Robert Gordon Kidd v All Services Group Holdings Ltd ((in Liquidation))

JurisdictionJersey
CourtRoyal Court
JudgeChristensen,J. A. Clyde-Smith OBE.,Jurats Crill
Judgment Date05 November 2019
Neutral Citation[2019] JRC 221
Date05 November 2019

[2019] JRC 221

ROYAL COURT

(Samedi)

Before:

J. A. Clyde-Smith OBE., Commissioner, and Jurats Crill and Christensen

In the Matter of the Representation of Robert Gordon Kidd, Milan Balac and Lee Brian Cox (As Shareholders of All Services Group Holdings Limited, In Liquidation)

and

In the Matter of All Services Group Holdings Limited, in Liquidation

and

In the Matter of Article 175 of the Companies (Jersey) Law 1991 (As Amended)

Between
Robert Gordon Kidd
First Representor

and

Milan Balac
Second Representor

and

Lee Brian Cox
Third Representor
and
All Services Group Holdings Limited (In liquidation)
First Respondent

and

Malcolm Cohen and Philip Braun as Joint Liquidators of All Services Group Holdings Limited (In liquidation)
Second Respondent

Advocate R. Christie for the Representors.

Advocate J. Speck for the Respondents.

Authorities

Security Interests (Jersey) Law 2012.

Companies (Jersey) Law 1991.

Deloitte & Touche A.G. v Johnson and Another [1999] 1 WLR 1605

In the representation of Sienna SARL [2015] JRC 260

Re Corbenstoke Limited (No 2) [1898] 5 BCC 765).

In the matter of Angel Group Limited [2015] EWHC 3624 Ch

Companies — re: liquidation.

THE COMMISSIONER:
1

On 4 th October, 2019, the Court appointed two additional liquidators of All Services Group Holdings Limited (“ASGH”), a Jersey incorporated company, in order for them to investigate, and if appropriate, to pursue a claim against the only substantial creditor of ASGH.

2

The Representors are the shareholders of ASGH, with Mr Robert Gordon Kidd owning 73%, Mr Milan Balac 16% and Mr Lee Brian Cox 11%. ASGH was, as its name implies, a holding company, its principal asset being all of the issued shares in another Jersey company, Rental Solutions and Services Limited (“RSS”). RSS was at all material times and still is in the business of large-scale electricity generators and cooling plant ownership and rental in the Middle East and Africa. Underneath it are a number of subsidiaries in various locations.

3

The essential facts, which are not in dispute, are as follows:-

  • (i) In mid 2015, ASGH entered into negotiations with CarVal Investors GB LLP for a facility of US$90 million. On 25 th August, 2015, after a period of negotiation, a facility in the lower sum of US$40 million was made available to ASGH by two related CarVal entities, CVI CVF III Lux Finance Sarl and EOC Lux Finance Sarl. We will refer to all three CarVal entities as “CarVal”. The facility was repayable in 12 months. In addition to CarVal taking security over the shares in RSS and the shares owned by Mr Kidd and Mr Cox in ASGH, RSS, along with other subsidiaries in the RSS group, was also a joint and several guarantor of the facility.

  • (ii) Paragraph 3.1 of the Facility Agreement provided that the amounts borrowed would be applied towards:-

    • (a) Repayment of an existing loan in an amount of US$24 million;

    • (b) The financing of deferred dividends to the Representors in an amount of US$3.5 million; and

    • (c) Its general corporate purposes and payment of certain fees and expenses.

  • (iii) In the early part of 2016 CarVal became concerned that ASGH would be unable to repay this facility upon its expiration in August that year and on 3 rd March, 2016, it exercised its rights under the Facility Agreement to appoint an observer to attend any meetings of the boards or committees of ASGH and RSS and issued a Reservation of Rights letter to notify ASGH of various events of default and its right, amongst other things, to declare the loans immediately due and payable.

  • (iv) ASGH commissioned a report from Deloitte dated 18 th April, 2016, referred to as the “Ambience Report” as to the re-financing options open to it. It is fair to say that the report highlighted the serious financial challenges the group was facing. Whilst not a valuation, it suggested the value of RSS was in the region of US$40 million and commented that selling the group was unlikely to yield any return to the shareholders.

  • (v) CarVal concluded that there was no viable re-financing opportunity, and accordingly it enforced its security, appropriating the shares in RSS on 26 th July, 2016. On 9 th August, 2016, and pursuant to Article 48 of the Security Interests (Jersey) Law 2012 (“the Security Interests Law”), CarVal gave notice to ASGH, at the offices of its administrators in Jersey, that it had appropriated the shares in RSS at a gross value of US$25.5 million, pursuant to a valuation it had obtained from Deloitte dated 9 th August, 2016, and referred to as the “Aeon Report”, leaving an amount outstanding to CarVal (including costs and expenses) of US$16.3 million. It is the case of the Representors that they did not see this report until 17 th January, 2019, and this notification until 15 th April, 2019.

  • (vi) By e-mail dated 15 th November, 2016, Advocate Raulin Amy of Ogier, acting for CarVal, wrote to BDO with the view to that firm providing liquidators for ASGH for the specific purpose of pursuing the Representors for the repayment of the dividend of $3.5 million they had received shortly after the Facility Agreement had been drawn down (and as anticipated in the Facility Agreement), which it was contended had been made unlawfully.

