Offshore Case Digest: Bermuda, British Virgin Islands, Cayman Islands - Issue No. 9 – November 2014 – February 2015

The Offshore Case Digest offers readers a high level summary of the major commercial cases decided in Bermuda, the British Virgin Islands and the Cayman Islands between November 2014 and February 2015. Our goal is to provide a useful reference tool for clients and practitioners who are interested in the development of case law in each jurisdiction.

BERMUDA

PRIVY COUNCIL

CROSS-BORDER INSOLVENCY - WINDING UP - DISCLOSURE SOUGHT BY FOREIGN LIQUIDATORS - JUDICIAL ASSISTANCE - EXCESS OF JURISDICTION - EXTENT OF COMMON LAW WHERE EXISTING STATUTE - STANDING - PUBLIC POLICY - MODIFIED UNIVERSALISM

PricewaterhouseCoopers (Bermuda exempted partnership No. 7420) -v- (1) Saad Investments Company Limited [2014] UKPC 35 (10 November 2014)

Singularis Holdings Limited -v- PricewatershouseCoopers (Bermuda exempted partnership No. 7420) [2014] UKPC 36 (10 November 2014)

In the Singularis case, the Privy Council (Lords Neuberger, Mance, Clarke, Collins and Sumption) delivered an important judgment (1) about the jurisdiction of the Bermuda court to assist foreign liquidators by ordering the production of documents and information by persons in Bermuda and (2) defining the common law powers of assistance to foreign liquidators.

The interplay or conflict between the decisions of the Privy Council and the UK Supreme Court in Cambridge Gas -v- Navigator [2007] 1 AC 508, Rubin -v- Eurofinance [2012] UKSC 46 and Al Sabah -v- Grupo Torras [2005] 2 AC 333 has been a source of great debate and litigation in the world of cross-border insolvency. The Privy Council has now provided clarity to this area of the law.

In summary:

The Bermuda court has no general jurisdiction under the Companies Act, 1981 or at common law to wind up foreign companies that do not conduct business in Bermuda; "Modified Universalism" is part of the common law and there is a common law power to assist foreign liquidators, inter alia, by ordering the production of documents and information, but this power has the following limits: Firstly, it is available only to assist the officers of a foreign court of insolvency jurisdiction or equivalent public officers. It is not available to assist a voluntary winding up that is not conducted by or on behalf of an officer of the courts. Secondly, it is a power of assistance. It exists for the purpose of enabling courts to surmount the problems posed for a worldwide winding up of the company's affairs by the territorial limits of each court's powers. It is not available to enable office-holders to do something which they could not do even under the law by which they were appointed. Thirdly, it is available only when it is necessary for the performance of the office-holder's functions. Fourth, the power is subject to the limitation in In Re African Farms Ltd, in Re HIH Casualty and General Insurance Ltd and Rubin, that such an order must be consistent with the substantive law and public policy of the assisting court, in this case that of Bermuda. PricewaterhouseCoopers ("PwC") is a Bermuda exempted partnership with its registered office in Bermuda. It is a different legal entity to the PricewaterhouseCoopers Bermuda auditing firm. Through its Dubai branch, PwC audited two Cayman companies, Saad Investments Company Limited ("SICL") and Singularis Holdings Ltd. ("Singularis"). PwC did not have any office or other physical presence in Cayman. The Cayman court ordered the compulsory winding up of SICL and Singularis, and Joint Provisional Liquidators ("JPL") were appointed in Cayman in 2009. Production orders were made against PwC as former auditors in Cayman, that were complied with. The Cayman orders did not and could not require PwC to produce its own working papers (merely documents that were the property of SICL and Singularis).

Some three years after the Cayman winding up orders, in 2012 the JPLs obtained an ancillary winding up order in Bermuda against SICL. They subsequently obtained ex-parte orders against PwC (1) under s195 of the Companies Act, 1981 requiring the production of extensive documentation relating to SICL, including the auditor's working papers and the response to interrogatories and (2) at common law against both SICL and SHL requiring the production of substantially the same extensive documentation and interrogatories. PwC challenged the making of these orders, and was unsuccessful at first instance before Kawaley CJ.

PwC appealed to the Bermuda Court of Appeal and was partially successful. Both sides appealed to the Privy Council in two separate appeals. The question whether the Bermuda Court has power at common law and under Bermuda statute to grant assistance in cross-border insolvencies arose for determination. The position was complicated by the fact that Bermuda has no statutory regime similar to that contained in s426 of the (English) Insolvency Act, 1985, expressly permitting assistance to foreign liquidators.

