Re Times Property Hldgs

• Jurisdiction: Cayman Islands
• Judge: (Foster, J.)
• Judgment Date: 01 April 2011
• Court: Grand Court (Cayman Islands)
• Date: 01 April 2011

Grand Court, Financial Services Division

(Foster, J.)

IN THE MATTER OF TIMES PROPERTY HOLDINGS LIMITED

Ms. S.M. Corbett and Ms. F.L. MacAdam for the petitioners;

J.P. Walton and R. Coe for the company.

Cases cited:

(1) AWB (Geneva) SA v. North America SS. Ltd., [2007] 2 Lloyd”s Rep. 315; [2007] 2 C.L.C. 117; [2007] EWCA Civ 739, referred to.

(2) Company (No. 0012209 of 1991), In re a, [1992] 1 W.L.R. 351; [1992] 2 All E.R. 797, referred to.

(3) Mann v. Goldstein, [1968] 1 W.L.R. 1091; [1968] 2 All E.R. 769, referred to.

(4) Pioneer Freight Futures Co. Ltd. v. Worldlink Shipping Ltd., BVI High Ct., Claim Nos. BVIHCV 135/2009 and BVIHCV 152/2009, July 1st, 2009, unreported, dicta of Bannister, Ag. J. applied.

(5) Quarry Prods. Ltd. v. Austin Intl. Inc., 2000 CILR 265, referred to.

(6) Sparkasse Bregenz Bank AG v. Associated Capital Corp., BVI C.A., Civil Appeal No. 10 of 2002, June 18th, 2003, unreported, dicta of Byron, C.J. applied.

Companies-compulsory winding up-grounds for winding up-inability to pay debts-no winding-up order if company disputes debt and parties agreed to refer dispute to foreign arbitration-court not to consider whether company”s claims of any real substance as would pre-judge issue under arbitration-not appropriate to resolve issues of fact and foreign law in Cayman winding-up proceedings-petition stayed pending arbitration award

The petitioners sought the winding up of a Cayman company on the ground that it was unable to pay its debts.

The company was party to a subscription agreement between the petitioners and Asiaciti, another company in the same group. The subscription agreement provided, inter alia, that (a) it was to be governed by and construed in accordance with the law of Hong Kong; (b) any dispute arising out of it that was not resolved through negotiation within 30 days should be resolved by arbitration in Hong Kong; and (c) the company guaranteed Asiaciti”s obligations under the subscription agreement and related documents. The petitioners alleged that, on two occasions, the actions of the company amounted to defaults, pursuant to the subscription agreement, as a result of which it was now indebted to them and unable to pay. The company disputed the petitioners” claims. The dispute remained unresolved after 30 days, and the parties entered into arbitration in Hong Kong.

The petitioners sought the winding up of the company, submitting that (a) as a result of the defaults, the company was indebted to the petitioners and unable to pay; and (b) the company”s grounds for disputing the debt were of so little substance that they had no reasonable prospect of success, and a winding-up order was therefore justified.

The company sought the dismissal of the winding-up petition, submitting that (a) under the terms of the subscription agreement, it was not in default and did not owe a debt to the petitioners which it was unable to pay; (b) it disputed the alleged debt on bona fide and substantial grounds, which therefore should not form the basis of a winding-up order; (c) the Cayman court should not seek to resolve the dispute concerning the alleged debt, as the subscription agreement expressly provided that this

was to be determined by arbitration in Hong Kong in accordance with Hong Kong law; (d) it would further not be appropriate for the Cayman court to make a determination on the disputed debt, as this would involve making findings of fact on the basis of affidavit evidence without cross-examination; and (e) the court should err on the side of caution when asked to make a winding-up order on grounds that were to be the subject of determination by arbitration.

Held, staying the petition:

(1) The court would decline to make a winding-up order on the basis of the company”s inability to pay its debts at this time. The company disputed the existence of the debts, and the parties had expressly agreed that any dispute arising out of the subscription agreement not resolved through negotiation within 30 days would be resolved by arbitration in Hong Kong. Such arbitration was already taking place, and there was no obvious reason why the parties should not be held to their agreement. Moreover, the dispute raised factual issues and issues of Hong Kong law that were not appropriate for resolution in the Cayman court, on the basis of affidavit evidence without cross-examination. The court would therefore not seek to determine whether the company”s disputing the alleged debt had any real substance, since this would be to pre-judge an issue of which the company was entitled to seek resolution in arbitration in Hong Kong (para. 19; paras. 21–22).

(2) Even if the court were to consider the dispute concerning the alleged debt, it would not have concluded that the company”s arguments were of so little substance as to have no reasonable prospect of success, and that a winding-up order was therefore justified. Rather, the company disputed the alleged debt on bona fide and substantial grounds. Moreover, the court would err on the side of caution in circumstances such as these, in which the issues grounding the winding-up petition were to be the subject of a determination by arbitration to which the parties had expressly agreed. The court would therefore decline to make a winding-up order at this time. Rather than dismissing the petition altogether, however, it would stay the petition until the arbitration in Hong Kong had been determined (para. 20; paras. 22–23).

1 FOSTER, J.: By their amended petition dated February 11th, 2011, the petitioners seek an order that the respondent, Times Property Holdings Ltd. (‘the company’), be wound up pursuant to the provisions of the Companies Law (2010 Revision) on the ground that the company is unable to pay its debts (see s.92(d)) and for the appointment of three members of the firm of KPMG as joint official liquidators. The amended petition is opposed by the company...