The Companies Law (2016 Revision) and Matrix Inc.

• Jurisdiction: Cayman Islands
• Judge: Kawaley
• Judgment Date: 21 June 2018
• Court: Grand Court (Cayman Islands)
• Docket Number: CAUSE NO: FSD 55 OF 2018 (IKJ)
• Date: 21 June 2018

In the Matter of the Companies Law (2016 Revision)

And in the Matter of Matrix Inc.

Before:

The Hon. Justice Kawaley

CAUSE NO: FSD 55 OF 2018 (IKJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

HEADNOTE

Winding-up petition-arbitration for award for liquidated sum in favour of petitioner-non-monetary cross-claim by company against petitioner arising out same arbitral award-whether debt disputed on substantial grounds-exercise of discretion to wind-up

Appearances:

Christopher Harlowe and Jonathon Milne of Mourant Ozannes, for the Petitioner

Ian C Lambert of HSM Chambers on behalf of the Company

REASONS FOR WINDING UP ORDER

(in Court)

Introductory

1 On April 4, 2018, Heathcliff Trading S.A., a Panamanian corporation, (the “Petitioner”) presented a winding-up petition as a creditor against Matrix Inc. (the “Company”) pursuant to section 94 (1)(b) of the Companies Law on the grounds that the Company was unable to pay its debts and was liable to be wound-up on that ground (section 92(d)). Although the Petition relied upon the failure to pay a demand dated January 18, 2018 and implied that demand was served under section 93(a) of the Law, evidence filed in support of the Petition made it clear that the relevant demand was not served on the Company's registered office. Reliance instead was placed on a failure to pay combined with a failure to honour past promises to pay and an absence of any post-petition offers to pay as evidence of commercial insolvency.

2 The Company opposed the Petition but at the end of a comparatively short hearing on May 28, 2018, I granted the winding-up Order sought by the Petitioner and appointed David Griffin and Andrew Morrison of FTI Consulting (Cayman) Limited as Joint Official Liquidators of the Company.

3 These are the reasons for the decision which I promised to deliver. The factual matrix

4 The most pertinent facts were essentially agreed. They may be distilled as follows:

• • the Company referred a dispute with the Petitioner about the sale of selenium-74 to arbitration before a Sole Arbitrator in Geneva, Switzerland. The Sole Arbitrator delivered a Final Award which ran to 116 pages on March 14, 2017;

• • the Final Award required the Petitioner to return or procure the return of the selenium to the Company within 30 days and ordered the Company to pay the Petitioner liquidated sums in excess of CHF 7.4 million (CHF 5.8 million plus some CHF 1.6 million in an escrow account);

• • the Company appealed this decision and obtained a stay of the Final Award pending appeal. The Swiss Federal Supreme Court dismissed the Company's appeal on January 8, 2018;

• • by letter dated January 18, 2018, the Petitioner's Swiss attorneys (Klein) wrote to the Company's Swiss attorneys (Python) demanding payment of the liquidated sums awarded to the Petitioner in the Final Award, together with default interest. The Python firm responded by letter dated January 19, 2018, advising that the Company would comply with the Award “at the latest in the week of 5 February 2018”;

• • before the Petition was presented on April 4, 2018, the Company did not dispute its obligation to pay the sums due to the Petitioner under the Final Award;

• • the only evidence filed by the Company in opposition to the Petition was an Affidavit sworn by a former director Peter Fischer on May 25, 2018. This Affidavit:

  • (a) reiterated the Company's case which was rejected in the Final Award and by the Swiss Supreme Court; and

  • (b) asserted: “As the Petitioner is not the legal owner of the Goods it is not in a position to demand money from Matrix”.

The Petitioner's submissions

5 The Petitioner submitted that it was only if a petition debt was disputed bona fide on substantial grounds that its presentation or prosecution would be improper: Mann v Goldstein [1968] 1 WLR 1091. Other vintage cases were cited in support of the incontrovertible proposition that a failure to pay an undisputed debt was in and of itself evidence of insolvency: Cornhill Insurance PLC v Improvement Services Ltd. [1986] 1 WLR 114; Taylors Industrial Flooring Ltd. v Plant Hire (Manchester) Ltd. [1990] BCLC 216. As far as the discretion to wind-up was concerned, reliance was placed on the following dictum of Jones J in HSH Cayman I GP Limited and others v HSH Coinvest (Cayman) GP Limited [2010] (1) CILR 157 (assuming an undisputed debt and insolvency were proven):

“…the petitioner has a prima facie right to expect the court to make winding-up orders. The court's power is a discretionary one, but the petitioner can expect the court to exercise its discretion in favour of making an immediate winding-up order unless it is satisfied that there is some exceptional circumstance or special reason which justifies the adoption of a different course.”

The Company's submissions

6 The Company's opposition was not, in the final analysis,...