Between: (1) Kuwait Ports Authority (on its own behalf and on behalf of The Port Fund L.P.) (2) The Public Institution for Social Security (on its own behalf and on behalf of The Port Fund L.P.) (3) The Port Fund L.P. Plaintiffs v (1) Port Link GP Ltd (in Voluntary Liquidation and Receivership) (2) Mark Eric Williams (3) Wellspring Capital Group, Inc. (4) KGL Investment Company Asia (5) Golden Shahin General Trading & Contracting Company (6) Apache Asia Ltd (A Hong Kong Company) (7) Ronald Henry Ayliffe (8) KGL Investment Company KSCC (9) Apache Asia Limitada (A Macao Company) Defendants (1) Gordon Macrae (2) Elizabeth Mackay (in their capacity as joint receivers of Port Link GP Ltd and The Port Fund L.P.) Interested Parties
| Jurisdiction | Cayman Islands |
| Judge | Raj Parker |
| Judgment Date | 06 October 2023 |
| Docket Number | Cause Nos: FSD 236 of 2020 (RPJ) |
| Court | Grand Court (Cayman Islands) |
The Hon. Raj Parker
Cause Nos: FSD 236 of 2020 (RPJ)
THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Section 124 of the Companies Act-discretion-supervision application-liquidation-continuation of receivership-factors in exercise of discretion — dismissal of supervision application and liquidation-different Judge to oversee continuing receivership.
Mr David Allison KC instructed by Ms Jennifer Fox and Mr Harry Clark of Ogier (Cayman) LLP for the Plaintiffs
Mr Andrew Johnstone and Ms Rhiannon Zanetic of Harneys for the Joint Voluntary Liquidators (“JVLs”)
Mr Daniel Bayfield KC instructed by Mr Matthew Dors of Collas Crill, for the Interested Parties (the “Receivers”)
On 18 September 2023, the Court heard an application by the joint voluntary liquidators (“JVLs”) of Port Link GP Ltd (the “GP”) for an order that the liquidation of the GP continue under the supervision of the Court pursuant to section 124 of the Companies Act (the “supervision application”) and to review the Receivership order it had granted in respect of the GP on 1 June 2023.
Mr David Allison KC appeared for the Plaintiffs. Mr Andrew Johnstone appeared for the JVLs. Mr Daniel Bayfield KC appeared for the Receivers.
The Court decided that the Receivers should remain in office and the GP should not go into official liquidation. The supervision application was dismissed.
The Court also decided that the receivership proceedings should be assigned to a separate judge in the Financial Services Division of the Grand Court for the purposes of supervision of the receivership.
These are the reasons for that decision.
Port Link GP Ltd is the general partner of The Port Fund L.P. (“TPF”). The Plaintiffs are Limited Partners of TPF and together with the other limited partners of TPF together hold approximately 65% in value of the total investment.
The term of TPF expired almost nine years ago on 31 December 2014. Since then, TPF's principal activity has been to complete an orderly wind down and make distributions to those entitled to them.
The claims of the limited partners as to the misconduct of TPF's business by the GP (and its related entities and persons) has led to extensive litigation in this Court. Before the orderly wind down of TPF can be completed this litigation needs to be concluded.
One piece of litigation is particularly significant. In the FSD 236 of 2020 proceedings 1 the Plaintiffs are seeking to recover sums belonging to TPF and/or the Limited Partners in excess of USD 100 million which have allegedly been misappropriated by the GP and the other Defendants. The proceedings were commenced some three years ago. 2
The Court is of the view that it is important to ensure that this litigation continues without further undue delay and cost. It will manage the litigation in a cost effective and efficient way, which is
On 15 February 2023 the GP's former independent directors (the “FFP directors”) resigned which left it unable to prosecute or defend the claims to which it is a party. This left D2, Mr Williams, in ultimate control of the GP who could thereby influence the prosecution of the GP's counterclaims and its defence to the cross claim brought by D2 — D4. The Court found that state of affairs to be unsatisfactory and, following a hearing and a reasoned Judgment, appointed receivers as independent officers of the Court to manage the various proceedings on the GP's behalf. It also granted the Plaintiffs leave to defend the cross claim as limited partners of TPF. 3
On 2 May 2023 the GP's sole shareholder passed resolutions inter alia to appoint the JVLs of the GP. On 5 May 2023 the JVLs issued a notice of winding up and consent to act in accordance with sections 123(a) and (b) of the Companies Act and Order 13 rules 2 (a) and (b) of the Companies Winding Up Rules (2023 revision). The JVLs, as they are required to, have now made this application.
