Flightlease (Ireland) Ltd (in Voluntary Liquidation) v Companies Act

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke,Mr. Justice Murphy
• Judgment Date: 15 June 2006
• Neutral Citation: [2005] IEHC 274
• Court: High Court
• Date: 15 June 2006

[2005] IEHC 274

THE HIGH COURT

[Rec. No. 72COS/2005]

Flightease Ireland Limited -v- Companies Act

IN THE MATTER OF FLIGHTLEASE IRELAND LIMITED (IN VOLUNTARY LIQUIDATION)

AND

IN THE MATTER OF THE COMPANIES ACTS, 1963 TO 2003

AND

IN THE MATTER OF AN APPLICATION FOR DIRECTIONS PURSUANT TO SECTION 280 OF THE COMPANIES ACT, 1963

Abstract:

Company law - Insolvency - Interpretation of Council Regulation 1346/2000 - Proof of claims in insolvency proceedings - Applicable law - Third parties’ rights in rem - Council Regulation 1346/2000, arts. 4, 15

Facts: The company’s centre of economic interest was in Ireland. In the liquidation of the company, creditors’ claims amounted to Eur290 million in respect of which there were available assets of €13 million. The liquidator rejected the proof of claim of Air Lib. Laffoy J. directed that the following issues of interpretation arising from the provisions of Council Regulation 1346/2000 on insolvency proceedings be determined by the court:

(i) Did article 4 of the Regulation require the claim made by Air Lib in the winding up of the company to be determined by the Irish court in accordance with Irish law governing the lodging, verification and admission of claims in insolvency proceedings?

(ii) Did article 15 of the Regulation require that the effect of the winding up of the company on certain proceedings before the courts in France, in which Air Lib was a plaintiff and the company was a defendant, be governed by the law of France.

Held by Murphy J. that article 4 of the Regulation required the claim made by Air Lib in

the winding up of the company to be determined by the Irish court in accordance with

Irish law governing the lodging, verification and admission of claims in insolvency

proceedings. Article 15 of the Regulation did not require that the effect of the winding up

of the company on certain proceedings before the courts in France, in which Air Lib was

a plaintiff and the company was a defendant, be governed by the law of France.

Reporter: R.W.

1 Judgment of Mr. Justice Murphy dated the 27th day of July, 2005.

1. Background

2 Swissair was the holding company of Flightlease (the Company) now in voluntary liquidation.

3 Société d'Explotiation OAM Air Liberté (Air Lib) was formed in summer 2001, to take on the activities of several insolvent companies.

4 Swissair agreed to pay Air Lib's holding company, Holco, certain monies. Following the attacks of September 11, 2001 and the effects thereof on the international airline industry, Swissair discontinued those payments. Air Lib was placed in liquidation on 17th February, 2003 and joint liquidators were appointed.

5 On 8th November, 2001, within a month of the events of September 11th, proceedings were initiated in France by Air Lib and Holco against a number of defendants, including the Company, for the sum of €503 million approximately (the claim).

6 In the liquidation of the Company, creditors” claims amount to €290 million in respect of which there is available assets of €13 million. The liquidator rejected the proof of claim of Air Lib on 24th January, 2005.

7 Air Lib requested a stay on the liquidation of the Company. The Company opposed that request and indicated its wish to proceed with and determine the liquidation.

8 The Company, whose centre of economic interest is in Ireland, initiated these proceedings.

2. Issues

9 The parties had agreed and Laffoy J. directed that the following issues of interpretation arising from the provisions of Council Regulation 1346/2000 on insolvency proceedings (the Regulation) require to be determined by the court:

10 1) Does article 4 of the Regulation require the claim made by the liquidators of Societé d'Explotiation OAM Air Liberté (Air Lib) in the winding-up of the Company to be determined by the Irish Court in accordance with Irish law governing the lodging, verification and admission of claims in insolvency proceedings?

11 2) If the answer to 1) is "yes", what steps must now be taken by the liquidators of Air Lib in relation to their appeal against the Notice of Rejection of Proof dated 24th January, 2005, delivered by the liquidators of the Company?

12 3) Does article 15 of the Regulation require that the effect of the winding-up of the Company on certain proceedings before the courts in France, in which Air Lib is a plaintiff and the Company is a defendant, be governed by the law of France?

