PwC’s application was refused. PwC appealed to the Court of Appeal and succeeded in having the Supreme Court’s order set aside on the arguments above. Singularis appealed to the Privy Council, and in November 2014, the Board handed down their judgment: Singularis Holdings Limited v PricewaterhouseCoopers [2015] AC 1675 (Singularis).
The Board determined unanimously that the liquidators’ appeal should be dismissed but were divided as to the reasons why. The majority of the Board – Lord Sumption, Lord Clarke and Lord Collins – determined that a common law power existed to assist foreign liquidators by compelling a third party to produce information. The minority – Lord Neuberger, and Lord Mance – expressed the view that no such common law power existed.
The majority view was derived from a much debated, inconsistently recognised principle referred to in the judgment as “modified universalism”. Modified universalism, in short, can be stated as the principle that domestic courts have a power to and should assist foreign liquidators so far as they properly can. Although an old principle – deriving from In re African Farms Ltd [1906] TS 373 – the extent of any power derived from the principle, per Lord Neuberger’s pithy dissenting remarks in Singularis, is “a very tricky topic on which the Board, the House of Lords and the Supreme Court have not been conspicuously successful in giving clear or consistent guidance”. The minority expressed concern that the Board had embarked on an exercise in judicial creation.
In the Privy Council’s earlier decision in Cambridge Gas Transportation Corporation v Official Committee of Unsecured Creditors of Navigator Holdings PLC [2007] 1 AC 508, it stated that the Court could, when assisting a foreign liquidator, do whatever it could properly have done in a domestic insolvency and that the absence of jurisdiction in rem or in personam was irrelevant.
The majority in Singularis found that a power existed but that it was narrower than described in Cambridge Gas. Lord Sumption, delivering the majority judgment in Singularis, said the Board would not “encourage the promiscuous creation of other common law powers to compel the production of information” and limited the scope of power to information that:
a. Was sought by officers appointed by a foreign court of insolvency jurisdiction;
b. Could be ordered to be provided by a person in that foreign jurisdiction by the court of that foreign jurisdiction;
c. Was necessary for the performance of the functions of the officers appointed by the foreign court;
d. Was not being sought for purposes that were inconsistent with domestic public policy or subject to other compulsory information gathering schemes, for instance, for use in actual or anticipated litigation.
Singularis was hailed a decade ago as a significant clarification and restatement of the common law power of the Court to assist foreign liquidators, but to what use has it been put since then? Singularis has been referred to in obiter dicta, outside the restructuring and insolvency context, as authority for the principle that the Court should adopt a more restrictive approach to the interpretation of legislation.
In reported Bermuda judgments, however, there are only five judgments where Singularis has been substantively invoked for or against the principle that the Court should act in support of foreign insolvency proceedings.
In four of these five decisions, Singularis was distinguished, foreign proceedings were recognised and relief granted. Those four decisions were:
i. In the Matter of Energy XXI Ltd [2016] Bda LR 90;
ii. In the Matter of Celestial Nutrifoods Limited [2017] Bda LR 11;
iii. In the Matter of C & J Energy Services Ltd [2017] Bda LR 22; and
iv. In the Matter of Seadrill Limited [2018] SC (Bda) 30 Com.
In each of these cases, the support sought by the foreign officeholders was the grant (or maintenance) of a stay of proceedings against the debtor company, either directly under the Court’s inherent jurisdiction or as a result of the appointment of provisional liquidators in Bermuda (which gives rise to a statutory stay).
The Court, in Energy XXI, held that a stay of domestic proceedings was consistent with the doctrine of modified universalism, as set out in Singularis. In Celestial Nutrifoods, the Court held that the grant of a stay forms part of the Court’s inherent jurisdiction and is, therefore, not an exercise of a power that was novel or peculiar to the insolvency context.
In C&J Energy, the Court had granted the application of the Company, represented by Appleby, to appoint JPLs in support of foreign insolvency proceedings, and commented refreshingly on its approach (25) – “Having drunk from the intoxicating and liberating common law cooperation Cambridge Gas chalice, it does admittedly require measured analysis to justify the conclusion that the usual requirements for concluding a liquidation […] can, by necessary implication, be dispensed with so as to permit provisional liquidators to bring a wholly administrative liquidation process to a speedy conclusion. And the conscious thought processes which prompted me to grant the relief sought […] were, admittedly, more informed by commercial pragmatism of a Cambridge Gas variety than the conceptual clarity of Singularis. In the final analysis, however, the application of both approaches in the present context takes one to the same legal destination.”
In the most recent case in Bermuda where Singularis was invoked, it was followed. Hunt v Transworld Payment Solutions Limited [2020] SC (Bda) 14 Com, saw the UK liquidator of a UK company seek recognition in Bermuda in support of information requests from a Bermuda group entity. The Bermuda entity resisted the recognition order on the basis that the UK liquidator had already determined to bring litigation against the Bermuda entity and its ultimate beneficial owner, and that accordingly the information sought in Bermuda was outside the recognition that could be afforded under Singularis. The Court agreed, finding that the liquidator’s attempt to gain recognition was an illegitimate use of the recognition procedure, and there was no other legitimate reason for recognition, applying the restrictions set out by Lord Sumption at [25] of Singularis (a-d above). If the liquidator wanted information for the purpose of litigation, he was required to make an application under rules of civil procedure.
The Bermuda Court remains mindful of Singularis when considering applications in support of foreign insolvency proceedings. There have, however, been only a handful of cases invoking Singularis. This may be because Singularis has discouraged broad applications for assistance. Given the increasing cross-border insolvency and restructuring activity in Bermuda, however, we consider there is scope and increasing motivation for litigation on the extent of modified universalism as set out in Singularis.
First published in Corporate Live Wire, Bankruptcy & Restructuring – Expert Guide, April 2023
