Harms Offshore Aht "Taurus" GmbH & Co. Kg & Anor v Bloom & Ors

An English court may exercise its equitable jurisdiction in personam to restrain a creditor from retaining the advantage of a foreign attachment against a company in administration. That jurisdiction is not defeated by the territorial limits of the statutory moratorium.

Its exercise is exceptional. Comity creates a strong presumption against interfering with foreign proceedings. Relief may nevertheless be justified where a creditor’s oppressive, unfair or improper conduct obstructs administrators in performing their statutory functions and harms the collective administration.

An English company entered administration. The appellants, German owners of offshore vessels and pre-administration creditors under English-law charterparties containing London arbitration agreements, obtained ex parte maritime attachments in New York without informing the administrators or the District Court of the administration and arbitration agreements.

The attachments caught funds sent through New York to pay post-administration suppliers. The administrators had agreed a sale of the company conditional on a creditors’ arrangement under Part I of the Insolvency Act 1986. A deputy judge granted a mandatory injunction requiring release of the attachments and restraining the New York proceedings. The central issue was whether the English court should restrain the appellants despite the territorial limits of the statutory moratorium and considerations of comity.

Disposition

The Court of Appeal dismissed the appeal. It varied the injunction so that interference with the New York proceedings was confined to releasing attachments of monies paid by the administrators for post-administration liabilities through New York before 25 March 2009.

1. Per Stanley Burnton LJ, the likely territorial confinement of Paragraph 43(6) of Schedule B1 to the Insolvency Act 1986 did not exhaust the court’s powers. Re Oriental Inland Steam Company ex parte Scinde Railway Company (1874) LR 9 Ch App 557 and Mitchell v Carter [1997] 1 BCLC 673 showed that the court’s equitable jurisdiction can protect the collective insolvency regime despite a foreign attachment. There was no material distinction in this respect between compulsory liquidation and administration. Administrators hold statutory functions and duties for the benefit of creditors as a whole, including custody or control of property wherever situated.

2. The jurisdiction was discretionary and had to be exercised with strong regard to comity. Foreign courts normally decide whether proceedings before them should continue. But an English court may intervene where a creditor’s conduct is oppressive, vexatious, unfair or otherwise improper, and where intervention is necessary to enable administrators to fulfil their functions.

3. The appellants’ conduct made the case exceptional. The company, administration and relevant business had no material connection with the United States. The appellants procured attachments without disclosing the administration or arbitration agreements, withheld notice until funds were attached, and thereby set a trap for court-authorised payments for post-administration services. The attachments obstructed the administrators’ performance of court-authorised statutory functions. Comity did not preclude relief in those circumstances.

4. Sir John Chadwick agreed, while stressing that the variation confined the relief to the special feature that the trap had obstructed the administrators’ proper discharge of their functions. Ward LJ agreed with both judgments.

• Court of Appeal (Civil Division) — in [2009] EWCA Civ 632, dismissed the appeal but varied the injunction to confine its effect to specified pre-notice post-administration payments routed through New York.
• High Court, Chancery Division, Companies Court — Robert Englehart QC, sitting as a deputy judge, granted a mandatory injunction requiring the appellants to seek release of the New York attachments and restraining substantive proceedings there.