Property situated in Northern Cyprus appropriated by foreign government – Property vested in and occupied by subsidiaries of subsequently insolvent United Kingdom company – Shares of subsidiary companies sold and in hands of administrators of insolvent company – Owners of appropriated property seeking leave to commence proceedings against administrators – Whether court having jurisidction – Whether applicants having seriously arguable claim
Four properties in Northern Cyprus, a hotel, an apartment block, a packaging plant and a warehouse, owned by the four applicant companies, were appropriated by the government of the Turkish Republic in 1983. The owners of the companies fled to Greek Cyprus and the properties were vested in, or occupied by, subsidiaries of Polly Peck International plc (PPI), a United Kingdom company. In 1990 PPI collapsed. The shares of the subsidiaries of PPI were sold on March 24 1995 to Learned Ltd and the proceeds were in the hands of the administrators.
The four apllicants applied under section 11(3)(d) of the Insolvency Act 1986 to commence proceedings by way of writ against PPI. They contended that their property had been illegally occupied and exploited without their authority by PPI’s subsidiaries, alleging that by these means PPI derived financial advantage from the commission of illegal acts. The administrators refused and contended that: (1) the English courts had no jurisdiction to entertain the proposed action by virtue of the rule in British South Africa Co v Companhia de Mocambique (1893) AC 602, the Mocambique rule, as modified by section 30(1) of the Civil Jurisdiction and Judgments Act 1982; and (2) even if the English courts did have jurisdiction, the claims were misconceived and failed to disclose any seriously arguable case. The judge granted leave and held that the court had jurisdiction under section 30(1) of the 1982 Act . The administrators appealed.
Held The appeal was allowed.
1. The court could grant leave to commence proceedings against the company under section 11(3)(d) of the 1986 Act provided its jurisdiction to entertain the claim had been established in respect of a seriously arguable case; see Re Atlantic Computer Systems plc (no 1) [1992] Ch 505, at p528.
2. The question whether the claim was seriously arguable, rather than the question of jurisdiction, was to be answered first, because if there were no serious issue to be tried under English law, the question of jurisdiction became irrelevant. On its face this was a novel claim: the applicants were seeking an order from an English court retrospectively imposing on the assets of an insolvent company in administration in England a “remedial constructive trust” giving them a proprietary interest in those assets. However, there was no prospect of the court in the instant case granting such a trust to the applicants in respect of the proceeds of sale of the shares held by PPI in its subsidiaries, since the effect of the statutory scheme applicable on an insolvency was to shut out a remedy which would, if available, have the effect of conferring a priority not accorded by the provisions of the statutory insolvence scheme. On this ground the appeal was allowed.
3. The judge had not erred in concluding that the case fell within the Mocambique rule, nor in concluding that the court had jurisdiction to entertain the proposed action under section 30(1) of the 1982 Act. The contention that the proceedings were not “principally concerned with a question of a title to, or the right to possession of “property situated outside the United Kingdom was seriously arguable.
Michael Crystal QC, William Trower and Philippe Sands (instructed by Cameron McKenna) appeared for the appellants; Lawrence Collins QC, Barbara Dohmann QC and Thomas Beazley (instructed by Osborne Clarke, of Bristol) appeared for the respondents.
