Summary
The claimants were the appointed liquidators of MSIL, a company domiciled in England. The defendants were YBC, a company incorporated in the Cayman Islands, and FM, a company incorporated in France. A winding up order for compulsory liquidation of MSIL was issued by the English court in December 2008. The creditors were short of some £185 million.
On the 8th July 2009, the liquidators applied to the Companies Court in England for a declaration that MSIL is the sole beneficial owner of a yacht which was called Bull. Subsequently, the application was amended requesting the court to take a view that “if the Bull [was] not beneficially owned by MSIL then the payments made by MSIL to or for the benefit of YBC in respect of its purchase [had been] transactions at an undervalue for which the appropriate remedy [would be] an order that YBC [did] transfer the Bull to MSIL.” [11]
Parallel proceedings were initiated as follows: 1) Cayman Island – MSIL suing to establish the ownership of Bull; 2) France – FM suing YBC and Mrs Madoff for damages; 3) Antibes – MSIL suing to establish its beneficial ownership of Bull..
FM challenged the jurisdiction of the English court, relying on Brussels I and seeking a declaration that the English court had no jurisdiction to hear and determine the dispute.
The claimants’ contra-argument was that Brussels I does not apply, invoking the Article 1(2)(b) exception.
On 1st February 2010, the English court held that the dispute was within the scope of Brussels I because the “principal claim is the declaration as to beneficial ownership.” [25] However, Sir Andrew Morritt stated that the English court had no jurisdiction with regard to the claims advanced by para 1 and 2 of the ownership application, holding that:
"[…] art.2 applies to that claim. It is necessarily made against both YBC and FM. YBC is not domiciled in another Member State but FM is domiciled in France and is entitled to be sued there in accordance with art.2. In those circumstances I consider that I should, as asked by counsel for FM, declare that this court has no jurisdiction over FM in relation to the claim made in paras 1 and 2 of the Ownership Application. This conclusion renders further consideration of grounds (c) to (f) set out in the amended Jurisdiction Application unnecessary. But what orders I should make in relation to paras 3 to 5 may depend on whether the Insolvency Regulation applies to them. Accordingly I will defer my decision on what order to make in relation to those paragraphs until I have considered the issues raised by counsel for FM in relation to the application of that regulation.” [27]
With this in mind, the English court stayed the proceedings in respect of paras 3-5 of the ownership application until the time when the French took a view on the issues noted in paragraphs 1 and 2 of the claimant’s application. In particular, it was held that:
“38 […] depending on the decision of the French court on the issue of the beneficial ownership of the Bull, the claims made by the JLs against FM in relation to ss.130(2) , 238 and 423 may have been properly brought in this jurisdiction under those provisions of the Insolvency Act 1986 , see arts 3 and 4(2) . Accordingly, the appropriate order in relation to paras 3–5 of the ownership application is to stay all further proceedings in respect of them until such time as the issues raised in paras 1 and 2 have been finally decided by the courts in France, compromised or abandoned.” [38].