The Companies Law (2007 Revision) v The Weavering Macro Fixed Income Fund Limited (In Liquidation)
| Jurisdiction | Cayman Islands |
| Judge | The Hon. Chief Justice |
| Judgment Date | 07 October 2009 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | Cause No: 138 Of 2009 |
| Date | 07 October 2009 |
The Hon. Chief Justice
This is the application of Ian Stokoe and David Walker acting in their capacity as Joint Official Liquidators (‘JOLs’) of Weavering Macro Fixed Income Fund Limited (In Liquidation) (‘the Company’).
By a Summons, dated 11 September 2009 (‘the Summons’), the JOLs seek an order from the Court, pursuant to Regulation 10 of the Insolvency Practitioner's Regulations 2008 (‘the IPR’), that the Court approve their remuneration for the period 19 March 2009 to 30 June 2009.
Pursuant to Regulation 13 of the IPR, the Summons and all supporting evidence has been served on counsel for the Liquidation Committee.
This is one of the earliest applications brought pursuant to the IPR which, in keeping with the statutory provisions of the Companies Law (2007 Revision as amended ‘the Law’) seeks to set the frame-work for the charging of the liquidator's fees and expenses and for the approval of them by the Court. While enabled by the Law, it is a frame work that reflects as well, the development of the jurisprudence on this issue in the Cayman Islands prior to the IPR and the potential benefits taken from earlier Court approval of ‘best practices’. The IPR therefore embodies a code of practice which is intended to ensure that while liquidators are fairly and reasonably remunerated for their services the interests of creditors, shareholders and other stakeholders in liquidation estates are fully protected against unreasonable or extravagant fees and expenditure.
In keeping with the IPR, applications for Court approval must be formally made and supported by relevant evidentiary material.
This application meets the requirements and following are the reasons for the grant of the Court's approval. The application is grounded primarily by Mr. Ian Stokoe's third affidavit and by the JOL's First Report to this Court dated 31 August 2009 (‘the Report’).
On 19 March 2009, the Applicants were appointed Joint Voluntary Liquidators of the Company. Following an indication from the Directors of the Company that they would not be providing a Declaration of Solvency, the Applicants petitioned for an order that the voluntary liquidation be continued subject to the supervisionof the Court. By an Order dated 3 April 2009, it was ordered that pursuant to Section 124 of the Law, the voluntary liquidation would continue under the Court's supervision and that the Applicants be appointed as the JOLs of the Company.
The Company is an open-ended investment company, established as an exempted company with limited liability under the laws of the Cayman Islands. The Company's trading activities were controlled by Weavering Capital (UK) Limited (‘WCUK’), the Company's UK based investment advisor. Since 2005, the Company's investment portfolio was dominated by interest rate swaps with Weavering Capital Fund Ltd., a company incorporated in the British Virgin Islands (‘the BVI Fund’).
By 30 September 2008, approximately 75% of the Company's net asset value (‘NAV’) was represented by interest rate swaps. The JOLs investigations have revealed that the value attributed to these swaps was severely overstated, and accordingly when faced with the large volume of redemption requests that were made between the period October 2008 - January 2009, the Company faced severe liquidity problems which ultimately led to its insolvency.
It appears from the Report that since the date of their appointment, the JOLs have spent a considerable amount of time and effort ascertaining the group structure, the background to the Company's trading history, including but not limited to investigating the BVI Fund and placing it into liquidation, proving in the administration of WCUK, and also undertaking...
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