COMI and Administration considered - Pillar Securitisation SARL & Ors v Spicer & Anor (Court Administrators) [2010] EWHC 836 (Ch) (01 April 2010)

Mrs Justice Proudman (pictured) has handed down her decision in Pillar Securitisation SARL & Ors v Spicer & Anor (Court Administrators) [2010] EWHC 836 (Ch). The case concerns the fallout from various bank insolvencies and the question of COMI in an administration context. The learned judge mulls on issues surrounding the validity of appointment of the administrator. As she observes:

"There are currently five applications before the court relating to the administration. First, there is the applicants' application. That raises the following issues:

• Was KCP's appointment of the administrators for Master effective? The applicants say it was not, on the following grounds:

Master's centre of main interests ("COMI") was Guernsey for the purposes of the Council Regulation on Insolvency Proceedings (1346/2000/EC) so that the English court has no jurisdiction in relation to the insolvency;

The appointment out of court, and the written resolution leading to the appointment, are both formally and substantively invalid.

• If the appointment was invalid, what becomes of the remuneration drawn by the administrators to date?

• In the alternative, the applicants asked that the administrators be removed from office and replaced with other identified insolvency practitioners pursuant to the Insolvency Act, Schedule B1, paragraphs 88 and 95(b).

• In the second application, the administrators asked that they be permitted to make an interim distribution.

• They also ask for an extension of their term of office to give them time to dispose of Master's remaining assets.

• In the context of this application the administrators ask for directions as to whether the applicants are entitled to interest on their claims in respect of the period of delay caused by their application.

• If the appointment was invalid, the administrators ask the court to make an administration order retrospectively.

• Again, if the appointment was invalid, there is the issue of the effect of paragraph 104 of Schedule B1 and whether there should be an order for indemnity pursuant to paragraph 34 or otherwise.

• The administrators ask that the court should allow an amendment to the notice appointing the administrators to correct what is said to be a slip.

• Lastly, two of the investors ask to be joined to the applications to support the administrators' applications and oppose the applicants' applications. Their expressed basis for joinder, which is opposed by the applicants, is that they have a genuine economic interest justifying their presence.

1. The first issue, therefore, is as to the validity or otherwise of the appointment."

In relation to COMI the learned judge noted:

"The first ground on which the applicants say that the appointment was bad relates to Master's COMI. The English Court may assert jurisdiction to open insolvency proceedings in respect of an entity outside England and Wales where the EC Council Regulation on Insolvency Proceedings (1346/2000/EC) applies and the entity's COMI is within England and Wales. The applicants assert that Master's COMI was Guernsey, which is not an EU Member State, so that the English Court has no jurisdiction in relation to the insolvency.

The English Court also has jurisdiction where it would, apart from the EC Regulation, have jurisdiction under domestic legislation. The applicable provision is Section 117 of the Insolvency Act 1986, as amended and applied to partnerships by the Insolvent Partnerships Order 1994. There is jurisdiction if Master has, or at any time has had, a principal place of business in England and Wales: section 117(1). Mr Todd QC asserted on behalf of the administrators that Master had "a" principal place of business in London, notwithstanding that it had another principal place of business elsewhere. This was to get round the fact that, in order to obtain registration as a limited partnership in Guernsey, Master had declared for the purposes of section 8(2)(d)(ii) of the 1995 Law, that its principal place of business was at an address in St Peter Port, Guernsey.

Mr Todd QC did not really pursue the argument under Section 117. The argument before me centered on Master's COMI. COMI is a separate matter from principal place of business, and in considering COMI, Mr Todd submitted that the court need not grapple with the inconsistency between the statement as to principal place of business under the 1995 Law and the contention that a principal place of business was in England.

The test for establishing COMI under the EC regulation was authoritatively stated by the ECJ in Re Eurofood IFSC Limited [2007] BCLC 150, and recently explained, after analysis of the authorities, by the majority of the Court of Appeal in Re Stanford International Bank Limited [2010] EWCA Civ 137. It is common ground in this case that the following principles fall to be applied:

(i) There is a presumption that the body's COMI is in the state where its registered office is located.

(ii) The presumption can be rebutted only by factors which are both objective and ascertainable by third parties. Thus the court is to have regard to factors already in the public domain, or which would be apparent to a typical third party doing business with the body, excluding such matters as might only be ascertained on inquiry.

(iii) Accordingly, the place where the body's head office functions are carried out is only relevant if so ascertainable by third parties.

(iv) Each body or individual has its own COMI, there is no COMI constituted by an aggregation of bodies or individuals."

Picture Credit: http://www.thelawyer.com/pictures/web/images/13527_prudman.jpg