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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Lennox Holdings Plc, Re [2008] EWHC B11 (Ch) (20 June 2008) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2008/B11.html Cite as: [2009] BCC 155, [2008] EWHC B11 (Ch)

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IN THE HIGH COURT OF JUSTICE

		Royal Courts of Justice Strand London, WC2A 2LL
		Friday, 20th June 2008

MR JUSTICE LEWISON:

1. Lennox Holdings Ltd. was established in 1992 to supply British food products to British expatriates and holidaymakers in Spain. It has a number of suppliers, most of whom are household names, and are UK companies. Major suppliers who account for more than half the purchases of the business include Unilever, Ocean Spray, United Biscuits, John West, Dorset Cereals and GlaxoSmithKline. Lennox’s ordinary shares have been quoted on the Alternative Investment Market where they have now been suspended.
2. Lennox has a number of subsidiaries, including European Supplies Logistics Ltd., European Supplies SL and Milenio Foods. European Supplies SL and Milenio Foods are both corporations which have their registered offices in Spain. I am satisfied that all of the companies within the group are likely to be unable to pay their debts as they fall due and consequently that they ought to be the subject of an appropriate insolvency procedure.
3. So far as Lennox Holdings plc and European Suppliers Logistics Ltd. are concerned, there is no real doubt the appropriate insolvency procedure is entry into administration under the Insolvency Act 1986.
4. So far as European Supplies SL and Milenio Foods are concerned, the appropriate procedure again is administration if, but only if, I have jurisdiction. That in turn depends upon whether England and Wales can be said to be the centre of the main interests of those companies, notwithstanding that their registered offices are in Spain.
5. Under Article 3 of the relevant regulation [Regulation 1346/2000], in the case of a company the place of the registered office is presumed to be the centre of its main interests in the absence of proof to the contrary. Thus in the case of those two companies, there is a rebuttable presumption that their centre of main interests is in Spain.
6. The question of what is the centre of main interests of the company was considered by the European Court in Re Eurofood IFSC Ltd. The Court was considering the case of an Irish subsidiary of an Italian company. The Irish subsidiary conducted business in Ireland but its policy was determined by the Italian parent. The Advocate-General went into the question rather more fully than the Court itself. At paragraph 111 of the Advocate-General’s opinion, he recorded a submission that,

"If it is to be demonstrated that the centre of main interest is somewhere other than the state where a company’s registered office is located, it consequently needs to be shown that the head office type of functions are performed elsewhere. The focus must be on the head office functions rather than simply on the location of the head office because a head office can be just as nominal as a registered office if head office functions are not carried out there."

The Advocate-General said that he found that submission sensible and convincing.

7. He then quoted the further submission that,

"The ascertainability by third parties of the centre of main interests is not central to the concept of the centre of main interests. That can be seen from recital 13 of the preamble itself which states that, “The centre of main interests should correspond to the place where the debtor conducts the administration of his interests on a regular basis.” In other words, in the case of a corporation, where its head office functions are exercised. Recital 13 continues, “and which is therefore ascertainable by third parties.” In other words, it is because the corporation’s head office functions are exercised in a particular member state that the centre of main interests is ascertainable there."

The Advocate-General again agreed with that submission.

8. So far as the Court itself was concerned, the decision is contained in paragraph 31 and following of the decision. I should refer particularly to paragraphs 34 and following in which the court said this:

"34. It follows that in determining the centre of the main interests of the debtor company, the simple presumption laid down by the Community legislature in favour of the registered office of that company can be rebutted only if factors which are both objective and ascertainable by third parties enable it to be established that an actual situation exists which is different from that which locating it at that registered office is deemed to reflect.

‘35. That could be so in particular in the case of a letterbox company not carrying out any business in the territory of the member state in which its registered office is situated.

‘36. By contrast, where a company carries on its business in the territory of the member state where its registered office is situated, the mere fact that its economic choices are or can be controlled by a parent company in another member state is not enough to rebut the presumption laid down by the regulation."

9. The two particular examples which were given by the Court are, if I may respectfully say so, at two opposite and extreme ends of the spectrum. The facts of the present case, as I rather suspect the facts of most cases, lie somewhere between those two extremes. It is for that reason that the approach of the Advocate-General is a particularly helpful one. What I should concentrate on is the head office functions of the two Spanish companies. It is, I should say, clear that the two Spanish companies do carry on business in the member state where their registered offices is situated and consequently the, ‘mere fact,’ that its economic choices are or can be controlled by a parent company is not enough to rebut the presumption. That is not what is relied on in the present case. It is not control by a parent company that is relied on in the present case. It is control of the companies themselves by their boards of directors.
10. The facts relied upon are summarised in Ms STONEFROST’s skeleton argument and I am satisfied that they do represent an accurate summary of the evidence given by Mr Terry. The relevant facts, and I quote now from her skeleton argument in relation to European Supplies SSL are as follows:

"One, the strategic operational and financial management of the company is conducted in this jurisdiction. Mr Terry, the sole director of the company, lives and works in this jurisdiction although he visits the company in Spain regularly. Mr Tattersall, the operations manager of each of the companies in the group, is English and works in England. The board and management meetings of the company are held at Lennox’s registered office in Gower Street. The accounts for the group which include the company are prepared by English auditors based in Hertfordshire.

‘Two. Unilever, the major supplier of the company, would call Mr Terry when they saw movements in the Lennox share price on AIM. For example, they called him when the shares were suspended. Ocean Spray, another creditor, likewise took note of movements in the Lennox share price and phoned Mr Terry in relation to the continuation of supplies. Mr Terry’s view is that the perception of the major creditors of the company is that the group is an English group registered on a UK stock exchange and that supply creditors of the company follow the AIM announcement of Lennox’s share price. Lennox is the ultimate parent of the company although as the ECJ pointed out in the Eurofood case, that by itself is not enough to rebut the presumption. The company does not have a commercial undertaking which is separate from that of Lennox. Lennox provides the working capital to enable the company to trade. A substantial majority of the company’s creditors are in this jurisdiction and indeed amongst those creditors is Lennox itself. Thus the financing of the company, its major decisions and the administration of the company itself is conducted in this country and through English suppliers, English directors and with English funding."

11. On that basis, I am satisfied that its centre of main interests in the sense of its head office functions are carried out within the jurisdiction, notwithstanding that it also carries on business in Spain.
12. So far as Milenio is concerned, the management of the company operates in the same way. Mr Terry is the sole director of Milenio and Mr Tattersall again is the operations manager. Once again, the board and management meetings for Milenio are held at Lennox’s registered office in Gower Street. Milenio does not in fact have a commercial existence which is independent of the other companies in the group and its only creditor is ES Spain. Again, because the administration of the company is conducted in this country, I also conclude that its centre of main interests is in this jurisdiction.
13. I have already said that if I had jurisdiction the appropriate insolvency procedure in relation to these two companies is an administration. I am satisfied that I have jurisdiction to make the order and consequently I make that order at 3.55.

MS STONEFROST: I am grateful, My Lord. I hope that a copy of some orders have made their way into your bundle at tab six.

MR JUSTICE LEWISON: Yes, tab six.

MS STONEFROST: My Lord, the only point that appears in the order that I haven’t addressed Your Lordship on is the confidentiality of some of the material. Paragraph six in each of the orders contains a restriction on disclosure until 21st July.

MR JUSTICE LEWISON: What is the magic of the 21st July?

MS STONEFROST: My Lord, I did ask that question myself. I understand that it is in order to give the administrator sufficient time to sell the business. I for myself would normally not have put any date in but would have simply required there to be an application given to the Court of which obviously the administrators had notice. I don’t know...

MR JUSTICE LEWISON: Well, I mean, if anybody wants to inspect, they are still entitled to apply because paragraph six does contemplate leave being given before 21st July but once 21st July comes and goes, anybody can have a look.

MS STONEFROST: My Lord, yes. My Lord, could I actually redraft that [inaudible] more usual way?

MR JUSTICE LEWISON: Yes.

MS STONEFROST: I think this was taken from MG Rover and I have no idea why MG Rover had a date in it.

MR JUSTICE LEWISON: Right.

MS STONEFROST: So subject to me redrafting that, My Lord, the orders are all in the same form.

MR JUSTICE LEWISON: Yes, fine.

MS STONEFROST: I am grateful, My Lord. [Inaudible] I can send them to you.

MR JUSTICE LEWISON: Yes, the only thing is I am not sure if I am going to be here next week. I still do not know yet. I may be going to Bristol but they can always be emailed.