HARMS OFFSHORE AHT “TAURUS” GMBH & CO KG V BLOOM

[2009] EWCA Civ 632, Lord Justice Ward, Lord Justice Stanley Burnton, Sir John Chadwick, 26 June 2009

Insolvency – Rule B Attachment – Unsecured creditors – Trust – Foreign proceedings – Cross-border reach of administration proceedings – Statutory prohibition against creditors bringing proceedings – Effect of trust in winding up – Court’s discretion

Oilexco, an oil exploration company incorporated in England, had gone into administration with the respondents as administrators. The appellants were one-ship companies incorporated in Germany and were unsecured creditors in the administration under time charterparties they had concluded with Oilexco in respect of their vessels Taurus and Magnus. Soon after Oilexco went into administration, the appellants obtained Rule B attachment orders in the Southern District Court in New York. In doing so, they neglected to mention both the administration proceedings and the London arbitration agreements in the charterparties to the New York court. The New York court issued an order to 19 named New York banks for attachment of the property of Oilexco, including property held for its benefit or moving through or within the possession of the named banks. Shortly thereafter the administrators, who were unaware of this, paid monies through one of the named banks to a supplier for services provided to the administration proceedings. Those monies were attached. This was the appeal of the appellant one-ship companies against the order at first instance whereby they were ordered to use their best endeavours to procure the release of the two ex parte orders of maritime attachment and garnishment made by the New York court. The Court of Appeal dismissed the appeal. The statutory prohibition against creditors bringing proceedings against a company being wound up by the court was not extra-territorial so that in principle, proceedings could be brought in foreign courts. Nevertheless, the extra-territorial jurisdiction in winding up proceedings based on a trust, as per Re Oriental Inland Steam Co ex parte Scinde Railway Co (1874) LR 9 Ch App 577, demonstrated that the court was not restricted by the territoriality of the statutory prohibition. The trust in that case was a mere legal construct and the only right of the beneficiary creditors was to have the company and its assets wound up in accordance with the statutory scheme. There was no material distinction between a winding up and administration in this regard. In this case, the conduct of the appellants and the circumstances brought it into the exceptional category in which the grant of injunctive relief is justified, notwithstanding comity and notwithstanding the outstanding application of the administrators in New York.