Grand Court clarifies requirements for leave to proceed with a counterclaim against a company in official liquidation

• The Grand Court has clarified that, where a company in official liquidation commences proceedings claiming that it holds certain rights, in order for the defendant to proceed with a counterclaim asserting that it is the true holder of the same rights, leave under section 97 of the Companies Act (2023 Revision) is required.¹

• Further, the Grand Court has confirmed that such leave may be sought retrospectively.

Abraaj Investment Management Limited (in Official Liquidation) ('AIML'), together with a separate entity, commenced proceedings in England claiming to be entitled to a particular receivable from a third party (the 'Receivable').  Mashreqbank psc, and Keiran Hutchison and Hani Bishara of EY, in their capacity as joint receivers appointed by Mashreqbank over certain assets (together, the 'Bank Parties'), who were known to assert a claim to the Receivable, were joined to the English proceedings for the purposes of filing a defence and any counterclaim, both of which they duly did. The Bank Parties are represented by Walkers in the Cayman Islands, led by Barnaby Gowrie, Luke Petith, and Blake Egelton.

Under section 97 of the Companies Act (2023 Revision), no civil proceedings may be commenced or proceeded with against a company in official liquidation except with the leave of the Grand Court. However, established authority provides that leave is not required where the claim is defensive in nature.² As such, the question arose as to whether the Bank Parties' counterclaim was defensive in circumstances where the Bank Parties submitted that the counterclaim sought only the inverse of what AIML claimed – i.e. both AIML and the Bank Parties claimed the same entitlement to the Receivable. 

In determining the Bank Parties' application under section 97, Segal J found that leave was required, primarily on that basis that "[T]he Bank is positively asserting rights adverse to AIML and against property (a chose in action) which AIML claims to be property of the AIML estate".³ This finding serves as a useful clarification of the law in respect of what claims are considered to be defensive for the purposes of section  97.

His Lordship went on to grant the Bank Parties leave to proceed with the counterclaim, which was necessarily on a retrospective basis. In doing so, Segal J confirmed the Grand Court's ability to grant section 97 leave retrospectively.

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¹ In the matter of Abraaj Investment Management Limited (In Official Liquidation) (unreported, FSD 111 of 2018, 25 November 2024).

² See for example Re Adenium Energy Capital, Ltd. (In Official Liquidation) (unreported, FSD 54 of 2020, 26 April 2022) per Justice Richards at [52] and [54], as cited in the present case at [16].

³ At [20].