By Christina Kish, senior associate
In an extempore judgment (that has been reduced to writing) given in the Grand Court of the Cayman Islands on 18 July 2014 in the matter ofHiTs Africa Limited (in official liquidation) (unreported, Cause No FSD 96 of 2013 (CQJ)), Mr Justice Quin set out the principles applicable when determining whether a winding up order should be stayed pending the conclusion of an appeal brought by the company the subject of the order (“the Company”).
The petitioning creditor was Huawei Technologies, China’s biggest manufacturer of electronics and electronic equipment, in regard to a debt of US$26 million owed by the Company to Huawei for equipment and services provided in connection with the roll-out of a mobile telephone network in Tanzania.
On 29 January 2014, the Judge made the winding up order and, a few months later, on 8 April 2014, the Company applied for a stay of the winding up pending the conclusion of an appeal that had been filed on 17 February 2014.
In determining whether or not to grant a stay, the Judge turned to the principles set out by Cresswell J at paragraph 22 of his Judgment in Heriot African Trade Finance Fund Limited v Deutsche Bank (Cayman) Ltd 2011 (1) CILR 34 where Cresswell J had said:
“In my opinion, the relevant legal principles are as follows:
(a) the Court of Appeal Law (2006 Revision), s.19(3) provides so far as material: “No stay of execution … shall be granted upon any judgment appealed against save …. upon good cause shown to the Court or to the Grand Court”;
(b) the critical test is whether good cause has been shown;
(c) the onus is upon an appellant to show good cause (i.e good reasons) for the imposition of a stay pending appeal;
(d) in considering whether good cause has been shown, the court will have regard to all the circumstances of the case, including, without limitation (i) whether the appeal would be rendered nugatory if a stay is not granted (Wilson v. Church (13) (12 Ch. D. at 458-459)); (ii) whether the appellant can show a good arguable case; (iii) whether the appeal is in exercise of a true right of appeal and not for some collateral purpose; (iv) the balance of convenience (see Quintin v. Phillips Petroleum Co. (9)); and (v) appropriate regard should be had to the reasons given by the first instance judge for refusing a stay;
(e) a stay of an order for the winding-up of a company will generally not be granted where a stay (Parmalat (7) (2007 CILR 1, at para. 3)) “would probably make it very difficult for a liquidator to investigate the affairs so as to be able in a timely and efficient manner to ascertain the company’s liabilities and assets and so take steps to recover those assets for the benefit of the creditors and, if a solvent estate, for the benefit of shareholders as well”;
(f) the question whether or not to grant a stay is entirely in the discretion of the court; and
(g) indications in past cases do not fetter the scope of the court’s discretion.”
These principles were affirmed by Quin J in the present case.
Quin J found that the Company was hopelessly insolvent and that there were many aspects of the Company’s affairs that required further investigation. Furthermore, delaying the liquidation could potentially affect the liquidators’ ability to investigate and ascertain the liabilities and assets of the Company and ultimately prejudice the creditors.
The Judge confirmed that the critical test is in section 19(3) of the Court of Appeal Law which provides that the onus is on the appellant to show good cause for the Court to grant the stay. He concluded that “I find that the Appellant has not shown any good cause for the Court to grant the stay in this case”.
Importantly, Quin J referred to In re A & BC Chewing Gum Ltd [1975] 1 WLR 574 where he said “Plowman J stated in very wide terms that, although there was jurisdiction to do so, a stay, as a matter of principle is never granted, and there are good reasons for not doing so”.
The decision in HiTs Africa is yet further confirmation that the bar is very high for obtaining a stay of a winding up pending an appeal.
