San Antonio International Ltd v San Antonio Oil & Gas Services Ltd
| Jurisdiction | Bermuda |
| Judge | Chief Justice Hargun |
| Judgment Date | 15 October 2020 |
| Court | Supreme Court (Bermuda) |
| Docket Number | CIVIL JURISDICTION 2018: No. 437 |
| Date | 15 October 2020 |
[2020] SC (Bda) 46 Com
In The Supreme Court of Bermuda
Hon. Chief Justice Hargun
CIVIL JURISDICTION
COMMERCIAL COURT
2018: No. 437
Mr. John Hindess, Marshall Diel & Myers Limited, for the Plaintiffs
Mr. David Kessaram, Cox Hallett Wilkinson Limited, for the Defendant
Application for the provision of audited accounts and permission to inspect the books and papers of a company in liquidation under the supervision of Court by an applicant who is neither a creditor nor a contributory; scope of section 176(5) of the Companies Act 1981; whether the applicant is a proper person to invoke the jurisdiction
This is an application by San Antonio International Limited, the Applicant, for an order under section 176 (5) of the Companies Act 1981 (the “ Act”) for an order that the Joint Liquidators of San Antonio Oil & Gas Services Limited (the “ Company”) provide to the Applicant audited accounts and permit the Applicant to inspect the books and papers of the Joint Liquidators in this matter.
The application is supported by the First affidavit of Saul Dismont sworn on 1 November 2019. The Joint Liquidators have also filed evidence in the form of the First Affidavit of Matthew Clingerman sworn on 18 December 2019.
The Applicant owns 100% of the shares of Oil Services Holdco Ltd “ Oil Services”) which owns 100% of the shares of Armadillo Holdings Inc. (“ Armadillo”) which in turn owns hundred percent of the shares of the Company. The Applicant claims that it is entitled to a copy of the audited accounts and inspection of the books and papers of the Joint Liquidators on the basis that it has sufficient interest on two grounds.
First, as the Applicant is the indirect holder of 100% of the shares of the Company, the Applicant has an economic interest in any surplus dividend declared by the Joint Liquidators to the shareholders of the Company.
Secondly, it is said that the Applicant has an economic interest in the shares of the company owned by Armadillo. The shares of the company owned by Armadillo were pledged as collateral for the indebtedness of the Company, pursuant to a Credit Facility Agreement dated 23 July 2008 between the Company, as the borrower, Armadillo, as the owner of the shares of the Company to be pledged, and the lenders who are parties to that agreement. In 2014, the lenders foreclosed on the debt and the collateral agent, Mayflower Management Services (Bermuda) Limited (“Mayflower”), took possession of the shares pursuant to the terms of the Credit Facility Agreement. In the written submissions, filed on behalf of the Applicant, it is said that the Applicant is entitled to any surplus after the sale of the shares of the Company “ held by the [Applicant]”. In the written submissions it is contended that this entitlement arises pursuant to the terms of the Credit Facility Agreement. At the hearing of this application Mr Hindess, who appeared on behalf of the Applicant, was unable to point to any particular provision in the Credit Facility Agreement which provided that entitlement to the Applicant. Mr Hindess contended that the Applicant had an economic interest in any surplus from the sale of the shares of the Company given that the Applicant was the indirect holder of 100% of the shares of the Company.
As noted, this application is made under section 176 (5) of the Act which provides that:
“If any person is dissatisfied by any act, omission or decision of the liquidator, that person may apply to the Court, and the Court may confirm, reverse or modify the act or decision complained of, and may give such directions and make such order in the premises as it thinks just.”
It should be noted that the Act expressly provides for inspection of books and papers of a company in liquidation. Section 193(1) of the Act provides:
“The Court may, at any time after making a winding-up order, make such order for inspection of the books and papers of the company by creditors and contributories as the Court thinks just, and any books and papers in the possession of the company may be inspected by creditors or contributories accordingly, but not further or otherwise.”
Furthermore, Rule 129 of the Companies (Winding Up) Rules 1982 provides that:
“When the liquidator's accounts have been audited, the Registrar of Companies shall certify the fact upon the account and thereupon the duplicate copy bearing a like certificate, shall be filed with the Registrar and that copy together with a copy of the said account delivered to the Court for filing in accordance with section 180 of the Act, shall be open to the inspection of any person on payment of the same fee as is payable with respect to the inspection of the file of proceedings under rule 12.”
Rule 12, referred to in Rule 129, provides that:
“Every person who has been an officer of a company which is being wound up and the Registrar of Companies shall be entitled, free of charge, and every contributory and every creditor whose claim or proof has been admitted, shall be entitled on payment of the prescribed fee, at all reasonable times, to inspect the file of proceedings and to take copies or extracts from any document therein, or be furnished with such copies or extracts on payment of the prescribed fee.”
In correspondence with the Applicants attorneys, the Joint Liquidators have taken the position that the Applicant has no entitlement to the books and papers of the Company as the Applicant is neither a creditor nor a contributory. The Joint Liquidators have taken the position that the Applicant is an outsider and has no legal standing to pursue this application.
Mr Hindess, on behalf of the Applicant, argues that the law is clear that a party does not need to be either a creditor or a contributory to take advantage of the redress available in section 176 (5) of the Act. He relies upon the decision of the Bermuda Supreme Court in Re Mentor Insurance Ltd [1987] Bda LR 52 which in turn relied upon the decision of the Privy Council in Attorney General of the Gambia v N'jie [1961] AC 617.
Re Mentor Insurance Limited concerned winding up proceedings pursuant to an order of the Supreme Court made on 25 June 1985. Mentor was, at the date of a winding up, a wholly owned subsidiary of Mentor Holding Corporation (“ MHC”), a Delaware corporation which in turn was wholly owned subsidiary of another Delaware corporation, Ocean Drilling and Exploration Company (“ ODECO”). The particular application also concerned Pinnacle Reinsurance Company Limited (“ Pinnacle”), another Bermuda incorporated exempted company, which at all material times carried on reinsurance business in Bermuda and was a wholly owned subsidiary of CE Heath Underwriting Agencies Pty Ltd.
In March 1986, the joint liquidators of Mentor, having obtained the sanction of the committee of inspection, commenced proceedings in the US District Court for the Eastern District of Louisiana against a number of defendants including Pinnacle, ODECO, MHC and a number of corporate officers individually, claiming damages for alleged fraud. Some of the causes of action comprised in the Complaint were founded upon alleged violation of the US Racketeer Influenced and Corrupt Organizations Act (RICO).
In response, Pinnacle issued an Originating Summons in the Supreme Court claiming, pursuant to section 176 (5) of the Act, a declaration that in instituting and maintaining the Louisiana proceedings against Pinnacle the joint liquidators had acted in excess of and in abuse of their powers as liquidators. The liquidators challenged the locus standi of Pinnacle to make such an application under section 176 (5) of the Act, contending that the statutory scheme contemplates that only creditors or contributories can make applications under this subsection. Counsel for Pinnacle, relying upon the Privy Council decision in N'jie, argued that the phrase “person...
To continue reading
Request your trial