The two decisions of the Privy Council are complex and the law discussed is difficult.

In the SICL decision, the Privy Council held that the statutory company law regime in Bermuda did not enable the Bermuda courts to wind up foreign companies that were not doing business in Bermuda. This judgment overturns Bermuda case-law to the contrary going back some 10 years.

In the Singularis decision, the Privy Council held by a majority (Lords Sumption, Clarke and Collins) that "modified universalism" means that while there is indeed a common law power in Bermuda to assist a foreign liquidator by making document and information production orders, that power is not unlimited. The limits on the power are as set out above. Of particular significance for the present case was the fact that under the Cayman legislation governing their functions, the Cayman liquidators could only obtain production orders in Cayman for documents and records that were the property of the company. An auditor's working papers are not the property of the company and therefore cannot be obtained in Cayman. The common law power in Bermuda cannot be used to extend the powers of the liquidator to enable him to obtain the auditor's working papers.

The minority judgments in Singularis (Lords Neuberger and Mance) held that there was no general common law power in Bermuda to order the production of documents or information in aid of a foreign liquidation.

COURT OF APPEAL

LEAVE TO ENTER JUDGMENT IN ARBITRATION - INDONESIAN LAW - EXCESS OF JURISDICTION - PLEADINGS - OPPORTUNITY TO PRESENT CASE - PUBLIC POLICY

Sampoerna Strategic Holdings Ltd -v- (1) Huawei Tech Investments Co Ltd and (2) Huawei International Pte Ltd [2014] Bda LR 108 (19 November 2014)

The issue in this appeal was whether the Supreme Court correctly gave leave to the Respondents to the Appeal to enter judgment against the Appellant in the terms of a Consolidated Final Award dated 27 June 2013 (the "Award") issued by the Singapore International Arbitration Centre ("SIAC"). The Appellant was a Bermudian company named Sampoerna Strategic Holdings Ltd. The Respondents (the Claimants in two arbitrations against the Appellant) were Huawei Tech Investments Co Ltd (a Hong Kong company) and Huawei International Pte Ltd (a Singapore company).

In short, the Arbitral Tribunal had awarded the sums claimed by the Respondents, not on the grounds advanced in the Statements of Claim, which were rejected, but under the provisions of Article 1316 of the Singapore Civil Code, which was not expressly pleaded. The Appellant now contended that: 1. the Award dealt with disputes not contemplated by and not falling within the terms of the submission to arbitration; 2. the Award contained decisions on matters beyond the scope of the submissions to arbitration; 3. the Respondent was unable to present its case; and 4. the enforcement of the Award would be contrary to public policy.

On 9 October 2013 Hellman J gave leave to enter judgment in the terms of the Award. By Summons dated 14 November 2014, the arbitration Respondent applied to set aside the Order of Hellman J, on the grounds stated above. The application was refused by the Chief Justice following a hearing in Chambers. The Court of Appeal dismissed the appeal on each on the grounds:

Ground 1 - Excess of Jurisdiction

Section 42(2) of the Bermuda International Conciliation and Arbitration Act, 1993 (the "Act") provides, inter alia, that enforcement of an Award may be refused where the defendant proves -"(d) ...that the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration; ...". The Court of Appeal held that it was clear beyond doubt that the jurisdictional challenge must fail on the basis that the arbitration agreement was broadly defined to incorporate "All disputes arising out of or in connection with this letter shall be finally settled under the administrative and procedural rules of [SIAC]...".

Ground 2 - The Pleading Point

The Appellant submitted that the Respondents did not, in their Notices to Arbitration, their Consolidated Statement of Claim, or their Consolidated Statement of Reply, plead or even mention Article 1316.

Counsel for the Appellant submitted that under Singapore law "a party is bound by his pleadings and an action is confined to the issues raised therein" and therefore, the Arbitral Tribunal was precluded from granting any relief under Article 1316. However, it was also accepted by the Appellant's Counsel that the Singaporean authorities do not go so far as to hold that an arbitrator's finding can be set aside merely because it was a finding based on a ground not expressly included in the pleadings before him. The Court of Appeal held that in every case where there is no express reference in the pleadings it is necessary to consider about the factual background leading to the failure to plead a particular issue. There is no general rule that, because the matter was...