Kuwait LBO Fund L.P. (in Voluntary Liquidation) and the Exempted Ltd Partnership Act (2021 Revision)
| Jurisdiction | Cayman Islands |
| Judge | Justice David Doyle |
| Judgment Date | 09 November 2021 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE FSD NO. 273 OF 2021 (DDJ) |
The Hon. Justice David Doyle
CAUSE FSD NO. 273 OF 2021 (DDJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Sections 36(3)(g) and 36(13) of the Exempted Limited Partnership Act (2021 Revision)—declaration in respect of the validity of the appointment of voluntary liquidators — non-party indemnity costs order
Mr Adrian Davey and Mr James Eldridge of Maples and Calder (Cayman) LLP on behalf of the Public Institution for Social Security for the State of Kuwait
There was no appearance by or on behalf of First Services International
The Public Institution for Social Security for the State of Kuwait (the “Petitioner”) seeks “a direction and/or a declaration pursuant to s.36(3)(g) of the [Exempted Limited Partnership Act (2021 Revision)] that the Appointment Resolution was validly passed, and that Alexander Lawson and Christopher Kennedy each of Alvarez and Marsal Cayman Islands Limited… were and are duly appointed as voluntary liquidators of the Fund, namely Kuwait LBO Fund L.P.”
The Appointment Resolution reads follows:
“KUWAITLBO FUND, L.P. (the “Fund”)
WRITTEN RESOLUTION OF THE MAJORITY IN INTEREST OF THE LIMITED PARTNERS
WHEREAS the Fund, which was previously known as Noor Kuwait LBO Fund, L.P., is a Cayman Islands exempted limited partnership, the terms of which are governed by its Amended and Restated Limited Partnership Agreement dated September 2007 (the “ LPA”). Save where otherwise indicated defined terms in this resolution have the same meaning as in the LPA.
WHEREAS the general partner of the Partnership is Kuwait LBO Fund GP (the “ General Partner).
WHEREAS the term of the Fund has ended pursuant to clause 2.4 of the LPA, at which time the liquidation of the Fund commenced pursuant to clause 9.1(a) of the LPA (and section 35(1)(a) of the Exempted Limited Partnership Law (2018 Revision)), with the General Partner having been appointed to act as liquidator pursuant to clause 9.2 of the LPA.
WHEREAS the Public Institution for Social Security (“ PIFSS”) is a Limited Partner of the Fund, holding more than 50% in Interest of the Limited Partners of the Fund.
WHEREAS the General Partner (a) currently has no directors; (b) currently has no registered office (in breach of the Companies Law (2020 Revision); (c) has been designated by the Cayman Islands Registrar of Companies as being due to be struck off the register; and (d) has been unable or unwilling to progress the liquidation of the Fund.
WHEREAS in premise of the above the General Partner is unavailable to act as liquidator of the Fund.
WHEREAS in premise of the above PIFSS is entitled pursuant to clause 9.2(a) of the LPA to designate and appoint alternative liquidators to the Fund.
IT IS RESOLVED THAT:
Mr Alexander Lawson and Mr Christopher Kennedy of Alvarez and Marsal be and hereby are duly appointed as Liquidators of the Fund, with the power to act jointly and severally.
For and on behalf of The Public Institution for Social Security
Name: Meshal Alothman
Title: Director General
Dated: September 14, 2020”
The Petitioner is stated to be an entity established under Kuwaiti law with, among other things, the ability to enter into contracts and bring legal proceedings in its own name. Kawaley J in ( Adamas Asia Strategic Opportunity Fund Limited (in voluntary liquidation) FSD; unreported judgment 23 July 2019) described the Petitioner as “a Kuwaiti public institution responsible for implementing a social security scheme”.
Section 36(3)(g) of the Exempted Limited Partnership Act (2021 Revision) (the “ELP Act”) provides as follows:
“Except to the extent that the provisions are not consistent with this Act, and in the event of any inconsistencies, this Act shall prevail, and subject to any express provisions of this Act to the contrary, the provisions of Part V of the Companies Act (2021 Revision) and the Companies Winding Up Rules, 2018 shall apply to the winding up of an exempted limited partnership and for this purpose… on application by a partner, creditor or liquidator, the court may make orders and give directions for the winding up and dissolution of an exempted limited partnership as may be just and equitable.”
In addition to this jurisdiction, the Court also has a discretionary power to grant a declaration as to the legal rights of the parties. The Court should take into account justice to all parties and whether the declaration would serve a useful purpose.
