“Truly Extraordinary”: Flexibility In Granting Winding Up Orders

PSI and the 1MDB fraud

In December 2024, the official liquidator of Bridge Global Absolute Return Fund SPC (Petitioner), applied for an order restoring PSI to the register of companies and for its subsequent winding up (Petition). The Petition claimed that PSI and its principals, including Mr. Tarek Obaid (founder and former director of PSI), were key participants in a scheme to defraud 1MDB and its sister company of some US$7.78 billion and that the Petitioner was a contingent creditor of the Company, with claims exceeding US$1.8 million.

A winding-up order was duly made on the papers, without notice or hearing, the Court having dispensed with the requirement of service, notice or advertisement of the Petition, which Justice Doyle acknowledged was “highly unusual”.

Mr. Obaid applied to the Court to (among other things) set aside the winding up order on the basis that the Court had no jurisdiction to make it on the papers and without notice, on four main grounds:

• the Petitioner’s lack of standing;
• that the debt was disputed, and insolvency and the need for investigation were not made out;
• the official liquidators did not meet the independence requirement; and
• there were failures in respect of full and frank disclosure. 

Court’s decision

 Jurisdiction

Justice Doyle held that the Court has a wide jurisdiction to grant winding up orders[1], including the jurisdiction to make “any other order that it thinks fit” under s. 95 of the Companies Act. Justice Doyle further emphasised the breadth of the statutory jurisdiction by referring to Lancefield v Lancefield[2], in which it was found that the English Court had power “in an appropriate case, to order of its own motion the winding up of a company without a petition before it”.

Whilst acknowledging that a winding up order should ordinarily be made on notice and in open court (noting the importance of compliance with the Companies Winding Up Rules as set out in HSH Cayman[3]), the Court held that “jurisdiction is one thing, compliance with the rules another” and that “extraordinary circumstances justify making orders in extraordinary ways”.  Accordingly, the Court held that in the circumstances Justice Kawaley had the jurisdiction to make the orders in the manner that he did, despite it being a “truly extraordinary exercise of the jurisdiction”. In any event, Mr. Obaid had been given the opportunity at the inter partes hearing to challenge the Winding Up Order.

Standing of Petitioner

The Court found that the Petitioner did have standing, given that section 94 (1)(b) of the Companies Act allows contingent or prospective creditors to petition, and that, pursuant to Re Shinsun Holdings[4], it was required to prove “on the balance of probabilities” that it was a contingent creditor.

Justice Doyle referenced the judgments in Re Atom Holdings[5] and Re Aubit International[6], both of which provide analysis on the evidence required to demonstrate standing as a contingent creditor. The Court concluded that, based on the evidence before it, the Petitioner had claims which were “sufficient to establish standing in the circumstances of [the] case”.

Need for investigation

Justice Doyle determined that there was “plainly a need for an investigation” and confirmed that this is a “free standing ground for a winding up order”[7]. The Court rejected submissions made on behalf of Mr. Obaid that the free-standing ground is not a “free for all”[8], because the circumstances of the instant case “cried out for a full investigation into the affairs of PSI, and for any wrongdoers to be brought to justice”.[9]

Independence of liquidators

The Court explained that a conflict would arise if the liquidator appointed over the Petitioner had filed a proof of debt in the liquidation of PSI, because the same liquidator was appointed over both entities. In such circumstances, the liquidators would effectively be marking “their own homework”. However, Justice Doyle did not see this conflict as a bar to the liquidators’ appointment over PSI, as the conflict could be dealt with by the appointment of a “conflict liquidator”.

The Court did not accept Mr. Obaid’s arguments on the independence of the liquidators and referred to the “wise words” of Parker J in Re CW Group Holding Limited[10], that “professional officeholders who act as officers of the court normally act “in the best interests of all of the company’s creditors and stakeholders, irrespective of who sought the appointment.”.” In the Court’s objective analysis, no reasonable perception of a lack of independence was established and the Court was satisfied that the liquidators met the independence requirement.

Full and frank disclosure

Justice Doyle referred to his judgments in Wang v Credit Suisse[11] and Raier v Correa[12] in which he outlined the relevant law on the duty to make both full and frank disclosure and a “fair presentation” of the case in ex parte applications. The Court further emphasised that “an aggressive, over-zealous, one-sided, unbalanced approach is not appropriate” and cautioned against continuing to proceed on an ex parte basis, where there was no longer a valid reason to do so. Whilst there had been serious failings on the part of the Petitioner, the Court found that this was not so serious that the Court should set aside the Winding Up Order. Ultimately, it was in the interests of justice that the Winding Up Order be continued.

Comment

This judgment demonstrates the Court’s extensive power to wind up companies, and provides a helpful reminder that creditors can petition on the basis of a contingent debt, and where there is a need for an investigation into a company’s affairs. The Cayman Court confirmed its willingness to prioritise the interests of justice over strict procedural formalism.

[1] See sections 91 and 92 of the Companies Act (2025 Revision) (Companies Act)

[2] [2002] BPIR 1108

[3] HSH Cayman 1 GP Ltd v ABN Amro Bank NC [2010 (1) CILR 114]

[4] [2023 (1) CILR 473]

[5] [2023 (2) CILR 106]

[6] Re Aubit International (Unrep., 19 October 2023)

[7] Ibid.

[8] Re Baosheng Media Group Limited (Unrep., 30 October 2024)

[9] Given that the Court decided in favour of the Petitioner on the need for investigation, it did not need to determine the insolvency ground or issues relating to the disputed debt.

[10] (Unreported, 3 August 2018)

[11] (Unreported, 8 April 2022)

[12] (Unreported, 9 June 2023)