Cayman Islands: Grand Court Considers The Scope Of Liquidators' Statutory Powers To Collect In A Company's Documents

Last Updated: 1 December 2016
Article by Guy Manning, Andrew Pullinger and Hamid Khanbhai

In a recent judgment in Primeo Fund (in official liquidation)1 that will be of concern to liquidators of Cayman Islands companies, and of interest to auditors and other persons from whom liquidators seek information, the Grand Court has clarified and arguably restricted the scope of liquidators' statutory powers to collect documents under sections 103 and 138 of the Companies Law.

In particular, the Court has:

  • reiterated that auditors are not a "relevant person" within the meaning of section 103, such that they cannot be ordered to produce documents belonging to the company under that section (nor, it would follow, are they subject to a statutory duty to cooperate with liquidators or capable of being ordered to be examined)2; and
  • found, more controversially, that liquidators may not use their section 138 powers to collect documents to which the company appears to be entitled (or, by analogy, documents belonging to the company using their section 103 powers) from any person, if their purpose in doing so is to use those documents in litigation against another person. This conclusion appears to go beyond the existing line of authorities, in which liquidators have been prevented from using their statutory powers to collect documents for use in litigation, but only where the person in possession of the documents sought is itself the litigation defendant or potential target.


The statutory auditors of Primeo Fund ("Primeo") were Ernst & Young Ltd in the Cayman Islands ("EY Cayman"). Although EY Cayman was the statutory auditor, the audit fieldwork in respect of Primeo was carried out by a separate Ernst & Young entity in Luxembourg ("EY Luxembourg"), from which jurisdiction Primeo was administered.

The liquidators of Primeo sought an order, pursuant to sections 103 and/or 138 of the Companies Law, compelling EY Cayman to use its best endeavours to obtain from EY Luxembourg certain categories of documents and provide them to Primeo. There was no question in this application of Primeo seeking to obtain documents from EY Luxembourg directly, for example by way of a letter of request procedure (whether under section 103(7) of the Companies Law or otherwise). It was alleged, and found, that the documents were being sought by Primeo's liquidators for use in separate proceedings brought by the liquidators in the Cayman Islands against HSBC group entities.

EY Cayman resisted the application.

Statutory Provisions

Section 103(3) provides that "While a company is being wound up, the official liquidator may at any time before its dissolution apply to the Court for an order... (b) that a relevant person transfer or deliver up to the liquidator any property or documents belonging to the company"

A "relevant person" is defined as including, amongst others, "a professional service provider to the company".

Section 138(1) provides that "Where any person has in his possession any property or documents to which the company appears to be entitled, the Court may require that person to pay, transfer or deliver such property or documents to the official liquidator".

Primeo's Submissions

Primeo argued that the Court should order EY Cayman to use its best endeavours to obtain the documents from EY Luxembourg and deliver them up to Primeo because the documents:

  • were within EY Cayman's possession, in that EY Cayman had an implied or express contractual right to obtain possession of them from EY Luxembourg; and
  • either belonged to Primeo (section 103(3)) or were documents to which Primeo was entitled (section138).

Decision: Section 103

The argument in relation to section 103 was rejected on the grounds that the section was not engaged. The Court followed Mr Justice Jones QC's decision in ICP Strategic Credit Income Fund [2012] (1) CILR 383, in which it was held that a "relevant person" did not include outsiders whose only relationship with the company was that they had been in business with it or contracted with it to provide goods or services – e.g. external auditors. In particular, Mr Justice McMillan held that EY Cayman was not a "professional service provider", which is defined in section 89 as a person providing "general managerial or administrative services to a company".

This conclusion is consistent with the Companies (Amendment) Bill, 2007 that preceded the introduction of sections 89 and 103 into the Companies Law. The Bill (which was surprisingly not cited in either ICP Strategic or Primeo) explained that the term "professional service provider" was "intended to catch, e.g. mutual fund administrators and investment managers, but not lawyers and auditors".

Decision: Section 138

Section 138 is wider in scope than section 103. An order may be made under section 138 against "any person", irrespective of their relationship to the company, but only insofar as that person "has in his possession" property or documents to which the company "appears to be entitled".

The section has been relied on successfully by liquidators to obtain documents from auditors, including auditors' working papers on the grounds that although the auditors owned the documents comprising the working papers, the liquidators were entitled to copies to the extent that they contained information which derived from or was provided by the company.3

However, the section 138 argument advanced by the liquidators of Primeo failed on several grounds.

