Saad Investments Company Ltd Re

• Jurisdiction: Bermuda
• Judge: Kawaley, J.
• Judgment Date: 15 April 2013
• Court: Supreme Court (Bermuda)
• Docket Number: 284 of 2012; 38 of 2013
• Date: 15 April 2013

Supreme Court

Kawaley, C.J.

284 of 2012; 38 of 2013

Saad Investments Company Limited Re:

Appearances:

Mr. Rod Attride-Stirling and Ms. Kehinde George, Attride-Stirling & Woloniecki, for the Joint Liquidators of Saad Investments Company Ltd (in [Bermuda ancillary] Liquidation) (“SICL”) and the Joint Official Liquidators of Singularis Holdings Ltd (in Official Liquidation) (“SHL”) (collectively, the “JOLS”)

Mr. Paul Smith and Mr. Scott Pearman, Conyers Dill & Pearman, for PricewaterhouseCoopers, an exempted partnership (“PWC Exempted”)

Company Law - Statutory Liquidation — whether the court had the power to make an order without direct reference to statute — whether the court could apply common law prior to statutory winding up provisions to overseas liquidators.

Civil Practice and Procedure - Civil Practice and Procedure — Application to set aside ex parte orders — Enforcement of money judgments — whether the elements of enforcing a personal money judgment were applicable to a foreign insolvency order

Kawaley, J.

1 On August 17, 2012, SICL acting by its Caymanian Joint Official Liquidators presented a Petition for its winding-up in Bermuda. On August 20, 2012, Stephen Akers, Mark Byers and John McKenna were appointed as Joint Provisional Liquidators in the local ancillary liquidation. On September 14, 2012 SICL was wound-up by this Court and the Joint Provisional Liquidators were appointed as Joint Liquidators. The usual first statutory meetings were dispensed with due to the ancillary character of the liquidation proceedings. On February 13, 2013, the Joint Liquidators applied by Ex Parte Summons for an Order under section 195 of the Companies Act, 1981 for the examination of and production of documents by its former auditors, PWC Exempted, a Bermuda exempted partnership acting through its Dubai Branch.

2 By Ex Parte Originating Summons dated February 12, 2013, the Joint Official Liquidators of SHL, also in Caymanian liquidation, applied for recognition and assistance at common law and, further, for corresponding relief to that sought by SICL under section 195. However, this specific information obtaining relief was sought pursuant to the Court's inherent jurisdiction, under common law and/or pursuant to section 195 of the 1981 Act. The two applications were heard together for convenience and were granted in respect of the companies, each of which was incorporated in and in liquidation in the Cayman Islands (together, “the Companies”).

3 PWC Exempted now applies to set aside two ex parte Orders granted to the JOLs. The Orders were made on March 4, 2013 for the production of documents by and examination of former auditor of the Companies (PWC Exempted and Paul Suddaby):

• (a) under section 195 of the Companies Act 1981 in relation to SICL, which is in liquidation in Bermuda;

• (b) under the inherent jurisdiction of the Court and/or at common law and/or under section 195 of the Companies Act 1981 in relation to SHL. Sensibly, no challenge was made to paragraph 1 of the SHL Order which declared that the JOLs Caymanian appointment was recognised with a view to furnishing assistance to the Caymanian liquidation.

4 The grounds of the challenge before this Court in relation to the SICL Order are limited to whether or not the Order ought to have been made and/or the scope of the Order. PWC Exempted accepts that it is not open to it to challenge the jurisdiction of this Court to make an ancillary winding-up Order in respect of SICL because the Court of Appeal refused to grant it an extension of time within which to appeal the winding-up Order. This Court is bound by the Court of Appeal's decision in PwC (a Firm) v. Kingate Global Fund Ltd; Kingate Euro Fund Ltd. [2011] Bda LR 31 to the effect that a winding-up order may not by challenged by the respondent to an application made by liquidators in the liquidation under section 195 of the Act.

5 An identical challenge is made in respect of the propriety of granting and/or the scope of the SHL Order. However, because the SHL Order was not made in the context of ancillary winding–up proceedings to which section 195 unarguably applies (nice questions about this court's jurisdiction to wind-up overseas companies apart), another jurisdictional challenge is raised. It is contended that this Court's power to assist at common law does not extend to making orders either under section 195 or by way of analogy with section 195. This jurisdictional challenge raises points of law which have vexed insolvency judges and practitioners throughout the common law world relating to the precise parameters of the common law discretion to assist foreign insolvency representatives.

