It was once thought that proceedings begun whilst a company was in liquidation pursuant to an order of the court were a nullity and could not be validated retrospectively. In the case of BDO Cayman Ltd. and BDO Trinity Ltd. v Ardent Harmony Fund Inc. (in Official Liquidation)[1] the Grand Court held that a plaintiff which launches originating proceedings against a … Company voluntary arrangements (CVA) The position will depend on the terms of the CVA, which are binding on all creditors One of those credit advisers defrauded Ardent of approximately 90% of its assets under management, resulting in Ardent being placed into official liquidation in 2016. when a winding-up order is made or a provisional liquidator is appointed, no suit, action or other proceedings, including criminal proceedings, shall be proceeded with or commenced against the company except with the leave of the court and subject to such terms as the court may impose; and. This suggestion was finally laid to rest (albeit only at first instance) in The Governor and Company of … The Grand Court held that BDO had lost nothing, because BDO Cayman is not a defendant to the New York proceedings and, were it not for the tolling agreement, Ardent would have filed its suit in 2017 to preserve its position and BDO Trinity would be defending it. This period was extended on three occasions, the final extension providing for the agreement (and the tolling period) to end 14 days after the final resolution of any appeal in the Argyle proceedings. Search for details of companies involved in insolvency proceedings, liquidation, frozen assets Check if a company is being liquidated or in provisional liquidation - GOV.UK Cookies on GOV.UK The parties to those proceedings signed a Consent Order that the Privy Council appeal be dismissed on 4 November 2019. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations. Section 471B of the Act provides that whilst a company is in liquidation, a person cannot without leave of the court, commence or proceed against the company or its property, or continue enforcement proceedings in relation to company property. In response, Ardent contended that the bargain between the parties was not to commence the New York proceedings before a particular day, not that there should be no proceedings or that the proceedings should not continue, and that BDO had not suffered any loss by reason of the New York proceedings being commenced 5 days before the date of expiry of the tolling period. A trustee in bankruptcy has the statutory power to commence or continue proceedings on behalf of the bankrupt as those claims vest in the trustee under … There is no such moratorium for voluntary forms of liquidation, which will allow a landlord to take forfeiture action or pursue CRAR (taking control of the tenant’s goods in order to satisfy the arrears) if they desire. [4] Re Argyle Funds SPC Inc. (in Official Liquidation) [2018 (1) CILR 114] and Argyle v BDO Cayman Ltd [2018 (2) CILR 362]. BDO sought an anti-suit injunction to restrain Ardent from continuing the New York proceedings on the basis of a sole recourse clause in the audit engagement letters, pursuant to which Ardent agreed that it would not pursue a claim against any affiliate of BDO Cayman, which includes BDO Trinity, unless the claim was founded on an allegation of fraud or wilful misconduct or other liability that cannot be excluded under applicable laws (the 'carve out'). The Grand Court of the Cayman Islands (the "Grand Court") recently considered the statutory moratorium against commencing proceedings against a Cayman Islands company which has been placed into liquidation. In the case of BDO Cayman Ltd. and BDO Trinity Ltd. v Ardent Harmony Fund Inc. (in Official Liquidation)[1] the Grand Court held that a plaintiff which launches originating proceedings against a company in liquidation, seeking adverse orders against that company, "patently requires leave" of the Court to bring the proceedings. BDO sought an anti-suit injunction to restrain Ardent from continuing the New York proceedings on the basis of a sole recourse clause in the audit engagement letters, pursuant to which Ardent agreed that it would not pursue a claim against any affiliate of BDO Cayman, which includes BDO Trinity, unless the claim was founded on an allegation of fraud or wilful misconduct or other liability that cannot be excluded under applicable laws (the "carve out"). The Grand Court held that these decisions were not applicable authority, in circumstances where BDO Cayman is not a party to the New York proceedings and was not: Rather, the Grand Court held that "BDO has launched originating proceedings against Ardent seeking adverse orders against the company, and patently requires leave.". William Jones and Sam Keogh of Ogier's Cayman Islands Dispute Resolution team acted for the JOLs of Ardent in this proceeding, and instructed Clare Stanley QC of Wilberforce Chambers in London to appear at the hearing. (4) In the Argyle case, the Grand Court at first instance granted the requested anti-suit injunction restraining proceedings against BDO Trinity. (4) Re Argyle Funds SPC Inc (in Official Liquidation) ([2018 (1) CILR 114]) and Argyle v BDO Cayman Ltd ([2018 (2) CILR 362]). This client briefing has been prepared for clients and professional associates of Ogier. For that reason I hold BDO has not established that it has a case worth entertaining. BDO contended that Ardent had