Re Tangerine Inv

• Jurisdiction: Cayman Islands
• Judge: (Foster, J.)
• Judgment Date: 25 April 2013
• Court: Grand Court (Cayman Islands)
• Date: 25 April 2013

Grand Court, Financial Services Division

(Foster, J.)

IN THE MATTER OF TANGERINE INVESTMENT MANAGEMENT LIMITED

M. Goucke and J.O”Driscoll for the petitioner;

P. McGrath, Q.C. and Ms.A.Adda for the joint receivers;

Mrs. G. Johnson-Goring and Ms.N.Ebanks for CIMA.

Cases cited:

(1) ABC Co. (SPC) v. J & Co. Ltd., 2012 (1) CILR 300, referred to.

(2) Arrows Ltd., Re, [1992] BCC 121, followed.

(3) DD Growth Premium Master Fund, In re, 2009 CILR N[11], distinguished.

(4) HSH Cayman I GP Ltd. v. ABN AMRO Bank N.V., 2010 (1) CILR 114, distinguished.

Legislation construed:

Companies Winding Up Rules 2008, O.3, r.8:

‘(1) Every person who intends to appear and be heard on the hearing of a petition shall give 3 day”s [sic] notice of his intention to the petitioner”s attorneys.

(2) The notice shall be in CWR Form No. 4 and shall specify . . .

(c) the amount and nature of his debt.’

Companies-liquidators-appointment-conflict of interest-potential conflict of interest not to prevent appointment of liquidator when impact of conflict outweighed by benefits to costs and efficiency (e.g. appointing receiver of related company to prevent duplication of work)-impact not to outweigh benefits if can be mitigated by court (e.g. appointment of independent conflict liquidator)

Companies-segregated portfolio company-segregated portfolios-representations during debtor”s liquidation hearing may be made on portfolio”s behalf even though not independent legal entity-if portfolio in receivership, representations to be made by receivers of portfolio

The petitioners applied for the company to be wound up and for the appointment of joint liquidators.

The company”s sole business had been to act as the investment manager of two segregated portfolios. The portfolios entered receivership and joint receivers were appointed. As the portfolios had significant potential claims against the company, the joint receivers investigated its circumstances and transactions. At its liquidation hearing, they proposed that one of them should be appointed as a joint liquidator of the company.

The joint receivers submitted that, as the portfolios were the company”s only clients, there was a large overlap in their tasks and responsibilities and of the company”s liquidators. The joint receivers had already performed a substantial amount of work investigating the company”s affairs and significant costs and delays would be avoided by appointing one of them as a joint liquidator. These savings would offset any difficulties which might arise from a conflict of interest as there were well-established procedures which could be followed to minimize its impact. Further, although the joint receivers had omitted the amount and nature of the debt allegedly owed to them from their notice of appearance (in breach of the Companies Winding Up Rules 2008, O.3, r.8(2)(c)), this was only a technicality as, since the portfolios were the company”s sole client and the potential claims were well publicized (both in the court record and the press), it could not have caused any prejudice or confusion to the company, or any creditor, shareholder or interested party.

The petitioners submitted in reply that the joint receiver would be subject to a conflict of interest that prevented him from being appointed as a liquidator of the company and that, if he were appointed, he would obtain information which would enable the portfolios to bypass the normal discovery process to obtain privileged information. The advantages of information sharing could be achieved through a written protocol between the liquidators and the receivers without the risk of a conflict of interest. Moreover, the joint receivers had no standing to be heard in the company”s winding-up proceedings. The portfolios were not distinct legal entities from the segregated portfolio companies to which they belonged and, therefore, were not entitled to submit an application in their own right as they could not be creditors of the company. Further, the joint receivers” omission from their notice of appearance was fatal to the application.

Held, appointing a joint receiver of the portfolios as a joint liquidator of the company:

(1) The joint receivers were the most appropriate party to make representations on behalf of the portfolios and so were entitled to be heard in the company”s liquidation hearing. Although the portfolios were not distinct legal entities from the segregated portfolio companies, the directors of those companies no longer had any functions or powers in relation to the portfolios, whereas the joint receivers were under a statutory duty to act, and make representations on behalf of, the portfolios. The joint receivers should not, therefore, be precluded from making representations directly to the court on behalf of the portfolios and, as the submissions were being made by the receivers themselves rather than by representatives of the segregated portfolio companies as a whole, it was preferable that the submissions were made in their names. Further, the fact that the notice did not contain the amount and nature of the debt was not likely to cause any prejudice or confusion to any interested party. The joint receivers had set out their potential claims against the company in the affidavit supporting their proposal and, as the company”s sole business was the management of the portfolios, their relationship was well known to any party involved. There was therefore no benefit in either adjourning the hearing to allow an amended notice to be submitted or disallowing them from appearing (paras. 18–20).

(2) A joint receiver would be appointed as one of the joint liquidators of the company as, due to the overlap between the portfolios and the company, there were clear benefits in terms of cost saving and increased efficiency. The applicants” concern that the portfolios would be able to use the information obtained by the joint receiver to avoid the normal disclosure procedures were not well founded as, in his role as a joint liquidator, the joint receiver would owe a duty to act in the best interests of the creditors of the company. Although this might cause a conflict of interest, such an arrangement was not uncommon in the liquidation of master/feeder funds (where a similar overlap existed), where effective

methods for minimizing the impact of a conflict of interest had been used (e.g. the appointment of an independent conflict liquidator or the making of appropriate orders by the court). A written protocol would not be suitable as it would not allow for unexpected changes in circumstances during the winding up. The flexibility of approach required for a complex liquidation could be more easily achieved by appointing one of the joint receivers as one of the joint liquidators (paras. 21–23).

1 FOSTER, J.:

Introduction

This ruling concerns the appropriate person to be appointed jointly as an official liquidator of a company which is the subject of a winding-up order pursuant to a creditor”s petition, in the particular circumstances. The petitioner, on the one hand, and the court-appointed receivers of two segregated portfolios of which the company was the investment manager, on the other hand, differ as to whether one of the receivers should be appointed as an official liquidator jointly with one of the petitioner”s own choice of official liquidators.

Background

2 The company to be wound up is Tangerine Investment Management Ltd. (‘Tangerine’). There was no question that Tangerine should be wound up pursuant to the winding-up petition-dated February 12th, 2013-of a creditor, Novus International Investments Ltd., to which

Tangerine is indebted in the...