A liquidator’s double edged sword
In a decision that will be of interest to all offshore insolvency practitioners, the English High Court has tacitly acknowledged the relevance of a liquidator’s position to the evidential threshold for permission to serve outside the jurisdiction.
InRe SMU Investments Ltd EWHC 875 (Ch) the liquidator of an insolvent company alleged that certain payments had amounted to preferential transactions with a connected party pursuant to s. 239 of the (UK) Insolvency Act 1986, and applied for permission to serve an originating application upon a Panamanian company outside the jurisdiction.
The liquidator was required to demonstrate that the Panamanian company had beenconnected to the insolvent company and, in order to obtain permission to serve his application upon the Panamanian company in Panama, that there was a real prospect of success.
The English High Court, acknowledging the significant advantages available to the liquidator which derived from the company having been in liquidation for some six years before the application had been made, determined that the liquidator had fallen short of providing any substantive or inferential evidence that the insolvent company was connected to the Panamanian company.
It followed that the initial order granting permission ex parte to serve the Panamanian company in Panama was set aside at the inter partes hearing.