Re Awal Fin Company
| Jurisdiction | Cayman Islands |
| Judge | (Smellie, C.J.) |
| Judgment Date | 22 June 2011 |
| Court | Grand Court (Cayman Islands) |
| Date | 22 June 2011 |
(Smellie, C.J.)
D. Dinner for the liquidators (and three of the liquidators in person);
G. Keightley and Ms. C. Whittaker for AHAB.
(1) Bristol Fund Ltd., In re, 2008 CILR 317, applied.
(2) Oryx Natural Resources, In re, 2007 CILR N[6], distinguished.
(3) Strategic Turnaround Master Partnership Ltd., In re, 2008 CILR 447, distinguished.
Companies Law (2010 Revision), s.92(d): The relevant terms of this sub-section are set out at para. 10.
s.93: The relevant terms of this section are set out at para. 10.
s.139(1): The relevant terms of this sub-section are set out at para. 17.
Companies Winding Up Rules 2008, O.8, r.1(1): The relevant terms of this paragraph are set out at para. 2.
O.9, r.1(3), as amended by the Companies Winding Up (Amendment) Rules 2010, s.2: The relevant terms of this paragraph are set out at para. 3.
O.9, r.1(6), as amended by the Companies Winding Up (Amendment) Rules 2010, s.2: The relevant terms of this paragraph are set out at para. 6.
O.9, r.1(7), as amended by the Companies Winding Up (Amendment) Rules 2010, s.2:
‘If the official liquidator is satisfied, for whatever reason, that it will be practically impossible to establish a liquidation committee in accordance with the foregoing rules, he shall apply to the Court for-
(a) a direction dispensing with the need to establish any liquidation committee; or
(b) a direction permitting the establishment of a liquidation committee with a fewer number of members or a different combination of creditors and contributories.’
Companies-liquidation committee-establishment-no dispensing with need for liquidation committee because only one contributory, if liquidators should have found company doubtfully solvent thereby making contingent creditor qualify for committee-when determining company”s solvency under Companies Winding Up Rules, O.8, r.1(1), liquidators to take account of contingent liabilities pursuant to Companies Law (2010 Revision), s.139(1)
The Awal companies were in official liquidation in the Grand Court.
AHAB, a Saudi Arabian company, brought an action against several parties, including the Awal companies, claiming damages for an alleged fraud. The Awal companies, which each had one contributory, were placed into liquidation in the Grand Court.
Their joint official liquidators applied pursuant to the Companies Winding Up Rules, O.9, r.1(7) to dispense with the need to establish liquidation committees, submitting that (a) they had determined that the Awal companies were solvent in accordance with CWR, O.8, r.1(1); (b) they were right to exclude AHAB”s claim when considering whether the Awal companies were solvent, as it was only a contingent claim and therefore not relevant to the determination of solvency under ss. 92(d) and 93 of the Companies Law (2010 Revision); (c) by CWR, O.9, r.1(3), a liquidation committee in respect of a solvent company was required to consist of at least three contributories; and (d) there being only one
contributory in respect of each of the Awal companies (AHAB being merely a contingent creditor), it was practically impossible to establish liquidation committees.
AHAB submitted in reply that (a) by s.139(1) of the Companies Law, contingent liabilities were to be considered and provided for when determining whether a company in liquidation was solvent; (b) had the liquidators made proper provision for its claim, they would have concluded that the Awal companies were at best of doubtful solvency; (c) by CWR, O.9, r.1(6), such a conclusion would require any proposed liquidation committee to involve not only contributories, but also creditors, i.e. AHAB; and (d) it was therefore practically possible to establish liquidation committees, albeit of only two members, in respect of each of the Awal companies.
Held, refusing the applications:
The court would not dispense with the...
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The Companies Act (2023 Revision) and Atom Holdings
...a damages claim for fraud, qualifies for proof under section 139 (1) of the Act. In Re Awal Finance Company Limited and Seven Others [ 2011 (1) CILR 487], Anthony Smellie CJ (as he then was) held as follows: “ 17 In the present circumstances, I entertain no doubt that the JOLs are under an ......
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...The proposition that contingent liabilities should be ignored for these purposes was firmly rejected in Re AWAL Finance Company Limited [2011(1)] CILR 487. 3 The application of the net equity methodology in Herald's case is slightly complicated by its transactions with Primeo Fund (In Liqui......
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