The creditor challenging the appointment of the voluntary liquidators as JOLs argued that the circumstances of the voluntary liquidators’ appointment gave rise to an appearance of partiality. The circumstances of the appointment of voluntary liquidators and the other salient facts were as follows:

  • the insolvent company was a B-Class bank (Bank) regulated by the Cayman Islands Monetary Authority (CIMA);
  • the creditor that became the party opposing the JVL’s appointment (Opposing Creditor) had earlier sought to withdraw c.$8m deposited with the Bank;
  • in light of that withdrawal request and other factors, and concerned about the Bank’s position, 8 days later the Bank’s directors appointed Fund Fiduciary Partners (FFP), to provide a solvency analysis to the Bank on an urgent basis;
  • the following day (a Friday), attorneys for the Opposing Creditor made a final demand for payment and threatened a winding up petition against the Bank;
  • on the following Monday (a public holiday in Cayman), the Bank’s directors received FFP’s insolvency analysis and concluded that the Bank needed to be placed into the hands of independent liquidators immediately. On the same day (the holiday Monday), the Bank’s shareholders passed a special resolution appointing Michael Pearson and Adam Keenan of FFP as voluntary liquidators (JVLs) of the Bank;
  • 2 days after their appointment, the JVLs filed a petition for the conversion of the voluntary liquidation to a court supervised liquidation, the petition seeking orders that the JVLs be appointed as JOLs;
  • the Opposing Creditor sought the appointment of alternative JOLs (initially Grant Thornton, but after considering the JVLs’ evidence, Kalo);
  • another major creditor (also of c.$8m in value) notified the JVLs that it had no objection to their appointment as JOLs.

In essence, the grounds advanced by the Opposing Creditor for Kalo to be appointed JOLs rather than the JVLs were:

  • the circumstances of the appointment of the JVLs (set out above) gave rise to the appearance that the Bank was actuated by an intention to appoint its own choice of liquidators, and this gave rise to an unavoidable and irremediable perception of partiality;
  • the JVLs were appointed by a special resolution of the shareholders and it would be tantamount to preferring the views of shareholders over creditors if the JVLs were to be appointed (the Opposing Creditor being a major creditor opposing the appointment of the JVLs as JOLs);
  • insolvent liquidations must be conducted in the interests of the true economic stakeholders, being the creditors;
  • Court of Appeal authority required the Court to appoint the opposing creditor’s nominee; and
  • the objective test referenced in the cases (in relation to the perception of partiality) was satisfied, because the Opposing Creditor was a reasonable and fair-minded stakeholder.

The Court did not accede to the Opposing Creditor’s request to appoint Kalo as JOLs and, instead, appointed the JVLs to that position.

In doing so, the Court accepted Appleby’s submissions that:

  • the facts of each case needed to be considered;
  • the questions that the Court needed to ask in order to resolve the issue of the identification of the JOLs were (a) whether a problematic relationship existed, (b) whether that relationship was capable of giving rise to perceptions of partiality and, if so (c) whether that risk would be sufficiently material in the judgement of a reasonable and fair-minded shareholder;
  • FFP’s brief pre-appointment relationship with the Bank incidental to preparation of an urgent assessment of and report on solvency did not give rise to a problematic relationship;
  • the JVLs appointment on a public holiday under threat of a winding up petition did not give rise to an appreciable risk of the perception of partiality;
  • the Court should always consider and give primacy to the views of the economic stakeholders in a liquidation, but the economic stakeholders views is just one factor that Court considers in the assessment of “all objective factors”, and is not the equivalent of a veto over the appointment of JVLs as JPLs;
  • the Court must be satisfied on the evidence that the objective test is satisfied – it is not appropriate or sufficient for a challenging creditor to simply describe themselves as a reasonable and fair-minded stakeholder.


Section 124 of the Companies Act, which mandates the appointment of JOLs if a declaration of solvency is not filed after 28 days of the appointment of JVLs was arguably not drafted in contemplation of companies that are known to be insolvent being placed into voluntary liquidation. Nevertheless, the practice of expeditious appointment of liquidators and immediate petitions for conversion to court-supervised liquidations are common. Absent legislative amendment, the practice will continue and challenges will continue to be made to the appointment of JVLs as JOLs.

The case provides helpful guidance on how the Court will respond when the only real basis of the objection of a creditor is that voluntary liquidators should not become Court-supervised liquidators because the JVLs were company-appointed and there are investigations to be carried out in respect of the conduct of the company’s directors. It is a solid endorsement of the professionalism and impartiality of Cayman liquidators, and a clear delineation of the objective criteria that need to be satisfied in order for grounds for objection to the appointment of JVLs as JOLs to be made out.


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