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

The court decided two related issues. First, applying paragraph 14 and paragraph 111(1B) of Schedule B1 to the Insolvency Act 1986 and Article 3(1) of Council Regulation 1346/2000/EC, the rebuttable presumption that a company’s centre of main interests is its registered office was not displaced: the Companies’ COMI was in England and Wales. Key factors were the appointment of FREPIM as agent in England performing head-office type functions, day-to-day management and third-party dealings from London, contractual governance by English law and English jurisdiction clauses, and creditor-facing contacts being conducted from England.

Second, under paragraph 81 of Schedule B1 the court declined to order that the administrations cease. The court adopted an approach that requires an improper motive on the part of the appointor to be demonstrated and then exercises a broad discretion, having regard in particular to whether the statutory purposes of administration are likely to be achieved. On the evidence Nationwide did not act with an improper motive and, even if an improper motive had been established, termination would not have been appropriate because the statutory purposes could still be met.

The matter concerned six expedited applications arising from the appointment of administrators to three Jersey incorporated companies which owned English shopping centres. The joint administrators had been appointed by Nationwide Building Society under qualifying floating charges. The administrators applied for declarations as to the companies' centre of main interests (COMI) and the validity of their appointments; the shareholder and directors cross-applied under paragraph 81 of Schedule B1 seeking termination of the administrations on the basis of alleged improper motive.

The facts: the companies were Jersey incorporated special purpose vehicles owning shopping centres in England. They had no employees in Jersey, bank accounts in Jersey and a Jersey registered office provided by a corporate services provider. Day-to-day management and a wide range of investment and asset management functions were performed by FREPIM, an English company based at Wigmore Street, London, under an Advisory Agreement governed by English law. Nationwide held a qualifying floating charge under debentures and, after the loans fell due, appointed administrators on instructions influenced by Promontoria, a holder of the economic interest under a participation agreement.

The court first addressed jurisdiction and COMI. Applying the EC regulation jurisprudence (in particular the principles in Re Eurofood and Interedil) the court treated the registered office presumption as rebuttable only by objective factors ascertainable by third parties. The court found that agent-based central administration in England, visible to third parties (including creditor contacts, VAT returns and invoice addresses), and the creditor-facing contractual and practical arrangements rebutted the Jersey presumption and placed COMI in England and Wales.

On the paragraph 81 cross-applications the court reviewed the limited authorities and concluded that an improper motive by an appointor is a condition for the court's jurisdiction under paragraph 81 but that the remedy is discretionary and will normally only be exercised where the statutory purposes of administration cannot be achieved because of the appointor's improper purpose. Applying that test, the court rejected the allegation that Nationwide appointed administrators to stifle the pending litigation, found Nationwide acted to protect its position in line with Promontoria's contractual rights, and concluded that paragraph 81 relief should be refused. The administrators' substantive relief was granted and the cross-applications dismissed.

Cross-applications dismissed and the administrators' applications granted. The court held that the Companies' centre of main interests was in England and Wales and that Nationwide had not acted with an improper motive under paragraph 81 of Schedule B1 of the Insolvency Act 1986; even if an improper motive had been shown the court would not have terminated the administrations because the statutory purposes were capable of being achieved.