This article will look at the recent decision of David Doyle J in In the Matter of HQP Corporation Limited (in Official Liquidation) (7 July 2023) and its effect on the ability of investors to recover damages from a company in which they have acquired shares as a result of a fraudulent misrepresentation.

Introduction

The case involved an application by liquidators for direction in relation to three issues in the winding up of the Company:

When a plaintiff obtains judgment against an insured but insolvent defendant in the Cayman Islands is the plaintiff entitled to the policy proceeds or do they have to be paid to the liquidator for the benefit of the defendant's creditors? The answer is yes when the claim involves a vehicle but is less clear in other cases. This article considers the arguments for and against a plaintiff being entitled to the policy proceeds in cases that do not involve a vehicle.

Background

 In a decision published October 19, 2020, Judge Frank J. Bailey of the U.S. Bankruptcy Court for the District of Massachusetts found that an Indian tribe was not subject to the Bankruptcy Code’s automatic stay.

The U.S. Court of Appeals for the Third Circuit recently confirmed that bankruptcy plans need not always recognize subordination agreements among creditors.

In 2015, Distressing Matters reported on the Third Circuit’s decision in In re Jevic Holding Corp., wherein that panel ruled that, in rare circumstances, bankruptcy courts may approve the distribution of settlement proceeds in a manner that violates the Bankruptcy Code’s statutory priority scheme.