Re ICP Strategic Credit Income Fund Ltd and ICP Strategic Credit Income Master Fund Ltd

• Jurisdiction: Cayman Islands
• Court: Grand Court (Cayman Islands)
• Judge: (Jones, J.)
• Judgment Date: 15 May 2014
• Date: 15 May 2014

IN THE MATTER OF ICP STRATEGIC CREDIT INCOME FUND LIMITED and ICP STRATEGIC CREDIT INCOME MASTER FUND LIMITED

(Jones, J.)

Grand Court, Financial Services Division

Companies-liquidators-control by court-may sanction liquidators” litigation in foreign court against parties to fraudulent trading under Companies Law (2013 Revision), s.147-will refuse sanction if foreign court unlikely to apply substantive Cayman law

Held, granting the application:

(1) The liquidators were entitled to seek a declaration under the Companies Law (2013 Revision), s.147 in the US courts. Section 147 should be read with s.146, which created a restitutionary remedy when any of the company”s property was disposed of at an undervalue with the intent of defrauding its creditors. These provisions were introduced in the same amending Law and were aimed at different aspects of the same mischief, although s.146 did not contain any reference to the word ‘court.’ There was no apparent reason why the legislature would intend that a

remedy under s.146 could be pursued extraterritorially but that one under s.147 could only be granted domestically; the use of the word ‘court’ in s.147 was not, therefore, intended to limit the remedy to the Grand Court. Further, s.147 must have been intended to apply to individuals who were not domiciled or resident in Cayman as to find otherwise would vastly reduce the section”s utility. Accordingly, it was unlikely that the legislature had intended that this remedy could only be granted in the domestic court. The application of the literal or grammatical meaning of the word ‘court,’ as defined in s.2(1), therefore created an anomalous, irrational or illogical result when put into the proper context and, for the purposes of s.147, the proper construction of the word ‘court’ must have included a foreign court (paras. 3–7).

(2) The court would sanction the liquidators” application. Although the court would not grant its sanction if the claim were likely to be struck out on jurisdictional grounds, the US Bankruptcy Court was likely to allow for the application of substantive Cayman law. Further, it was impossible for the liquidators to pursue the claim in the Grand Court as the law firm did not have any presence in Cayman and the damage suffered was the result of acts performed in New York. It was therefore in the best interests of the funds” creditors for the proceedings to be sanctioned (paras. 7–9).

Case cited:

(1) Bilta (UK) Ltd. v. Nazir (No. 2), [2014] Ch. 52; [2013] 3 W.L.R. 1167; [2014] 1 All E.R. 168; [2014] 1 Lloyd”s Rep. 113; [2013] STC 2298; [2013] BCC 655; [2014] 1 BCLC 302, applied.

Legislation construed:

Companies Law (2013 Revision), s.147: The relevant terms of this section are set out at para. 3.

The joint official liquidators...