East Riding of Yorkshire Council as Administrating Authority of the East Riding Pension Fund v KMG Sicav-SIF-GB Strategic Land Fund

The Court dismissed the appeal against ICC Judge Kyriakides' order refusing a winding-up petition brought under ss.220-221 of the Insolvency Act 1986. The principal legal questions were whether a Luxembourg "Dedicated Fund" (the Sub-Fund) fell within the statutory meaning of an "unregistered company" in s.220(1), and whether the appellant was a contingent creditor of the Sub-Fund for presentational standing under s.124(1).

The judge and the court below held that the Sub-Fund did not fall within s.220(1): it was not an incorporated company or an "association" within the meaning of the section, and on its characteristics as shown by the Articles, the Offering Document and Luxembourg expert evidence it was, in substance, a segregated portfolio of assets belonging to the umbrella Fund rather than a legal person with contributories, capacity to contract or separate title to assets. That conclusion was supported by authorities constraining the scope of the phrase "association" where Parliament could not reasonably have intended winding-up jurisdiction to extend to the entity concerned.

The court also held that the appellant had not established contingent creditor status of the Sub-Fund. Expert evidence required a high probability of a liquidation surplus before a shareholder could be treated as a contingent creditor under Luxembourg law; no such likelihood was established on the evidence and, if any contingent creditor status existed, it was more likely to be as to the Fund rather than the Sub-Fund. The court therefore dismissed the appeal.

Background and parties: The appellant (East Riding of Yorkshire Council as administering authority of its pension fund) invested £20 million in a Luxembourg specialised investment Fund's Dedicated Fund (the Sub-Fund). The Sub-Fund held UK land assets. The Fund suspended dealings in June 2016 and the Sub-Fund was put into liquidation, with a final notification in December 2020 stating the liquidation net asset value was zero and that creditors had been repaid.

Nature of the application: The appellant presented a petition in England on 13 May 2021 seeking compulsory winding-up of the Sub-Fund as an unregistered company under ss.220-221 Insolvency Act 1986 because no equivalent winding-up remedy was available in Luxembourg for a Dedicated Fund. The petition was defended on jurisdictional grounds.

Procedural history: The court granted permission to serve the petition out of jurisdiction in May 2021; that permission was set aside below but reinstated on appeal by Green J on 24 July 2023. ICC Judge Kyriakides dismissed the petition in a judgment dated 10 May 2024. The present appeal was heard before Richard Smith J and decided on 8 November 2024 ([2024] EWHC 2845 (Ch)).

Issues framed: (i) Whether the Sub-Fund is an "unregistered company" within s.220(1) IA, in particular whether it is an "association" or company for those purposes; (ii) whether Parliament could reasonably have intended such a Dedicated Fund to be amenable to a compulsory winding-up under English insolvency law; (iii) whether the appellant was a contingent creditor of the Sub-Fund (or the Fund) with standing to present a winding-up petition; and (iv) subsidiary questions about the nature, ownership and liability of the assets and the ability of a liquidator to sue in the Sub-Fund's name.

Court's reasoning and findings:

• The court emphasised that s.220(1) is framed by its express words and historical authorities. The authorities (notably In re St James Club and In re International Tin Council) show that broad statutory words must be read in context and do not extend to associations or entities which Parliament could not reasonably have intended to be subject to winding-up jurisdiction.
• On the facts and Luxembourg expert evidence, the Sub-Fund was a segregated portfolio within an umbrella Luxembourg société (the Fund) and lacked separate legal personality, contributories, capacity to contract or to hold legal title independently. Investors are shareholders of the Fund; the segregation operates to limit recourse to particular assets but does not make the Sub-Fund a separate legal person under Luxembourg law.
• Those characteristics are relevant indicia for construing whether Parliament intended s.220(1) to apply. The absence of contributories, the fact that creditors must sue the Fund (not the Sub-Fund) to recover and the continuation of the Fund's board powers (creating conflict risks with any English-appointed liquidator) were material factors against treating the Sub-Fund as within s.220(1).
• The appellant's analogies to protected cell companies under the Risk Transformation Regulations 2017 and to instances where English courts had made exceptional winding-up orders were considered but were not sufficient to show that Parliament intended a Dedicated Fund of this nature to be wound up as an unregistered company in England.
• On contingent creditor status, the Luxembourg evidence required that an anticipated liquidation surplus be highly probable before a shareholder could be treated as a contingent creditor able to present a petition. The facts and evidence did not establish such a probability and, in any event, if a surplus were to arise the creditor relationship would more likely be against the Fund rather than the Sub-Fund.

Disposition: The appeal was dismissed. The judge below was not shown to have erred in law or fact on the principal jurisdictional issues.

The appeal is dismissed. The court agreed with the judge below that the Sub-Fund is, in substance, a segregated portfolio within a Luxembourg umbrella fund and not an "unregistered company" within the meaning of s.220(1) Insolvency Act 1986; investors are not contributories of the Sub-Fund and contingent creditor status was not established. For these reasons Parliament could not reasonably be taken to have intended the Sub-Fund to be wound up as an unregistered company in England.

Petition presented 13 May 2021 (amended 31 July 2023). ICC Judge Prentis granted permission to serve out (18 May 2021). That permission was set aside by ICC Judge Burton (2 February 2023). Mr Justice Michael Green allowed the appellant's appeal and restored service out (24 July 2023). ICC Judge Kyriakides dismissed the winding-up petition (10 May 2024). Appeal to the High Court (Insolvency & Companies List) heard 4 September 2024; judgment of Richard Smith J dismissing the appeal delivered 8 November 2024 ([2024] EWHC 2845 (Ch)).