On 10 November 2014, the Privy Council gave its judgments holding (by the majority of the Board) that there are powers at common law which permit a court to give assistance to a foreign court in insolvency proceedings by ordering the production of documents, but only to the extent that that same power exists in the foreign jurisdiction.\u00a0 It was also found (unanimously) that a winding up order would not be granted in relation to an overseas company if that company did not come strictly within the statutory definition of an entity which may be wound up.\u00a0 Further (also unanimously), where the sole purpose of the winding up application was to target a third party within the jurisdiction, notwithstanding the fact that the court will normally not entertain submissions from \u201cstrangers\u201d to the winding up and the third party did not strictly come within the statutory classes of those entities having standing to contest such an application, jurisdiction exists in exceptional circumstances to grant standing \u2013 if only on the grounds of natural justice.<\/p>\n
Background<\/strong><\/p>\n Saad Investments Company Limited [1] (\u201cSaad<\/strong>\u201d) and Singularis Holdings Limited [2] (\u201cSingularis<\/strong>\u201d) are related companies which were both incorporated in the Cayman Islands and which were both ordered to be wound up by the Grand Court of the Cayman Islands. PricewaterhouseCoopers (\u201cPwC<\/strong>\u201d), based in Bermuda, was the auditor for both Saad and Singularis.\u00a0 The liquidators for the companies wanted to obtain documents in PwC\u2019s possession in relation to its audits of the companies.<\/p>\n The liquidators of Saad applied for and obtained a winding up order in the Supreme Court of Bermuda and, in turn, an order pursuant to section 195 of the Companies Act 1981<\/em> (Bermuda) seeking the disclosure of information in PwC\u2019s possession.<\/p>\n The liquidators of Singularis sought and obtained recognition from the Supreme Court of Bermuda of the Cayman liquidation.\u00a0 The Bermuda court in turn issued an order, based on its \u201ccommon law power\u201d to assist the Cayman liquidation, requiring PwC to produce information (namely, the working papers in relation to the audits, which it appears were agreed not to be property of Singularis) which otherwise would not have been disclosed under section 195 of Bermuda\u2019s Companies Act 1981<\/em> or the equivalent statutory provision in the Cayman Islands (section 103 of the Cayman Islands Companies Law<\/em>).<\/p>\n PwC resisted the orders made in both cases and appealed to the Bermuda Court of Appeal.\u00a0 The Court of Appeal rejected PwC\u2019s appeal and upheld the Saad decision (in relation to which PwC had argued that the Supreme Court of Bermuda had no jurisdiction to order the winding up of Saad because Saad was an overseas company which did not carry on business in the jurisdiction and thus did not come within the statutory definition required to establish jurisdiction under Bermuda law).\u00a0 The Court of Appeal allowed PwC\u2019s appeal and set aside the Singularis decision (in relation to which PwC had argued that the Supreme Court of Bermuda could not assist the Cayman liquidation by ordering production of information which could not have been ordered by the Cayman court itself).<\/p>\n Further appeals of the decisions were brought to the Privy Council.<\/p>\n Privy Council<\/strong><\/p>\n The Saad Appeal<\/p>\n The Privy Council\u2019s decision in the Saad appeal was unanimous.\u00a0 The Board held that the Supreme Court of Bermuda did not have jurisdiction to order a winding up of Saad because the jurisdiction was wholly statutory in nature and Saad did not fall within the statutory definition of a \u201ccompany\u201d necessary to establish jurisdiction under Bermuda law.\u00a0 The liquidators\u2019 submission that Saad\u2019s ownership of shares in a company incorporated in Bermuda was sufficient to bring Saad within the definition of \u201ccompany\u201d was not accepted by the Board.<\/p>\n On a collateral issue, the liquidators had argued that PwC had no standing in relation to the winding up order because PwC did not fall within any of the statutory classes of persons entitled to appear in relation to applications for winding up orders.\u00a0 The Board rejected this submission based on the extraordinary circumstances of the case.\u00a0 It found that PwC had standing to contest the winding up even though it was technically a \u201cstranger\u201d to the proceeding.\u00a0 The exception applied by the Board was based upon the fact that the entire winding up proceeding was focused on PwC because PwC\u2019s books and records relating to its audits of Saad were the sole target of the exercise.\u00a0 Accordingly, the Board found that it was just and equitable to permit PwC to have standing to challenge the winding up order and that, if it was held otherwise, it would be a breach of natural justice to deny PwC the ability to argue that the court lacked jurisdiction in the proceedings in which PwC was the target.<\/p>\n The Singularis Appeal<\/p>\n The Privy Council\u2019s decision in the Singularis appeal was not unanimous and was delivered by the members of the Board in five separate judgments.<\/p>\n The majority of the Board held that there is a common law power to assist a foreign court in insolvency proceedings and that the principle of \u201cmodified universalism\u201d is available to assist a foreign winding up proceeding so far as the court properly can<\/em>.\u00a0 The limits on a court\u2019s ability to assist the foreign proceeding are established by local law, public policy and the limits of the court\u2019s own statutory and common law powers.\u00a0 Accordingly, when a compelling legal policy calls for it, in the absence of a specific statutory power (in this case, to compel production of information) the court has the common law power to overcome the statutory shortfall.<\/p>\n