Dilbert leaving/Arbitration v Winding Up/Extending ELP/Ebullio
Dilbert leaving ICO
Jennifer Dilbert, MBE JP, Cayman Islands Information Commissioner, has announced in the Information Commissioner’s Office (ICO) 2012/2013 FOURTH QUARTER REPORT she has advised His Excellency the Governor that she will not be seeking a further term as Information Commissioner when her current appointment expires at the end of December, as she will be retiring from the Public Service.
She also said, “Further budgetary pressure plagued the ICO this quarter. Despite these restrictions, the post of Senior Appeals and Policy Analyst, which was vacated due to budget cuts in recent years, will be reinstated from October. This decision was made in the expectation that the ICO budget will be increased in order for the ICO to function effectively. The Information Commissioner has advised the newly formed Legislative Assembly that she is unable to continue to head a viable office without some relatively small increases in the budget for 2013/14, which she has requested.”
She also said, “The legal and professional fees budget of the ICO had been completely stripped away during budget cuts, and the Commissioner has always stated that should it become necessary additional funding would have to be provided.
“These issues, although budget related, have the effect of negatively affecting the ability of the Commissioner to effectively meet her obligations under the Law, and they therefore interfere with the independence of this Office.”
M/s Dilbert has been appointed to the International Advisory Board (IAB) of the Centre for Freedom of information at Dundee University.
Between 1 January and 31 March 2013, 175 Freedom of Information requests were logged into the central FOI tracking system by public authorities. This figure represents a 44% increase in requests from the previous period, and a 47% increase over the same period last year. Of the 175 requests received, 102 were closed during the same period, as were 22 carried over from the previous quarters. A total of 49 out of 92 public authorities received requests in this period. The other 43 authorities did not log any FOI requests into the tracking system.
Of the 118 appeals accepted by the ICO to date, most are resolved informally in the pre-hearing investigation stage. To date, 34 have progressed to hearings before the Information Commissioner. Many appeals to the ICO are due to poor procedural handling of requests by public authorities.
Although public authorities are by law required to conduct a reasonable search for records relevant to a request, and communicate with the applicant to ensure that there are no misunderstandings about the scope of the request, the ICO is finding that many public authorities do not take this duty sufficiently seriously. It is becoming increasingly common for significant numbers of new records to surface after an appeal has been raised and the ICO is in the midst of conducting a pre-hearing investigation, sometimes even after the applicant has repeatedly been assured that no responsive records exist.
The ICO is also finding it increasingly difficult to secure the cooperation of some public authorities and public officers, even at the highest levels, in the context of an appeal. While an applicant is by law entitled to reasons why records are being withheld, such an explanation is sometimes not or insufficiently given, and it is not uncommon for full reasons to be delayed until a hearing has commenced.
One of the side effects of this deteriorating approach by some public authorities is the fact that appeals are taking longer to resolve.
In and ICO hearing 31-02012 where an applicant made a request to the Department for Children and Family Services (DCFS) for particular files, the ICO upheld the decision of the DCFS to withhold personal information of third parties, but ordered that the Applicant be provided with some of the redacted information. She determined that with respect to the records claimed by the Applicant to have been withheld, the DCFS had provided such records as exist which are responsive to the request.
“A very strained and contentious situation between the Applicant and the DCFS led at times to poor or confused responses from both the DCFS and the Applicant, and what appeared to be a breakdown in the relationship between the Applicant and the DCFS resulted in further delays. As well, the Applicant was prone to combining details of the complaint/case with the request for records, asking questions and stating various grievances relating to the one, thereby contributing to the delay of the other.
“There was a time-consuming question as to whether an Internal Review as required under the Law had been conducted by the Ministry, and delays in locating and identifying records. In the course of the Appeal, the DCFS for the most part did not meet ICO deadlines for provision of information for the pre-hearing investigation, the location and identification of records, and preparation for the Hearing. There is also the issue of whether specific records being requested by the Applicant actually exist.
“During the pre-hearing investigation, the ICO suggested that much information that had initially been redacted by the DCFS did not qualify as personal information under the Law. This information was subsequently provided to the Applicant. Further records were also identified and provided to the Applicant during the Appeal.
“The Applicant points out, and I agree in this case, that there is a conflict of interest with the Human Resource Manager and Information Manager (IM) being the same person. In my view a conflict may arise where an IM decides on the application of the FOI Law to records relating to matters in which he or she personally played a role, as was the case here. The DCFS has since appointed a new IM, who has received training from the ICO, so it is hoped that some of the problems experienced with this request will not be repeated”.
The hearing of the Judicial Review from the Governor’s office pertaining to Operation Tempura documents being made public, is scheduled to take place on 30 and 31 October 2013 in the Grand Court.
The full copy of the ICO 4th Quarter Report can be downloaded at: http://www.infocomm.ky/images/Document%20Library/ICO%202012-2013%20Fourth%20Quarter%20Report.pdf
The full copy of the Information Commissioner issues Decision 31 involving Department of Children and Family Services and the Ministry of Home and Community Affairs can be downloaded at:
http://www.infocomm.ky/images/Appeal%20Decisions/ICO%20Decision%2031-02012%20DCFS.pdf
Cayman Islands: Arbitration v Winding Up – Which Prevails?
