Offshore Case Digest: Bermuda, British Virgin Islands, Cayman Islands - Issue #7 - March 2014 - June 2014

Bermuda

Supreme Court

April

WINDING UP – THE COMPANIES ACT, 1981 – BERMUDA INTERNATIONAL CONCILIATION AND ARBITRATION ACT, 1993 – ABILITY OF SECURED CREDITOR TO PETITION – STAY OF EXECUTION OF ENFORCEMENT ORDER

In the Matter of LAEP Investments Ltd ("the Company") [2014] SC (Bda) 23 Com (1 April 2014)

The Court was asked to consider three applications before the Court: (1) An amended petition to wind up; (2) A Summons of the Company to dismiss the petition and set aside the appointment of the Joint Provisional Liquidators ("JPLs"); and (3) A Summons of the Company to stay execution of a Court Order granting leave to the Petitioner to enforce an arbitral award against the Company in Brazil (the "Enforcement Order").

Winding Up Petition: The Judge considered the Company's arguments that the winding up was sought to subvert the judicial process in Brazil and that the debts were already fully secured in Brazil. The Court was not satisfied with the evidence on either point. It was noted that the fact that a creditor is secured did not prevent it bringing a winding up petition (Moor -v- Anglo-Italian Bank [1979] 10 Ch 681 applied). The Judge ordered the winding up of the Company.

Stay of Execution of Enforcement Order: The Judge confirmed that the test as to whether to stay enforcement was effectively a balance of convenience test and did not favour interference with the Petitioner's right to enforce the award. In this respect, the Judge placed weight on the Petitioner's submission that the judicial process pursued by the Company in Brazil (which formed the ground upon which the stay was sought) could take ten years to pursue and that a stay would result in severe financial prejudice. The application for the stay was dismissed.

INTERIM INJUNCTION TO PREVENT PRESENTATION OF PETITION – ABILITY TO SET ASIDE INTERIM INJUNCTION – CROSS CLAIM BY COMPANY EQUIVALENT TO PETITIONER'S DEBT

Agrenco Limited ("Argenco") -v- Credit Suisse Brazil (Bahamas) Limited ("Credit Suisse") [2014] SC (Bda) 24 Com (26 February 2014)

This case concerned an application by Credit Suisse to set aside an interim injunction which restrained it from presenting a petition to wind up Argenco. The Court noted that following the grant of the injunction there had been two material changes: (1) Argenco had conceded that the existence of the debt upon which the Statutory Demand was based was not disputed; and (2) Argenco was no longer in a position to assert that it was solvent on a balance sheet basis.

In determining whether to set aside the injunction, the Court considered the legal principles governing the restraint of the presentation of a winding up petition against a company in circumstances where there is a cross-claim equal to the Petitioner's debt. The Judge stated that he was required to assess whether or not the cross-claim relied upon by Argenco has "sufficient prima facie plausibility to merit further investigation as to [its] truth". Having considered the cross-claim the Judge held that it did not withstand scrutiny. The Judge usefully outlined that the possible extinction of Credit Suisse's claim (when adjudicated by liquidators considering the cross-claim) was not a material factor justifying continuing with the injunction, particularly having regard to the improbable nature of the cross-claim itself.

May

STAY PENDING APPEAL – RULING ON COSTS AND TERMS OF FINAL ORDER – INDEMNITY COSTS – MISCONDUCT – RETURN OF MONIES HELD AS SECURITY FOR COSTS

(1) Stifton Salle Modulable (2) Rütli-Stiftung -v- Butterfield Trust (Bermuda) Limited [2014] SC (Bda) Civ 42 (28...