Case No: A2/2009/1018
A2/2009/1018(A)
Neutral Citation Number: [2009] EWCA Civ 723
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION, COMPANIES COURT
ROBERT ENGLEHART QC (sitting as a Deputy of the High Court)

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: Wednesday, 20th May 2009

Before:

LORD JUSTICE WARD
LORD JUSTICE STANLEY BURNTON
and
SIR JOHN CHADWICK
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Between:

	BLOOM & ORS	
Appellants	
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HARMS OFFSHORE AHT “TAURUS” GMBH & CO KG & ANR	

Respondents	

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Ms E Talbot-Rice QC and Mr E Cumming (instructed by Messrs Ince & Co) appeared on behalf of the Appellants.
Mr W Trower QC and Mr T Smith (instructed by Messrs Herbert Smith) appeared on behalf of the Respondents.
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Judgment
Sir John Chadwick:

1.	We have before us an application for a stay of the order made on 15 May 2009 by Mr Robert Englehart QC sitting as a deputy judge of the High Court in the Chancery Division.  That application has been listed with the substantive appeal from that order. We have heard the appeal; and have reached the conclusion that, save for some variation of the order made, the appeal should be dismissed.  In those circumstances it is unnecessary to consider further the question of a stay.

2.	We will put on our full reasons for the conclusion which we have reached into written judgments in due course; but it may assist the United States District Court in New York sitting in bankruptcy, before whom related applications are to come in the course of today, if I provide a very brief summary of those reasons at this stage.

3.	The background facts are fully set out in the judgment of Mr Englehart and it is unnecessary that I should rehearse them in any detail.  The salient facts are these.  First, on 7 January 2009 an administration order was made in respect of Oilexco North Sea Limited, an English registered company, in the High Court in London.  Administrators of the company were appointed.  Second, also on 7 January 2009 the judge made an order giving the administrators power to pay post-administration liabilities out of the assets of the company in his hands. Third, also on 7 January 2009 sthe appellants, two single-ship German companies, were notified of the making of the administration order.  Fourth, on 16 January 2009 the German companies made application in New York for attachment orders attaching the assets of the company within that jurisdiction, both present and future.  As we understand to be normal -- and for understandable reasons -- notice of the intention to make that application was not given to the administrators.  But, more pertinently, no information was provided to the court in New York on two matters which might have assisted it in deciding whether to make the orders.  The first of those matters was the existence of exclusive jurisdiction arbitration clauses in the underlying charter parties which were said to give rise to the debts owed to the German companies providing for arbitration in London.  The second was the existence of the administration order which had been made by the High Court some nine days earlier.  Fifth, in the absence of that information, the New York court made the attachment orders sought on 21 and 26 January 2009.  Again, the administrators were not told of the making of the orders at that stage.  Sixth, on 19 March 2009, at a time when the administrators were still in ignorance of the existence of the attachment orders, they made payment of a post-administration debt to an account with JP Morgan Bank in New York for the credit of a post-administration creditor.  Seventh, on 24 March 2009 the appellants notified the administrators that they claimed that the payment made to JP Morgan was caught by the attachment orders made, so that they were now in a position of being secured creditors.

4.	The question before the judge was whether he should direct the German companies, who are the appellants before us, to release the attachment orders which they had obtained in the circumstances that the continued security claimed under those orders prejudiced a company voluntary arrangement which the administrators had procured and which was imminently to become effective.  The hearing in New York of a related application by the administrators is fixed for today.  

5.	The judge held that the order sought by the administrators should be made.  He ordered that the appellants be restrained from taking any further steps in the attachment proceedings commenced in the United States District Court for the southern district of New York; and he ordered that they use best endeavours forthwith to procure the release of the two ex parte orders of maritime attachment and garnishment made by that District Court in these proceedings against the intangible and tangible assets of the company, and the release of any attachments effected pursuant to those orders.  

6.	Having listened to argument in the course of this morning we are satisfied that, for the appellants to rely on the orders made in New York in order to obtain security over monies paid by the administrators in satisfaction of a post-administration debt at a time when the administrators had not been informed of the existence of the attachment orders, would seriously prejudice the functions of the administrators under the administration order made by the courts of this country on 7 January 2009.  It would be unconscionable for the German companies to seek to rely on the orders made in New York to obstruct the administration order.

7.	Put very shortly, the effect of what had happened was that, in the knowledge that there was an ongoing administration in the course of which it would undoubtedly be necessary for the administrators both to incur and to discharge post-administration liabilities, the German companies, without informing the administrators, established a position under which any such payment made in dollars through New York would be caught by attachment and so become a security for their claims against the company.  The conduct of the appellants, as it seems to me, can properly be described as a trap.  It may well be that under the law of New York and under the law of Germany the ship companies are entitled to set a trap in that way; but it has the effect of obstructing the proper functioning of the administration order as directed by this court.  In those circumstances the German companies should not be entitled to rely upon the security they have obtained.  

8.	Accordingly we dismiss the appeal against the judge’s order.  But we invite submissions as to a variation of that order so as to make clear that it applies only to assets paid by the administrators to New York in respect of post-administration liabilities before 25 March 2009, that is to say, before the date upon which the administrators were on notice of the existence of the attachments.

Order: Appeal dismissed (no order on stay)