commenced the New York proceedings before the end of the tolling period, and so BDO was entitled to strictly enforce the agreement, such that Ardent's claims in New York should be restrained. The Court's discretion is wide and unfettered - there is no presumption in favour of or against giving leave - and each case turns on its own facts; (3) In deciding what would be fair, the Court can give s. 97 leave subject to conditions subject to a consideration of what would be fair, in the context of the liquidation as a whole. For compulsory liquidation, a statutory moratorium is put in place which prevents proceedings being commenced against the company in liquidation. This includes a summary of the statutory moratorium or automatic stay of proceedings that arise under the Insolvency Act 1986 when a company is in administration or liquidation respectively, and guidance on the court's approach on an application for leave to pursue a claim. BDO Cayman did not pursue its appeal to the Privy Council from the decision of the Court of Appeal dismissing the anti-suit injunction granted by the Grand Court against Argyle. Section 471B of the Corporations Act 2001 (Cth) (the Act) specifies that while a company is being wound up by the Court, or by a provisional liquidator, a person cannot commence proceedings against the company except with the leave of the Court. We regularly win awards for the quality of our client service, our work and our people. [2] Formerly the Companies Law; Cayman Islands Laws have recently been renamed Acts pursuant to the Citation of Acts of Parliament Law, 2020. Instead, BDO sought Section 97 leave as the first item of relief in its originating summons. The Grand Court also held that the plaintiffs in that case did not have "a case worth entertaining" in respect of either basis on which they had brought the applications in question. On this basis the Grand Court held that: "As Ardent makes similar allegations of professional and gross negligence against BDO Trinity, I see no reason for this Court to give the question any new consideration. [4] In the Argyle case, the Grand Court at first instance granted the requested anti-suit injunction restraining proceedings against BDO Trinity, however the CICA reversed this decision, holding that the claims Argyle had filed in New York (also materially the same as those filed by Ardent) fell within the carve out. Our global network of offices covers every time zone. In April 2020 BDO Trinity and Ardent's statutory auditor, BDO Cayman Ltd (together with BDO Trinity, 'BDO'), took out an originating summons against Ardent, seeking anti-suit injunctions to restrain the New York proceedings and damages on the basis that the New York proceedings had been brought in breach of: Unusually, BDO did not seek leave of the Grand Court to commence the proceedings, as required by Section 97 of the Companies Act (2020 Revision),(2) before taking out the originating summons. In its decision, the Grand Court considered that the Court of Appeal had considered the claim in professional and gross negligence made at Paragraphs 221 to 234 of Argyle's New York complaint to be a claim of wilful misconduct falling within the carve out, whatever the deficiencies in the pleadings might be as a matter of Cayman law. Again, if that claim is rejected in whole or part then the claimant can appeal that decision through the bankruptcy court. This contention relied on a series of English decisions, which were to the effect that a company could not commence proceedings itself then subsequently use the equivalent of Section 97 to stymie the defendants. The fact is the Argyle proceedings were effectively at an end the moment BDO Cayman agreed with Argyle on terms not to pursue its appeal to the Privy Council, whatever formalities remained. The Court then considered the relevant authorities for section 97, and found that: "The principles to be extracted from the case law governing section 97 leave are that: (1) The applicant for leave must first establish an arguable case to be litigated; (2) If it establishes an arguable case, the Court then has to consider whether it would be fair, in the context of the liquidation as a whole, for the JOLs to have to deal with the burden of that litigation. The liquidator’s role The decision of the Grand Court provides helpful and succinct guidance on the purpose, meaning and application of section 97, and we understand it has already been referred to in another application for section 97 leave. Rushleigh proposed to sue Forge on behalf of those persons or entities who:1 1. purchased shares in Forge on the Australian Securities Exchange (ASX) at any time during the period from 7 March 2012 to 1 November 2013 (relevant period). The court then considered the relevant authorities for Section 97 and found that: The principles to be extracted from the case law governing section 97 leave are that: (1) The applicant for leave must first establish an arguable case to be litigated; (2) If it establishes an arguable case, the Court then has to consider whether it would be fair, in the context of the liquidation as a whole, for the JOLs to have to deal with the burden of that litigation. The Court of Appeal also held that "the intended effect of the carve-out was that Argyle should be free to bring claims that fall within the carve-out in judicial rather than arbitration proceedings". BDO contended that the pleadings in the New York