They seek to continue to wind up the GP as Official Liquidators under the supervision of the Court in circumstances where there are no directors of the GP able to sign a declaration of solvency.
As stated above, the Court has relatively recently appointed Joint Receivers (the “Receivers”) over the litigation for the GP having decided in its judgment of 25 May 2023 (at [128]) that it was not appropriate, necessary or desirable to appoint a liquidator.
The Court relevantly decided:
at [110] that: “….the most appropriate remedy in all the circumstances which does justice between the parties is to appoint independent Receivers. The main purpose of the appointment is for an independent professional to manage the complex litigation on behalf of the GP reasonably and efficiently. This leads to a more bespoke method of supervision by the Court than that of a statutory liquidation with its rigid rules. The Receiver Application is more flexible and may be tailored to the material circumstances relating to the litigation which will inevitably change.”
at [126] that: “as the Court is presently choosing between liquidation and receivership, liquidation would also be the more invasive remedy. A liquidator would be bound to follow the statutory scheme. The Court agrees with Mr Allison KC that this would sound the ‘death knell’ for the General Partner and liquidators would assume full control going forward.”
at [129] the issue was: “one of incapacity at the General Partner in the context of claims and crossclaims in litigation, not, at least on presently available evidence, insolvency.”
On 5 June 2023, the JVLs issued and served the supervision application, indicating that the directors of the GP had not provided a declaration of solvency within 28 days of the commencement of the voluntary liquidation of the GP (unsurprisingly as the GP has no directors) and accordingly seeking that the winding up of the GP continue under the supervision of the Court.
The JVLs say the supervision application has been made in compliance with the mandatory requirements of the Companies Act, and that it was made “ not to seek to infringe upon or otherwise duplicate the efforts (or costs) of the [JRs] but simply to comply with section 124(1) of the [Companies Act]”.
Mr Johnstone's main arguments in support of the JVLs' written position to continue as official liquidators was to draw the Court's attention to the JVLs' interpretation of the statutory regime. He argued that the Court retained a discretion as to whether to grant a supervision order, but it is a very limited discretion. It arises merely because there is a rebuttable presumption of insolvency. There is no wider discretion.
He was at some pains to point out that the JVLs remained neutral as to the outcome, but the JVLs had provided their consent to act as joint official liquidators of the GP in the event that the Court should consider that appropriate.
Section 124(1) of the Companies Act provides that:
“where a company is being wound up voluntarily its liquidator shall apply to the Court for an order that the liquidation continue under the supervision of the Court unless, within twenty-eight days of the commencement of the liquidation, the directors have signed a declaration of solvency in the prescribed form in accordance with subsection (2).
Section 124(2) of the Companies Act provides that:
“a declaration of solvency means a declaration or affidavit in the prescribed form to the effect that a full enquiry into the company's affairs has been made and that to the best of the directors' knowledge and belief the company will be able to pay its debts in full together with interest at the prescribed rate, within such period, not exceeding twelve months from the commencement of the winding up, as may be specified in the declaration.”
Section 133 of the Companies Act provides that:
“a supervision order shall take effect for all purposes as if it was an order that the company be wound up by the Court except that
(a) the liquidation commenced in accordance with section 117 [i.e. at the time of the passing of the resolution for voluntary winding-up]; and
(b) the prior actions of the voluntary liquidator shall be valid and binding upon the company and its official liquidator.”
As can be seen, section 124 is mandatory in its terms. The JVLs have a statutory duty to apply, absent a declaration of solvency.
However, in this case there is no application made upon evidence that the JVLs have determined that in all the circumstances that it is necessary or desirable for there to be a Court supervised liquidation. The application is made simply because it is a mandatory step that the JVLs should apply for an order that the liquidation continue under the supervision of the Court.
There is some limited case law guidance on section 124(1).
In the first case to...
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