Re Fideras Investment Ltd

JurisdictionBahamas
CourtSupreme Court
JudgeGonsalves-Sabola, C.J.
Judgment Date23 Dec 1994
Docket NumberNo. 404 of 1994

Supreme Court

Gonsalves - Sabola, C.J.

No. 404 of 1994

Re: Fideras Investment Limited
Appearances:

John K. F. Delaney, ESQ; counsel for Montcour Finance Limited.

Emerick A. Knowles, ESQ; counsel for Directors of Fidenas Investment Limited and minority shareholders.

Company Law - Winding up — Summons brought to strike out the presentation of a petition praying that a Company be wound up and the making of an ex parte order appointing a chartered accountant as a provisional liquidator with certain specified powers — Claim that the petition discloses no cause of action and is an abuse of the process of the Court — S. 197(a) of the companies Act, deals with winding up of insolvent companies — Resolution was passed by the members of the Company resolving that it be wound up — Petition to wind up was properly before the Court pursuant to rule 21 of the Companies (Winding up) Rules — Summons dismissed.

Gonsalves-Sabola, C.J.
1

By consent of all parties four summonses in this matter were heard together. They were filed in reaction to two events — (i) the presentation of a petition on 12th April, 1994 by Montcour Finance Limited (MFL) praying that Fidenas Investment Limited (FIL) be wound up and (ii) the making of an ex parte order on 13th April, 1994 appointing Wayne J. Aranha, Chartered Accountant, provisional liquidator with certain specified powers.

2

The four summonses, each filed on 18th April, 994, were brought respectively:

  • (i) by directors of FIL in the name of the Company to strike out the petition.

  • (ii) by the minority shareholders of FIL in their own names to strike out the petition.

  • (iii) by the directors of FIL to set aside the ex parte order, and

  • (iv) by the minority shareholders of FIL to set aside the ex parte order.

3

The two summonses to strike out the petition can be treated as one summons, their only difference being in the names of the respective parties who filed them. Similarly, the two summonses to set aside the ex parte order.

4

The facts which form the background of all these applications should be stated. FIL is a Company incorporated under the International Business Companies Act, 1989 as a Company limited by shares. MFL is the majority shareholder owning 59.4 percent of the shares of FIL. MFL alleges that, at all material times, 4 was the intention of the shareholders of FIL to launch a joint venture by way of investment in shares of an American consumer electronics Company (“Emerson”) and eventually acquire a controlling interest in a reorganised Emerson. Since about September 1993, Emerson became subject to bankruptcy proceedings pursuant to Chapter 11 of the United States Federal Bankruptcy Code. Getting to the heart of the matter, the reorganisation plan had to be approved by the United States Bankruptcy Court. MFL advanced to FIL a loan of $15 million to enable FIL to secure from Congress Financial Corporation, New York, certain financing for Emerson known as debtor-in-possession financing. One Geoffrey P. Jurick (“Jurick”) guaranteed that loan.

5

With effect from 2nd December, 1993 “Jurick” became sole director of FIL. Within FIL, Jurick, as a director, represents Fidenas International Bank Ltd FIB and Centralinvest SA ( CSA) together conveniently described as “the Jurick group”.

6

It is alleged that Jurick, as sole director, used his powers under the Articles not in good faith to effectively exclude MFL from ability to participate in the management of FIL by making a strategic empowering amendment to Clause 15 of the Memorandum of Association and article 72 of the Articles of Association. The allegation is that the amendment nullifies the power which properly belongs to MFL as majority shareholder by putting it in the hands of the Jurick group.

7

MFL alleges that FIL is insolvent and proclaims its total lack of confidence in Jurick and the Jurick group. MFL cites a deposition by Jurick made on 7th March, 1994 in the Emerson bankruptcy proceedings as showing that Jurick has acted and is likely to continue to act in conflict with the interests of FIL and its own interest. The reasons for this assertion are said to be that at or around December 1993, Jurick procured a change of name of an existing Bahamian international business Company to “Fidenas International Limited” an entity wholly owned by Jurick and his alter ego. That new Company was cleared of its assets before incorporation. The new name of the Company is strikingly similar to that of FIL and the acronyms of both names are identical. MFL fears that Jurick has made his aforesaid alter ego ready to take over the benefit of FIL's investment of moneys and efforts towards the acquisition of Emerson in breach of Jurick's fiduciary obligations to FIL as its director. Moreover, at or about 31st, March, 1994 Jurick's Fidenas International Limited contributed US $30 million in cash to Emerson, relative to its acquisition. FIL alleges that some of that money may have belonged to FIL, at least the US $15 million borrowed by MFL and advanced to FIL under the debtor-in-possession arrangement previously mentioned.

