Re Straumur-Burduras Bank

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 09 September 2010
• Court: Grand Court (Cayman Islands)
• Date: 09 September 2010

Grand Court, Financial Services Division

(Smellie, C.J.)

IN THE MATTER OF STRAUMUR-BURDURAS INVESTMENT BANK HF

B. Gowrie for the applicant.

Legislation construed:

Companies Law (2009 Revision), s.103(1):

‘This section applies to any person who, whether resident in the Islands or elsewhere-

(a) has made or concurred with the statement of affairs;

(b) is or has been a director or officer of the company;

(c) is or was a professional service provider to the company;

(d) has acted as a controller, advisor or liquidator of the company or receiver or manager of its property;

(e) not being a person falling within paragraphs (a) to (c), is or has been concerned or has taken part in the promotion, or management of the company,

and such person is referred to in this section as the “relevant person”.’

s.103(2): ‘It is the duty of every relevant person to co-operate with the official liquidator.’

s.241(1)(b): ‘Upon the application of a foreign representative the Court may make orders ancillary to a foreign bankruptcy proceeding for the purposes of enjoining the commencement or staying the continuation of legal proceedings against a debtor.’

Foreign Bankruptcy Proceedings (International Co-Operation) Rules 2008, r.3:

‘(1) An application by a foreign representative made under Section 235 (1)(b)–(e) of the Law shall be made by originating summons in GCR Form 3.

(2) An originating summons under this rule is required to be served on each respondent.

(3) An originating summons under this rule shall be supported by an affidavit which contains-

(a) an affidavit sworn by the foreign representative containing full particulars of-

(i) the facts and matters referred to in Rule 2(3);

(ii) the facts and matters relied upon in support of the allegation that the respondent is a “relevant person” within the meaning of the Law;

(iii) the reasons for seeking an ancillary order against the respondent; and

(b) an affidavit of foreign law which explains the powers and duties of the foreign representative under the law of the place of his appointment and addresses the matters referred to in Section 254(1) of the Law.

(4) An ancillary order under this rule shall be in Form 2 or 3 or 4 or 5 as may be appropriate.’

Companies-foreign bankruptcy proceedings-restraint of Cayman proceedings-on application of foreign representative of company in liquidation overseas, court may enjoin commencement of proceedings against company in Cayman Islands under Companies Law (2009 Revision), s.241(1)(b) to protect integrity of foreign proceedings

The applicant sought an order enjoining the commencement of legal proceedings in the Cayman Islands against an Icelandic bank.

The bank, which had significant assets in the Cayman Islands, had entered into bankruptcy proceedings in Iceland, in which the applicant had been appointed as a ‘moratorium assistant.’ In order to achieve a more favourable valuation of its assets, the bank entered into a composition arrangement under Icelandic law. The Grand Court recognized the applicant as having the right to represent the bank in the Cayman Islands pursuant to s.241(1)(a) of the Companies Law (2009 Revision) and the Foreign Bankruptcy Proceedings (International Co-Operation) Rules 2008.

Pursuant to s.241(1)(b), he then sought an order enjoining the commencement of legal proceedings in the Islands against the bank without the leave of the court, submitting that (a) such an order was necessary to protect the global integrity of the composition; (b) the requirements of s.241(1)(b) were fulfilled, since he was a foreign representative of a debtor in a foreign bankruptcy proceeding; (c) the application had been made by originating summons, as required by r.3(1) of the Foreign Bankruptcy Proceedings (International Co-Operation) Rules 2008; (d) as there were no confirmed respondents, but many potential ones on whom formal service would be impractical, the requirement in r.3(2) that the originating summons be served on every respondent should be qualified, and the court should consider that the comprehensive notice of the application given on the bank”s website, in the Icelandic Gazette and via email were sufficient for those purposes; (e) the originating summons was supported by affidavits...