Hanging By A Thread: The Re-Modelling Of Modified Universalism

On 10 November 2014, the Privy Council handed down its decision in Singularis Holdings Limited v PricewaterhouseCoopers1, together with its decision in a related case, PricewaterhouseCoopers v Saad Investments Company Limited2, both on appeal from the Court of Appeal in Bermuda. The decision provides guidance on the application of the principle of modified universalism.

By way of background, Grant Thornton had been appointed as official liquidators to Singularis Holdings Limited ("Singularis") and Saad Investments Company Limited ("SICL" and together with Singularis, the "Companies") in the Cayman Islands, the Companies' jurisdiction of incorporation. The liquidators obtained orders in the Cayman Islands pursuant to section 103(3) of the Companies Law (2013 Revision) against PricewaterhouseCoopers ("PwC"), the Companies' auditors registered in Bermuda, requiring PwC to deliver to the liquidators any "property or documents belonging to the Companies" in order to assist the liquidators in tracing assets. PwC took the position, which was not contested by the liquidators, that as a matter of Cayman Islands law, the requirement to produce documents pursuant to orders made under section 103(3) of the Companies Law, was not sufficiently broad to include PwC's internal working papers because those documents would not be considered as "belonging to" the Companies. This is the generally accepted interpretation of section 103(3) of the Companies Law, albeit this interpretation of the section has never been tested.

The liquidators subsequently obtained recognition of their appointment to Singularis from the Bermudan Court and an order winding up SICL in Bermuda. The liquidators then sought the production of PwC's internal working papers in reliance upon (i) section 195 of the Bermudan Companies Act 1981, which applied to SICL as a company being wound up in Bermuda, and (ii) the common law principles of modified universalism applicable in insolvency proceedings, in respect of Singularis. In both cases, the liquidators considered that the orders which could be made by the Bermudan Court requiring PwC to produce documents and information would be wide enough to include PwC's internal working papers and would not be limited to documentation or information belonging to the Companies. This is because section 195 of the Bermudan Companies Act 1981 is in broader terms than section 103(3) of the Cayman Islands Companies Law.

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