Re MerchantBridge Managers

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 09 February 2012
• Court: Grand Court (Cayman Islands)
• Date: 09 February 2012

Grand Court, Financial Services Division

(Smellie, C.J.)

IN THE MATTER OF MERCHANTBRIDGE MANAGERS INCORPORATED

A.G. Bompas, Q.C., T. Gentleman and M. Mulligan for the applicant.

Cases cited:

(1) American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396; [1975] 1 All E.R. 504, applied.

(2) Atlasview Ltd. v. Brightview Ltd., [2004] 2 BCLC 191; [2004] BCC 542; [2004] EWHC 1056 (Ch), referred to.

(3) Ebrahimi v. Westbourne Galleries Ltd., [1973] A.C. 360; [1972] 2 W.L.R. 1289; [1972] 2 All E.R. 492; (1972), 116 Sol. Jo. 412, applied.

(4) O”Neill v. Phillips, [1999] 1 W.L.R. 1092; [1999] 2 All E.R. 961; [1999] 2 BCLC 1; [1999] BCC 600, referred to.

(5) R & H Electrical Ltd. v. Haden Bill Electrical Ltd., [1995] 2 BCLC 280; [1995] BCC 958, applied.

(6) Strategic Turnaround Partnership Ltd., In re, 2008 CILR 447, applied.

Companies-compulsory winding up-grounds for winding up-‘just and equitable’-individual has locus standi to petition on just and equitable ground even though participates in quasi-partnership as beneficial owner of another company-to take broad approach and recognize underlying interest of individual

The petitioner, Mena Financial Inc. (‘MENAFIN’), sought the winding up of the respondent company (‘ManCo’) on the just and equitable ground.

Mr. Le Blan was MENAFIN”s principal and sole shareholder, having, together with one Mr. Al-Rahim and others, founded ManCo. It was submitted that ManCo was in essence a quasi-partnership of which Mr. Le Blan was not only a shareholder, through his equity interests held through MENAFIN, but also in essence a ‘partner,’ by virtue of the understanding between the original founders. Following an accident in which Mr. Al-Rahim and the other remaining participant in ManCo were killed, Mr. Le Blan became its only surviving shareholder, director and partner. He was later purportedly removed as director by a resolution passed by Mr. Al-Rahim”s widow and other family members, whom he had appointed to the board on Mr. Al-Rahim”s death. He was told this was a result of his position relative to an underlying dispute between the MerchantBridge Group and Al-Rahim family interests in respect of an entity called Bluewood Inc. MENAFIN filed a petition for the winding up of ManCo on the just and equitable ground citing the loss of confidence of Mr. Le Blan, as an individual participant, and the loss of substratum-it submitted that Mr. Le Blan”s removal paralysed ManCo as an investment management company because no one else remaining was capable of carrying on its functions.

MENAFIN made the present ex parte application seeking injunctions to maintain the status quo until its petition could be heard, or until further order of the court/written consent of MENAFIN in respect of the conduct to be restrained, and directions for service outside the jurisdiction on Nauf Ltd., a Lebanese entity through which the Al-Rahim interests held their shares in the MerchantBridge Group. The first injunction was sought to prevent the board of ManCo from removing Mr. Le Blan as director of

nine special purpose vehicles (‘SPVs’) which were the investment holding companies of the MerchantBridge Group and which held substantially all its assets-MENAFIN was said to have substantial interests in the SPVs. The second injunction was sought to restrain ManCo from disposing of its shares in MerchantBridge Holdings (Cayman) Ltd. (‘MBTopCo’) which was the Cayman holding company through which the investment consortium, now subsumed into the MerchantBridge Group, was constituted and through which their shares were held. The consortium included the nine SPVs.

Held, granting the injunctions and directions for service on Nauf Ltd.:

The tests for the grant of the interlocutory injunctions were met. First, there was a serious issue to be tried-there was material that arguably evidenced the existence of the alleged quasi-partnership and Mr. Le Blan”s purported removal from the board of ManCo could have been found to justify his loss of confidence and trust; alternatively, the petition to wind up arguably could have sustained an order that his shares be bought out by the other members of ManCo. Further, MENAFIN had standing to petition; the fact that the quasi-partnership involved certain of the individuals participating through SPVs did not detract from the court”s jurisdiction to grant a petition on the just and equitable ground citing the loss of confidence of one of the individual participants and the loss of substratum. The court was to take a ‘broad approach,’ which allowed it to look through the corporate veil of ownership of MENAFIN to recognize Mr. Le Blan”s real interest as a...