Cross-border insolvencies – the power to request information under common law

14 January, 2015

Obtaining information can be a particular problem in multi-jurisdictional insolvencies.  A number of international legal structures exist to create a jurisdictional framework by which the courts in one jurisdiction can give effect to an insolvency appointment in another, but these structures are not universally available.  Where there is not such an arrangement, the Privy Council in the recent case of Singularis Holdings Ltd v PricewaterhouseCoopers (Bermuda) [2014] UKPC 36 has confirmed that in the absence of express statutory provisions the court has the power to assist officeholders with the conduct of their appointment.

Singularis was a company incorporated in the Cayman Islands, which was put into liquidation following a winding up order being made in the Cayman court.  The liquidators of Singularis sought an order be made in the Bermudan court to compel the company’s auditors, the Bermudan branch of PwC, to provide information to assist them with the conduct of the liquidation.  PwC opposed the application because the liquidators were not entitled to this information under Cayman law.

In their judgment, The Privy Council unanimously confirmed the existence of the principle of “modified universalism”, whereby the court will assist a foreign insolvency practitioner with the conduct of his duties.  When coming to this judgment the court noted that it was in the public interest for there to be a comprehensive scheme in which companies with multinational assets could be wound up in an orderly fashion.  However, this power was not to be applied without limitation and in his judgment Lord Sumption provided some useful guidelines on when this principle would be applied:

  1. The power is only available to assist the officers of a foreign insolvency court or equivalent public officers and would not, for example, be available to assist a voluntary winding up.
  2. Modified universalism is a power of assistance and cannot give a foreign insolvency officer power to do something they could not do under the law by which they were appointed.
  3. The power exists to allow the officeholder to gain access to the information necessary to assist them with the conduct of their appointment, not to obtain evidence for use in actual or anticipated litigation.
  4. The power is not available if there is another mechanism available to the officeholder by which they could obtain the information.

In this case the Privy Council found in favour of PwC because the liquidators of Singularis were not entitled to the information they were seeking under Cayman law and to make such an order in the Bermudan courts would be an extension of the liquidators’ powers. 

Strictly speaking the decision in Singularis relates to the powers of the Bermudan court and is not directly applicable in this jurisdiction, but the comments of Lord Sumption are of persuasive authority and are likely to be adopted by the courts in England and Wales.