Deepak Raswant v Centaur Ventures Ltd
| Jurisdiction | Bermuda |
| Judge | Hargun |
| Judgment Date | 26 August 2019 |
| Neutral Citation | [2019] SC Bda 55 Com |
| Docket Number | CIVIL JURISDICTION |
| Court | Supreme Court (Bermuda) |
| Date | 26 August 2019 |
[2019] SC (Bda) 55 Com
In The Supreme Court of Bermuda
Hon. Chief Justice Hargun
CIVIL JURISDICTION
2019: No. 284
Mr Matthew Watson, Cox Hallett Wilkinson Limited, for the Petitioner
Mr Richard Horseman, Wakefield Quin Limited, for the Respondents
Jurisdiction to appoint provisional liquidators; Petitioner seeking relief under sections 111 and 161(g) of the Companies Act; relevant factors to be taken into account
This is the hearing of an ex parte application (on notice) by Mr Deepak Raswant, (“the Petitioner”), seeking an order that Rachelle Frisby and John Johnston of Deloitte Ltd in Bermuda be appointed to act jointly and severally as Provisional Liquidators (“JPLs”) of Centaur Ventures Limited (“CVL” or “the Company”).
The application seeks that the powers of the JPLs shall not be limited, pursuant to section 170(3) of the Companies Act 1981 (“the Act”), by the order appointing them and in particular that the JPLs shall be empowered to have the conduct of the Company's creditor claim in Optimum Coal Mine (Pty) Ltd (In Business Rescue) (“OCM”), including but not limited to vote in respect of any business rescue plan on behalf of the Company.
The underlying proceedings were commenced by the Petitioner by filing a Petition dated 3 July 2019, seeking orders under sections 161(g) and 111 of the Act.
Under section 161(g) the Petitioner seeks an order that the Company be wound up on the basis that it is just and equitable to do so.
At the same time the Petitioner seeks relief under section 111, the alternative remedy to winding up in cases of oppressive or prejudicial conduct, that the Petitioner be restored his shareholding to 50% in the Company and that the Company's bye laws be restored from those amended bylaws purportedly adopted on 31 May 2019, to those amended bylaws adopted by Order of the Court dated 19 March 2019. The effect of the relief sought under section 111, the Petitioner asserts, is to obtain 50% of any surplus net assets upon the winding up of the Company, which the Petitioner says are valued at excess of US $17 million.
The relief sought under section 111 is only available if the Court is satisfied the Company's affairs are being conducted or have been conducted in a manner oppressive or prejudicial to the interests of some part of the members and that wind up of the Company would unfairly prejudice that part of the members, but otherwise the facts would justify making the winding up order on the ground that it was just and equitable, that the Company should be wound up. The apparent conceptual inconsistency in seeking relief under section 161(g) and 111 at the same time will have to be argued at the hearing of the Petition.
The statutory basis for the appointment of provisional liquidators is to be found in section 170(2) of the Act and rule 23(1) of the Companies (Winding-Up) Rules 1982.
Section 170(2) provides that:
“The Court may on the presentation of a winding-up petition or at any time thereafter and before the first appointment of a liquidator appoint a provisional liquidator who may be the Official Receiver or any other fit person.”
Rule 23(1) of the Companies (Winding-Up) Rules 1982 provides that:
“After the presentation of a petition for the winding-up of a company by the Court, upon the application of a creditor, or of a contributory, or of the company, and upon proof by affidavit of sufficient ground for the appointment of a provisional liquidator, the Court, if it thinks fit and upon such terms as in the opinion of the Court shall be just and necessary, may make the appointment.”
The appointment of provisional liquidators is an exercise of judicial discretion. In exercising that discretion, the courts in Bermuda ( Re CTRAK Ltd [1994] Bda LR 37 (Ground J); Discover Reinsurance Co v PEG Reinsurance Co Ltd [2006] Bda LR 88 (Kawaley J); and BNY AIS Nominees Ltd v Stewardship Credit Arbitrage Fund Ltd [2008] Bda LR 67 (Bell J)), have followed the guidance given in the judgment of Sir Robert Megarry in Re Highfield Commodities Ltd [1984] 3 All ER 884, at 892–893 in following terms:
“At the outset let me say that I accept that the court will be slow to appoint a provisional liquidator unless there is at least a good prima facie case for saying that a winding-up order will be made: see Re Mercantile Bank of Australia [1892] 2 Ch 204 at 210, Re North Wales Gunpowder Co [1892] 2 QB 220 at 224. Founding himself on cases such as Re Cilfoden Benefit Building Society (1868) LR 3 Ch App 462 (where the words ‘in general’ should be noted) and Re London and Manchester Industrial Association (1875) 1 Ch D 466, counsel for HCL contended that if the company opposed the application for the appointment of a provisional liquidator, no appointment would be made (and any ex parte appointment would be terminated) unless either the company was obviously insolvent or it was otherwise clear that it was bound to be wound up, or else the company's assets were in jeopardy, as seems to have been the case in Re Marseilles Extension Rly and Land Co [1867] WN 68.
