Simon Conway, Anthony Manton and Mohammed Farzadi v Air Arabia PJSC

• Jurisdiction: Cayman Islands
• Court: Grand Court (Cayman Islands)
• Judge: Asif, J.
• Judgment Date: 20 May 2025
• Year: 2025
• Docket Number: FSD2024-0183

Simon Conway, Anthony Manton and Mohammed Farzadi

and

Air Arabia PJSC

Asif, J.

FSD2024-0183

Grand Court

Appearances:

Mr. Tom Smith KC of counsel and Mr. Peter Sherwood and Ms Kalyani Dixit of Carey Olsen for the Plaintiffs.

Mr. Steven Thompson KC of counsel and Mr. Erik Bodden, Ms Alecia Johns and Mr. Harry Clark of Conyers, Dill & Pearman LLP for the Defendant.

A. INTRODUCTION

Asif, J.

1 The parties are agreed that this case raises a novel point, on which there is no authority in the Cayman Islands other than a very short judgment of Jones, J. in Re ICP Strategic Credit Income Fund [2014] 2 CILR 1, which the Defendant invites me to disregard and which the Plaintiffs criticise in other respects.

2 The primary issue before me is whether leave to serve out of the jurisdiction is required for a claim under s.147 of the Companies Act (2023 Revision), namely the fraudulent trading provision, where the person from whom a contribution to the company's assets is sought has submitted a proof of debt within the liquidation. Secondly, the arguments presented raise the wider question whether s.147 of the Companies Act is of extraterritorial effect, such that leave to serve out is not needed in any event, even where the person from whom a contribution is sought has not submitted a proof of debt. This is obviously of wider importance to the conduct of insolvent liquidations under the jurisdiction of the Court generally. Thirdly, the case raises procedural points regarding the appropriate form for applications brought under Part V of the Companies Act by liquidators and the applicable procedural route if leave to serve out of the jurisdiction is required for a claim under s.147 of the Act.

3 I record at the outset that the Defendant disputes that the Court has any jurisdiction over it. The Defendant also disputes that the Plaintiffs' service of these proceedings by email and delivery by courier to the Defendant's offices in Sharjah, United Arab Emirates was effective. The Defendant has indicated that its participation in the hearing of the Plaintiffs' summons should not itself be treated as being a submission to the jurisdiction of the Grand Court.

4 The procedural route taken to bring the matter before me is slightly unusual in that, having served the amended writ on the Defendant in the UAE on the basis that leave to do so is not required, the Plaintiffs have proactively issued a summons seeking declarations from the Court to that effect, and that service on the Defendant has been effective, rather than waiting for the Defendant to acknowledge service contesting jurisdiction under GCR O.11 and for the Defendant to apply to set aside service. However, the Defendant did not object to this procedural approach.

5 I am very grateful to Mr. Tom Smith KC and Mr. Steven Thompson KC and their supporting legal teams for their extremely helpful written and oral arguments. They have not made my task any easier, but they have illuminated the path towards my conclusions. I am also grateful to the parties for their patience in awaiting this judgment.

B. RELEVANT BACKGROUND

B.1 THE UNDERLYING LIQUIDATION PROCEEDINGS

6 The current writ action arises out of the collapse of the Abraaj group of companies in early 2018. The First and Third Plaintiffs, along with a Mr. Michael Jervis, were initially appointed as joint provisional liquidators of Abraaj Holdings by McMillan J on 18 June 2018. On 11 September 2019, McMillan J put Abraaj Holdings into official liquidation and those same individuals were appointed as its joint official liquidators. Following Mr. Jervis' death, the Second Plaintiff was appointed to replace Mr. Jervis as a joint official liquidator on 15 February 2024.

7 The first meeting of Abraaj Holdings' creditors took place on 17 July 2018. The Defendant attended and was appointed to the Liquidation Committee. Mr. Conway's unchallenged evidence is that the Defendant has attended 29 of the 33 Liquidation Committee meetings held between 29 September 2018 and 1 January 2024 and continues to be a member of the Liquidation Committee.

8 The Defendant has submitted two proofs of debt within Abraaj Holdings' liquidation, as follows:

• 8.1 A proof of debt dated 4 July 2018 for approximately US $78.8 million in respect of monies said to be owed under a short-term investment agreement dated 9 January 2018, which provided for a “minimum guaranteed return” of 10.25% per annum. This loan forms part of the foundation for the Plaintiffs' claim against the Defendant in these proceedings.

• 8.2 A proof of debt dated 12 April 2019 for approximately US $108.5 million arising from a Subscription Agreement dated 7 May 2012 between Abraaj Holdings and the Defendant, amongst others. This loan also provides part of the basis for the Plaintiffs' current claim.

