Matthew Hardwick KC success in Cayman receivership dispute

Matthew Hardwick KC, instructed by Harneys in the Cayman Islands, successfully represented Oakwise Value Fund SPC (“Oakwise”) in its defence of the petition of CMB International Securities Limited (“CMB”) in the Grand Court of the Cayman Islands.

CMB petitioned for the appointment of receivers over a particular segregated portfolio of Oakwise (“the Segregated Portfolio”) pursuant to ss224 and 225 of the Companies Act (2022) Revision on the grounds that (1) the Segregated Portfolio was insolvent, in view of a redemption debt of in excess of USD90m; and (2) it had lost confidence in Oakwise’s management of the Segregated Portfolio.

Matthew and the Harneys team successfully argued that (1) recent Cayman case law (Re Obelisk Global Fund; Re Green Asia) authoritatively established that the correct test was that of balance sheet (not cash flow) insolvency; (2) the Segregated Portfolio was solvent on a balance sheet basis (net assets of USD284m in 2022); (3) the appointment of receivers would not achieve the statutory purposes of s224(3); and (4) the management allegations were irrelevant in circumstances where s224(1)(a) contains no just and equitable ground (cf s92(e) of the Companies Act 2022).

The 26 May 2023 judgment of Doyle J., sitting in the Grand Court of the Cayman Islands (Financial Services Division), provides (1) important confirmation of (a) the narrow (balance sheet insolvency) ambit of the jurisdiction to appoint receivers pursuant to ss 224 and 225 of the Companies Act (2022); and (b) the absence of a just and equitable ground in that context, as well as (2) an up to date illustration of the application of the balance sheet insolvency test to a segregated portfolio with a healthy net balance sheet.

The full judgment can be read here.