Ronelp Marine Ltd & Ors v STX Offshore & Shipbuilding Co Ltd & Anor

When an affected creditor seeks permission to continue proceedings stayed under a modified stay imposed pursuant to the Model Law, the creditor bears the burden of justification. The court must identify the interest relied upon, consider whether continuation would impede the insolvency or rehabilitation process, and balance the creditor’s legitimate interests against those of creditors generally.

A purely monetary claim will ordinarily remain within the collective insolvency process. Permission is exceptional, but may be justified where the claim involves unusually difficult legal issues, existing proceedings are materially advanced, continuation would assist the insolvency court, and the creditor gains no improper priority or distributional advantage.

The applicants were buyers under shipbuilding contracts made with a Chinese subsidiary of STX. STX had guaranteed performance. After the subsidiary entered Chinese insolvency proceedings and the vessels were not built, the buyers claimed substantial damages under the guarantees.

The buyers had commenced English Commercial Court proceedings. STX later entered Korean rehabilitation proceedings, which were recognised in England as a foreign main proceeding under the Cross Border Insolvency Regulations 2006. The recognition order modified the automatic stay so that proceedings could continue only with consent or permission of the court.

The buyers’ claim had been rejected by the Korean administrator, requiring confirmatory proceedings in Korea. They sought permission to continue the English action so that the claim could be determined and presented to the Korean rehabilitation court.

Permission granted. The buyers were permitted to continue the existing Commercial Court proceedings, and the replacement foreign representative was recognised.

1. Under paragraph 43 of Schedule B1 to the Insolvency Act 1986, as applied through the modified stay, the affected creditor bears the burden of establishing the case for relief. The creditor must identify the interest to be promoted, address whether continuation is likely to impede the insolvency purpose, and enable the court to balance the competing interests. The relevant considerations are not exhaustive.
2. It is ordinarily exceptional for a creditor with a merely monetary claim to obtain permission to bypass the statutory insolvency machinery. The creditor must show circumstances of sufficient weight to overcome the strong imperative that claims be dealt with collectively and, ordinarily, by the insolvency court.
3. The buyers’ claim was unusually complex. It involved difficult questions concerning illegality under English law and the interaction between contractual and common-law remedies. The court considered the law of illegality to be in an exceptional state of uncertainty, referring to Patel v Mirza [2016] UKSC 42.
4. The existing English proceedings were reasonably advanced, with the issues defined, a trial fixed and substantial preparation undertaken. Determination in England would assist the Korean confirmatory process, would not materially impede the rehabilitation plan, and would not confer enforcement or distributional priority on the buyers.
5. Balancing the interests of the buyers against those of creditors as a whole, the nature of the dispute and the advanced state of the English proceedings were crucial. There was no evidence of disorder, unequal distribution or material prejudice to the collective rehabilitation. Permission to continue was therefore granted.