9 The Plaintiffs state that the Defendant's first proof of debt was adjudicated for the purpose of voting for and constituting the Liquidation Committee only, and that neither of the Defendant's proofs of debt have been adjudicated or admitted for any other purpose.

10 The Defendant's proofs of debt are both signed by Mr. Adel Abdulla Ali, the Defendant's CEO, and record the following contact addresses for the Defendant:

Post Air Arabia Head Office, Building A1, Next to Cargo Entrance, Sharjah International Airport, P.O. Box 132, Sharjah, United Arab Emirates

Email oromeih@airarabia.com

magarwal@airarabia.com and vraghavan@airarabia.com

Telephone +971 6 508 8988

B.2 SUMMARY OF THE PLAINTIFFS' INTENDED CLAIM AGAINST THE DEFENDANT

11 The Plaintiffs commenced these proceedings against the Defendant by a writ issued on 14 June 2024. Their claim is for a declaration pursuant to s.147 of the Companies Act that the Defendant is liable to contribute to Abraaj Holdings' assets because the Defendant was knowingly a party to Abraaj Holdings' business being carried on with intent to defraud creditors and/or for a fraudulent purpose.

12 Originally, the writ also named Abraaj Holdings as a co-plaintiff and included a claim by Abraaj Holdings against the Defendant for dishonest assistance, based on the same facts as the s.147 claim. However, on 19 August 2024 and prior to service of the writ, the Plaintiffs amended the writ to remove Abraaj Holdings and to delete the dishonest assistance claim. They did not need leave to do so as the writ had not been served.

13 The Plaintiffs served the amended writ on the Defendant at the addresses stated in the Defendant's proofs of debt by email on 26 August 2024 and by delivery by courier on 10 September 2024.

14 The basis for the Plaintiffs' claim against the Defendant is certain loans made by the Defendant to Abraaj Holdings or other Abraaj entities from time to time from about March 2013 until early 2018. The Plaintiffs allege that the Defendant made short-term loans to Abraaj Holdings totalling nearly US $1 billion over this period. The Plaintiffs allege that the loans were used by Mr. Arif Naqvi, the founder of the Abraaj group and Abraaj Holdings' executive director, vice chairman and CEO at the relevant time, to help prop up Abraaj Holdings and the wider Abraaj group while it was suffering from a chronic shortage of cash.

15 The Plaintiffs intend to argue that the way in which the Defendant made the loans enabled Mr. Naqvi to “window dress” Abraaj Holdings' accounts and conceal that cash shortage from the Abraaj group's investors and creditors, and to defeat, hinder or delay the payment of Abraaj Holdings' creditors and creditors of the wider Abraaj corporate group. The Plaintiffs allege that, for example, the loans from the Defendant were often made to off-balance sheet entities associated with the Abraaj group, which allowed Abraaj Holdings and the Abraaj group to avoid disclosing the resulting debt owed to the Defendant, and the loan proceeds were paid into bank accounts for Abraaj group companies to inflate the cash balances in the year-end financial statements or to procure inflated bank balance confirmations to appease investors demanding to have visibility over fund balances, before the monies were then repaid to the Defendant.

16 Further, the Plaintiffs allege that the circumstances in which the loans were made, including continuous “roll-overs” of loans, and the terms on which the loans were made, were highly unusual, artificial and uncommercial. As an example of the last point, the Plaintiffs assert that the Defendant negotiated favourable terms such as high interest rates or exorbitant lending fees in exchange for the loans.

17 The Plaintiffs intend to assert that the Defendant knew, or suspected but made a deliberate decision to avoid confirming that suspicion, that Abraaj Holdings was carrying on its business with an intent to defraud creditors or for a fraudulent purpose, such that the Defendant was a knowing participant in the carrying on of Abraaj Holdings' business fraudulently for the purpose of s.147(2) of the Companies Act.

18 The Plaintiffs say that the effect of the concealment of Abraaj Holdings' cashflow insolvency and the insolvency of the wider Abraaj group was artificially to delay Abraaj Holdings' inevitable collapse and to facilitate Abraaj Holdings' continued perpetuation of a fraud on its creditors and on the creditors of the Abraaj group.

19 It is then said for the Plaintiffs that if the loans had not been made, Abraaj Holdings' deteriorating financial position would have been revealed far sooner: Abraaj Holdings would have gone into official liquidation earlier than June 2018 (when it went into provisional liquidation), with the consequence that the losses suffered by Abraaj Holdings' creditors would have been significantly lower than has transpired.

20 The Plaintiffs will apparently contend that, in those circumstances, as a result of the Defendant's knowing participation in the carrying on of Abraaj Holdings' business fraudulently, the...