Re NBRL Global, Ltd

• Jurisdiction: Cayman Islands
• Judge: Raj Parker
• Judgment Date: 20 June 2017
• Court: Grand Court (Cayman Islands)
• Docket Number: Cause No. FSD 83 of 2017 (RPJ)
• Date: 20 June 2017

In the Matter of the Companies Law (2016 Revision)

And in the Matter of NBRL Global, Ltd.

Before:

The Hon. Justice Raj Parker

Cause No. FSD 83 of 2017 (RPJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

HEADNOTE

Companies-Winding up-Companies Law (2016 Revision)-debts as they fall due-section 92(d)-section 93(c)-creditors agreements to be paid over time-cash flow test-function of court where disputed evidence but no live testimony-discretion.

Appearances:

Mr Peter McMaster QC, and Mr Daniel Hayward-Hughes on behalf of the Petitioner

Mr James Eldridge and Adam Huckle on behalf of the Respondent Company

Mr Rupert Bell on behalf of Kosivana Holdings Limited, an ordinary shareholder of the Company

IN OPEN COURT

JUDGMENT

INTRODUCTION

1. By a Winding Up Petition dated and filed on the 21^st day of April 2017 the Petitioner, Learn Capital Venture Partners III, L.P. (the Petitioner) seeks an order for the winding up of NBRL Global, Ltd. (the Company) and the appointment of joint official liquidators.

2. The Company is an exempted company registered pursuant to the Companies Law (2016 Revision) (the Companies law).

3. The Petitioner is a creditor of the Company. It is owed $250,0001 with interest by the Company under the terms of secured promissory notes dated 7 March 2017 ($50,000) and 12 April 2017 ($200,000) which are repayable on demand. The Petitioner also holds 10,000,000 preference shares in the Company with a par value of $0.0001 each.

4. The Petitioner has standing both as a creditor and as a holder of shares in the Company. The Petitioner does not rely on its own advances to the Company to prove the Company's insolvency. There is evidence before the Court that the Company is prepared to pay back the money advanced by the Petitioner and has in fact tendered it to the Petitioner. The Petitioner has not accepted that money, because of the winding up order that it is asking the court to make which would result in the payment of these monies to be void (see section 99 of the Companies law).

5. The Company is the holding company for a group of entities that provides medical services to patients through the use of an exclusive licence to exploit intellectual property in brain and pain — related treatments.

6. The Petitioner claims that the Company is unable to pay its debts. It claims (by paragraph 7 of the Petition) that the Company owed (at least) the following debts as at 31 March 2017:

$287,000 to PwC, the accounting firm

$171,500 to MagVenture, a vendor/supplier

$161,886.49 to Gunderson Dettmer (GD), a law firm

$90,000 to IT-This, for IT services

$51,300 to Saliwanchik, Lloyd & Eisenschenk, a law firm

$50,000 to the Petitioner

$12,000 to Herbert Smith Freehills, the law firm

TOTAL: $824,000.

7. The Petitioner alleges that as at 31 March 2017 the Company had available a sum of $75,000 to meet the above debts which was inadequate and there were additional liabilities in respect of payroll which also fell due on that date which amounted to almost $75,000.

8. On 12 April 2017 the board of the Company resolved to accept an additional $200,000 from the Petitioner. The Petitioner states that its

motive in making further monies available to the Company was to preserve its own $10,000,000 investment in the Company in preference shares and to preserve value in the Company. The Petitioner claims that the Company is unable to repay the amounts set out at paragraph 6 above as they fall due and accordingly it should be wound up in accordance with the Companies law.

THE LAW

9. Section 92 of the Companies law (2016 revision) provides that a company may be wound up by the court if—

…

(d) the company is unable to pay its debts.

10. Section 93 provides that a company shall be deemed to be unable to pay its debts if—

…

(c) it is proved to the satisfaction of the Court that the company is unable to pay its debts.

11. The test for solvency under the Companies law is cash flow insolvency, an inability to pay debts as they fall due-see Weavering Macro Fixed Income Fund Limited (in liquidation) (CICA No.2 of 2016). It is settled law that the onus is on the Petitioner to prove that the Company is unable to pay its debts (to the civil standard of proof on the balance of probabilities), not on the Company to prove its solvency. The Court's power to make a winding up order is discretionary. That discretion exists even when it is proved to the Court's satisfaction that the company is unable to pay its debts-see Re Minrealm Ltd (2007) EWHC 3078 (Ch.).

SUBMISSIONS and EVIDENCE

12. Mr McMaster QC for the Petitioner submits that the evidence shows that the monies set out in paragraph 6 above fell due, were not paid, are still unpaid and that all the Company has managed to do is to ask its creditors to be patient, and they have agreed (with the exception of the GD debt which is disputed by the Company). Mr McMaster QC submits that an agreement by each creditor to be paid over time does not mean that a debt is not due, and that the Company is unable to pay those debts.

Moreover he submits that the Company's evidence in relation to the disputed GD debt is unsatisfactory and not credible. He submits that Mr Won's evidence is defective and incomplete in various respects. He criticises the failure to provide the Court with any proper cash flow projections or management accounts. He submits that where the President and CEO of the Company (Mr Won) is in possession of a monopoly of such information I should draw adverse conclusions from Mr Won's failure to give necessary evidence-see Prest v Petrodel [2013] 2 AC 415 per Lord Sumption at paragraph 44.

I have as a result examined Mr Won's two affidavits, in the light of the extensive criticisms made by Mr McMaster QC, very carefully.

13. He also referred me to Tay Bok Choon [1987] 1 WLR 413 where Lord Templeman giving the judgement of the Privy Council said at PP 418–19:

“Of course a judge may indicate to a petitioner that unless he calls oral evidence or applies to cross examine the deponents of the opposition so as to prove a disputed fact, the petition is likely to fail. The judge may equally indicate to a respondent that unless he calls oral evidence or applies to cross examine the petitioner's deponents for the purposes of disproving an allegation made by the petitioner, then the petitioner is likely to succeed. At the end of the day the judge must decide the petition on the evidence before him. If allegations are made in affidavits by the petitioner and those allegations are credibly denied by the respondent's affidavits, then in the absence of oral evidence or cross-examination, the judge must ignore the disputed allegations. The judge must then decide the fate of the petition by consideration of the undisputed facts.”

14. At the end of the day I do indeed have to decide the Petition on the evidence before me. The material evidence before me consisted of an affidavit of Gregory Mauro with exhibits dated 21 April 2017, and an affidavit of Paul Strange and exhibit dated 6 June 2017 for the Petitioner. For the Company it consisted of an affidavit of Erik Won dated 2 June...