Harbour Fund II LP v ORB a.r.l. and Dr Gail Cochrane

CourtRoyal Court
JudgeJ. A. Clyde-Smith,Jurats Grime,Liston
Judgment Date12 January 2017
Neutral Citation[2017] JRC 7
Date12 January 2017



Harbour Fund II LP
ORB a.r.l.
First Respondent


Dr Gail Cochrane
Second Respondent

[2017] JRC 007


J. A. Clyde-Smith, Esq., Commissioner, and Jurats Grime and Liston



Bankruptcy — applications by the applicant for en desastre declarations


Representation of Harbour II LP [2016] JRC 171 .

Bankruptcy (Désastre) (Jersey) Law 1990.

Bankruptcy (Désastre) Rules 2006.

Bankruptcy (Désastre) (Jersey) Order 2006.

SO Holding [2011] JLR 782 .

Re Baltic Partners [1996] JLR Note 1c .

Dessain and Wilkins Pages 143–144.

In re Rosedale Investments Limited [1995] JLR 123 .

In re Blue Horizon Holidays [1997] JLR 124 .

Companies (Jersey) Law 1991.

Siena SARL v Glengall Bridge Holdings Limited and Others [2015] JRC 260 .

Advocate E. B. Drummond for the Applicant.

Advocate P. G. Nicholls for the First and Second Respondents.

The Viscount attended in person.

Advocate S. A. Franckel for Phoenix Group Foundation.

Advocate J. D. Garrood for the Serious Fraud Office.


On 24 th November, 2016, the Court declared the first respondent (“Orb”) and its sole shareholder, the second respondent (“Dr Cochrane”), en désastre and we now set out our reasons.


The background is set out in the Court's judgment of 28 th September, 2016, ( Representation of Harbour II LP [2016] JRC 171–“the first judgment”), in which the Court declined to issue a letter of request to the English High Court seeking the making of an administration order with respect to Orb, for the reasons set out in the first judgment. The Court accepted that Harbour was a creditor of Orb, with a liquidated claim of £5,189,010.48p at least and indicated at paragraph 71 that on the evidence before it, it would have been minded to make a declaration en désastre, although it acknowledged that it had not heard from the other creditors or from the Viscount on whether a declaration should be granted.


This judgment must be read as a continuation of the first judgment of 28 th September, 2016, and we adopt the same definitions.


On 29 th September, 2016, Harbour made demand on Dr Cochrane under the terms of her personal guarantee of the obligations of Orb.


She responded by two letters dated 5 th October, 2016. In the first letter, she stated that Harbour's liquidated claim was substantially less than the amount stated. She denied any liability under her guarantee. In the second letter, she stated that the amount funded by Harbour under the Funding Agreement was £4.2M. No reference was made in either letter to any claim against Harbour.


On 10 th November, 2016, Harbour e-mailed a copy of its demande and supporting evidence to Orb, Dr Cochrane and the other interested parties.


On 11 th November, 2016, Harbour obtained orders formally convening Orb and Dr Cochrane to an inter parties hearing on 24 th November, 2016.


On 14 th November, 2016, a copy of the Act of Court and amended demandes were e-mailed to Orb, Dr Cochrane and all of the other interested parties. On 15 th November, 2016, Orb and Dr Cochrane were formally served with the relevant papers by the Viscount's Department.


On 22 nd November, 2016, two days before the hearing, Orb and Dr Cochrane filed a claim in the High Court against Harbour (and a related entity) in the sum of £73M. Having done so, they instructed Lewis Silkin LLP, Solicitors, to advise on the claim. It would seem that round about the same time, they instructed Advocate Nicholls to appear at the hearing on 24 th November to resist the application for a declaration en désastre. Advocate Nicholls filed a skeleton argument late on 23 rd November, 2016.


Harbour's position in short was that it is a creditor of Orb with a liquidated claim of £5,189,010.48p and a further disputed claim of £28,756,041.92p. It had made demande upon Orb. Orb had not paid. Orb was thus unable to pay its debts as they fell due and was “insolvent” for the purposes of the Bankruptcy (Désastre) (Jersey) Law 1990 (“the Désastre Law”). Dr Cochrane had guaranteed Orb's debt. Harbour had made demande upon Dr Cochrane. She had not paid. She too was therefore insolvent for the purposes of the Désastre Law. Both had realisable assets.

Relevant legal principles

A creditor applying for a declaration en désastre must heed the procedural requirements of Article 3 of the Désastre Law and Rule 2 of the Bankruptcy (Désastre) Rules 2006 (“the Désastre Rules”). By Rule 2(3), the creditor must show (inter alia) that the debtor is insolvent (defined as meaning “an inability to pay its debts as they fall due” i.e. on a cash flow basis) but with realisable assets.