By Jeremy Walton From Appleby
A creditor petitions to wind up a company for non-payment of a contractual debt. The company disputes the debt. Not only that, but the company denies the court’s jurisdiction to determine whether there is a genuine and substantial dispute over the existence of the debt – that being the usual test for dismissing the petition. Rather the company says that the presence of an arbitration clause in the contract means that the court must simply refer the matter to arbitration, without enquiring any further, and meanwhile must dismiss or stay the petition.
The court is faced with a tension between upholding the primacy of the arbitration agreement and the court’s exclusive statutory jurisdiction to determine winding up petitions. How does the court respond?
There have been conflicting decisions over the years, but the trend is towards the court retaining its power to decide whether there is actually a genuine and substantial dispute, even though the court would not go on to resolve any such dispute. This runs counter to the trend towards giving absolute primacy to arbitration agreements via the UNCITRAL Model Law which has been adopted (subject to certain variations) in many jurisdictions, including the Cayman Islands.
In the Hong Kong case of Hollmet AG v Meridian Success Metal Supplies Ltd. [1997] HKLRD, the company submitted that, as long as one party alleged there was a dispute that was referable to arbitration, the court’s jurisdiction was effectively ousted. The court disagreed and said it was concerned to wind up an insolvent company, not to enforce private rights. A winding up proceeding was not the subject of the arbitration clause – that clause simply applied to the underlying contract. Therefore, the court had a jurisdiction to determine, in the winding up, whether there was a genuine and substantial dispute. Unless it was satisfied that there was a genuine dispute, the money would be treated as due and payable.
Genuine Dispute
The court’s reasoning in Hollmet has been applied in other decisions, although it contains an apparent flaw. Of course a winding up petition invokes the court’s insolvency jurisdiction and of course the arbitration clause does not provide that this jurisdiction is subject to arbitration. But where the petition to wind up requires proof of an unpaid debt, and where the liability to pay that debt is disputed, then only if the court resolves the dispute (albeit by concluding that the dispute cannot be characterized as “genuine and substantial”) can it go on to make a winding up order. However, the parties have agreed that the dispute can only be resolved by arbitration and the arbitration law of all these jurisdictions accords absolute primacy to the parties’ agreement on this point; that reflects a public policy decision.
Public Policy Decision
That policy is not simply the policy of an individual national law. The national arbitration laws give effect to an UNCITRAL Model Law and the policy behind the law is reflected in a report to the UNCITRAL Commission, dealing with Article 8(1) of the Model Law, which explains the policy in these terms:
“Article 8(1) deals with an important negative effect of an arbitration agreement. The agreement to submit a certain matter to arbitration means that this matter shall not be heard and decided upon by any court, irrespective of whether this exclusion is expressed in the agreement.”
In some later cases, the court has indeed upheld the primacy of an arbitration clause by declining to decide whether there was a genuine and substantial dispute. This happened in the BVI case of Pioneer Freight Futures Co Ltd v Worldlink Shipping Ltd, Samoa – 135/2009 and 152/2009. Bannister J held that, if the BVI court were to decide that there was no genuine or substantial dispute, this would effectively prevent the company from exercising its right to deploy its arguments in arbitration. It was not for the BVI court to deprive the company of that right. Pioneer was followed by the Cayman Islands court in Re Times Property Holdings Ltd 2011 (1) CILR, although in Times the court held that, on the facts, there was a genuine dispute – so the court would have reached the same conclusion in any event.
“… the court’s power … to control the winding up process will trump the primacy of arbitration agreements in determining whether a petition debt is disputed on genuine and substantial grounds.”
Firm Trend
However, the firm trend is towards the court retaining its power to determine whether there is a genuine and substantial dispute, notwithstanding an arbitration clause or even an actual arbitration. In the BVI, Bannister J has expressly departed from his earlier decision in Pioneer, in Alexander Jacobus de Wit v Vascon Trading Ltd, 129/2011.
In correcting his earlier analysis, Bannister J said he had misinterpreted an earlier BVI Court of Appeal decision in Sparkasse Bergenz Bank AG v Associated Capital Corpn 10/2002, which he had regarded as analogous. Sparkasse concerned whether the court should decide whether there was a genuine and substantial dispute if the contract was governed by a foreign law and jurisdiction. The Court of Appeal said yes, it should, even though the Court could not go on to determine any such dispute.
In de Wit Bannister J also relied upon the English Court of Appeal decision in BST Properties Ltd v Reorg-Apport Penzugti rt [2001] EWCA Civ 1997; whether or not proceedings raising a dispute about the alleged debt could be stayed pursuant to an arbitration clause, that was irrelevant to the question before the court: namely, whether the debt is bona fide disputed on substantial grounds.
Bona Fide Debt
The Cayman Islands court has adopted this approach recently in The Matter of Ebullio Commodity Master Fund L.P. [1989 S9HC 4]. In Ebullio, the petitioner relied upon non-payment of sums under shipping contracts. The company disputed liability, on the basis that there was a separate oral contract that permitted the contracts to be rolled over such that the sums had not become payable.