…..
I do not think that the old authorities, properly read, had the effect of laying down any rule that the power to appoint a provisional liquidator is to be restricted in the way for which counsel for HCL contends. No doubt a provisional liquidator can properly be appointed if the company is obviously insolvent or the assets are in jeopardy; but I do not think that the cases show that in no other case can a provisional liquidator be appointed over the company's objection. As the judge said, s 238 is in quite general terms. I can see no hint in it that it is to be restricted to certain categories of cases. The section confers on the court a discretionary power, and that power must obviously be exercised in a proper judicial manner. The exercise of that power may have serious consequences for the company, and so a need for the exercise of the power must overtop those consequences. In particular, where the winding-up petition is presented because the Secretary of State considers that it is expedient in the public interest that the company should be wound up, the public interest must be given full weight, though it is not to be regarded as being conclusive”
I accept the submission that Highfield Commodities makes clear that the categories of cases in which it would be appropriate to appoint a provisional liquidator are not closed. Indeed this is demonstrated by the practice in this Court of appointing provisional liquidators to facilitate restructuring where the Company is in the “zone of insolvency” (see Discover Reinsurance, per Kawaley J at [18], [19]).
Counsel for the Respondents does not take issue with the discretionary nature of the Court's jurisdiction to appoint provisional liquidators. He cautions that the Court is bound to take into account the commercial consequences of such an appointment and urges that an appointment should not be made if other measures adequate to preserve the status quo are available ( Derek French, Applications to Wind Up Companies, 3 rd edition, 4.90).
In support of the application for the appointment of the JPLs the Petitioner relies upon the following facts and circumstances as demonstrating that there is a good prima facie case for winding up the Company and for the appointment of JPLs.
First, it is said that the Company is potentially insolvent. The management accounts for the Company, as at February 2018, show assets of $146,121 273 and liabilities of $128,707,037 showing net equity of $17,434,236. Included in the liabilities is amount owing to Griffin Line General Trading LLC (“Griffin Line”) in the amount of $97,664,293. This amount represents indebtedness under a loan facility in the amount of $100 million granted by Griffin Line to the Company and there appears to be a dispute as to whether this amount is presently due or some time in the future.
The Company contends that the indebtedness to Griffin Line is not due and payable until 4 January 2021, relying on a loan amendment agreement which appears to be executed by Mr McGowan on behalf of the Company and a Mr Singhala on behalf of Griffin Line. That document does indeed state that the repayment date has been extended to 4 January 2021. The Court was referred to correspondence from Kennedys, Bermuda attorneys acting on behalf of Griffin Line, which appears to dispute the validity of the loan amendment agreement. It appears to be suggested that the signature of Mr Singhala on the amendment agreement may not be genuine.
I accept that if the true position is that the amendment agreement is a forgery and therefore the indebtedness under the loan facility is presently due, then the Company is likely to be insolvent on a cash flow basis. However, I am not in a position to take a considered view on this matter. Having said that I do note if the amount was due in June 2017, as appears to be contended in the letter from Kennedys dated 17 May 2019, it is not altogether clear why no formal demand for its repayment was made until 27 January 2019 by Kobre & Kim (UK) LLP and why the audited accounts of Griffin Line continued to show that the loan made by Griffin Line was “current” as at 31 December 2017.
Second, it is said that Company has ceased carrying on any business since February 2018, for which it was incorporated and as a result can fairly be said that its substratum no longer exists. In support of this proposition the Petitioner relies on the fact that the Company has not traded...
To continue reading
Request your trial
-
Agritrade Resources Ltd
...regime in Bermuda for the appointment of provisional liquidators generally in my Ruling in Deepak Raswant v Centaur Ventures Ltd [2019] SC (Bda) 55 Com (26 August 2019) in paragraphs 7–11: “7. The statutory basis for the appointment of provisional liquidators is to be found in section 170(2......