East Riding of Yorkshire v KMG: Appeal court upholding lower courts

This case concerned a sub-fund which was a “dedicated fund” of an investment company (the fund), a company incorporated in Luxembourg. The fund offered investments in several sub-funds, each sub-fund having their own separate pool of assets and specific investment objectives. 

The appellant invested in the sub-fund, receiving in return shares in the fund on the basis that its rights to capital and income were restricted to the assets of the sub-fund. 

Subsequently, the fund collapsed in value. The appellant brought a petition seeking winding up as an unregistered company in England pursuant to section 220 of the Insolvency Act 1986 (IA).

At first instance and on first appeal the court held that section 220, IA did apply only to entities that were either companies or associations. At first instance it was conceded that the entity was not a company or association for this purpose but at first appeal the judge permitted this issue to be reopened but then went on to hold that the sub-fund was not an entity that Parliament reasonably intended to be wound up as an unregistered company. Accordingly the appeal was dismissed.

The appellant appealed to the Court of Appeal which held:

• It was clear the appellant did not seek permission to appeal the finding of both lower courts that section 220 was limited to bodies that were either an association or a company, the appellant’s arguing before the Court of Appeal that the entity was an “association”.
• The word “association” was a very general one but had been given a narrower meaning in the context of the winding-up legislation.
• The correct approach required the court to focus its attention not only on the nature and constitution of the body in question but also upon the nature of the process of winding up by the court under the 1986 Act.
• To fall within section 220 an association must be comprised of persons who had some substantive legal relationship with each other, rather than persons who were connected for purely social or personal reasons or who merely shared a common interest.
• Applying those principles to the instant case, whether or not it was correct that section 220 was limited to bodies that were either companies or associations (as to which point the Court of Appeal expressed no view since the point was not taken on appeal), the court had no doubt in holding that the sub-fund was not an association which Parliament could have intended should be wound up by the court under the 1986 Act, inter alia, on the following grounds: 
  
  • The first and most obvious point to make was that the sub-fund was not in any sense a body whose existence was founded on some contractual obligations undertaken by any members between themselves. The sub-fund was simply a collection of assets owned by the company which was managed and dealt with by the company, separately from its other dedicated funds.
  • The only legally relevant "association" between any persons was the relationship between the shareholders of the company. The sub-fund was merely a collection of assets that was in no sense an association between anyone.
  • It was also readily apparent that the process of winding up by the court could not be applied to the sub-fund itself: the sub-fund was not a debtor and it did not have creditors: the expert evidence was that the sub-fund was simply a collection of assets which had no separate legal personality and could not enter into legal relations or incur any liabilities. 

Accordingly the appeal was dismissed.

East Riding of Yorkshire Council as Administrating Authority of the East Riding Pension Fund v KMG Sicav-Sif-GB [2025] EWCA Civ 1137, Court of Appeal