proceedings, which alleged fraud and gross negligence, were defective as a matter of New York law and so did not fall within the carve out in the sole recourse clause. If I were wrong in so holding, and the mere fact of the breach meets the threshold of 'an arguable case,' then I would refuse the application) on the ground that BDO has suffered no loss. Proceeding against a company in voluntary winding-up In reply, BDO contended that it had lost a limitation defence which would otherwise have been open to it and had accordingly lost the costs of defending the New York proceeding. Ardent, which was not a party to the Argyle proceedings, commenced the New York proceedings on 18 November 2019 – 14 days after the parties to the Argyle proceedings agreed to dismiss the Privy Council appeal. For more information, see Information Sheet 54 Receivership: A guide for creditors (INFO 54). Relevantly, section 97(1) imposes a moratorium on commencing or continuing proceedings against a Cayman Islands company in liquidation without leave of the Grand Court. It also considers some of the policy reasons behind those stays. Instead, BDO sought section 97 leave as the first item of relief in its Originating Summons. The purpose of the agreement was achieved. BDO Cayman did not pursue its appeal to the Privy Council from the decision of the Court of Appeal dismissing the anti-suit injunction granted by the Grand Court against Argyle. The stay means that no action or proceedings can be brought, or continued with, against the company … On 25 November 2019 the registrar dismissed the appeal on the terms agreed by the parties. Ours is the only firm to advise on these five laws. If an individual is made bankrupt, as with administration and liquidation, the proceedings against that individual are stayed, subject to agreement of the trustee in bankruptcy or a court order allowing the trustee to adjudicate on the claim. On this basis, the Grand Court held that: The breach was a technical breach. Keep a step ahead of your key competitors and benchmark against them. When a company is in liquidation, the law provides protection against lawsuits – including shareholder class actions. Ardent Harmony Fund Inc (in Official Liquidation) is a Cayman fund which invested in receivables financing by way of contractually engaged credit advisers. The sole recourse clause was in terms materially the same as the clause considered by the Grand Court then the Court of Appeal ("CICA") in the Argyle proceeding. (3) Referring to the Australian decision of Vagrand v Fielding (113 ALR 128), in turn citing Thompson v Mulgoa Irrigation Co Ltd ((1893) 4 BC (NSW) 33). that a company in liquidation is not to be harassed and its assets wasted by unnecessary litigation, and the leave of the Court is therefore required as a safeguard. Relevantly, Section 97(1) imposes a moratorium on commencing or continuing proceedings against a Cayman company in liquidation without leave of the Grand Court. The requirement for leave to bring proceedings against a company in voluntary liquidation under s 500(2) of the Corporations Act will not be used by the Courts as a de facto certification process to prevent competing class actions. BDO contended that the pleadings in the New York proceeding, which alleged fraud and gross negligence, were defective as a matter of New York law, and so did not fall within the carve out in the sole recourse clause. In respect of the audit engagement letters in the Argyle proceeding, the Court of Appeal held that: it is manifest that these claims are founded on an allegation of fraud or wilful misconduct within the wording of the carve-out. Even if I were wrong, and the fact that there would be dueling opinions on New York law is a basis for holding BDO Cayman has an arguable case that the pleadings are inadequate, then I would also hold that the inadequacy of the pleadings has already been raised in the New York proceedings by BDO Trinity, that the New York Court is best suited to determine a question of New York law and that I should not grant leave. BDO also sought an anti-suit injunction on the basis that Ardent had breached a tolling agreement made between Ardent and BDO, which suspended the limitation period for Ardent’s threatened claims against BDO Cayman and its affiliates, pending the resolution of an anti-suit injunction application by BDO Cayman concerning Argyle. This contention relied on a series of English decisions, which were to the effect that a company could not commence proceedings itself then subsequently use the equivalent of section 97 to stymie the defendants. The Grand Court of the Cayman Islands (the " Grand Court ") recently considered the statutory moratorium against commencing proceedings against a Cayman Islands company which has been placed into liquidation. The CA held that a company in liquidation can refer a dispute to adjudication and an adjudicator does have jurisdiction to hear a claim brought by such a company in the same way that an arbitrator would. For these reasons, the Grand Court held that it would not be right or fair to Ardent's creditors to require Ardent's liquidators to deal with a challenge to the adequacy of the pleadings in the New York proceeding on two fronts, and that the costs of doing so would be an undue burden on Ardent's liquidation estate. Cayman Islands: Commencing Proceedings Against A Cayman Islands Company In Liquidation: Having A Case Worth Entertaining. This