No basis on which to require the use of best endeavours to deliver documents

The Court held that section 138 conferred no power on the Court to order that a person "use best endeavours" to obtain and deliver property or documents to which the company appeared to be entitled. Rather, the power is limited to requiring that a person transfer or deliver property and documents. Alternatively, it would be contrary to the interests of justice to require a party to use best endeavours when the exact meaning of the phrase in this context was unclear and undefined.

The auditors were not in possession of the documents

Added to that was another jurisdictional failing, namely that the liquidators had not persuaded the Court that EY Cayman had in its possession the documentation sought. By "possession", the Court appears to have accepted that either physical possession or a right to physical possession would be sufficient. The Court found, however, that there was insufficient evidence of any contractual or agency relationship between EY Cayman and EY Luxembourg pursuant to which EY Cayman had a right to receive documents in EY Luxembourg's possession.

Improper Purpose

EY Cayman also argued that the liquidators:

  • were seeking to use section 138 to obtain third party discovery for the purposes of Primeo's litigation with entities within the HSBC Group, and that this was not a proper purpose for the exercise of the statutory power; and
  • were purporting to use their powers at the behest of another party (viz. the HSBC Group defendants) effectively to obtain third party discovery, which was said to be unprecedented and wrong.

The Court agreed with EY Cayman on the first point and did not address the second point. The Court referred to the familiar English authorities of In re Spiraflite [1979] WLR 1096, Re Atlantic Computers [1998] BCC 200 and Re BCCI SA (No 12) [1997] 1 BCLC 526, and the leading Grand Court decision in Re Basis Yield Alpha Fund [2008] CILR 50, and held that section 138(1) was "not an appropriate or lawful mechanism for general and ongoing civil discovery". Rather, the purpose of the section was the "getting in of the company's property", and it was "not in the interests of justice to have recourse to section 138(1) for the purpose which the [liquidators] have identified".


The Court has helpfully clarified two points relating to liquidators' powers under sections 103 and 138:

  • At first instance, at least, it must now be settled that an auditor will not fall within the scope of section 103, unless it was also an officer of the company. That provision is aimed at 'insiders' not 'outsiders'.
  • The meaning of "possession" in section 138 includes a right to physical possession. This is sensible, since section 138 is used to get in the company's property from, for example, service providers who may well outsource work within their group. If section 138 were limited to documents actually possessed by the specific entity retained by the company that would emasculate the power.

In relation to the use of the section 138 power, the authorities show that liquidators of a company should not be in a position to use their statutory powers to obtain wider discovery than an ordinary litigant. But it may be argued that the mischief is confined to situations in which the liquidators seek to use those powers to extract wider discovery from the person against whom the company is, or is contemplating, litigating. Those were the facts in all of the previous English and Cayman cases referred to by the Judge.

In this case, Primeo's liquidators sought documents which it was said the company was entitled to from the company's former auditor for use in litigation against the company's former administrator and custodian. It is difficult to understand why this was thought to be objectionable in principle. Section 138 requires a liquidator to demonstrate that the company appears to be entitled to the documents sought, i.e. that the company has a proprietary or contractual entitlement to the documents in question.4 Similarly, section 103 requires the liquidator to demonstrate that the documents sought belong to the company. This was not the case in any of the earlier English and Cayman cases referred to by the Judge, all of which concerned a much broader statutory power (no longer available in Cayman under the Companies Law) by which liquidators could obtain any documents relating to a company's affairs irrespective of whether the company had a proprietary or contractual right to them. That being the case, why should Primeo's liquidators be prevented from obtaining from any person documents that the company owns or is contractually entitled to, simply because the liquidators wish to use those documents in litigation against a third party? An ordinary litigant would not be restricted from commencing separate proceedings to enforce its proprietary or contractual rights to documents in those circumstances.

Unfortunately it does not appear from the judgment that these distinctions were drawn to the Judge's attention, but the failure to do so does at least leave scope for further argument on the next occasion that this issue comes before the Court.


1 McMillan J, unreported, 21 November 2016.

2 There was no evidence in this case that the auditors were officers of the company. Had they been, as a matter of construction of Primeo's articles of association and/or the terms of their engagement, they would have constituted a "relevant person" for the purpose of section 103.

3 See In re China Milk Products Group Limited, Jones J, unreported, 4 June 2015.

4 See China Milk, ibid, at [10].

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions