East Riding of Yorkshire Council as administrating authority of the East Riding Pension Fund v KMG SICAV - SIF - GB Strategic Land Fund

On an application for permission to serve insolvency proceedings out of the jurisdiction, the merits threshold is whether there is a serious issue to be tried, meaning a real, rather than fanciful, prospect of success. The good arguable case standard applies to whether the claim falls within a jurisdictional gateway, not ordinarily to the merits.

In deciding whether a body may be wound up as an unregistered company, separate legal personality is relevant but not decisive. The court must consider whether the body has attributes akin to those of a company and whether Parliament may reasonably be inferred to have intended the winding-up jurisdiction to apply. A contingent creditor may have standing, but must show a sufficient interest; that interest was insufficient for an inability-to-pay-debts petition on the facts, though it raised a serious issue for a petition based on cessation or dissolution.

This was an appeal from an order of ICC Judge Burton dated 2 February 2023, which set aside an earlier order of ICC Judge Prentis granting permission to serve a winding-up petition out of the jurisdiction.

The petition concerned a Luxembourg investment company’s segregated sub-fund, presented as an unregistered company under sections 220 and 221 of the Insolvency Act 1986. The appellant, administrator of a pension fund investor, alleged that substantial investments had been lost without adequate independent investigation. The issues included the applicable permission-to-serve-out tests, whether the Sub-Fund could be wound up in England, sufficient connection with the jurisdiction, the appellant’s standing as a contingent creditor, and alleged failures of full and frank disclosure.

1. Appeal allowed. The order setting aside permission to serve out was set aside, and ICC Judge Prentis’s original order was restored. No order for costs was made on the appeal.
2. The applicable permission test has three elements: a serious issue to be tried on the merits; a good arguable case that the claim falls within a jurisdictional gateway in practice direction 6B; and a discretionary determination that England is clearly or distinctly the appropriate forum and that permission should be granted. The merits question requires only a real, rather than fanciful, prospect of success. The lower court had confused these standards and wrongly applied the higher good-arguable-case test to the merits.
3. Under sections 220 and 221 of the Insolvency Act 1986, separate legal personality is relevant to whether a body is akin to a company, but it is not decisive. The court must examine the body’s attributes and determine whether it can reasonably infer that Parliament intended the unregistered-company winding-up jurisdiction to apply. The evidence raised a serious issue to be tried concerning the Sub-Fund’s eligibility.
4. The evidence also raised a serious issue to be tried concerning sufficient connection with England and Wales. Relevant matters included the nationality and domicile of investors, the location of underlying real estate, the location of directors and the centre of main interests of subsidiary entities. The apparent need for investigation and the absence of evidence of an independent investigation in Luxembourg also supported the possibility of benefit.
5. A contingent creditor may petition and may rely on the grounds available to existing creditors, but must demonstrate a sufficient interest in the winding-up. The appellant’s alleged interest was insufficient to proceed under section 221(5)(b), based on inability to pay debts. It nevertheless raised a serious issue concerning standing under section 221(5)(a), where the company has ceased business, is dissolved, or carries on business only for winding-up purposes.
6. The original application and supporting documents should have explained more clearly the Sub-Fund’s legal structure and the appellant’s status. However, the deficiencies were innocent, and, applying the correct approach, they had no material effect on the decision. The respondent remained entitled to contest jurisdiction, discretion and standing at the substantive hearing.

• High Court (Insolvency and Companies List): appeal allowed against the order of ICC Judge Burton dated 2 February 2023; the original permission-to-serve-out order of ICC Judge Prentis dated 18 May 2021 was restored.
• Permission to appeal from the lower court was refused by ICC Judge Burton and granted by Marcus Smith J on 9 May 2023.