13 4) If the answer to 3) is "yes", what are the consequences for the conduct of the winding-up of the Company in the claim of the liquidators of Air Lib in that winding-up? (The court was informed that this does not yet arise and, accordingly, is not a matter in relation to which the court needs to concern itself in this application.)

14 In relation to the issues, Air Lib submitted that the answer to the first issue was in the negative and that the answer to the third issue was in the affirmative. Flightlease, on the other hand, submitted that the answers be reversed: yes to issue one and no to issue three.

3. Council Directive 1346/2000

15 3.1 The background and objective of the Regulation is given in the recitals 2, 3, 6, 12 and 22 to 24.

"The proper functioning of the internal market requires that cross-border insolvency proceedings should operate efficiently and effectively and this Regulation needs to be adopted in order to achieve this objective which comes within the scope of judicial co-operation in civil matters within the meaning of article 65 of the Treaty. (2)

The activities of undertakings have more and more cross-border effects and are therefore increasingly being regulated by Community law. While the insolvency of such undertakings also affects the proper functioning of the internal market, there is a need for a Community act requiring co-ordination of the measures to be taken regarding an insolvent debtor's assets. (3)

…

In accordance with the principle of proportionality this Regulation should be confined to provisions governing jurisdiction for opening insolvency proceedings and judgments which are delivered directly on the basis of the insolvency proceedings and are closely connected with such proceedings. In addition, this Regulation should contain provisions regarding the recognition of those judgments and the applicable law which also satisfy that principle. (6)

…

This Regulation enables the main insolvency proceedings to be opened in the Member State where the debtor has the centre of his main interests. These proceedings have universal scope and aim at encompassing all the debtor's assets. To protect the diversity of interests, this Regulation permits secondary proceedings to be opened to run in parallel with the main proceedings. Secondary proceedings may be opened in the Member State where the debtor has an establishment. The effects of secondary proceedings are limited to the assets located in that State. Mandatory rules of co-ordination with the main proceedings satisfy the need for unity in the Community. (12)

…

This Regulation should provide for immediate recognition of judgments concerning the opening, conduct and closure of insolvency proceedings which come within its scope and of judgments handed down in direct connection with such insolvency proceedings. Automatic recognition should therefore mean that the effects attributed to the proceedings by the law of the State in which the proceedings were opened extend to all other Member States. Recognition of judgments delivered by the courts of the Member States should be based in the principle of mutual trust. To that end, grounds for non-recognition should be reduced to the minimum necessary. This is also the basis on which any dispute shall be resolved where the courts of the two Member States both claim competence to open the main insolvency proceedings. The decision of the first court to open proceedings shall be recognised in the other Member State without those Member States having the power to scrutinise the court's decision. (22)

This Regulation should set out, for the matters covered by it, uniform rules on conflict of laws which replace, within their scope of application, national rules of private international law. Unless otherwise stated, the law of the Member State in the opening of the proceedings should be applicable (lex concursus). This rule on conflict of laws shall be valid both for the main proceedings and for local proceedings; the lex concursus determines all the effects of the insolvency proceedings, both procedural and substantive, on the persons and legal relations concerned. It governs all the conditions for the opening, conduct and closure of the insolvency proceedings. (23)

Automatic recognition of insolvency proceedings to which the law of the opening State normally applies may interfere with the rules under which transactions are carried out in other Member States. To protect legitimate expectations and the certainty of transactions in Member States other than that in which proceedings are opened, provisions should be made for a number of exceptions to the general rule. (24)"

16 3.2 The parties agree that the liquidation proceedings of both Air Lib and the Company are insolvency proceedings for the purpose of the Directive.

17 3.3 Article 3 gives jurisdiction to the course of the Member State where the centre of the debtor's main interest is situate and recognises secondary winding-up proceedings.

18 Article 4, in relation to the applicable law, provides as follows:

19 2 "1. Save as otherwise provided in this Regulation, the law applicable to insolvency proceedings and their effects shall be that of the Member State within the territory of which such proceedings are opened, hereafter referred to as the “State of the opening of proceedings”.

20 2. The law of the State of the opening of proceedings shall determine the conditions for the opening of those...