The Grand Court’s recent decision in Re Altair Asia Investments Limited to dismiss a winding-up petition on the basis of a bona fide dispute on substantial grounds over the existence of the petition debt is a rare example of the Cayman Court declining to follow an earlier judgment of the High Court of Hong Kong on the same issue.
The case involved two winding-up petitions arising out of the same set of facts: one in Cayman against the principal company and one in Hong Kong against a guarantor of the company. The Cayman Court adjourned the hearing of the Cayman petition pending judgment of the Hong Kong Court, so as to avoid conflicting judgments (noting that comity and cooperation are particularly important in cross-border insolvency).
Prior to the filing of the petitions, the petitioning creditor reached a settlement agreement with both the company and the guarantor by which if certain precedent conditions were met, the petitioner would accept partial payment in satisfaction of its debt; however, if any of the conditions were not met, the petitioner retained the right to claim its full debt. The company proceeded to make the partial payment, however a dispute arose as to whether certain of the conditions had been satisfied.
The Hong Kong Court considered the matter first and reached the conclusion that one of the conditions, the requirement to pay the petitioner’s legal fees for entering into the settlement agreement by 15 February 2018, clearly had not been satisfied as no payment towards the legal fees was made. On that basis, the Hong Kong Court found the balance of the debt to be due and owing and proceeded to wind-up the guarantor.
The Grand Court then, unusually, declined to follow the Hong Kong Court’s finding and dismissed the petition against the company. In doing so, it accepted that the Hong Kong judgment had persuasive effect but did not consider it res judicata (ie determinative) between the parties as they were different parties. Ultimately, the Grand Court placed heavy reliance on the fact the petitioner failed to provide accurate invoices prior to the 15 February deadline, a point which had not been raised before the Hong Kong Court in oral submissions. In those circumstances, the Grand Court took the view that it was incumbent upon the petitioner to provide accurate invoices before the deadline and the failure to do so gave rise to a bona fide dispute on substantial grounds over the existence of the petition debt.