Re Freerider Ltd

JurisdictionCayman Islands
Judge(Foster, J.)
Judgment Date16 December 2010
CourtGrand Court (Cayman Islands)
Date16 December 2010
Grand Court

(Foster, J.)

IN THE MATTER OF FREERIDER LIMITED

Attorneys: Appleby for the petitioner; Turner & Roulstone for the respondent; Maples & Calder for the liquidators; Campbells for the GCF Group.

Companies-compulsory winding up-contributories

A winding-up order was made and official liquidators appointed in respect of a company established as a quasi-partnership between two contributories, Mr. Heinen and Mr. Le Comte. Subsequently, Mr. Le Comte, purporting to act on behalf of the company, entered into promissory notes with 733 Properties providing inter alia for the grant by the company of security over all of its assets. 733 Properties then assigned its rights to the GCF Group. In July 2009, Mr. Heinen applied for a declaration that the promissory notes and the security were void. In August 2009, the liquidators brought a summons seeking substantially the same relief. Following this, Mr. Heinen did not proceed with his own application, instead actively participating in proceedings on the liquidators” summons.

The Grand Court (Foster, J.) held that the security was void under s.99 of the Companies Law (2010 Revision) (in proceedings reported at 2010 (2) CILR 154). Mr. Heinen applied for his costs arising on both his original application and the proceedings on the liquidator”s summons. Mr. Le Comte and the GCF Group opposed Mr. Heinen”s application on the basis that he did not have locus standi to seek a declaration that the security was void.

Held: (1) The proper plaintiff in proceedings to recover property or obtain reimbursement for the benefit of a company in liquidation was the company itself, acting through its liquidators (Re Ayala Holdings Ltd., [1993] BCLC 256, dicta of Chadwick, J. applied). Mr. Heinen should have understood and accepted that, from the time the company entered official liquidation, it was no longer under his-or Mr. Le Comte”s-control, but that of the officially-appointed liquidators. This was necessary to protect the general body of creditors, since liquidators were generally required to act in the interests of creditors, whereas Mr. Heinen, as a contributory, came under no such obligation. If Mr. Heinen had felt that the liquidators had failed to exercise their powers properly, it was open to him to make a sanction application under O.11 of the Companies Winding Up Rules. He did not have locus standi to seek a declaration that the security was void.

(2) The court would generally award...

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