The Companies Law (2013 Revision)and BTU Power Company (in Official Liquidation)

• Jurisdiction: Cayman Islands
• Judge: Mr. Justice Peter Cresswell
• Judgment Date: 17 January 2014
• Court: Grand Court (Cayman Islands)
• Docket Number: CAUSE NO. FSD 183 OF 2011 (PCJ)

In the Matter of the Companies Law (2013 Revision)

and

In the Matter of BTU Power Company (In Official Liquidation)

The Hon. Mr. Justice Peter Cresswell

CAUSE NO. FSD 183 OF 2011 (PCJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

Appearances:

Mr. Francis Tregear, QC instructed by and with Mr. Matthew Goucke of Walkers for the Joint Official Liquidators of BTU Power Company (In Official Liquidaiton)

Mr. Mark Goodman of Campbells for the Appellants

In Open Court

TABLE OF CONTENTS

• 1. BACKGROUND, COMPANY STRUCTURE AND SUMMARY OF THE CASE

• 2. REMAINING ISSUE ON THE APPEALS

• 3. MR. ALMAZEEDI'S SUBMISSIONS

• 4. THE SUBMISSIONS OF THE JOINT OFFICIAL LIQUIDATORS

• 5. ANALYSIS AND CONCLUSIONS

1. BACKGROUND. COMPANY STRUCTURE AND SUMMARY OF THE CASE

1 BTU Power Company (the “Company” or “Power” or “BPC”) was incorporated on 16 December 2002 as an exempted limited company under the laws of the Cayman Islands and was established as an open-ended investment vehicle.

2 The Company's Offering Memorandum dated 20 January 2003 (the “Offering Memorandum”) provided that the Company was incorporated for the purpose of acquiring equity interests in pre-selected power generation and water desalination projects in the Middle East North Africa region. At the time of the appointment of the joint official liquidators, Michael Penner and Stuart Sybersma of Deloitte & Touche (the “JOLs”), the Company held indirect equity investments in two such facilities, Taweelah Asia Power Company P.J.S.C. (“TAPCO”) in Abu Dhabi and Carthage Power Company S.A.R.L. (“CPC”) in Tunisia.

3 The Company has a share capital of US$4,100.00 divided into 100 ordinary shares with a par value of US$1.00 each and 4,000 preference shares with a par value of US$1.00 each (the “Preference Shares”).

4 The Offering Memorandum further provided that the business of the Company was managed by its board of directors, initially consisting of Mr Abdul-Mohsen Hayat (“Mr Hayat”) and Mr. Wael Almazeedi (“Mr Almazeedi”), and later (and at all material times) consisting of the Company's sole director, Mr Almazeedi. The board of directors of the Company largely delegated the management of the Company to BTU Power Management Company (the “Manager” or “BPMC”) pursuant to a management agreement between the Company and the Manager dated 6 June 2003 (the “Management Agreement”). The Manager is also an exempted limited company incorporated under the laws of the Cayman Islands and Mr. Hayat and Mr Almazeedi were the initial directors of the Manager. Later (and at all material times) Mr. Almazeedi was the sole director. [The court was not informed until the second day of the hearing that the Manager was struck off on 31 October 2013].

5 The Manager was formerly owned by another Cayman Islands exempted limited company BTU Holdings Company (“Holdings”). Holdings is now in liquidation in the Cayman Islands. Holdings is owned by Mr Hayat as to 44% and Mr Almazeedi / Ms Oishi (Mr Almazeedi's wife) as to the other 56%.

6 The owner of the Manager is another Cayman Islands exempted limited company, BTU Industries Holdings Ltd (“Industries Holdings”), which held 1,000,000 shares in the Manager directly and 6,500 shares indirectly through a wholly owned subsidiary, BTU Industries Holdings (USA) Inc. (“BTU USA”). Industries Holdings was in turn wholly owned by BTU Industries Limited (“Industries”). Industries was owned as to 50% each by Mr Almazeedi and Ms Oishi. Both Holdings and Industries Holdings were struck off the register of companies on 31 October 2013. [The court was not informed until the second day of the hearing that Holdings and Industries Holdings were struck off on 31 October 2013].

7 The Manager initially owned 100% of the ordinary voting shares (the “Ordinary Shares”) in the Company. On 9 October 2008 the Ordinary Shares were transferred from the Manager to another Cayman Islands exempted limited company, Q Gen Industries Ltd (“QGEN”). Mr Almazeedi is the sole director of QGEN. [The court was not informed until the second day of the hearing that QGEN was struck off on 31 October 2013].

8 QGEN is owned by a further Cayman Islands exempted limited company, MW Partners. Mr Almazeedi was the sole director and 100% owner of MW Partners. MW Partners was struck off the register of companies on 31 October 2013.

