Background and facts
A recent Privy Council case, which itself referenced the Singularis decision referred to elsewhere in this article, again had reason to examine the interplay between different jurisdictions in insolvency situations. In Stichting Shell Pensioenfonds v Krys v Ors (BVI) [2014] UKPC 41, the court considered the extent to which a BVI court could injunct a Dutch company attaching assets in the Netherlands. Although the Court applied BVI law, it found that there was no material difference for these purposes between the position in the BVI and that under English law.
Shell was a Dutch pension fund which had invested c. $45m in Fairfield, a BVI feeder fund for a Bernie Madoff entity, BLMIS. Upon Mr. Madoff’s arrest in December 2008, Shell sought redemption of its shares, which was not forthcoming. It therefore sought attachment over assets held by Fairfield through Citco, a Dutch bank, pending resolution of its claim in the Dutch courts.
Fairfield had been placed into winding up proceedings in the BVI, into which Shell lodged a proof of claim. The action by Shell had the potential effect of giving them payment in full of their claim, whilst other (otherwise equal ranking) creditors would receive only a distribution. The BVI trustees sought an injunction against enforcement of the Dutch attachment. The proceedings in the Netherlands were effectively stayed pending the BVI action.
The BVI Appeal Court overturned the first instance judge, and granted the anti-suit injunction. Shell appealed.
Issues and decision
Shell’s objective in pursuing the Dutch attachment was to obtain preferential recovery compared to that to which it may be entitled in the BVI. The Court found that this was the type of litigation which it was able to injunct.
The nature of an anti-suit injunction was personal against one creditor. As such, that creditor must be subject to the injuncting court’s jurisdiction. The lodging of a proof of claim in the BVI by Shell, together with its appearance in the injunction proceedings was enough to find that Shell had submitted to the jurisdiction of the BVI court.
Shell claimed that English (and thus BVI law) prohibited injunctions against foreign entities suing in their own jurisdiction. The court found no such principle. In so finding, the court asserted the primacy of the notion that, where a company is being wound up, all of its assets are subject to an effective trust in favour of its creditors, wheresoever located. The court thus upheld the injunction.
Closing thoughts
The lodging of a proof of claim in the BVI winding-up, together with fighting the injunction, was arguably a tactical mistake. The court found that submission to the jurisdiction was effectively conceded by those actions.
In the circumstances, Shell could not pursue local Dutch proceedings with the aim of gaining priority over other creditors.
