The Companies Law (2012 Revision) (as Amended) Tangerine Investment Management Ltd

JurisdictionCayman Islands
JudgeThe Hon Mr. Justice Angus Foster
Judgment Date04 April 2013
CourtGrand Court (Cayman Islands)
Docket NumberCAUSE NO: FSD 25 OF 2013 (AEFJ)
Date04 April 2013
In The Matter of the Companies Law (2012 Revision) (As Amended)
In the Matter of Tangerine Investment Management Limited
[2013] CIGC J0425-1

The Hon Mr. Justice Angus Foster

CAUSE NO: FSD 25 OF 2013 (AEFJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS FINANCIAL SERVICES DIVISION
RULING
Introduction
1

This ruling concerns to 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 Limited (‘Tangerine’). There was no question that Tangerine should be wound up pursuant to the winding up petition dated 12th February 2013 of a creditor, Novus International Investments Limited, to which Tangerine is indebted in the principal sum of £437,500 plus interest pursuant to an agreement between them. The debt was not disputed and the winding up petition was not opposed. Accordingly, at the hearing of the petition before me on 4th April 2013 I ordered that Tangerine should be wound up pursuant to the Companies Law (2012 Revision) (‘the Law’) with one of the petitioner's choices appointed as official liquidator. The only disputed issue, which was reserved, was who should be appointed jointly as the other official liquidator.

3

Tangerine was formerly the investment manager of two segregated portfolios (together ‘the Axiom Portfolios’) of 2 segregated portfolio companies, JP SPC 1 and JP SPC 4 respectively (together ‘the Segregated Portfolio Companies’) in what is effectively a master/feeder fund type structure. On 12th February 2013 on the petition of the directors of the Segregated Portfolio Companies the joint receivers (‘the Joint Receivers’) of the Axiom Portfolios were appointed by the Court pursuant to Section 224 of the Law on the statutory ground that the assets attributable to the Axiom Portfolios were likely to be insufficient to discharge the claims of their creditors. The Court appointed Mr. Hugh Dickson and Mr. Mike Saville of Grant Thornton Cayman and Mr. James Earp of Grant Thornton UK as the Joint Receivers and they have been acting as such since then.

4

Although not strictly relevant to Section 224 of the Law, it was also made clear at the hearings on 31st January and 1st February 2013 which led to the order on 12th February 2013 that, in light of a substantial report to the directors of the Segregated Portfolio Companies by KPMG, the Axiom Portfolios, or one or other of them, has significant potential claims against Tangerine and its principal, Mr. Timothy Schools, whose actions had led to the Axiom Portfolios' financial difficulties, for fraud, misrepresentation and/or other misfeasance. It was also clear that Tangerine had been incorporated specifically to carry on the business of investment manager to the Axiom Portfolios and that was its sole business.

5

The assets of the Axiom Portfolios are receivables from loans ostensibly made for specific purposes to certain English law firms. Tangerine as investment manager to the Axiom Portfolios was either directly, or indirectly through related persons or entities, responsible for selection of the law firms concerned, procuring payment of the loans and generally dealing in that respect with the financial resources of the Axiom Portfolios which of course ultimately derive from their investors, now their creditors.

The Arguments
6

In the circumstances which I have outlined above the Joint Receivers contended that it would be appropriate and beneficial for one of them, namely Mr. Saville of Grant Thornton Cayman, to be appointed as an official liquidator of Tangerine jointly with Mr. Ian Stokoe of PriceWaterhouseCoopers (‘PwC’), one of the petitioner's nominees whom I appointed as an official liquidator at the hearing on 4th April 2013. The petitioner opposed that proposal but suggested that as far as it goes any common interest between the official liquidators of Tangerine and the Joint Receivers of the Axiom Funds respectively could be accommodated by a protocol between them.

7

The Joint Receivers were, as I have said, appointed on 12th February 2013, some 7 weeks before the hearing of the winding up petition in respect of Tangerine. They had already carried out substantial work in investigating the relationship between Tangerine and the Axiom Portfolios and the actions and activities of Tangerine as their investment adviser. Furthermore, the Joint Receivers have from the start had the detailed report to the directors of the Segregated Portfolio Companies by KPMG to which I have referred, which already goes a considerable way in investigating the details of the relationship between Tangerine and the Axiom Portfolios and the actions of Tangerine and Mr. Schools, although more investigative work is still needed. The Joint Receivers had therefore already acquired considerable knowledge of matters directly relevant to whoever was to be appointed as official liquidators of Tangerine and they are continuing to investigate those issues.

8

The Joint Receivers submitted that to require a fresh set of professionals from PwC to re-do and complete all this work and to acquire the knowledge already available or to become available to the Joint Receivers made no sense. It would involve incurring significant duplicated costs and unnecessary delay. I should mention as well that, although not as such the subject of evidence at the hearing of the winding up proceedings relating to Tangerine, it was known to the Court through its involvement in the receivership of the Axiom Portfolios, that the Joint Receivers had recently obtained directions from the Court that they may exercise the relevant powers which an official liquidator would have pursuant to the provisions of the Law to assist the Joint Receivers to fulfil their duties of closing down the businesses of the Axiom Portfolios and the distribution of their assets to those entitled to have recourse to them pursuant to Section 224(3) of the Law. The Joint Receivers were also recently authorised by the Court to seek recognition from the High Court of England and Wales in furtherance of their duties, given that the assets of the Axiom Portfolios are located there and further investigative work and possibly legal proceedings to discover or secure assets may be required there.

9

The Joint Receivers contended that, given that Tangerine's sole business was as investment manager to the Axiom Portfolios and given the accepted state of the Axiom Portfolios and the nature of the allegations surrounding how they got into that state, there was clearly very considerable overlap in the tasks and responsibilities of the Joint Receivers on the one hand and whoever was appointed as official liquidators of Tangerine on the other hand. They argued that there is a clear common interest between Tangerine and the Axiom Portfolios and their respective creditors in ascertaining where Tangerine and its principals had transferred or procured the transfer of funds belonging to the Axiom Portfolios and on what terms andwhether they had been in accordance with the terms agreed between Tangerine and the directors of the Segregated Portfolio Companies on behalf of the Axiom Portfolios.

10

Leading counsel for the Joint Receivers said that they were fully alive to the potential for conflict of interest between the Axiom Portfolios and Tangerine in light of the possible future claims against Tangerine on behalf of the Axiom Portfolios. However, he argued that such future potential conflicts of interest were not fatal to their proposal. They submitted that if such a conflict of interest did arise in future there are well established procedures for accountants for dealing with conflicts of interest and also procedures approved by the Courts, which may of course give appropriate directions as necessary in such circumstances. The Joint Receivers contended that the potential for such conflict of interest in the future would depend upon the precise circumstances at the time and should not deter the Court from the obvious benefits in terms of cost, time and efficiency of enabling one of the Joint Receivers to be appointed as a joint official liquidator of Tangerine and thereby to directly participate and bring his knowledge to the winding up of Tangerine for the overall benefit of its creditors.

11

The Joint Receivers' proposal was supported by a creditor of Tangerine, Mr. Steven Goodman of Singapore, who gave notice of intention to appear at the winding up hearing, although in the event he did not appear and was not represented at the hearing. Mr. Goodman claimed to be a creditor of Tangerine in the sum of £$25,770,076 plus the costs of litigation which he is bringing against Tangerine in England. In his notice of appearance dated 14th March 2013 filed on his behalf by a local law firm, Mr. Goodman...

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