6 This is an area of the law that in recent times has often been dominated by commercial pragmatism combined with an almost deification of the goal of promoting cross-border co-operation in insolvency cases with an international element, unwittingly no doubt, at the expense of the development of a set of coherent principles. One reason for this trend may be the fact that statutory cross-border cooperation frameworks are now the norm rather than the exception in most large common law jurisdictions. The opportunity to consider common law cooperation thus only occurs in fits and starts and then often in offshore jurisdictions with no local legal academy to stoke the fires of the theoretical debate. Moreover, in Bermuda at least, these questions have almost exclusively been considered at the first instance level.

7 In respect of both Orders, however, narrower but important points of practice and principle have been raised. Should this Court grant relief which is more generous in terms of the scope of production than the scope permitted by the law of the principal liquidation or are the applications impermissible “forum-shopping”? Is the “usual” practice to make section 195 Orders ex parte, or ought the JLs to justify the need for ex parte relief? To what extent should the Court scrutinise the details of the production requests to ensure that they are not abusive in terms of the scope of documents requested and/or the time within which production is required? This Court must be mindful of the need to balance the competing interests of justice for international creditors and justice for their potential debtors (be they former auditors, directors or other managers) who do business here.

8 Taking these considerations into account together with the evidence and the submissions of counsel, I have reached the following broad conclusions:

Legal findings: scope of common law discretionary power to assist the SHL JOLs

• (a) scope of common law discretion to assist foreign liquidators:

  • (i) this Court may validly recognise the SHL JOLs' appointment in the place of the companies' incorporation (together with the Caymanian winding-up order) and assist them at common law by analogy with the statutory powers contained in section 195 of the Companies Act by ordering them to produce the same documents which could be ordered under the local statute in the case of a domestic or ancillary liquidation;

  • (ii) Lord Hoffman's exposition on the breadth and flexibility of the common law judicial assistance jurisdiction in Cambridge Gas Transportation Corp v. Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] UKPC 26; [2007] 1 AC 508, as applied to the specific context of the recognition of winding-up orders made in and liquidators appointed in insolvent companies' place of incorporation, has not been diminished in any way by the United Kingdom Supreme Court majority's recent holding in Rubin v. Eurofinance; and New Cap Re v. AE Grant [2012] UKSC 46; [2013] 1 AC 236 that Cambridge Gas was wrongly decided;

  • (iii) the parameters of common law assistance which can be provided appear to be demarcated most conservatively by the inherent jurisdiction of the Court and the extent of common law or equitable powers which may be deployed under the general law of Bermuda without recourse to statutes of particular application such as the Companies Act 1981. However, what could be done in a local liquidation will generally delineate the course of the common law assistance journey;

  • (iv) alternatively, and at first blush far more radically, the scope of assistance which can be provided at common law is delineated by both the general law (including the Court's inherent powers) and the statutory insolvency regime which would apply in a local primary or ancillary liquidation. This is, ultimately, my preferred jurisdictional basis for the assistance granted. Although this conclusion seems less straightforward to justify, it appears to be supported by Lord Hoffman's landmark dictum in the Cambridge Gas case which broadly approved the Transvaal Supreme Court decision in Re African Farms Ltd. [1906] Transvaal Law Reports 373. This proposition has been positively and most explicitly affirmed in the two most recent cases to consider this topic, Frank Schmitt v. Hennin Deichman [2012] EWCH 62 (Ch); [2013] Ch 61 (Proudman, J.) and Picard (as Trustee for the liquidation of the Business of Bernard L. Madoff Investment Securities LLC) et al v. Primeo Fund (In Official Liquidation), Cayman Grand Court FSD 275 of 2010, Judgment dated January 14, 2013 (Andrew Jones J);

• (b) merits/scope of production/examination Orders:

  • (i) where foreign liquidators genuinely need documents relating to the affairs of an insolvent company or group of companies from persons or entities resident in Bermuda which they cannot obtain in the primary liquidation, this Court can in an ancillary liquidation or by way of common law assistance order the production of documents liable to be produced in a local liquidation;

  • (ii) save where a statute or rules of court expressly provide that an application may be made ex parte, the applicant for an ex parte order must justify proceeding...