Cayman Court Allows Interim Distributions In Saad Liquidation

The Grand Court of the Cayman Islands (the "Court") has sanctioned a proposal enabling the Joint Official Liquidators ("JOLs") of Saad Investments Company Limited ("SICL") to make interim distributions to unsecured creditors, notwithstanding a pending Court of Appeal ("CICA") decision regarding a third-party proprietary claim over the entire liquidation estate.

The judgment, delivered 1 October 2019, sought to strike a balance between the continuing prejudice suffered by admitted creditors in not receiving a distribution, and the prejudice potentially to be suffered by the third-party proprietary claimant should its appeal be successful. In the end, Chief Justice Smellie was satisfied the JOLs had put appropriate measures in place to protect the third-party claimant, and found that it was in the best interests of SICL that the JOLs be authorised to make the interim distributions.

Background

The background to this matter is well-rehearsed in the Cayman Islands. The JOLs were appointed to SICL in 2009 and realised very significant sums, but they were unable to make any distributions to SICL's admitted creditors because of multi-billion dollar proceedings brought against SICL by Ahmad Hamad Algosaibi and Brothers Company ("AHAB"), in which AHAB asserted proprietary claims over the entire SICL estate.

In 2018 the Chief Justice dismissed AHAB's claims at first instance in a 1348-page judgment. AHAB's appeal was heard by the CICA over six weeks in mid-2019 (the "AHAB Appeal"). The CICA judgment remains reserved, with a prospect of a further appeal to the Privy Council.

The Distribution Application

Although the JOLs considered the AHAB Appeal to have no prospect of success, they were bound to continue to recognise AHAB as a contingent creditor of the SICL estate until such time as the AHAB Appeal was determined by the CICA and/or the Privy Council.

In those circumstances, the JOLs found themselves stuck in insolvency purgatory. Making no decision on distributions until the final determination of the AHAB Appeal would cause continuing prejudice to admitted unsecured creditors who had already waited ten years for a distribution from the estate. But to make an interim distribution to those creditors while the AHAB Appeal remained pending would obviously prejudice AHAB if it ultimately succeeded in establishing its proprietary claim. Either route could open the prospect of personal claims against the JOLs for breach of duty.1

While the Companies Law...