having been appointed on 21 September 2011), those proceedings being main proceedings in light of the Company having shifted its COMI to Luxembourg. That was accepted by Trillium (Nelson) Properties Limited ('the Petitioner') and as such the question for Mr Justice Mann to decide was whether the Company had an establishment in this jurisdiction at the relevant time, such that the English Court has jurisdiction to open secondary proceedings.

Establishing an establishment
Article 3(2) of the Insolvency Regulation makes clear that an establishment is pre-requisite for secondary proceedings stating that:
'Where the centre of a debtor's main interests is situated within the territory of a Member State, the court of another Member State shall have jurisdiction to open insolvency proceedings against that debtor only if he possesses an establishment within the territory of that other Member State. The effects of those other proceedings shall be restricted to the assets of the debtor situated in the territory of the latter Member State.'
Article 2(h) of the Insolvency Regulation then defines 'establishment' as meaning 'any place of operations where the debtor carries out a non-transitory economic activity with human means and goods'. Some guidance as to how the concept of an 'establishment' is to be interpreted is provided by the Virgos-Schmit report at paragraph 70, where it is said that:
'For the sake of an overall consensus on the Convention, those States agreed to abandon the present of assets as a basis for international competence provided that the concept of establishment is interpreted in a broad manner but consistently with the text of the Convention. This explains the very open definition given in Article 2(h). In the Convention the mere presence of assets (e.g. the existence of a bank account) does not enable local territorial proceedings to be opened. The presence of an establishment of the debtor within the jurisdiction concerned is necessary.'

Mr Justice Mann accepted the need to interpret the concept of an 'establishment' broadly, in the sense that it needs to be interpreted realistically, bearing in mind that it is concept operating in a commercial context; this is the test by reference to which it is held proper that insolvency proceedings be commenced and 'not some sort of box-ticking exercise'.
As well as that general point, Mr Justice Mann extracted the following points from the Virgos-Schmit report (in particular from paragraph 71). First, there must be some activity external to the company itself, and which is apparent to the outside world; internal activities which do not operate on the market are not sufficient. Second, there has to be something which amounts to a place of operations; operations by themselves, not linked to some sort of location, are not sufficient. 'Presumably', Mr Justice Mann suggests in this regard, 'it is intended that liability to secondary proceedings should depend on the possibility of identifying such a physical location. Thus a collection of roving salesmen, without some sort of additional location from which the activities could be said to be conducted, would not be sufficient.'