The Grand Court of the Cayman Islands has recently released two unreported judgments which consider the applicable principles on an application to adjourn a winding up hearing. This provides an apt opportunity to review how the court exercises its wide discretion on such applications. In both cases the court focussed on the merits of the winding up application and whether there was any good reason for delay.

An application to adjourn a winding up hearing should not be seen as a mere procedural matter. If dismissed, the application is often the last act of the company before it is wound up. If the court is not minded to adjourn, an order to appoint official liquidators can usually be expected to follow.

In both recent cases, in the matter of Pinnacle Global Limited (unreported, 4 Feb. 2019) and in the matter of Oakrun Precious Metals Fund, Ltd (unreported, 30 April 2019), the court had no difficulty in dismissing both applications to adjourn and in both cases ordered the immediate appointment of official liquidators. In addition, the cases also touch on other issues which arise in relation to the winding up of companies. In Pinnacle, the court considered alleged defects of the petition and, in Oakrun, the court considered an application for a validation order to allow funds to be released to meet the legal costs of defending the petition.

In the matter of Pinnacle Global Limited

Perlen Holdings Ltd and Nerthington Ltd applied by petition to wind up Pinnacle Global Limited (PGL) pursuant to section 92(d) of the Companies Law (2018 Revision) on the basis that PGL was unable to pay its debts. The petitioners relied upon PGL’s failure to comply with statutory demands which together demanded payment in total of about US$20 million.

PGL opposed the winding up on the basis that the petition was a nullity, and applied that the matter should be adjourned due to issues which PGL argued must be considered by the court before any winding up order can be considered, including directions in relation to Austrian law and the quantity of the debt.

Alleged defects of the petition

On 18 Dec. 2018, the petitioners attempted to serve the petition on PGL. However, the hearing date was not endorsed upon the petition. Further, upon delivery the petitioners were informed that PGL’s registered office provider had recently resigned.

On 19 Dec. 2018, service was attempted again on PGL by way of delivery to the known current directors and a former director and legal adviser, this time with the hearing date endorsed upon it.

PGL argued that the petition was defective due to non-compliance with the Companies Winding Up Rules, 2018 (CWR) which require at O.3, r.5 that a hearing date is endorsed on the petition. PGL said the defect was so fundamental that it rendered the petition a nullity, and further submitted that the court had no jurisdiction to remedy the defect.

The court found that this was a relatively minor technical breach which had been explained in evidence and had caused no prejudice to any party. The court also referred to Order 2 of the Grand Court Rules which is now expressly incorporated into CWR Order 1 r.4 (1A). GCR Order 2 r.1 (1) provides: “Where, in beginning or purporting to begin any proceedings or at any stage in the course of or in connection with any proceedings, there has, by reason of anything done or left undone, been a failure to comply with the requirements of these Rules, whether in respect of time, place, manner, form or content or in any other respect, the failure shall be treated as an irregularity and shall not nullify the proceedings, any step taken in the proceedings, or any document, judgment or order therein.”

Accordingly, it was held that the court does have the power to remedy procedural defects. Having regard to the evidence by the petitioners, including that the hearing date was brought to the attention of PGL only one day after the first attempted service of the petition, and the absence of any prejudice to PGL, the court held that the hearing date defect should be remedied.

Application to adjourn

PGL further argued, in the event that the petition was valid despite the alleged defects, that the matter should be adjourned given questions regarding the quantity of the debt outstanding and issues given that various agreements were subject to Austrian law and that Austrian law imposes obligations on the petitioners which cannot be circumvented by winding up proceedings.

The court noted that PGL’s arguments were not supported by any evidence and that PGL did not raise any issues as to whether the sums claimed were due (only questioning quantum).

The court was satisfied on evidence that PGL never disputed the debt until the submissions were made at the winding up hearing. The court was satisfied that PGL was unable to pay its debts on the basis of its failure to comply with the statutory demand. Accordingly, the court declined PGL’s application to adjourn and granted the winding up order sought by the petitioners.

In the matter of Oakrun Precious Metals Fund, Ltd

Bejoy International Ltd petitioned that Oakrun Precious Metals Fund, Ltd be wound up on the grounds that the fund was unable to pay its debts and that it was just and equitable for the fund to be wound up. The winding up petition included allegations that the fund was cash flow insolvent, that there had been improper payment of expenses, that independent directors had been improperly removed, and that the fund was in breach of regulatory requirements because it lacked the requisite management.

The fund was not represented by an attorney at the winding up hearing, but a former director of the fund and the principal of the manager of the fund, appeared in person to seek an adjournment. The principal sought an adjournment on behalf of the fund to enable the fund to obtain legal representation.

Echelon Wealth Partners Inc, the custodian of certain assets of the fund also appeared. In the event that the principal’s application to adjourn was successful, Echelon sought a validation order blessing the release of US$25,000 of funds from Echelon to the fund for payment of the fund’s legal fees in defending the winding up application.

Application to adjourn

The court found that the principal could not identify any arguable basis on which the winding up application could be opposed and could not identify any possible defences.

Further, the court found that the principal did not satisfactorily explain why the manager had failed to obtain legal advice for the fund at its own expense and did not provide any practical justification for adjourning the winding up hearing and permitting the fund to obtain legal advice.

Ultimately, the court found that the arguments put forward by the principal served to fortify the case for an immediate winding up of the fund. The court declined the application to adjourn and ordered the appointment of official liquidators.

The validation application

Given the court’s decision to decline the application to adjourn, it did not need to make a decision on the validation application to bless the release of US$25,000 of funds from Echelon to the fund to pay the fund’s legal fees. Nevertheless, the court considered the application and found that it would not have made the validation orders sought in any event.

Section 99 of the Companies Law provides as follows: “When a winding up order has been made, any disposition of the company’s property and any transfer of shares or alteration in the status of the company’s members made after the commencement of the winding up is, unless the Court otherwise orders, void.”

The court noted that validation applications would ordinarily be made by a company or its liquidators. Nevertheless, the court considered that Echelon had standing to seek relief as a matter of general principle.

The court accepted the Bejoy’s submissions as to the legal principles governing an application for a validation order. Particularly, where the proposed payment relates to obtaining legal advice with a view to defending a winding up petition, the court must be provided some basis for concluding that a potentially successful defence exists. However, the court found that no arguable defence to the petition had been identified by any party in this case.

In the circumstances, the court considered there was no basis for granting a validation order.


Both judgments should be welcomed by creditors and insolvency practitioners as reminders that the Grand Court will not deprive a petitioner of immediate winding up orders in circumstances where a company makes a last ditch effort to delay the appointment of official liquidators by applying for an adjournment, without good reason.

Further, Oakrun provides useful guidance on the circumstances in which a court will make a validation order to bless the release of funds to pay legal fees in respect of a company defending a petition. Pinnacle helpfully makes clear that the court has discretion to cure any irregularities in relation to commencement of winding up proceedings in order to vindicate parties’ substantive rights.

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