Re Parmalat Capital Fin Ltd

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 21 July 2006
• Court: Court of Appeal (Cayman Islands)
• Date: 21 July 2006

Court of Appeal

(Smellie, C.J.)

IN THE MATTER OF PARMALAT CAPITAL FINANCE LIMITED

A. Turner and Ms. R.U.D. Lawrence for the applicants;

Miss S. Corbett for the respondents;

C.G. Quin, Q.C. for the Bank of America (a creditor).

Case cited:

(1) In re A. & B.C. Chewing Gum Ltd., [1975] 1 W.L.R. 579; [1975] 1 All E.R. 1017, followed.

Legislation construed:

Companies Law (2004 Revision), s.103: The relevant terms of this section are set out at para. 2.

Companies-compulsory winding up-stay of winding up-in practice stay never granted as hinders liquidator”s investigation of company”s affairs and recovery of debts-stay particularly unlikely if legal proceedings already initiated by company and likely to be prejudiced by delay

The respondent creditors brought a petition in the Grand Court for the winding up of Parmalat Capital Finance Ltd. (‘PCFL’).

In December 2003, the current joint official liquidators (‘JOLs’) were appointed ex parte as joint provisional liquidators (‘JPLs’). PCFL was hopelessly insolvent, and its only significant asset was the anticipated recoveries from litigation it was pursuing in New York against the Bank of America. In order to fund this litigation, the joint provisional liquidators entered into a funding agreement with a third party.

Various creditors from the Parmalat Group and one other unrelated creditor (‘the opposing parties’), owed a collective debt of around US$1bn., opposed the appointment of the JPLs as joint official liquidators and proposed that their own choice of liquidators be appointed, the foreign receiver-manager of the Parmalat Group promising that if those liquidators were appointed instead, he would provide funding for PCFL”s US litigation. In May 2006, the court affirmed the appointment of the joint provisional liquidators as joint official liquidators. The applicants proposed to appeal against that decision, and applied for a stay of execution of the winding-up order pending the determination of the appeal.

The applicants submitted that a stay should be granted because (a) the funding agreement for the US litigation was prejudicial to their interests as creditors, and a stay should be granted to halt the winding up and thereby prevent money being drawn under the agreement until their appeal had been heard; (b) the US action would not be prejudiced if a stay were granted; and (c) the winding up as a whole would not need to be disturbed by the stay, as the JOLs could be reappointed as JPLs until the case had been heard.

The respondents submitted in reply that the application should be dismissed because (a) in practice a stay of execution on a winding up was never granted as it interfered with the liquidator”s tasks of investigating

the affairs of a company in an efficient manner and taking steps...