Isle of Man: Insolvency Update: Has The Privy Council Turned The Isle Of Man’s Chief Justice Into A Timorous Soul?

Last Updated: 17 February 2015
Article by Adam Killip

In the recent case of Lombard Manx Limited v The Spirit of Montpelier Limited (CHP 2014/23), the principal question for the Isle of Man High Court (His Honour Deemster Doyle, the Island's Chief Justice) was whether the Court had jurisdiction at common law to rescind a winding-up order. In concluding that the Court did not have such jurisdiction, and that to grant the relief requested by the applicants would be an inappropriate development of the common law of the Island, His Honour echoed the famous speech of Lord Denning in Candler v Crane Christmas and Co [1951] 2 KB 164 by declaring his intention to be a "timorous soul" rather than a "bold spirit". DQ's Stephen Dougherty and Adam Killip acted for Lombard Manx Limited in the case.

Facts

On 8 May 2014, Lombard Manx Limited ("Lombard") obtained a winding-up order against The Spirit of Montpelier Limited (the "Defendant"), having served a statutory demand (the "Demand") upon the Defendant in February 2014. The Demand had remained unpaid at the winding-up hearing on 8 May 2014 (the "Hearing") and, at the Hearing, the Court found that the Defendant had failed to secure the debt to Lombard's reasonable satisfaction (pursuant to section 163(1)(1) of the Companies Act 1931). The Demand was based on an overdue loan facility provided by Lombard to the Defendant in connection with the acquisition of a yacht, over which Lombard had a first priority ship mortgage (the "Mortgage").

The Defendant's ultimate beneficial owner (together with a number of his connected companies which claimed to be creditors of the Defendant) (the "Applicants") brought an application for the winding-up order to be revoked on the basis that at the date of the Hearing, the sum owed under the Demand had in fact been secured to Lombard's reasonable satisfaction (essentially, by virtue of the existence of the Mortgage security). 

Legal Issues

The principal legal issue for the Court to determine was the question of whether or not the Court has jurisdiction to revoke its own sealed winding-up order (the "Jurisdiction Point"). Following on from this, if the Court did have such jurisdiction, should it exercise it on the facts of the case?

There was no specific authority nor any decided cases in Isle of Man law on the Jurisdiction Point. The Applicants argued that the Court should apply English law (specifically Rule 7.47(1) of the Insolvency Rules 1986) (the "Insolvency Rules") which gives the English High Court power to review, rescind or vary any order it has made in insolvency proceedings. DQ's Stephen Dougherty, however, argued on behalf of Lombard that the Court should look to the position in England prior to the Insolvency Rules 1986 coming into force, because this represented the true position in Isle of Man law, which was that an order could only be revoked if it could be described as a "nullity" (per Re Calmex Ltd [1989] 1 All ER 485 and Re Intermain Properties Ltd [1986] BCLC 265). Lombard submitted that the winding-up order in this case was not a nullity.

In coming to its decision, the Court reviewed other Commonwealth case law including decisions from New Zealand and Australia. Notably, the Court also considered the recent Privy Council decision in Singularis Holdings Limited v PWC [2014] UKPC 36 ("Singularis") which related to an appeal from Bermuda.

Decision

Following a detailed review of Commonwealth authorities, the Court found that it did not have jurisdiction to revoke its own winding-up order, and that even if it did, it would not have exercised that jurisdiction in this case.

The Court expressed the view that although it is unfortunate that Isle of Man law does not have an equivalent provision to Rule 7.47 of the Insolvency Rules, it is not for the judiciary to create an inherent or reserve power simply because this would be desirable. The Court should not attempt to legislate from the bench. In the absence of an express power of revocation, the Applicants should have applied for a stay of the winding-up, however on the facts of the case the chances of such an application succeeding were expressed to be slim.

The Court held that, even if it had jurisdiction, it would not have exercised it on the facts of the case. Since the winding-up order had been made, fresh evidence had come to light about the value of the Defendant's sole asset (the yacht). The evidence suggested that the yacht had decreased in value since May 2014. The Court found that the fresh evidence reinforced the winding-up order rather than undermined it. The debt was not secured to Lombard's reasonable satisfaction. The winding-up order was not a nullity and should not therefore be set aside.

From bold spirit to timorous soul?

The tenor of the judgment clearly reveals that His Honour Deemster Doyle wanted to identify a jurisdictional basis in Isle of Man law to revoke winding-up orders. His Honour reviewed a New Zealand case (Bridon New Zealand v Tent World [1992] 3 NZLR 725) in which the judge declined to follow English authorities and held that the New Zealand court had jurisdiction to rescind a winding-up order. Despite this, His Honour was much influenced by Singularis in holding that it would not be appropriate to "legislate from the bench" by importing provisions of the Insolvency Rules into Isle of Man law. His Honour said:

"I have, albeit with considerable reluctance, concluded that [Isle of Man] common law does not provide this court at first instance with jurisdiction to rescind a winding up order once it has been sealed or otherwise perfected. It is unfortunate that we do not have the equivalent of Rule 7.47(1) of the [Insolvency Rules]."

His Honour added:

"It is not for me at first instance to create an "inherent" or "reserve" power... simply because it would be desirable to have such a power... having had the advantage of recent guidance from some members of the Judicial Committee of the Privy Council in [Singularis] I will on this occasion be a "timorous soul" rather than a "bold spirit"...

For an example of His Honour's previous willingness to be a "bold spirit", see the judgment in Brittain v Impex Services and others (CP 2003/96) (26 January 2004).

His Honour's judgment has been appealed by the Applicants and is expected to be heard by the Staff of Government Division (the Isle of Man's Appeal Court) in May 2015.

DQ's Expertise

For more information on Isle of Man insolvency law and DQ's expertise in this area, please contact Stephen Dougherty, Simon Heggs or Giles Hill. For more information on BVI insolvency law, please contact Stephen Dougherty.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions