Case No. 6092 of 2012
Neutral Citation Number : [2015] EWHC 1031 (Ch)

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date : 16 April 2015

BEFORE :

HIS HONOUR JUDGE SIMON BARKER QC
(sitting as a Judge of the High Court)
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IN THE MATTER OF THE SANKO STEAMSHIP CO LTD

AND IN THE MATTER OF THE CROSS-BORDER INSOLVENCY REGULATIONS 2006

BETWEEN :

(1)	SANKO HOLDINGS CO LTD
(formerly THE SANKO STEAMSHIP CO LTD)

(2)	JINICHI TABATA
(as foreign representative of SANKO HOLDINGS CO LTD)
Applicants

- and -

GLENCORE LTD
Interested Party

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Representation

Mr Edward Davies and Ms Anna Scharnetzky instructed by Ince & Co LLP for the Applicants

Mr Tom Smith QC and Mr Andrew Shaw instructed by Holman Fenwick Willan LLP for the Respondent

Hearing Date : 10 March 2015
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JUDGMENT
HHJ SIMON BARKER QC : 

The Applications 

1	There are two applications before the court.  They raise issues under the UNCITRAL Model Law on Cross-Border Insolvency-as set out in Schedule 1 to the Cross Border Insolvency Regulations 2006 (‘CBIR’) and concern some US$ 3.85m (‘the funds’) held in court pursuant to orders made in the Admiralty Court.  The applications are : 

(1)	an application by Mr Jinichi Tabata (‘Mr Tabata’) under article 17(4) of CBIR (‘article 17(4)’) for the continued recognition of his status as foreign representative of Sanko Holdings Ltd, formerly The Sanko Steamship Co Ltd, (‘Sanko’) for the purpose of allowing him to discharge his residual obligations in relation to Sanko’s reorganisation plan (respectively ‘the Reorganisation’ and ‘the Plan’) which was approved in the course of insolvency proceedings in Japan (‘the Japanese proceedings’) before the Tokyo District Court (‘the Japanese court’).  This is referred to as the Recognition Application; and,

(2)	an application by Sanko and Mr Tabata under article 21(2) of CBIR (‘article 21(2)’) for payment to Sanko of the funds.  This is referred to as the Remission Application. 

Background

2	Sanko is a company organised and existing under Japanese law.  Sanko’s head office is in Tokyo.  Mr Tabata is a director of Sanko.  Sanko owns and operates cargo ships, one of which was the MV Sanko Mineral (‘the Vessel’).     

3	In about April 2012, Glencore Ltd (‘Glencore’) entered into a contract with Sanko for the carriage by the Vessel of some 10,000 tonnes of silicon manganese (‘the Cargo’) from Burgas, Bulgaria to New Orleans. 

4	The Vessel was delayed en route in Baltimore for 3 months as the result of various attachments over the Vessel made by creditors of Sanko. In the event, the Vessel arrived in New Orleans in late August 2012 and the Cargo was discharged by early September 2012. Glencore contends that the delay was a breach of the terms of the contract of carriage as a result of which Glencore claims it has sustained financial losses (calculated by reference to (a) a fall in the market value of the Cargo, (b) the cost of making substitutes for the Cargo available to customers, and (c) losses from delayed receipt of payment for the Cargo) amounting to some US$3m.

5	In the meantime and for the purpose of effecting the Reorganisation, on 23 July 2012, Sanko entered the Japanese proceedings, which were conducted under the Japanese Corporate Reorganisation Act and the Rules of Corporate Reorganisation. The Reorganisation has been conducted and carried out under the supervision of the Japanese court. The Japanese court initially appointed a Mr Asafuji as trustee with Mr Tabata being appointed as deputy trustee; on 17 October 2013, Mr Tabata was appointed trustee and a Mr Kim was appointed as deputy trustee.  (For convenience, I refer to the trustee and the deputy for the time being as ‘the Trustee’).

6	On 30 July 2012, the Japanese proceedings were recognised as the foreign main proceeding in respect of Sanko for the purposes of the CBIR by an order of this court made by Newey J.

7	On 14 September 2012, Glencore submitted claims in the Reorganisation primarily on the basis that the claimed financial loss is secured by a maritime lien and, in the alternative, it ranks as an unsecured liability of Sanko.  In November 2012, the Trustee rejected both claims.

8	On 17 December 2012, Glencore lodged petitions in the Japanese court challenging the rejections by the Trustee (‘Glencore’s petitions’). Glencore’s petitions are contested by Sanko and are still pending before the Japanese court.  

9	The Plan was submitted to the Japanese court on or shortly after 31 July 2013 and was approved on 17 October 2013. Responsibility for implementing the Plan fell on the Trustee.  As Glencore’s claims are neither admitted by the Trustee nor decided by the Japanese court, the secured claim is characterised in the Plan as an Unfinalised Secured Reorganisation Claim (‘USRC’).

10	It is common ground that in the event that the USRC is established it will become a Finalised Secured Reorganisation Claim (‘FSRC’) and will qualify for treatment in accordance with chapter 3 of the Plan.  In broad terms, as a FSRC it will be satisfied from the proceeds of sale of the Vessel. However, as explained in the course of submissions by Mr Davies, who appears with Miss Scharnetzky as counsel for Mr Tabata and Sanko, the proceeds of sale of all vessels sold pursuant to the Plan are held in one account and are being paid out in tranches principally to creditors having a FSRC, but also and to a lesser extent to unsecured creditors whose claims have been finalised. Thus, the proceeds of sale of a particular vessel are not held separately nor are they allocated to particular secured claims.

11	In the summer of 2014, the Vessel arrived at Falmouth and was the subject of proceedings in the Admiralty Court brought by a Japanese bank having a first mortgage over the Vessel. On 20 June 2014, Flaux J made an order for the Vessel to be sold and the proceeds paid into court. 

12	On 22 August 2014, Glencore filed a request for a caution against the release of the proceeds in the sum of US$3.85m, i.e. the funds, pursuant to CPR 61.8(2); the additional US$0.85m takes into account an allowance for interest and costs.  On 26 September 2014, Hamblen J made an order addressing the proceeds of sale in court; so far as relevant to the present applications the order provides for the funds to remain in court pending any further application. The funds are net of all but a small part under the sum due to the Japanese bank under its first mortgage over the Vessel; it is unclear, and immaterial to my decision on the applications before me, whether the Japanese bank retains or has withdrawn its claim to the sum not already paid.

13	On 13 November 2014 Sanko and Mr Tabata issued the Remission Application against Glencore for an order that the funds be entrusted to Mr Tabata pursuant to article 21(2) of CBIR (‘article 21(2)’).  Article 21 sets out the relief which may be granted upon recognition of a foreign proceeding. Article 21(2) provides : 

“Upon recognition of a foreign proceeding, whether main or non-main, the court may, at the request of the foreign representative, entrust the distribution of all or part of the debtor’s assets located in Great Britain to the foreign representative or another person designated by the court, provided that the court is satisfied that the interests of creditors in Great Britain are adequately protected”.

14	On 28 November 2014, Teare J gave judgment on Sanko’s application to strike out, or for the withdrawal of, Glencore’s caution. That application was successful. Ordinarily, that outcome would have led to an order for payment out to the Trustee.  Teare J declined so to order because of the Reorganisation, the recognition of the Japanese proceedings as the foreign main proceeding in respect of Sanko for the purposes of the CBIR, and the existence of Glencore’s petitions.  At paragraph 49 of his judgment Teare J held : 

“In the present case, however, where the reorganisation in Tokyo has been recognised as the foreign main proceeding in this jurisdiction under the Cross-Border Insolvency Regulations this court would not wish to hinder the proper working out of the reorganisation by the Tokyo court. Glencore maintains that it can make good its claim in contract in Tokyo. Whether it can do so is a matter for the court in Tokyo. I would therefore only be willing to order payment out on terms that the Trustee kept the proceeds of sale in a separate US Dollar account and held them to the order of the Tokyo court. Since I have been told that the Trustee has confirmed that the funds will be distributed “to creditors fairly and in good faith, under the control of the Tokyo District Court and in accordance with the Reorganisation Plan” I would be surprised if such undertakings cannot be given by the Trustee. But if they cannot be given then I would not order payment out”.

15	In consequence, the order made by Teare J provides, at paragraphs 4, 5 and 6 that : 

“4	[The funds] shall be paid out to the Trustee …  on the condition that the Trustee provides an undertaking to this Court in the terms that: the Trustee shall hold [the funds] in a separate US Dollar account held within the United Kingdom pending final determination of the claim made by [Glencore] to a [FSRC] in [the Japanese proceedings] or to the order of [the Japanese court] or to further order of this Court.  

5	Paragraph 4 of this Order shall in no way pre-determine, restrict or override any subsequent order of the Companies Court as regards [the funds]

6	Unless and until such an undertaking is provided by the Trustee … [the funds] shall remain in Court until further order of this Court”.  

16	It is common ground that Teare J was aware of the Remission Application (the grounds for the Recognition Application had not then occurred) and was of the view that it would be a matter for the Companies Court, knowing of, but unfettered by, the view of the Admiralty Court as to the appropriate terms to be imposed on the payment out of the funds, to decide whether to allow the funds to be taken out of the jurisdiction and, if so, whether or not to require an undertaking in the form required by the Admiralty Court, otherwise, or at all. 

17	Glencore has applied for permission to appeal against the decision of Teare J striking out its caution with a view to keeping the funds in court and Sanko has applied for permission to appeal against the imposition of the undertaking as a condition affecting the release of the funds.  Their respective on paper permission applications are pending before the Court of Appeal.

18	On 2 December 2014, the Japanese court terminated the Japanese proceedings with immediate effect. The grounds for termination were that two thirds or more in value of the claims approved pursuant to the Plan had been paid and no default had occurred under the Plan. In anticipation of the Japanese proceedings being terminated, on 1 December 2014, the Trustee gave an undertaking to the Japanese court that  

“ … even after the termination of [the Japanese proceedings], we will cause [Sanko] to implement [the Plan] in good faith, to continue to manage its properties appropriately, and to repay the reorganisation claims owed to the holders of those claims in accordance with [the Plan]”.  

19	By a statement dated 17 December 2014, Mr Tabata informed this court of the termination of the Japanese proceedings; and, Mr Tabata’s solicitors, Ince & Co LLP, filed a statement of subsequent information dated 19 December 2014. It appears from Mr Tabata’s statement that prior to termination of the proceedings there had been two distribution payments pursuant to the Plan and further that Sanko remains bound to make a further distribution payment to creditors in accordance with the Plan. Mr Tabata also states that he has ceased to be Trustee, and that, as representative Director of Sanko, he remains responsible for Sanko’s continuing compliance with the Plan.  

20	The Recognition Application was issued on 5 January 2015 with a return date fixed for 10 March 2015. There is no respondent to the application; however, Glencore appears on this application by counsel Mr Tom Smith QC and Mr Shaw instructed by Holman Fenwick Willan LLP (‘HFW’), without opposition from Mr Tabata or Sanko and with the permission of the court pursuant to paragraph 25(j) of Schedule 2 of CBIR, as a person who appears to have an interest justifying his appearance. 

21	In his affidavit of 28 January 2015, Mr Tabata confirms that, as from 2 December 2014, Sanko has formally exited insolvency proceedings in Japan and he is no longer Trustee. Mr Tabata goes on to explain his current position and his duties relating to the Plan as follows : 

“22.	… Nevertheless, as a matter of Japanese law, I continue to hold office as the “Representative Director” of Sanko.

23.	A Representative Director of a company (kabushiki kaisha) represents the company and has authority to do any and all judicial and non-judicial actions in connection with the day-to-day operations of the company, pursuant to the Companies Act of Japan. Directors other than a Representative Director cannot represent the company unless the authority to do so is specifically given to them. I am the only Representative Director of Sanko.

24.	On 1 December 2014, I gave an undertaking to the [Japanese court] (“the Undertaking”) that even after the termination of [the Japanese proceedings], I will cause Sanko to implement [the Plan] in good faith, continue to manage Sanko’s property appropriately and repay the reorganisation claims owed to holders of those claims in accordance with [the Plan].

25.	The Undertaking would be construed as an agreement between myself and [the Japanese court], under which [the Japanese court] expects that I, as Representative Director of Sanko, will cause Sanko to perform its obligations under [the Plan].

26.	I am advised by Japanese lawyers, Mori Hamada & Matsumoto, that as a matter of Japanese law, there would be no material difference in the treatment of [the funds] if they were remitted to Japan now that Sanko has exited [the Japanese proceedings]”.

The above evidence is not free from ambiguity and uncertainty. In particular, it is not clear that the Japanese court has any further authority over the implementation of the Plan beyond an expectation that it will be duly performed.      

22	Although both sides acknowledge that the application of the funds is a matter to be decided by the Japanese court applying Japanese law, I note that there is no expert evidence as to the terms, meaning and effect of relevant Japanese law. There is some hearsay evidence from both sides, but it is of no real assistance. 

The Recognition Application

23	This application is made under article 17(4) which provides :

“4.	The provisions of articles 15 to 16, this article and article 18 do not prevent modification or termination of recognition if it is shown that the grounds for granting it were fully or partly lacking or have fully or partly ceased to exist and in such a case the court may, on the application of the foreign representative or a person affected by recognition, or of its own motion, modify or terminate recognition, either altogether or for a limited time, on such terms and conditions as the court thinks fit”.

24	Article 15 of CBIR concerns the formalities for an application for recognition, which formalities were complied with on the application before Newey J on 30 July 2012. Article 16 of CBIR sets out certain presumptions concerning recognition. They do not need to be stated for the purposes of this application. 

25	Article 18 of CBIR provides :

“From the time of filing the application for recognition of the foreign      proceeding, the foreign representative shall inform the court promptly of --
(a)	any substantial change in the status of the recognised foreign proceeding or the status of the foreign representative’s appointment; and
(b)	any other foreign proceeding, proceeding under British insolvency law or section 426 request regarding the same debtor that becomes known to the foreign representative”.	
  
26	Article 2 of CBIR sets out definitions for the purposes of the Model Law. So far as relevant, they are :

“..  (f) “foreign court” means a judicial or other authority competent to control or supervise a foreign proceeding;
(g)	“foreign main proceeding” means a foreign proceeding taking place in the State where the debtor has the centre of its main interests; …
(i)	“foreign proceeding” means a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganisation or liquidation;
(j)	“foreign representative” means a person or body, including one appointed on an interim basis, authorised in a foreign proceeding to administer the reorganisation or the liquidation of the debtor’s assets or affairs or to act as a representative of the foreign proceeding; … “.  
  
27	It appears from these definitions that a foreign proceeding may be recognised as such where the control or supervision of that proceeding or process is undertaken by a non-judicial administrative body. There is, however, nothing to suggest that competence as an authority to control or supervise a foreign proceeding may devolve on anyone not independent of the debtor.    

28	Some further assistance as to what constitutes a foreign proceeding is available from the Guide to Enactment of the UNCITRAL Model Law on Cross-Border Insolvency. Paragraph 23 sets out a non-exhaustive list of attributes of a foreign proceeding as including :

“basis in insolvency-related law of the originating State; involvement of creditors collectively; control or supervision of the assets and affairs of the debtor by the court or another official body; and reorganisation or liquidation of the debtor as the purpose of the proceeding”; 

and, paragraph 24 refers to the nature of the proceedings eligible for recognition as including :

“ … reorganisation or those in which the debtor retains some measure of control over its assets, albeit under court supervision”.

This guidance is not exhaustive, but it affirms the proposition that for there to be a foreign proceeding there must be court or other official independent control or supervision of the assets and affairs of the debtor, albeit that the debtor may also enjoy some measure of control or supervision.  

29	With that in mind, I return to the relevant terms of article 17(4). Article 17(4) is engaged where the grounds for granting recognition of foreign proceedings have fully or partly ceased to exist. In such circumstances, the court may, on the application of the foreign representative or a person affected by recognition, or of its own motion, modify or terminate recognition, either altogether or for a limited time, on such terms and conditions as the court thinks fit. 

30	By the Recognition Application Mr Tabata contends that the main proceedings have partly ceased to exist. Mr Davies, for Mr Tabata and Sanko, submits that the proceedings have not fully ceased to exist because implementation of the Plan is ongoing and Mr Tabata’s responsibilities as foreign representative continue, albeit that he has exchanged the mantle of Trustee for that of Representative Director.

31	Mr Davies draws attention to the fact that the Recognition Application is required to ensure that the Remission Application, which was commenced while the Japanese proceedings were ongoing and was in the contemplation of Teare J when he made his order in November 2014, does not fail for a technicality. Mr Davies submits that such an outcome would be a triumph of form over substance. 

32	Mr Davies submits that a further purpose of the application is to enable Mr Tabata to comply with his undertaking to the Japanese court or, put negatively, to save him from breaching that undertaking. Again, Mr Davies submits that the Remission Application was pending and specifically contemplated, and should not be thwarted by a technicality.

33	In the alternative, Mr Davies submits that, as a matter of language, article 17(4) appears to envisage the possibility of modification of recognition even after the proceedings have ceased to exist :      

“ … do not prevent modification … of recognition if it is shown that the grounds for granting it …  have fully …  ceased to exist and in such a case the court may, on the application of the foreign representative or a person affected by recognition, or of its own motion, modify  … recognition, either altogether or for a limited time, on such terms and conditions as the court thinks fit”.
		
In other words, Mr Davies submits that, as a matter of construction of article 17(4), it is not necessary to pair ‘recognition’ being ‘fully lacking’ or having ‘fully ceased to exist’ with the consequence that recognition be ‘terminated’.

34	Mr Davies submits that it is irrelevant that an application for recognition of the Japanese proceedings could not be made now. Rather the court should take note of the fact that Mr Tabata became a foreign representative, that is he was authorised in the Japanese proceedings to administer the reorganisation of Sanko’s assets and to act as a representative of the Japanese proceedings. Mr Davies submits that Mr Tabata’s tasks are, as yet, not completed and that Mr Tabata continues to be the person personally charged with responsibility for seeing Sanko’s obligations under the Plan through to completion. In short, there is a legacy which survives the Japanese proceedings but is an essential aspect of the Plan and which Mr Tabata is duty bound to attend to.  

35	Mr Smith QC submits that the Recognition Application is misconceived because Mr Tabata seeks continuing recognition as a foreign representative in circumstances where there are no foreign proceedings to be recognised.

36	Mr Smith draws attention to article 17(4) and in particular to the express recognition given to changes of circumstances :

“termination of recognition if it is shown that the grounds for granting it … have fully … ceased to exist and in such a case the court may, on the application of the foreign representative or a person affected by recognition, or of its own motion, …  terminate recognition, either altogether or for a limited time, on such terms and conditions as the court thinks fit”.

37	As to the grounds for recognition, Mr Smith refers both to article 15 (which requires the foreign representative to demonstrate on an application for recognition of foreign proceedings both the existence of foreign proceedings and the appointment of the foreign representative) and article 17(1) (which is framed to promote recognition as a procedural decision rather than a decision made after scrutiny of the merits of the foreign court’s decision).

38	Mr Smith submits that this scheme points to the English court being charged with the simple task of considering whether a change of circumstances is such as to vitiate recognition. He submits, referring to article 2(j), that where the foreign proceedings have come to an end the authority of a foreign representative has also terminated. In other words, a foreign representative cannot sustain an independent existence, but can only exist in the atmosphere of a foreign proceeding.

39	Implicit in Mr Smith’s submission is the proposition that the phrase “ … the court may … “ in article 17(4) is not an acknowledgment of a discretion to choose between termination or modification (or even to make no order) when the grounds for recognition have ceased to exist.

40	It follows from this that Mr Smith disagrees with Mr Davies’ submission as to the linguistic scope for modification under article 17(4) of a proceeding which has been terminated.

41	On a hearsay basis (that is Mr Knox of HFW referring in a witness statement to information provided by Glencore’s Japanese lawyers, who are identified as Tsurusaki & Kobayashi), Glencore’s evidence is that under the Japanese Corporate Reorganisation Act the Japanese court was required to make an order terminating the Japanese proceedings, either upon application by the Trustee or of its own motion, where no default had occurred under the Plan at a time when two thirds or more in value of the claims approved pursuant to the Plan have been paid.  

42	Mr Smith submits that the onus is on Mr Tabata and Sanko to establish that the further working out of the Plan by Mr Tabata as Representative Director of Sanko is a foreign proceeding. 

43	Also, on the same hearsay basis, Glencore’s evidence is that Mr Tabata is no longer subject to the control or supervision of the Japanese court but is answerable to Sanko’s board of directors. 

44	Thus, Mr Smith submits, there is no Japanese law evidence before the court that Mr Tabata is a foreign representative for the purposes of Japanese law. In this context, it is common ground that Japan has implemented the Model Law. 

45	In my judgment, the arguments advanced by Mr Smith are to be preferred to those advanced by Mr Davies. 

46	First, I reject Mr Davies’ submission that the main proceedings have only partly ceased. The substance of the evidence is that the Japanese proceedings are no more and that is consistent with their description as ‘terminated’. The fact that the Plan has not been fully implemented does not serve to render the Japanese proceedings ongoing; rather they have been brought to an end because of the successful, albeit partial, implementation of the Plan.

47	As to the construction of article 17(4) and Mr Davies’ alternative submission that article 17(4) envisages modified but continued recognition after cessation of the main proceedings, (1) the construction contended for by Mr Smith is both natural as a matter of language and consistent with commercial common sense whereas that contended for by Mr Davies, while possible as a matter of language, is at odds with commercial common sense; (2) in the absence of expert evidence as to Japanese law, there is no proper basis on which I can accept that the Japanese proceedings continue to exist by reason of the undertaking given by Mr Tabata; and, (3) in the absence of expert evidence as to Japanese law, I am not in a position to accept that Mr Tabata has ongoing obligations to the Japanese court. 

48	I also note that there is no evidence before me – or, at least, none drawn to my attention - that the distribution to creditors triggering the termination of the Japanese proceedings had to occur or be implemented before the English court could accommodate the Remission Application; and, in the same vein, there is no evidence that an expedited hearing of the Remission Application could not have been obtained once it became known that the conditions triggering termination of the Japanese proceedings would occur. 

49	As to Mr Davies’ submission about triumph of form over substance, it does not follow that rejection of the Recognition Application will necessarily cause the funds to remain locked in court in England, or that the court is powerless to provide a remedy without offending the Model Law.

50	Accordingly, I dismiss the Recognition Application.

The Remission Application

51	This application is made pursuant to article 21(2) which provides :

“Upon recognition of a foreign proceeding, whether main or non-main, the court may, at the request of the foreign representative, entrust the distribution of all or part of the debtor’s assets located in Great Britain to the foreign representative or another person designated by the court, provided that the court is satisfied that the interests of creditors in Great Britain are adequately protected”.

52	Mr Davies, for Mr Tabata and Sanko, refers to the transcript of the hearing  before Teare J on 14 November 2014, and, in particular, to (1) Teare J’s conclusion that Glencore’s maritime cargo claim cannot be said to be a maritime lien in English law; (2) Teare J’s conclusion that Glencore’s claim is time barred pursuant to limitation terms in the contract of carriage and that Glencore has no right to bring a statutory claim in rem pursuant to sections 20-21 of the Senior Courts Act 1981 or to issue a caution pursuant to CPR 61.8(2); and, (3) Teare J’s refusal to grant permission to appeal and refusal to order a stay pending an application to the Court of Appeal for permission to appeal. 

53	Mr Davies submits that, had the Vessel not been sold and converted into money (the funds) held in court, it could and would have sailed from Falmouth as a result of Teare J’s order. 

54	Mr Davies also observes that the Court of Appeal has not made any interim order affecting the funds and further submits, by reference to CPR 52.7, that the fact that there is an application for permission to appeal pending before the Court of Appeal should not operate as or to encourage a stay on this application. 

55	Turning to Glencore, Mr Davies submits that, given that Glencore has no claim against Sanko as a matter of English law, there is no basis for the court to decline to pay the funds out of court to Sanko. 

56	Mr Davies further submits that Glencore seeks this court’s intervention on the basis that its claim before the Japanese court may be upheld. As to that he submits that (1) Glencore could have adduced proper expert evidence as to Japanese law in relation to its claim, but has chosen not to do so; (2) Glencore accepts that the proper forum for deciding its FSRC claim is the Japanese court and that issue is before that court, as is Glencore’s alternative claim to rank as an unsecured creditor; and, (3) the effect of Teare J’s order is to provide Glencore with the equivalent of a freezing order without requiring a cross-undertaking in damages.

57	In conclusion, Mr Davies submits that there is no evidence that Mr Tabata either cannot or will not comply with the Plan pursuant to his undertaking to the Japanese court; and, that it is not for the English court to impose greater protection to Glencore than is available under the Plan.

58	In answer, Mr Smith submits that pending the decision of the Japanese court on Glencore’s FSRC claim, the funds should be preserved to meet Glencore’s rights under the Plan as and when established in Japan. 

59	Mr Smith summarises the current position of that claim as follows : (1) finalisation of the USRC is ongoing through Glencore’s petitions before the Japanese court; (2) pending a final decision on the petitions, the USRC remains within the scope of the Plan; (3) if ‘finalised’ Glencore’s security interest will be recognised up to the amount as ‘finalised’; and, (4) Glencore will then be entitled to payment out of the funds, or – as submitted on behalf of Sanko – to payment from the pooled proceeds of sale of Sanko’s vessels including the funds.

60	Mr Smith submits that it is significant that Mr Tabata refused to give an undertaking to the court in the terms formulated by Teare J :    

“..to hold [the funds] in a separate US Dollar bank account within the United Kingdom pending the final determination of the claim made by [Glencore] to a [FSRC] in [the Japanese proceedings] or to the order of [the Japanese court] or to further order of this court”.

61	Mr Smith submits that Glencore does not know whether or not there are other creditors seeking finalisation of secured claims, and even if there are, the undertaking proposed by Teare J would provide adequate protection because it places Mr Tabata in a position to distribute the funds as ordered by the Japanese court.

62	Turning to article 21(2), Mr Smith submits that the application of this article is predicated on the basis that there is a continuing foreign proceeding and a request made to the court by a foreign representative; whereas, in fact, there is no longer a foreign proceeding and Mr Tabata no longer holds the position of a foreign representative, rather he has no standing to seek an order under the Remission Application.

63	Further, Mr Tabata could not be “ … another person designated by the court … ” to whom Sanko’s assets may be entrusted for distribution because  the context in which article 21(2) applies is a recognised - and, therefore, ongoing – foreign proceeding.  

64	Mr Smith submits that the funds are held in court pursuant to CPR 61 and that their payment out is not open to an order under CPR 37 because CPR 37 only applies to money paid into court by a party. Mr Smith submits that payment out is governed by CPR 61.10 which limits the recipients of any payment out to judgment creditors in accordance with priorities or as the court may order.    

65	Mr Smith submits, on a further or in the alternative basis, that if there is to be an order for remission of the funds, the terms should provide for adequate protection of Glencore’s interest; such terms should be or include, as a minimum, payment into a segregated US Dollar account subject to the control of the Japanese court.

66	Mr Smith submits that terms are needed to ensure that the funds continue to be preserved pending determination of Glencore’s petitions, or at least its FSRC claim, not least because it is not clear that Mr Tabata’s undertaking to the Japanese court constitutes a guarantee that Sanko will perform its obligations under the Plan. This submission is based on further hearsay evidence of Mr Knox referring to information received from Glencore’s Japanese lawyers and to concerns as to Sanko’s financial position.

67	As to Glencore’s interest in the proceeds, Mr Smith refers to the judgment of Teare J, which led to his order that Glencore’s caution based on its claimed security should be struck out, at paragraph 12 :   

“If and when it is finalised as a secured reorganisation claim Glencore will have a right to be paid out of the proceeds of sale of [the Vessel]”; 

and at paragraph 49 (cited in full above) :

“ … Glencore maintains that it can make good its claim in contract in Tokyo. Whether it can do so is a matter for the court in Tokyo. I would therefore only be willing to order payment out on terms that the Trustee kept the proceeds of sale in a separate US Dollar account and held them to the order of the Tokyo court”;

and, to an email of 9 December 2014 from Teare J to the parties’ representatives :

“… I do not wish to fetter in any way the discretion of the Companies Court when it decides [Sanko’s] application under article 21 of the CBIR. It would be inappropriate for the Admiralty Court to seek to do so. If the Companies Court decides to allow [the funds] to be taken out of the jurisdiction it will be a matter for it to determine whether, in circumstances where [the funds] have been created by an Admiralty Court sale and where the Admiralty Court considered that payment out of the Admiralty Court should be on terms of the undertakings indicated in paragraph 4 [of Teare J’s order], the Companies Court should also require such undertakings. That is a matter for the Companies Court”.

Mr Smith also refers to Sanko’s counsel’s skeleton argument submitted to the Court of Appeal in which Sanko submits that the Companies Court is likely to pay significant deference to and be reticent to contradict Teare J’s decision to give Glencore security for its claim in the Japanese proceedings.

68	In conclusion, Mr Smith submits that the court should dismiss the Remission Application and uphold dealing with the funds as provided for in Teare J’s order.

69	In my judgment, the Companies Court must recognise that the underlying circumstances have changed materially since Sanko issued the Remission Application. It is significant that the Japanese proceedings have been terminated, that Mr Tabata is no longer Trustee or a foreign representative, that the Japanese court no longer supervises implementation of the Plan, and that as a result of the Reorganisation Sanko is trading again free from insolvency process, i.e. as a going concern. The Companies Court must also recognise and both respect and, as a matter of comity, assist the process before the Japanese court which is the forum the parties have chosen, and which will, decide the issues as to entitlement to the funds.

70	Other factors weighing with me are that : (1) Teare J’s order was aimed at preserving the funds on a ring-holding basis; (2) there is no first hand expert evidence as to Japanese law; (3) there is no clear evidence as to the progress of or timetable for Glencore’s petitions; (4) there is no evidence as to how Glencore’s petitions may be further progressed (e.g. whether only on the initiative of Glencore); and, (5) there is no evidence as to the likely order of, or even as to the factors that would weigh with, the Japanese court if asked to preserve the funds pending determination of Glencore’s petitions, or at least its FSRC claim.

71	I keep in mind Teare J’s proposed order and undertaking, which envisaged payment out to a party other than a judgment creditor (albeit as an interim measure), the High Court’s inherent powers, and the long established practice of acting to preserve property subject to proprietary claims pending determination of those claims.  

72	In my view, leaving the funds in court in England seems likely to tolerate, if not encourage, delay, which is itself a hallmark of injustice. 

73	The just course seems to me to be to encourage Glencore to take the initiative to obtain a ruling from the Japanese court as to the appropriate interim order in respect of the funds. There is also considerable force in Mr Davies’ submission that at present Glencore has, in effect, the equivalent of a freezing order preserving the funds whereas Sanko does not have the usual corresponding protection of a cross-undertaking in damages.

74	I bear fully in mind the Admiralty Court’s view as to the measure of protection appropriate to the release of the funds at a time when the Reorganisation and the Japanese proceedings were ongoing. In line with the spirit of Teare J’s order and the provisions of CPR 61 as to payment out, I have regard to Mr Smith’s submissions as to the need for adequate protection of Glencore’s interest pending a decision by the Japanese court. It seems to me that this weighed with the Admiralty Court, notwithstanding that court’s rejection of the caution. 

75	I propose to order that provided Glencore undertakes (1) within 42 days to issue an application before the Japanese court for an order for the preservation of the funds pending determination of its petitions in that court, (2) to progress its petitions with all due expedition, and (3) to provide a cross-undertaking in damages enforceable by this court over the period from the present time to the date of an order by the Japanese court on an application made pursuant to (1), the funds should be paid out of court and be held in a US Dollar account in the joint names of the parties’ solicitors to abide an order of the Japanese court in respect of the application referred to under (1). In the absence of such an undertaking, I propose to order the payment out of court of the funds to Mr Tabata for disbursement in accordance with the Plan and his undertaking to the Japanese court, such order to take effect in 21 days.