  • (vii) Using the security powers of attorney given to CarVal, it procured the removal as director of Mr Kidd, who at that time was the only director of ASGH, and appointed a Mr Gerardo Bernaldez of CarVal as sole director in his place. On 3 rd April, 2017, ASGH was placed into a creditors' winding up and the Second Respondents, Mr Malcolm Cohen and Mr Philip Braun of BDO, were appointed joint liquidators. We will refer to them as “the Joint Liquidators”.

  • (viii) On 13 th April, 2017, letters were issued by Ogier, acting for the Joint Liquidators, to the Representors making formal demand for the repayment of the dividends.

  • (ix) The statement of affairs prepared by Mr Bernaldez, pursuant to Article 160(2) of the Companies (Jersey) Law 1991 (“the Companies Law”), noted that as a result of CarVal appropriating the shares in RSS and all monies in the accounts of ASGH, no assets remained in ASGH other than the right to claim in respect of the dividends and other possible transactions that had taken place before the liquidation. The Joint Liquidators were therefore reliant on funding being obtained to carry out the winding up of ASGH and the pursuit of the claim against the Representors and this was to be provided by CarVal by way of a loan to ASGH, pursuant to a Funding Agreement dated 3 rd April, 2017.

  • (x) By Order of Justice dated 4th October, 2018, ASGH, acting through the Joint Liquidators, issued proceedings against the Representors, demanding repayment of the dividends.

  • (xi) The Representors issued their representation on 2 nd May, 2019. They asserted that:-

    • (a) Had CarVal complied with its duties under Article 46 of the Security Interest Law, RSS would have been valued at over US$40 million. CarVal would not, therefore, be a creditor of ASGH, and the Joint Liquidators' primary duty would be to the Representors.

    • (b) The Joint Liquidators had not been prepared to question the appropriation by CarVal and had insisted on retaining Ogier, who had drafted the security documents for CarVal and advised CarVal on the enforcement and appropriation. They alleged that Ogier's conflict was serious and unmanageable.

    • (c) The Joint Liquidators had shown a lack of independence, and were not conducting the liquidation in the interests of the persons most likely to be interested in it. In the circumstances, the Representors, as shareholders, had standing to apply for their removal.

    The Representors therefore sought the removal of the Joint Liquidators or, alternatively, the appointment of additional liquidators for the specific purpose of investigating and if appropriate bringing a claim against CarVal. They sought a declaration that Ogier were conflicted and should be disinstructed and they also sought a stay of the dividend proceedings brought against them, pending resolution of the claim against CarVal.

  • (xii) In their representation the Representors raised a concern that any claim against CarVal could be prescribed at the expiration of three years from the date of appropriation suggesting a deadline of the 9 th August, 2019. As a consequence, the Court fixed 9 th July, 2019 for the hearing of the representation.

  • (xiii) In June 2019 Ogier ceased to act for the Joint Liquidators in this matter. Their new advisers, at that stage Appleby, required more time to prepare for the hearing, and applied for an adjournment beyond 9 th August, 2019, having entered into a standstill agreement with CarVal dated 18 th June, 2019. The hearing was then adjourned to 3 rd and 4 th October, 2019.

  • (xiv) The position of the Joint Liquidators is that ASGH was and remains insolvent and they have properly administered and investigated its affairs acting with due skill and diligence in the best interest of the creditors of ASGH. They considered that CarVal had complied with its obligations in the enforcement of its security with the benefit of advice from Ogier and Deloitte. They were satisfied with the Aeon Report which spoke for itself. In their view the Representors were simply using these proceedings to derail the dividend proceedings.

4

There is, of course, a great deal of flesh to be added to the bare bones of this summary of the background. The Court had before it affidavits and very extensive documentation from:-

  • (i) Mr Balac;

  • (ii) Mr Gaggar Shaggar, an individual who had shown an interest in purchasing part, if not the whole of RSS;

  • (iii) Mr Cox;

  • (iv) Mr Kidd;

  • (v) Mr Cohen, one of the Joint Liquidators;

  • (vi) Mr George David Jacobs of BDO, who had assisted the Joint Liquidators;

  • (vii) Mr Gregory Belonogoff, a principal of CarVal; and

  • (viii) Mr Braun, one of the Joint Liquidators.

5

The court also had expert...

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2 firm's commentaries
  • The Security Interests (Jersey) Law 2012- Enforcement
    • Jersey
    • Mondaq Jersey
    • 14 Enero 2020
    ...steps to determine the fair market value of the collateral at the time of an appropriation in Kidd and Ors v All Service Group Holdings [2019] JRC221). This case suggests that a secured party should not rely on only a single valuation, especially if the value of the collateral may be more t......
  • Enforcement Under The Security Interests (Jersey) Law 2012
    • Jersey
    • Mondaq Jersey
    • 9 Noviembre 2020
    ...steps to determine the fair market value of the collateral at the time of an appropriation in Kidd and Ors v All Service Group Holdings [2019] JRC221). This case suggests that a secured party should not rely on only a single valuation, especially if the value of the collateral may be more t......

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