In the recent decision of in In the Matter of the Companies Law (2018 Revision) and In the Matter of Platinum Partners Value Arbitrage Fund L.P. (In Official Liquidation) the Grand Court of the Cayman Islands granted an application seeking sanction to enter into a litigation funding agreement.
The application was brought by the joint official liquidators (the “JOLs”) of Platinum Partners Arbitrage Fund L.P (the “Master Fund”) for sanction to enter a litigation funding agreement with LL Finance LLC (“LLF”). Some of the creditors of the Master Fund purport to hold non possessory security interests in the Master Fund’s assets (the “PSCs”) in respect of liabilities which are considerably greater than net realisations to date. The JOLs informed the Court that funding was required in order to carry out investigations and to pursue litigation for the benefit of the Master Fund’s stakeholders. There was a real possibility that, without litigation, no distributions would be made to the unsecured stakeholders of the Master Fund.
An unusual aspect of the application was that the JOLs sought an order that amounts due to LLF would be paid as an expense of the liquidation (thus granting those amounts due statutory priority) save for when amounts may be due to the PSCs. In such an occurrence, the JOLs said, the sums due to LLF should be paid as an expense incurred in realising the proceeds of the litigation. This was necessary as the JOLs had been unable to determine whether certain claims belonged to the secured or unsecured estate.
The application was opposed by White Rock Properties LLC (“White Rock”), one of the PSCs. The submissions filed were brief and were not supported by evidence. They noted that White Rock did not oppose the principle of funding being obtained by the JOLs to enable them to pursue litigation; rather their concerns related to certain terms of the Funding Agreement and the failure, in their view, of the JOLs to provide sufficient information to allow White Rock to satisfy itself that its rights and position as a PSC were adequately protected.
The Court was advised that the other PSCs were on notice of the proceedings and did not support White Rock’s opposition or appear at the hearing, but they also did not consent to or support the JOLs’ application.
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In the Matter of the Companies Law (2018 Revision) and In the Matter of Platinum Partners Value Arbitrage Fund L.P. (In Official Liquidation)