Case Update: Polarcus ' A Declaratory Relief For Cayman Islands Official Liquidators

• Published date: 22 July 2022
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Insolvency/Bankruptcy/Re-structuring, Corporate and Company Law, Insolvency/Bankruptcy, Trials & Appeals & Compensation
• Law Firm: Ogier
• Author: Jeremy Snead and Paul Goss

The Grand Court of the Cayman Islands (Court) has confirmed that the Court has the jurisdiction to grant declaratory relief within winding-up proceedings (In the Matter of Polarcus Limited (In Official Liquidation) (Unreported, Justice Kawaley, 23 June 2022 Cause No: FSD 31 of 2021 (IKJ)).

This is welcome clarity for insolvency practitioners and other stakeholders in winding-up proceedings where such declaratory relief may be required and the relief cannot for some reason be included in a standard sanction application.

Background

Joint Official Liquidators (JOLs) were appointed to the Company on 21 June 2021. The JOLs sought sanction from the Court to enter into a sale and purchase agreement concerning the purchase of shares in foreign connected entities (Transaction). The Court granted such sanction pursuant to an order dated 14 December 2021 (Sanction Order). Notwithstanding the Sanction Order, the JOLs were subsequently required to demonstrate to a foreign regulator that they had the requisite power to enter into the Transaction on behalf of the company in liquidation. Accordingly, the JOLs sought a further order from the Court to provide that confirmation.

Finding

Justice Kawaley acknowledged the lacuna arising from the fact that the Companies Winding Up Rules (2018 Revision) (CWR) did not grant an express power to provide declaratory relief in winding-up proceedings and that the provisions of the Grand Court Rules (GCR) Order 15, rule 16 (providing the Court's jurisdiction to make binding declarations of right whether or not any consequential relief is or could be claimed) did not apply to winding-up proceedings.

In a helpful judgment that recapped the approach taken by the Court, Justice Kawaley noted that the Court had been prepared to use its inherent jurisdiction to fill gaps in the CWR (HSH Cayman I GP Limited et al [2010 (1) CILR 114] (Cayman Islands Court of Appeal) and that the express statutory power to grant declaratory relief (by way of section 11 of the Grand Court Act) was not limited by its own terms. The Court had also previously found that its jurisdiction to grant declaratory relief was as wide as that of the English courts (Insurco Intl Ltd v Gowan Company [1994 CILR 210]).

While reflecting that the parameters of the Court's jurisdiction to supervise official liquidators is expressed in "somewhat compressed terms", Justice Kawaley drew assistance from the ability of a voluntary liquidator to seek relief (under section 129 of the...