The contracts contained an arbitration clause and the company brought an arbitration on the same day as the petition was presented. Jones J had to consider whether this meant that he had no jurisdiction to determine whether there was a bona fide dispute on substantial grounds. He rejected that submission, holding that the arbitration clause and/or the existence of the arbitration would come into play only if he concluded that there was a bona fide dispute on substantial grounds. Jones J decided that there was no genuine dispute.
In practice, it seems that the court’s power (and desire) to control the winding up process will trump the primacy of arbitration agreements in determining whether a petition debt is disputed on genuine and substantial grounds. This approach certainly meets a practical concern that arbitration clauses could be invoked as a ruse to avoid a winding up. As a policy decision, it is probably sensible in preventing a debtor’s charter.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Time Gentlemen Please! – Extending an ELP investment period
By Solomon Harris
Private equity investment funds are bespoke structures with their own set of rules and regulations as determined by the articles of association in the case of a Cayman company, or the partnership agreement in the case of a Cayman Islands Exempted Limited Partnership (ELP). Investors need to have a clear idea of investment parameters, such as the type of investment group and its likely duration, so a common term is a limitation on the duration of the investment period – how long the fund has before all the pool of investment money is actively invested. With the current market uncertainty managers have found it difficult to find investments which match the restrictions in the time frame the investment structure decrees they have available, and rather than giving up hope and starting again, they are looking to find ways to extend the investment period to take advantage of new opportunities.
What are the restrictions?
Fund documents usually permit follow on investments after the expiry of the investment period but extending the investment period for new investments is usually restricted. Common requirements to extend for new investments include obtaining majority investor consent. It is also usual to see fund documents provide that any changes to fund documents should not result in limited partners being exposed to more liabilities than they originally contracted for. So if Investment Managers cannot find a suitable investment for all of the partnership’s pool of capital within the date specified in the Partnership Agreement (PA), but they find that they can invest that money at a date beyond the specified date, are they exposing their partners to more liability than that for which the partners have contracted even if the investors’ capital commitment amounts are not increased? Who is liable if the new investment is not successful? Do they just leave the pool of capital uninvested? Estimates are that there is around US$150 billion of uninvested private equity capital which needs to be invested by the end of this year. Rather than leave that capital idle, managers are going back to get the investor consents and extend the time limits.
Asking for more time
The simplest option is to go back to its investors for more time. Investors recognize that there are simply not enough places to put their money. With only a halting recovery, and with investors ever more risk averse, suitable deals are hard to find. Rather than abandon their aversion to risk and have their capital invested hastily to meet an artificial deadline, most investors are willing to allow managers to extend the investment period. With such a glut of money to be invested and only slowly increasing opportunities for new investments in the offing, extending the time for investment is a natural step. Some investors are also willing to allow their managers to vary the balance of investments held, if there is a clear advantage in so doing.
Keeping it legal
Any alteration of this sort will need to involve a detailed analysis of the provisions in the fund documents (usually the terms of the partnership agreement as most Cayman private equity funds are established as Cayman Islands ELPs) to establish what procedures and consents are required to make any changes to them which are needed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances
Noble wins court order to liquidate Ebullio Master Fund
By Chanyaporn Chanjaroen & Matthew Brown From Bloomberg
Noble Group Ltd. (NOBL) won a court order appointing liquidators for Ebullio Commodity Master Fund LP, which Asia’s largest raw-materials trader said had failed to pay it about $4.9 million for contract breaches.
Judge Andrew Jones of the Cayman Islands Grand Court accepted Noble’s petition and appointed Matthew Wright of RHSW (Cayman) Ltd. and Finbarr O’Connell of Smith & Williamson LLP as liquidators of the hedge fund, according to an Aug. 23 order.
Ebullio Capital Management LLP, which manages the $5 million fund, doesn’t comment on continuing litigation and its other funds aren’t affected “in any size, shape or form,” founder and executive managing partner Lars Steffensen said in interviews this week. Ebullio’s other operations have assets of about $250 million, he said.
A Noble unit sued Ebullio Commodity Master Fund on April 30, claiming it was insolvent after failing to pay damages when it breached two copper contracts. The hedge fund had said it had an oral agreement to roll over the contracts and filed for arbitration against Noble, saying they shouldn’t have been terminated, according to a May 24 ruling.
Stephen Brown, a Noble spokesman, declined to comment.
Noble Group, listed in Singapore, posted its third straight drop in quarterly profit in the three months ended June 30, dragged down by a loss at its agricultural business. Net income fell 68 percent to $62.8 million from $194.8 million a year earlier, it said. Sales rose 5 percent to $25.3 billion.
Ebullio Capital Management, based in Southend-on-Sea, east of London, has 25 employees, according to its website. Profit totaled 682,091 pounds ($1.1 million) in the year ended Sept. 30, 2012, compared with a loss of 880,886 pounds a year earlier, according to a filing with Companies House.
The case is In re Noble Resources International Pte Ltd and Ebullio Commodity Master Fund L.P., FSD No.56 of 2013 (AJJ) Grand Court of the Cayman Islands.
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