8

MFL fears for the safety of its assets especially because the affairs of FIL and the Jurick group are so closely intertwined, both being under the effective management and control of Jurick. In MFL's view the circumstances are extraordinary and call for urgent investigation into the management of FIL and the recovery of its assets.

9

Prompted by the foregoing circumstances, FIL, by resolution dated 8th April, 1994, duly consented to in writing by a majority of the votes of its members, resolved that the Company be wound up by the Court by virtue of the joint operation of Section 95 of the International Business Companies Act, 1989 and Section 197(a) the Companies Act, 1992.

10

The statement of facts recited above is in substance, omitting several matters of detail, the case for MFL as disclosed in the petition.

11

The summonses to strike out the petition plead the following grounds:

  • “(a) That it discloses no cause of action and is an abuse of the process of the Court:

  • “(b) That there was no resolution passed by the members (shareholders) of the Company resolving that it be wound up.

  • “(c) That Montcour Finance Limited (“MFL”) has no locus standi to present a Petition on behalf of the Company.

  • “(d) That MFL is not a proper party to present the Petition or to be the Petitioner in this action.

  • “(e) That the Verifying Affidavit was sworn before the Petition was presented.

  • “(f) That the deponent of the Verifying Affidavit was not a person who has been concerned in the matter on behalf of the Company or MFL.

  • “(g) That the petition has yet to be presented.”

12

I will deal with each ground separately:

13

Ground (a)

14

In paragraph 17 of the petition, it is declared that there was a resolution of FIL that the Company be wound up by the Court. Section 197(a) of the Companies Act provides that:

  • “197. A Company under this Act may be wound up by the Court in the following circumstances –

    • “(a) when the Company has passed a resolution requiring the Company to be wound up by the Court.

15

In the matter of Montcour Bank & Trust Company Limited – Equity No. 1198/1993) a judgment dated 26th July, 1994, I treated the fact of the passing of such a resolution as a sufficient basis for the presentation of a petition for winding up by the Court. I did recognise that there was no automatic right to the Court's grant of a winding up order under section 197(a). “The Court”, I there said, “must think it right in all the circumstances to make the order.”

16

Considering the matters alleged against Jurick in the petition it cannot be said that there is no prima facie foundation for the grant of the Court's order, or that the presentation of the petition is an abuse of the process of the Court.

17

Ground (b)

18

In the Montcour case (Equity No. 1198/1993) cited above I held and maintain now that a resolution for a winding up by the Court passed in the way the resolution of FIL dated 8th April, 1994 was passed, i.e. by its being consented to in writing by a majority of the members of FIL pursuant to section 2 of the Companies Act, 1992 read conjointly with section 29(2), is effectual in law. There is therefore, in being, a resolution which is entitled to cognisance by the Court for purposes of section 197 (a) of the Companies Act, 1992.

19

Grounds (c) and (d)

20

MFL has locus standi to present the petition on behalf of FIL because the resolution passed by FIL on 8th April, 1994 expressly authorised it so to do. But MFL has another leg to stand on. As majority shareholder it is a contributory of the Company and by section 199 of the Companies Act, 1992 is given express authority in its own right to petition for a winding up.

21

Grounds (e) and (g)

22

These grounds were not pursued.

23

Ground (f)

24

This ground attacked the standing of the deponent of the affidavit verifying the petition pursuant to rule 21 of the Companies (Winding-Up) Rules. That rule permits the deponent in the case of a petitioning corporation to be “some person who has been concerned in the matter on behalf of the corporation.” The deponent was Sarah M. Lobosky, the assistant secretary of the petitioner MFL and a counsel and attorney of the law firm of...

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