A creditor must show that it has a liquidated claim which exceeds the minimum threshold of £3,000 prescribed by Article 3(1)(a) of the Désastre Law and Article 2 of the Bankruptcy (Désastre) (Jersey) Order 2006 (“the Désastre Order). It was conceded by Advocate Nicholls that Harbour's liquidated claim exceeded that minimum threshold.


A “liquidated claim” means a certain debt which is undoubtedly due and payable. The indebtedness must be certain, and not the subject of a genuine dispute and arguable defence — see the comments of the Jersey Court of Appeal in SO Holding [2011] JLR 782 at paragraphs 8 and 9 citing Re Baltic Partners [1996] JLR Note 1 and Dessain and Wilkins Pages 143–144, paragraph 5.3. As a creditor applicant does not need to have a judgment, a creditor with a liquidated claim can apply even if that claim arises from a contract governed by a foreign law with a foreign jurisdiction clause, as was the case in SO Holding.


A sole creditor can apply for the collective remedy of désastre (as was the case in SO Holding.) Non-payment of a single debt is sufficient to demonstrate an inability on the part of the debtor to pay its debts and to be “insolvent” for the purposes of the Désastre Law — SO Holding at paragraphs 30 and 31, citing In re Rosedale Investments Limited [1995] JLR 123.


The application for a declaration en désastre can be made ex parte, i.e. without notice to the debtor — In re Blue Horizon Holidays [1997] JLR 124. A fortiori, it can be made without notice to other creditors of the debtor. A creditor does not need to establish the identity of any other creditors of the debtor; this is the task set to the Viscount following a declaration — SO Holding at paragraph 27.


A sole creditor is also not required to pursue some other form of enforcement remedy instead, which indeed might defeat the central purpose of a désastre, which is to preserve a status of equality amongst creditors — SO Holding at paragraph 28.


The debtor must be a person who can be declared en désastre under Article 4(1) of the Désastre Law. In this respect Orb is a company registered under the Companies (Jersey) Law 1991 and Dr Cochrane is an individual ordinarily resident in Jersey, and therefore both were susceptible to a declaration en désastre.


If all these criteria are met, the Court has a discretion whether or not to make the declaration sought, but unless there is anything in the facts or circumstances which militates against it doing so, the Court would normally make the declaration — SO Holding at paragraphs 38 and 39.

Harbour's liquidated claim

Advocate Drummond, for Harbour, took the Court through a careful analysis, set out in his skeleton argument, of how Harbour's liquidated claim arose under the Funding Agreement, the Isle of Man Agreement and the 2014 Agreement, the latter presenting an insurmountable hurdle for Orb and Dr Cochrane in that by that agreement, to which they were a party, they had agreed that the assets recovered by Dr Cochrane under the Isle of Man Agreement (at least £10M) would be treated as proceeds of the English proceedings Harbour had been funding, giving rise to an immediate liability on the part of Orb to repay the sums advanced, namely £5,189,010.48p, just short of the aggregate amount Harbour was committed to fund under the Funding Agreement.


To put the amount advanced beyond doubt, Harbour filed an affidavit by Michael Hartridge, a Senior Director of Harbour Litigation Funding, in which he listed all of the payments made by harbour to fund the English proceedings and exhibited redacted copies of the relevant Harbour bank statements, showing the transactions that correlated to each invoice payment made, redacted copies of the originating invoices and the payment instructions made by Harbour authorising each payment. As Advocate Drummond commented, with some justification, there was little more that Harbour could do to prove the amount of its liquidated claim.


Advocate Nicholls made no comment upon this careful analysis and seemingly overwhelming evidence, simply stating in his skeleton argument that Orb and Dr Cochrane did not accept the full amount of the liquidated claim. He said that Orb and Dr Cochrane would be able to procure evidence in short order, which would cast doubt as to whether the full sum claimed was in fact advanced by Harbour. If there was any such evidence, then, in the view of the Court, there was no excuse for it not being made available at the hearing of which Orb and Dr Cochrane had received ample notice. Indeed, Orb and Dr Cochrane filed no evidence at all to assist the Court, upon which we comment later.


We found that Harbour was indisputably owed the liquidated sum of £5,189,010.48p by Orb and that there was no reasonably arguable defence to that claim. We deal with the counterclaim below.

Orb's realisable assets

There was contradictory evidence as to the extent of Orb's assets which the Viscount will need to...

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