Re Belmont Asset Lending

JurisdictionCayman Islands
Judge(Jones, J.)
Judgment Date19 December 2011
CourtGrand Court (Cayman Islands)
Date19 December 2011
Grand Court, Financial Services Division

(Jones, J.)

IN THE MATTER OF BELMONT ASSET BASED LENDING LIMITED

P. Hayden and S. Dickson for the applicants;

F. Hughes for the respondent;

A. Bolton for Bear Stearns.

Cases cited:

(1) Emergent Capital Ltd., In re, 2011 (2) CILR 315, applied.

(2) Traianedes v. Mercury Brands Group Pty. Ltd. (No. 2), [2010] FCA 1140, applied.

Legislation construed:

Companies Winding Up Rules 2008, O.11, r.3(2): The relevant terms of this paragraph are set out at para. 12.

O.11, r.4(2): ‘When a sanction application is made by the liquidation committee or any creditor or contributory-

. . .

(b) it shall be the duty of the official liquidator to swear an affidavit in reply or make a report which states whether he-

(i) supports the application; or

(ii) opposes the application, in which case his affidavit or report must contain the evidence and analysis upon which he relies in opposition to the application; or

(iii) adopts a neutral position, in which case his affidavit or report must contain any evidence, not already before the Court, which he considers to be relevant to the Court”s decision.’

O.16, r.1(4): The relevant terms of this paragraph are set out at para. 6.

O.24, r.9(2): ‘The official liquidator”s costs of making a sanction application shall be paid out of the assets of the company unless the Court is satisfied that-

(a) the application ought not to have been made because the directions sought by the official liquidator were unnecessary and served no useful purpose; [or]

(b) the directions sought by the official liquidator were wholly unreasonable . . .’

Companies Law (2011 Revision), s.110(3): The relevant terms of this sub-section are set out at para. 13.

Companies-liquidators-powers and duties-no unqualified right to be heard in sanction application under CWR, O.11, r.3(2) or r.4(2)(b) at company”s expense-company in liquidation not party to liquidation proceedings but ‘subject-matter’ of proceedings-if sanction application takes on form of inter partes action, court may authorize or direct JOLs to take no part-continued participation then at own risk as to costs

Joint official liquidators were appointed to wind up the company on the just and equitable ground (in proceedings reported in 2010 (1) CILR 83).

The petitioner, Bear Stearns, which applied in its capacity as a contributory, subsequently claimed to be an ordinary unsecured creditor of the company (‘the Fund’). On legal advice, the JOLs concluded that Bear Stearns should be admitted to proof as an ordinary unsecured creditor but did not in fact follow this advice. Instead, they made a sanction application by which they sought the direction of the court that Bear Stearns be admitted to proof. In response, three shareholders issued a summons for directions and argued, inter alia, that the JOLs should take no further part in the proceeding. At the hearing, the three shareholders were supported by three unpaid redeemed shareholders (collectively ‘the Six Shareholders’). The Six Shareholders submitted that the JOLs should have either adjudicated the proof or adopted a neutral position and made a sanction application. The Grand Court made an order for directions that, inter alia, the sanction application be treated as an application by Bear Stearns against Finter Bank Zurich Ltd. (one of the Six Shareholders, which agreed to act in a representative capacity on behalf of all six) and that the JOLs take no further part in the application. The JOLs sought a variation of the direction that they take no further part in the application or alternatively for leave to appeal to the Court of Appeal. Finter applied for an order under the Companies Winding up Rules 2008, O.24, r.9(2)(a) and (b) that the applicants be deprived of their right to be paid the costs of the application out of the Fund”s assets.

The JOLs submitted that (i) by virtue of O.11, r.3(2) and pursuant to their duty under O.11, r.4(2)(b) to swear an affidavit in reply to any sanction application, official liquidators had an unqualified right to be heard on every aspect of a sanction application; and (ii) as the purpose of

the sanction application was to resolve an issue about the contractual rights as between Bear Stearns and the Fund, the Fund was the respondent with a right to be heard. Finter submitted that the JOLs should be deprived of their right to be paid the costs of the present application out of the Fund”s assets on the basis that their application was ‘unnecessary’ or ‘unreasonable’ within the meaning of O.24, r.9(2)(a) and (b).

Held, allowing the JOLs” application and rejecting the Six Shareholders” application:

(1) O.11, r.3(2) did not give the JOLs an unqualified right to be heard on every aspect of a sanction application at the expense of the company. When a sanction application took on the character of an inter partes action between stakeholders in which substantive rights against the company would be determined, the court could authorize or direct that the JOLs take no further part in the proceeding in order to avoid incurring unnecessary expense. Moreover, the JOLs” duty under O.11, r.4(2)(b) did not give them an ongoing right to be heard. They had already put the relevant documents in evidence and the evidence was undisputed and accepted by all parties as complete (paras. 12–14).

(2) The Fund was not a ‘party’ to the liquidation proceeding; it was the ‘subject-matter’ of the proceeding. The JOLs did not make the sanction application as agent on behalf of the company, but commenced it in their own right. It followed that the Fund had not been deprived of any right to be heard (para. 15).

(3) Though the court was not persuaded that the JOLs” continued participation in the application would serve any useful purpose, the direction that the JOLs take no further part in the sanction application was unnecessarily prescriptive. The court would vary it to provide that the JOLs were authorized to take no further part in the application but if they participated, they would do so at their own risk as to costs (para. 17).

(4) No leave to appeal would have been given as the case raised a pure liquidation case management issue and no point of principle which ought to be considered by the Court of Appeal (para. 18).

(5) As the JOLs were successful in their application to vary the direction, it was not ‘unnecessary’ or ‘unreasonable’ within the meaning of O.24, r.9(2)(a) and (b) and they should not therefore be denied their costs of the application (para. 19).

1 JONES, J.: This is an application by the Official Liquidators of Belmont Asset Based Lending Ltd. (referred to as ‘the Fund’ and ‘the JOLs’) for an order that my order for directions made on November 24th, 2011 in connection with a sanction application be varied or, alternatively, for leave to appeal to the Court of Appeal.

2 The Fund was put into compulsory liquidation on the basis of a contributory”s petition presented by Bear Stearns on the ground that the...

To continue reading

Request your trial
2 cases
  • The Companies Act (2022 Revision) and Ascentra Holdings, Inc. (in Official Liquidation)
    • Cayman Islands
    • Grand Court (Cayman Islands)
    • 3 November 2022
    ...of DD Growth Premium 2XFund 2013 (2) CILR 361 (“ DD Growth Premium”); (2) In the matter of Re Belmont Asset Based Lending Limited 2011 (2) CILR 484 (“ Belmont Asset”); (3) Emergent Capital Limited 2012 (1) CILR 12 “ Emergent Capital”); and (4) Traianedes in his capacity as Deed Administrato......
  • Re Herald Fund SPC (in official liquidation)
    • Cayman Islands
    • Court of Appeal (Cayman Islands)
    • 19 July 2016
    ...Attorneys: Walkers for the appellant; Mourant Ozannes for the respondent. Cases cited: (1)Belmont Asset Based Lending Ltd., In re, 2011 (2) CILR 484, referred to.referred to. (2)Culross Global SPC Ltd. v. Strategic Turnaround Master Partnership Ltd., 2010 (2) CILR 364, applied.applied. (3) ......
1 firm's commentaries

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT