Re Swiss Oil Corporation

• Jurisdiction: Cayman Islands
• Judge: (Collett, C.J.)
• Judgment Date: 13 April 1989
• Date: 13 April 1989
• Court: Grand Court (Cayman Islands)

Grand Court

(Collett, C.J.)

IN THE MATTER OF SWISS OIL CORPORATION

A. Jones for the Republic of Gabon;

S. Gee and A. Foster for Swiss Oil Corporation;

R. Potts, Q.C. and G. Hampson for Lovelace S.A. and Mercasp Corporation;

N. Clifford for the receiver.

Cases cited:

(1) Amalgamated Properties of Rhodesia (1913) Ltd., In re, [1917] 2 Ch. 115, applied.

(2) Ames v. Birkenhead Docks (Trustees)ENR(1855), 20 Beav. 332; 52 E.R. 630; 24 L.J. Ch. 540, distinguished.

(3) Anglesey (Marquis), In re, [1903] 2 Ch. 727; (1903), 72 L.J. Ch. 782, distinguished.

(4) Debtor, In re a, ex p. Peak Hill Goldfield Ltd., [1909] 1 K.B. 430; (1909), 78 L.J.K.B. 344, considered.

(5) Greenwood & Co., In re, [1900] 2 Q.B. 306; (1900), 69 L.J.Q.B. 751.

(6) Griggs (Douglas) Engr. Ltd., In re, [1963] Ch. 19; [1962] 1 All E.R. 498; (1962), 106 Sol. Jo. 221, applied.

(7) Kilderkin Invs. v. Player, 1984–85 CILR 63, distinguished.

(8) Maudslay, Son & Field, In re, [1900] 1 Ch. 602; (1900), 69 L.J. Ch. 347.

(9) Orri v. Moundreas, [1981] Com. L.R. 168.

(10) Salomon v. Salomon & Co. Ltd., [1897] A.C. 22; [1895–9] All E.R. Rep. 33; (1897), 66 L.J. Ch. 35; 41 Sol Jo. 363.

(11) Sartoris”s Estate, In re, [1892] 1 Ch. 11; [1891–4] All E.R. Rep. 193; (1892), 61 L.J. Ch. 1; 36 Sol. Jo. 41.

(12) Wools (L.H.F.) Ltd., In re, [1970] Ch. 27; [1969] 3 All E.R. 882; (1970), 113 Sol. Jo. 363, distinguished.

Companies-receivers-receiver appointed by court-appointment not injunction against creditor”s petitioning for winding up-if company liquidated receiver still able to protect debt

Companies-compulsory winding up-restraining winding up-pending appeal to foreign court challenging extent of company”s debt to petitioning creditor not sufficient reason to restrain winding up

A petitioning creditor, the Republic of Gabon, applied for the winding up of a Cayman company, the Swiss Oil Corporation.

In French arbitral proceedings for breach of contract, the Republic had been awarded a substantial sum against the company and certain affiliated shipowners upon whose behalf it had acted. In the same proceedings the company and the shipowners had also been awarded much smaller sums against the Republic. The company appealed unsuccessfully to the Paris Court of Appeals against the awards and filed a further appeal with the Cour de Cassation. That appeal was still pending.

The shipowners then successfully sought leave by originating summons in the Cayman Islands for the recognition and enforcement of the award made in their favour. They also successfully applied for the appointment of an interim receiver over the liability of the company to the Republic arising out of the arbitral awards in favour of the latter. The receiver was appointed with specific power ‘to do all such acts and take all such steps as might appear to him to be appropriate in connection with safeguarding and/or collection of those amounts including the taking of proceedings overseas.’

In the meantime the Republic had also started proceedings for the winding up of the company which the shipowners sought to prevent until after their originating summons had been heard. Once it had been heard and determined in their favour, the shipowners persisted with their application for an injunction to restrain the Republic from pursuing the winding up on the basis that the Republic had filed a notice of appeal and was estopped from continuing the winding-up proceedings until the final determination of that appeal. They alleged that an agreement to this effect had been made by their attorneys. The application failed because the Grand Court (Collett, C.J.) held, inter alia, that if such an agreement had been made and had been defaulted on by the Republic, a declaration and damages would have been the appropriate remedies. The court acknowledged, however, that this was an issue that would have had to be decided on its merits. The question of whether or not

there was such an agreement became the subject-matter of fresh proceedings which were still pending when the present proceedings were started. Previous proceedings are reported at 1988–89 CILR 226, 277 and 286.

The winding-up petition having been served and advertized, notice of intention to appear as an opposing creditor was given by Lovelace S.A., one of the shipowning associated companies entitled to the benefit of the award. In addition, an offer was made by Mercasp Corporation, a company alleging to be ‘shareholder’ of the Swiss Oil Corporation, to the receiver to purchase Swiss Oil Corporation”s debt to the Republic for a sum which was equivalent to the sum owed by the Republic to the shipowners on the basis of the arbitral award. This offer was made conditional upon the dismissal of the petition and phrased in such a way as to effect a cancellation should the petition succeed.

The three companies, Swiss Oil Corporation, Lovelace S.A. and Mercasp Corporation successfully sought leave to oppose the petition. As an officer of of the court with an interest in the underlying debt upon which the petition was founded and in the light of his wish to investigate the validity of the offer from Mercasp Corporation, the receiver was also allowed to advance submissions for the adjournment of the petition.

The opposing companies submitted that (a) the petition should be dismissed because the Republic had no locus standi to pursue it as its right to do so had been superseded by the appointment of the receiver who was the rightful person to ‘speak for’ the debt and to have the carriage of the petition and in any case the petition was an interference with the receiver”s possession of the debt and should be treated as contempt of court; (b) alternatively, the petition should be adjourned in the light of the pending appeal by the company in the French courts against the award upon which the debt was based; and (c) further justification for adjournment was that the Republic was in breach of an agreement not to pursue the winding up until the final determination of its, appeal to challenge an earlier order recognizing and enforcing the award made to them against it.

The receiver also sought an adjournment in order to investigate the validity of the offer made to him by the contributory in these proceedings to buy the oil company”s debt to the Republic.

The Republic submitted in reply that (a) it was the nature of the property under receivership which determined the scope of the receiver”s authority and in this case the receiver had taken over a debt, control of which could not deprive it of its statutory right to pursue a winding up in relation to that debt; (b) there was no justification for an adjournment of the petition, on the ground that the oil company was appealing against the award upon which the debt was based in French courts; and (c) the further claim that the petition should be adjourned because of an agreement to suspend its rights until the final determination of any appeals in this jurisdiction in relation to the subject-matter of these proceedings was unfounded.

Held, granting the petition sought:

(1) As a creditor, the Republic was a proper party to petition for the

winding up of the Swiss Oil Company. The receiver”s appointment operated as an injunction restraining the Republic from collecting the debt due to it from the company and its affiliates; it did not extend to giving him the sole right to conduct litigation proceedings in relation to the company, nor could it affect the rights of a petitioning creditor under the Companies Law by operating as an injunction to prevent the Republic, in whom the title to the debt was vested, from exercising its right to petition for the company”s winding up. There was, therefore, no conflict of interest between the Republic”s pursuit of a winding up and the appointment of a receiver. Even if the petition were successful and an official liquidator appointed, the receiver would still retain the sole authority to safeguard and control the debt which was all he was appointed to do. Accordingly, the application for the winding-up petition had been properly made (page 328, lines 1–29).

(2) The court would proceed to make that order as no grounds had been established to support the dismissal or adjournment of the petition. On the contrary, (a) the existence of an appeal to a foreign court challenging the arbitral awards upon which the company”s debt to the Republic was based, did not displace the prima facie right of the Republic, as a petitioning creditor, to a winding-up order and therefore was an insufficient reason for delaying these proceedings; and (b) even if the shipowners were able to show that a bargain had been made which committed the Republic to postponing its petition until the final determination of other related proceedings between the two parties, it had already been held in earlier proceedings that a declaration and damages would be a sufficient remedy and the court would not now place any reliance on the existence of such a bargain to support an adjournment; this would be tantamount to the granting of the equitable remedy of specific performance in a case where legal remedies were adequate to vindicate the plaintiff. In any case, its discretion could only be exercised upon the merits of the winding-up petition as a whole and could not be invoked to adjourn it by holding the Republic to a bargain which sought to advance the private interests of the shipowners as litigants in other proceedings against the Republic (page 331, lines 9–22; page 332, line 31 – page 333, line 25).

(3) With respect to the receiver”s support of an adjournment, the court, although acknowledging the necessity of his doing so, was nevertheless under no obligation to adopt a similar position. The offer to purchase the company”s debt to the Republic covered just the amount of the Republic”s liability to the shipowners. In addition it was expressly conditional upon the...