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No risk of dissipation, no clean hands: no winding-up

The Grand Court of the Cayman Islands (the Hon. Justice Ingrid Mangatal) handed down a series of judgments in In the Matter of Sterling Macro Fund FSD 200 of 2015 (IMJ). This article concerns the Winding Up Judgment (No.4).  

The Petitioner alleged that the conduct of those managing and advising the Company demonstrated such a lack of probity and was so egregious that the only appropriate remedy was for the Company to be wound up on the just and equitable ground. The basis for just and equitable winding up were:

  1. The Petitioner disputed that a transfer of interest held by the Petitioner in the Company was carried out with proper authority (the Unlawful Transfer); and
  2. The Petitioner sought disclosure of information surrounding the Unlawful Transfer from the Company, which the Company refused (the Information Application).

It was held that the Petitioner had not, on the balance of probabilities, proved its alleged factual case, and had not demonstrated that there was any proper basis for asserting it was just and equitable for the Company to be wound up. Justice Mangatal’s decision in Winding Up Judgment (No.4) was due in a large part to her decision in Summary Judgment (No.1) of the same matter, where the Company was deemed to have a real prospect of arguing that the Unlawful Transfer was more appropriately characterized as being procedurally wrong, ineffective and unauthorized, but not unlawful. She was not satisfied on a balance of probabilities that there had been any lack of probity by the Company so as to meet the requisite standard; and that the Petitioner did not have an objectively justifiable lack of confidence in the management of the Company, per Loch v John Blackwood Ltd [1924] AC 783. Furthermore, in relation to the Information Application, while the transaction surrounding the Unlawful Transfer should have been disclosed, it did not amount to grounds for winding up the Company on a just and equitable basis. Justice Mangatal also held that the evidence, including the joint provisional liquidators’ reports, did not support a case that there was any mismanagement or dissipation of the Company’s assets or affairs. She accepted that a winding up would likely damage the value of the investment in the Company, since the majority of it concerned “thinly traded stock” such that any sudden disposal would have a serious and adverse effect upon the price to be realized.

Finally, Justice Mangatal was of the view that evidence on behalf of the Petitioner did not clearly disclose certain motivations and relationships behind the Petition. As a result the Petitioner’s evidence concealed or suppressed pertinent information which the Court ought to have had in order to fully consider the winding up of the Company. This, therefore plainly indicated that the Court was not presented with a full picture, and thus the Petitioner did not come before the Court with clean hands.

Examiner

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