Court of Appeal reaffirms principles applying to challenges to Liquidators’ Actions
In a recent decision of the Eastern Caribbean Court of Appeal in which a pawrty was seeking to challenge, pursuant to section 273 of the Insolvency Act, 2003 (the Act), the Liquidators’ (Mark McDonald and Steve Akers of Grant Thornton BVI and Grant Thornton UK LLP) decision to enter into a settlement agreement, the Court re-iterated the principles to be applied when asking the following questions:
1 Who has standing to bring such a claim, and
2 The test to be applied to overturn the Liquidators’ decision.
The Court stated that its view was that section 273 requires the “person aggrieved” to be a contributory, a creditor or a narrow class of persons directly affected by the exercise of a power specifically given to liquidators, who would not otherwise have any right to challenge the exercise of that power. In this case the party seeking to challenge the Liquidators decision was at best the shareholder of a shareholder and the Court confirmed that this was insufficient to satisfy the requisite interest under section 273.
The Test to Overturn
Despite finding that the applicant did not have standing to challenge the Liquidators’ decision the Court went on to comment on the test applicable to overturn the decision of the Liquidators.
The Court confirmed that the threshold to succeed in any challenge is a high one and commented that “It is not open to a court to seek to substitute its opinion for that of the joint liquidators; the court is required to ascertain whether the decision is so absurd that no reasonable liquidators could have arrived at it.” In order to succeed on this ground the Court stated that the applicant had to show that the first instance judge was wrong in his findings of fact about the circumstances of the settlement entered into. The Court could see no prospect of the applicant persuading them that the Judge’s findings were wrong on this point.
Grant Thornton Comment
Liquidators are often faced with difficult decisions where they have to exercise their commercial judgment taking into account the information available to them. It is comforting to Liquidators to know that the courts will not seek to second guess their decisions and will only look to overturn them where they are clearly absurd or perverse.