Thomas & Anor v Frogmore Real Estate Partners GP1 Ltd & Ors

The registered-office presumption for a company’s centre of main interests may be rebutted only by objective factors ascertainable by third parties. The court must assess the company’s administration and interests comprehensively, including the location of head-office functions, dealings with creditors and management of assets.

Under paragraph 81 of Schedule B1 to the Insolvency Act 1986, an improper motive merely engages the court’s jurisdiction. Termination of an administration remains discretionary. The principal consideration is whether the statutory purposes of administration are likely to be achieved. Commercially aggressive motivation, or reliance on a creditor’s contractual directions, will not necessarily justify termination.

Three Jersey-incorporated companies owned English shopping centres and entered administration after defaulting on substantial lending from Nationwide Building Society. The joint administrators sought declarations that the companies’ centre of main interests was in England and Wales and that their appointments were valid.

The shareholder and directors applied under paragraph 81 of Schedule B1 to the Insolvency Act 1986, alleging that Nationwide had appointed the administrators to obstruct related litigation and that the companies’ centre of main interests was in Jersey. The issues were whether the appointments satisfied the jurisdictional requirements and whether the administrations should cease to have effect.

1. COMI. The presumption that a company’s centre of main interests is at its registered office was rebutted. Under paragraph 111 of Schedule B1 to the Insolvency Act 1986 and article 3 of Council Regulation 1346/2000/EC, COMI had to be assessed by objective factors ascertainable by third parties. The relevant companies’ English agent performed extensive head-office functions, including management, financing, accounting, strategy and dealings with advisers. Their business address and invoices pointed to London, and the principal creditor dealt with the companies through London-based personnel under English-law lending and security documents. The companies’ English assets and management arrangements therefore established COMI in England and Wales.
2. The location of board meetings in Jersey carried little weight. Third parties would not ordinarily know where meetings occurred, and the directors were not regarded as especially significant in the companies’ external dealings.
3. Paragraph 81. The provision requires an improper motive to establish jurisdiction, but does not require the court to terminate the administration once that threshold is met. The motive must be causative and incompatible with the statutory purpose of administration. Whether it was primary or secondary is immaterial.
4. The court’s main touchstone is whether the statutory purposes of administration are likely to be achieved. Even an improper motive may be relatively insignificant where those purposes remain capable of achievement, particularly if the appointor’s improper objective was not achieved. The fiduciary proper-purpose approach in Howard Smith v Ampol Petroleum [1974] AC 821, as applied in Jackson v Thakrar [2007] EWHC 2173 (TCC), was not applicable to an appointment by a creditor exercising a statutory power.
5. Nationwide had no improper motive. The evidence showed a desire to protect its position in relation to the loans. The timing of the appointment, the existence of litigation, the management of the shopping centres and the availability of receivership did not establish impropriety. Nor did Nationwide acquire an improper motive merely by taking account of Promontoria’s contractual directions.
6. The cross-applications were refused. The administrators’ applications succeeded, subject to agreement of the minute of order.