9 Accordingly, Mr Almazeedi was the ultimate beneficial owner of both the Manager and QGEN.

10 On 11 November 2011 certain of the Company's preference shareholders, Qatar Investment Authority and the Supreme Council for Economic Affairs and Investment, for themselves and on behalf of Qatar Foundation Fund (“QIA”), presented a petition seeking the winding up of the Company on the grounds that it was just and equitable to do so. The Petition was subsequently amended on 8 December 2011 (the “Petition”).

11 The Petition was supported by all of the Company's preference shareholders who together hold 100% of the economic interest in the Company (the “Preference Shareholders”).

12 On 26 January 2012, with the consent of Mr Almazeedi, this court granted the relief sought on the Petition and ordered that the Company be wound up in accordance with the Companies Law for the purposes of a fully solvent restructuring or reorganisation of the Company which included, but was not limited to (amongst other things), the JOLs investigating the claims made in the Petition against Mr Almazeedi and the Manager. I refer to my judgment dated 26 January 2012 for its full terms and effect.

2. REMAINING ISSUE ON THE APPEALS

13 The Appeals against the JOLs' formal rejection of proofs of debt were filed on 21 June 2013 by Campbells, who were retained by the Appellants. The JOLs (via Walkers) were served with the Appeals on 4 July 2013.

14 At a case management conference on 1 October 2013, Campbells confirmed that the Appellants were considering withdrawing certain of their claims for the purpose of narrowing the issues in dispute between the parties. Pursuant to paragraph 1 of the court's order for directions dated 1 October 2013 the Appellants were required to identify which elements of the Appeals would not be pursued by no later than 1 November 2013.

15 On 4 November 2013, Campbells wrote to Walkers setting out certain of the Appellants' claims that were to be withdrawn. In summary, the Appellants confirmed that only the following three claims were then being pursued (the balance of the claims having been abandoned, subject to the reservation of certain rights):

• (a) The Manager's claim in the sum of US$ 14,172,506 in respect of sums purportedly due to it under the Management Agreement;

• (b) The Manager's claim in the sum of US$1,680,000 in respect of sums purportedly due to the Manager under a Services Agreement dated 19 June 2010; and

• (c) Mr Almazeedi's claim in the sum of US$3,152,187 in respect of legal fees incurred in connection with the Massachusetts' Proceedings and separate proceedings issued by the Manager and the Company in the Cayman Islands. The Manager withdrew its claim for legal expenses in relation to these proceedings.

16 As set out at paragraph 49 of Mr Penner's Sixth Affidavit sworn on 20 December 2013 (“Mr Penner's Sixth Affidavit”), prior to the commencement of the hearing of the Appeals on 16 January 2014 the quantum of the Appellants' claims had already been substantially reduced from US$41,399,693 to US$19,004,693, as set out in the table below:

NO.	CREDIT OR	BASIS OF CLAIM	AMOUNT OF CLAIMS REJECTED (US$)	AMOUNT OF CLAIMS WITHDRAWN (US$)	AMOUNT OF CLAIMS SUBJECT TO APPEAL (US$)
1	Manager	Management fees under the Management Agreement	14,172,506	-	14,172,506
2	Manager	Services fees under the Services Agreement	1,680,000	-	1,680,000
3	Manager	Expenses incurred in connection with performing services under the Services Agreement	4,000,000	4,000,000	-
4	Manager	Legal fees incurred with the Massachusetts' Proceedings	3,152,187	3,152,187	-
5	Wael Almazeed i	Legal fees incurred with the Massachusetts' Proceedings	3,152,187	-	3,152,187
6	Wael Almazeed i	Pre-funded legal fees	1,000,000	1,000,000	-
7	BTU STEAG O&M Services Limited and Manager	Fees in respect of providing operational and maintenance services in respect of CPC	4,654,043	4,654,043
8	QGEN Industries Ltd.	Carried interest corresponding to 20% split of profits	9,588,770	9,588,770
TOTAL	41,399,693	22,395,000	19,004,693

17 In addition to the above claims, Campbells also indicated in their letter dated 4 November 2013 that BTU USA proposed to submit a proof of debt in the sum of US$4,000,000 in respect of expenses apparently incurred in connection with the proposed reorganisation of the Company. A proof of debt was then submitted by BTU USA on 6 January 2014 (which the JOLs objected to on the grounds that it was late). At the hearing of the Appeals it was accepted by Counsel for the Appellants that as the JOLs had not yet determined this proof of debt, it would be inappropriate for the court to consider it. [The court was not informed until the second day of the hearing that BTU USA was declared void as of 31 March 2013].

18 During the course of the first day of the Appeals on 16 January 2014, Mr Goodman for the Appellants ultimately accepted that all but one claim should be withdrawn. The only matter that remained for determination by the court was claim 5 shown in the table above — the claim for legal fees said to have been incurred by Mr Almazeedi in his personal capacity. Furthermore, Mr Goodman accepted that the maximum quantum of this claim (claim 5) could be no more than US$672,635.44, rather than the figure of $3,152,187 previously claimed.

3. MR. ALMAZEEDI'S SUBMISSIONS

19 Mr. Goodman's submissions in relation to the remaining appeal by Mr. Almazeedi...