Mr Adrian Davey, who appeared on behalf of the Petitioner, helpfully drew the Court's attention to section 11(2) of the Grand Court Act (2015 Revision) which provides that:
“Without prejudice to subsection (1), the Court shall have and shall be deemed always to have had power to make binding declarations of right in any matter whether any consequential relief is or could be claimed or not.”
Order 15 rule 16 of the Grand Court Rules provides that the Court may make binding declarations of right whether or not any consequential relief is or could be claimed.
Mr Davey brought to the Court's attention the judgment of Mangatal J in Woods v. Thompson and Saxon Motor and General Insurance Company Limited 2016 (2) CILR 1. Mangatal J in that judgment referred to various English authorities which included a reference to Neuberger J's (as he then was) well known judgment in Financial Services Authority v. Rourke (trading as J E Rourke & Co) [2002] CP Rep 14. It will be recalled that Neuberger J said that when considering whether to grant a declaration, the Court should take into account what was just for both parties, whether the declaration would serve a useful purpose and whether there were special reasons why the Court should not grant a declaration.
There is also reference at page 21 of Mangatal J's judgment to the dissenting judgment of Aikens LJ in Rolls-Royce plc v. Unite the Union [2010] 1 WLR 318 containing a summary of the principles derived from earlier cases and I can, for present purposes, limit my reference to the first three:
“(1) The power of the court to grant declaratory relief is discretionary.
(2) There must, in general, be a real and present dispute between the parties before the court as to the existence or extent of a legal right between them. However, the claimant does not need to have a present cause of action against the defendant.
(3) Each party must, in general, be affected by the court's determination of the issues concerning the legal right in question.”
In this case, for reasons which follow, I am satisfied that the directions sought under section 36(3)(g) of the ELP Act and the declaration sought would serve a useful purpose; i.e. bringing clarity to the appointment of Alexander Lawson and Christopher Kennedy as voluntary liquidators (the “JVLs”) of Kuwait LBO Fund L.P (the “Fund”) and placing the validity of their appointment beyond dispute, and I can see no reason as to why the directions and declaration requested should not be made.
I need to record the position in connection with service of the papers filed with the Court. The evidence reveals that the Petitioner is one of only two limited partners of the Fund. The other limited partner is First Services International (“FSI”), a company incorporated in the Cayman Islands. The Petitioner invested US$25,000,000 into the Fund and FSI invested US$9,000,000. The Petitioner holds approximately 73.5% of the limited partnership interest in the Fund and FSI holds the remainder.
The general partner of the Fund was Kuwait LBO Fund GP Limited (the “GP”), a Cayman Islands exempted limited company. It appears that the GP was struck off the Cayman Islands Companies Register on 30 October 2020. The evidence also reveals that the directors of the GP resigned on 17 December 2019.
I am satisfied that FSI has been duly served and has been given notice of these proceedings and this hearing. FSI has been given an opportunity to participate.
Maples and Calder (Cayman) LLP (“Maples”), attorneys for the Petitioner, by email dated 20 September 2021 to Ahmed Al Saleh and Ali El-Hakim of FSI provided copies of the petition, the affidavit of Meshal Alothman and a Notice of Hearing confirming that the matter would be heard today, 29 October 2021 at 10.00 a.m. Cayman Islands' time.
At paragraph 3 of the prayer of the petition, it is made clear that the Petitioner is seeking an order that FSI pay the Petitioner's costs on the indemnity basis. FSI has not appeared or caused an appearance to be entered today on its behalf.
By further email dated 5 October 2021 from Maples to FSI it was confirmed, for the avoidance of any doubt, that Maples were instructed to proceed with seeking the orders in the petition at the hearing on 29 October 2021 and it was expressly and fairly highlighted that “this includes seeking an order for costs against [FSI]”.
By email dated 25 October 2021 a copy of the Petitioner's skeleton argument was sent to FSI and by email dated 26 October 2021 a copy of the affidavit and exhibit of Christopher Kennedy dated 25 October 2021 was sent to FSI. This produced a somewhat strange email dated 28 October 2021 at 1.10 a.m. from Ahmed Al Saleh, at the email address used to send the documents that I have just referred to. Ahmed Al Saleh describes himself as ‘Director, First Services International, Majority Shareholder — Kuwait LBO Fund GP Ltd.” I have read that email carefully a number of times and unfortunately it fails to engage constructively in respect of the...
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