On 9 January 2014, His Honour Deemster Doyle (the Isle of
Man's Chief Justice) issued his judgment in the case Capita
v Gulldale. In that case, the Isle of Man High Court of
Justice was asked to issue a letter of request to the English High
Court to place Gulldale (an Isle of Man incorporated company) into
administration in England.
In determining whether or not it had jurisdiction to issue the letter of request, the Court considered several Jersey cases and, notably, the 2013 English Court of Appeal decision in HSBC Bank plc v Tambrook Jersey Limited (the "Tambrook case"). Click here to read Dougherty Quinn's article on the Tambrook case, which deals with the circumstances when the English High Court will assist foreign courts in insolvency matters.
Facts of the case
Gulldale was the indirect beneficial owner of leasehold
interests in various properties in the City of London. Such
interests were legally held by two English companies, as part of a
corporate structure. Capita lent money to that structure and in
return for the loan, Gulldale granted security in favour of Capita.
The companies then defaulted on the loan, receivers were appointed
over the English properties and administrators were appointed over
the two English companies.
Capita considered that the most effective way of realising value in the properties was to place Gulldale into administration in England, notwithstanding that Gulldale was incorporated in the Isle of Man and had its registered office here. Capita applied to the High Court of Justice of the Isle of Man, submitting that the Court should issue a letter of request to the English High Court to place Gulldale into administration in England under the provisions of English insolvency law.
Determination of the application
Deemster Doyle reviewed the applicable case law (including the
Tambrook case) and concluded that the most efficient and effective
way to administer Gulldale's assets would be to issue the
letter of request sought by Capita. Deemster Doyle noted that
Gulldale, although incorporated in the Isle of Man, had
"significant connections" with England. The Deemster
further noted that neither Gulldale nor any other creditors or
contributories of the company had appeared in the proceedings to
oppose the letter of request being issued.
Deemster Doyle referred to comments made by Deputy Bailiff Bailhache in a Jersey case known as In re REO (Powerstation) Limited  JRC 232A, to the effect that the issue of a letter of request can help to protect Jersey's international reputation. In a number of historic judgments, the Isle of Man Courts have previously referred to the importance of the Isle of Man maintaining a positive reputation on the international stage (see for example FSC v Mellor and Gelling (2003); Re Impex Services (2004) and Hafner (2006)).
Such observations have often been made in cases where the Isle of Man Courts have received letters of request from foreign jurisdictions. In Capita v Gulldale, the 'international reputation' considerations effectively operate in reverse, because in this case it was the Isle of Man Court issuing the letter of request, with a view to protecting creditors and debtors of Gulldale and also the best interests of the Isle of Man internationally.
This case demonstrates the flexibility of the Isle of Man's insolvency legislation which is considered to be one of the most creditor friendly regimes in the offshore world.
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.