Re Citrico International Ltd

• Jurisdiction: Cayman Islands
• Judge: (Levers, J.)
• Judgment Date: 21 June 2005
• Court: Grand Court (Cayman Islands)
• Date: 21 June 2005

Grand Court

(Levers, J.)

IN THE MATTER OF CITRICO INTERNATIONAL LIMITED

M.W. Imrie for the applicant;

Ms. S.M. Corbett and K. Krys for the liquidators.

Case cited:

(1) Contract Corp. (Gooch”s case), In re, (1871), L.R. 7 Ch. App. 207, applied.

Legislation construed:

Companies Law (2004 Revision) (Laws of the Cayman Islands, 1963, cap. 22, revised 2004), s.94(a): The relevant terms of this paragraph are set out at para. 2.

s.159: The relevant terms of this section are set out at para. 9.

Companies-liquidators-powers and duties-duty of disclosure-liquidators to make available to ‘interested party’ (e.g. having equity of redemption in company”s shares, even if may be of no value) any books or papers (including reports) it requires-interested party need not be shareholder or creditor to access confidential information

The applicant company, which was entitled to an equity of redemption in the shares of its subsidiary, sought the disclosure of reports and accounts of the joint liquidators of its subsidiary.

The applicant Citrico Inc., the parent company of Citrico International Ltd. which was established to do business with the Coca Cola company (‘KO’), pledged its shareholding to KO to secure the obligations of Citrico International Ltd. whose bank loans were guaranteed by KO. Citrico International Ltd. defaulted and KO, as mortgagee in possession of Citrico Inc.”s shares, passed a special resolution that Citrico International Ltd. be wound up by order of the court (under Companies Law (2004 Revision), s.94(a)). If Citrico International Ltd. were solvent and able to repay KO, any surplus would pass to Citrico Inc. The liquidators of Citrico International Ltd. paid off some of Citrico Inc.”s loans, without consulting or reporting this to Citrico Inc., in order to sell Citrico International Ltd.”s assets and projected that there would be no surplus in the winding up. Citrico Inc. sought disclosure of their reports and accounts.

The applicant submitted that (a) its equity of redemption gave it locus standi to say that it was an interested party and that, as such, it was entitled to the information requested; (b) the liquidators were fiduciaries, their duty to report was a fundamental obligation and they owed a duty to

Citrico Inc. to give it every assistance in finding the information it needed; (c) Citrico International Ltd. was of doubtful solvency-it had not been found by a court to be insolvent, the application was therefore not strictly one under the liquidation, and the applicant was entitled to know how Citrico International Ltd. became insolvent; (d) if KO were paid off in full, Citrico Inc.”s rights would be activated and it therefore had an interest in obtaining the information to establish if it had a tangible interest (i.e. if its equity of redemption had value) for the purposes of any further application; and (e) Citrico Inc. was neither presenting a petition to wind up nor acting on behalf of the company, but asking the liquidators to report and to account to it, as a party who had an interest.

The liquidators submitted that (a) the applicant had no locus standi because it was neither a shareholder (KO being the sole shareholder) nor a creditor; (b) the applicant”s equity of redemption in the mortgaged shares of Citrico International Ltd. did not give it locus to present a winding-up petition or to act on behalf of the company; (c) even if Citrico Inc...