period was extended on three occasions, the final extension providing for the agreement (and the tolling period) to end 14 days after the final resolution of any appeal in the Argyle proceedings. For these reasons, the Grand Court held that it would not be right or fair to Ardent's creditors to require Ardent's Liquidators to deal with a challenge to the adequacy of the pleadings in the New York proceeding on two fronts, and that the costs of doing so would be an undue burden on the liquidation estate of Ardent. Please contact [email protected]. ; In this case, the Supreme Court of NSW decided that even though competing class actions would deplete and intermix insurance proceeds, … 12. BDO sought leave to appeal the decision, but the Grand Court refused to grant leave on 18 January 2021. The Grand Court also held that the plaintiffs in that case did not have "a case worth entertaining" in respect of either basis on which they had brought the applications in question. If a liquidator has acted unreasonably in the context of litigation or in provoking another party to commence proceedings against them, there is a real risk that a costs order will be made against the liquidator personally, and depending on the degree of unreasonableness, the liability of the liquidator may not be limited to the assets of the company in liquidation. ", © Copyright 2006 - 2021 Law Business Research. The prohibition against commencing or continuing court proceedings against a company in winding up is an essential feature of the liquidation process. Real Estate Structuring, Acquisitions and Disposals, Corporate and Financial Services Disputes, Real Estate, Infrastructure and Energy Funds, Accounting and Financial Reporting Services, Property law - buying, selling, financing, Offshore relocations – relocating your business, Offshore relocations – relocating your family, To the point: Bringing the Ogier brand to life, Commencing proceedings against a Cayman Islands company in liquidation, the engagement letters entered between Ardent and BDO Cayman in respect of BDO's audits of Ardent; and, a tolling agreement in place between Ardent, BDO Cayman, BDO Trinity and other BDO affiliates, which suspended Ardent's claims against BDO pending the resolution of claims brought against BDO by another Cayman fund called Argyle Fund SPC (". Before any action can be brought or continued against a company, the court must investigate the intended litigation.”. Questions? The original agreement provided that the tolling period would accrue from the tolling date until 30 days after final resolution of the Argyle proceedings. Before any action can be brought or continued against a company, the court must investigate the intended litigation. (2) Formerly the Companies Law; Cayman laws were recently renamed 'acts' pursuant to the Citation of Acts of Parliament Law 2020. BDO contended that there was no question that this was a clear breach of the tolling agreement and that BDO was entitled to strictly enforce the terms of the agreement and ask the Grand Court to restrain the New York proceedings. The Grand Court's decision provides helpful and succinct guidance on the purpose, meaning and application of Section 97 of the Companies Act (2020 Revision) and appears to have already been referred to in another application for Section 97 leave. The Registrar advised in turn that a formal application to withdraw the appeal had to be made. The sole recourse clause was in terms materially the same as the clause considered by the Grand Court and then the Court of Appeal in the Argyle proceeding. Review your content's performance and reach. Even if I were wrong, and the fact that there would be dueling opinions on New York law is a basis for holding BDO Cayman has an arguable case that the pleadings are inadequate, then I would also hold that the inadequacy of the pleadings has already been raised in the New York proceedings by BDO Trinity, that the New York Court is best suited to determine a question of New York law and that I should not grant leave.". BDO Cayman thereafter advised the Registry of the Privy Council that it wished to withdraw its notice of appeal. The particulars from Companies House 17 should specify the form of winding-up where a company is in liquidation. Understand your clients’ strategies and the most pressing issues they are facing. BDO also sought an anti-suit injunction on the basis that Ardent had breached a tolling agreement made between Ardent and BDO, which suspended the limitation period for Ardent's threatened claims against BDO Cayman and its affiliates, pending the resolution of an anti-suit injunction application by BDO Cayman concerning Argyle. In November 2019 Michael Pearson and Andrew Childe of FFP Limited, Ardent's joint official liquidators (JOLs), commenced proceedings on Ardent's behalf against BDO Trinity Ltd in the Supreme Court of the State of New York, Nassau County (the 'New York proceedings'). The purpose of the agreement was achieved. Ogier provides practical advice on BVI, Cayman Islands, Guernsey, Jersey and Luxembourg law through its global network of offices. The Grand Court recently considered the statutory moratorium against commencing proceedings against a Cayman company which has been placed into liquidation. This means that litigation proceedings on foot are suspended and proceedings cannot be commenced against the company generally, or to recover or … when a winding-up order has been made, any attachment, distress or execution put in force against the estate or effects of the company after the commencement of the winding up is void. If I were wrong in so holding, and the mere fact of the breach meets the threshold of “an arguable case,” then I would refuse the application on the ground that BDO has suffered no loss. In a compulsory liquidation (ie a liquidation commencing with a winding-up order), claims and actions against the company in liquidation or its property are limited by virtue of a statutory stay that takes effect under section 130 of the Insolvency Act 1986 the moment the court makes the winding-up order. This provision requiring leave of Court is similar to a compulsory winding up situation where section 226 (3) provides for a similar stay and no action or proceeding shall be proceeded with or commenced against the wound up company except by leave of Court. Relevantly, Section 97(1) imposes a moratorium on commencing or continuing proceedings against a Cayman company in liquidation without leave of the Grand Court. Commencing proceedings against a Cayman Islands company in liquidation: having a case worth entertaining The Grand Court of the Cayman Islands recently considered the statutory moratorium against commencing proceedings against a Cayman Islands company which … With over 650 employees in nine locations Ogier provides multi-jurisdictional legal advice across all time zones. We get straight to the point, managing complexity to get to the essentials. We are the only law firm to advise on BVI, Cayman Islands, Guernsey, Jersey and Luxembourg law. On this basis, the Grand Court held that "as Ardent makes similar allegations of professional and gross negligence against BDO Trinity, I see no reason for this Court to give the question any new consideration". The Court of Appeal held that claims against the BDO affiliates falling within the carve out were not subject either to arbitration or to the exclusive jurisdiction clause in the agreements made between BDO Cayman and Argyle. The purpose of the agreement was to toll all and any limitation periods in order to preserve Ardent's right to pursue its intended claims. The liquidator or any creditor or shareholder may, however, apply to the court for a stay of any proceedings although this will not be granted automatically. There is an automatic stay of legal proceedings against the company or its assets (section 130, IA 1986). To double check whether a compulsory winding-up order has been made, you should telephone the general enquiry line of the Insolvency Service (020 7291 6895) quoting the company number. However, the Court of Appeal reversed this decision, holding that the claims that Argyle had filed in New York (also materially the same as those filed by Ardent) fell within the carve out. Moratorium on proceedings against the company – Unlike a compulsory liquidation, when a creditors’ voluntary liquidation is commenced there is no automatic moratorium on proceedings against the company. In November 2019, Michael Pearson and Andrew Childe of FFP Limited, the Joint Official Liquidators ("JOLs") of Ardent, commenced proceedings on Ardent's behalf against BDO Trinity Ltd ("BDO Trinity"), in the Supreme Court of the State of New York, Nassau County (the "New York proceedings"). But in cases such as this, where a cross-claim was brought by a creditor (Lonsdale), it would be unjust to allow the adjudication to continue. The stay means that no action or proceedings can be brought, or continued with, against the company without the leave of the court. This application was made on 7 November 2019. It is possible for a company in liquidation to also be in receivership. Commencing proceedings against a company in liquidation is never straightforward. The purpose of the Tolling Agreement was to stop Ardent from commencing proceedings until the Argyle Proceedings were concluded, and Ardent's agreement was secured on the basis that all periods of limitation and repose would be suspended. 2. entered into a litigation funding agreemen… They may not comply with the pleading requirements in England and the Cayman Islands, but Mr. Laffey deposed in his affidavit that they complied with New York’s pleading requirements and there was no admissible evidence to the contrary. The High Court has confirmed that it has jurisdiction to retrospectively grant leave for the commencement of proceedings against a company which is being wound-up. ", "…the mere fact that BDO Cayman has a lawyer who will say that Ardent’s claims do not, in fact, comply with New York pleading requirements, does not mean they have a case which is ‘worth entertaining’. In a compulsory liquidation (ie a liquidation commencing with a winding-up order), claims and actions against the company in liquidation or its property are restricted by a statutory stay that takes effect under section 130(2) of the Insolvency Act 1986 . The CICA held that claims against the BDO affiliates falling within the carve-out were not subject either to arbitration or to the exclusive jurisdiction clause in the agreements made between BDO Cayman and Argyle. In its decision, the Grand Court held that the rationale of Section 97(1) was:(3). "…the intended effect of the carve-out was that Argyle should be free to bring claims that fall within the carve-out in judicial rather than arbitration proceedings". 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