Stichting Shell Pensioenfonds v Krys and another

When a company is wound up in its place of incorporation, its worldwide assets are subject to a statutory scheme for collective distribution. A creditor amenable to the winding-up court may be restrained from using foreign proceedings to obtain unjustified priority over those assets. Vexatious or oppressive conduct is not required.

Lodging a proof of debt constitutes submission to the winding-up jurisdiction, whether or not the proof is admitted or a dividend paid. Foreign nationality or residence creates no immunity from an effective injunction. Pure adjudication abroad is generally permissible; the objection arises where an attachment or enforcement process gives prior access to the insolvent estate. Relief remains discretionary and must be framed cautiously.

Fairfield Sentry Ltd, a British Virgin Islands mutual fund, was placed in liquidation after the collapse of Bernard Madoff's investment scheme. Before the winding-up order, the appellant pension fund obtained Dutch conservatory attachments over approximately US$71m held for Fairfield Sentry in an Irish bank account. The attachments created no proprietary interest but could enable the appellant to satisfy a future Dutch damages judgment ahead of other claimants.

The appellant also lodged a proof of debt in the BVI liquidation. The liquidators sought an anti-suit injunction restraining the Dutch proceedings. Bannister J refused relief, but the Court of Appeal of the British Virgin Islands allowed the liquidators' appeal and restrained the appellant from pursuing those proceedings.

The central issues were whether the attachments conflicted with the statutory scheme of distribution, whether the appellant was amenable to the BVI court, and whether discretion and comity required the Dutch proceedings to remain unrestricted.

1. Appeal dismissed. Lord Sumption and Lord Toulson, delivering the Board's joint judgment, held that the Court of Appeal had been entitled to grant the anti-suit injunction.

2. A winding-up order made in the jurisdiction of incorporation subjects the company's worldwide assets to a statutory trust for distribution according to the applicable priorities. A proprietary interest validly acquired before winding up would rank ahead of that trust. The Dutch attachments, however, transferred no proprietary interest. After the BVI winding-up order they were directly inconsistent with the mandatory collective scheme because their purpose was to facilitate Shell's priority over the Dublin account.

3. The insolvency jurisdiction to restrain foreign proceedings is distinct from the jurisdiction based on vexation or oppression. Following the equitable principle illustrated by Carron Iron Company Proprietors v Maclaren (1855) 5 HLC 415 and explained in Société Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] AC 871, the court may act in personam to protect its ability to distribute an insolvent estate fairly. Vexatious or oppressive conduct is unnecessary where foreign proceedings are calculated to give a claimant prior access to assets governed by the statutory trust.

4. Shell was amenable to the BVI court in two ways. It participated unconditionally in the injunction proceedings and lodged a proof in the liquidation. Lodging the proof was itself a submission; admission of the proof and receipt of a dividend were unnecessary. The Board approved the corresponding conclusion in Rubin v Eurofinance SA [2013] 1 AC 236. Although proving claim A does not bar separate proceedings on claim B, the creditor cannot use those proceedings to obtain direct priority over assets governed by the collective scheme.

5. There is no principle immunising a foreign creditor who resorts to the courts of its own country. Nationality and residence do not alter claimants' rights against the insolvent estate. The contrary approach expressed in In re Vocalion (Foreign) Ltd [1932] 2 Ch 196 was a discretionary observation and was no longer consistent with the policy of international insolvency law.

6. Relief nevertheless remains discretionary and must be granted cautiously. Comity normally favours allowing a foreign court to decide whether it is the appropriate forum. That consideration did not govern this case because only the BVI liquidation could determine priorities among all claimants, Dutch law disregarded the foreign insolvency for attachment purposes, and the attached debt was situated in Ireland rather than the Netherlands.

7. An injunction should ordinarily target the attachment or enforcement process rather than prohibit purely adjudicatory proceedings. The existing order was left in place because the attachments were the sole substantial purpose and jurisdictional basis of the Dutch proceedings. Shell remained entitled to prove its damages claim in the liquidation.

1. Privy Council: By [2014] UKPC 41, dismissed the appellant's appeal and left the Court of Appeal's injunction in force.
2. Court of Appeal of the British Virgin Islands: Allowed the liquidators' appeal. It restrained the appellant from continuing the Dutch proceedings or commencing new proceedings against Fairfield Sentry.
3. High Court of the British Virgin Islands: Bannister J refused the liquidators' application for an anti-suit injunction on 9 August 2011.