Re Emergent Capital

• Jurisdiction: Cayman Islands
• Judge: (Jones, J.)
• Judgment Date: 11 November 2011
• Court: Grand Court (Cayman Islands)
• Date: 11 November 2011

Grand Court, Financial Services Division

(Jones, J.)

IN THE MATTER OF EMERGENT CAPITAL LIMITED

M. Roberts for the applicant;

J. Wood for the creditors;

N. Meeson, Q.C. for the liquidators.

Cases cited:

(1) Australian Consolidated Invs. Ltd. v. WoodingsUNK(1996), 16 W.A.R. 388, referred to.

(2) Condon, In reELR(1874), L.R. 9 Ch. App 609; [1874–80] All E.R. Rep. 388, referred to.

(3) HSH Cayman I GP Ltd. v. ABN AMRO Bank N.V., 2010 (1) CILR 114, applied.

(4) SPhinX Group, In re, 2009 CILR 178, considered.

Companies-voluntary winding up-creditors-proof of debt-court has inherent jurisdiction to allow admitted creditors/shareholders to participate in appeal from liquidator”s rejection of proof of debt, even when no suggestion that liquidator in breach of duty-inconsistent with CWR, O.16, r.17(1) to allow participation as a matter of course-court to require special reason why liquidator cannot represent interests of general body of creditors/shareholders

Emergent Capital Ltd. (ECL) was in voluntary liquidation in the Grand Court.

RAAL Ltd., a shareholder of ECL, applied for permission to appear on five creditors” appeals against the rejection of their respective proofs of debt by the joint official liquidators; it had a financial interest in the outcome of the appeals because the surplus available for distribution would have been reduced if any of the appeals were allowed.

It submitted that the court had an inherent jurisdiction to allow it to participate in order to safeguard its interest, and that, in the circumstances of the case, the court should allow it to participate. It relied on the fact that (i) the creditors appeared to have co-operated together, engaged the same attorneys and supported each others” claims; and (ii) D, who owned and controlled RAAL Ltd., was a material witness in the appeals.

Held, dismissing the application:

The court would not exercise its jurisdiction to allow the applicant to participate. The court”s inherent power in the context of winding-up proceedings could not be exercised in a way which was inconsistent with the scheme of the Companies Winding Up Rules 2008. Order 16, r.17(1) conferred a right of appeal against rejections of proofs in the form of

adversarial proceedings between the dissatisfied creditor and the official liquidator who represented the interests of the general body of creditors/shareholders. Although the court had an inherent jurisdiction to allow third party creditors/shareholders to participate-even when there was no suggestion that the official liquidator had acted in breach of duty in connection with the adjudication-it would be inconsistent...