Anderson J
```html <!DOCTYPE html> Grand Court of the Cayman Islands Ruling IN THE GRAND COURT OF THE CAYMAN ISLANDS Holden at George Town, Grand Cayman CAUSE NO: 356 OF 2004 IN THE MATTER OF FORTUNA DEVELOPMENT CORPORATION AND IN THE MATTER OF THE COMPANIES LAW (2009 REVISION) Appearances: Mr. Richard Hacker Q.C. instructed by Mr. Graeme Halkerston of Appleby for Fortuna Development Corporation, the Applicant Mr. Michael Makridakis and Mr. Guy Locke of Walkers for Tempo Limited, the Respondent Before: Hon. Justice Anderson Heard: November 12 and 16, 2009 RULING In a judgment handed down on or about January 6, 2009 involving another application between the same parties to the instant application, Henderson J. referred to the breakdown of “the relationship of trust and confidence” between them which had occurred in 2004 and which had led then to the presentation of a petition to wind up Fortuna Development Corporation (the Company) in 2004. Even a cursory look at the then Court file in the winding up proceedings of the Company, Tempo Group Limited, (hereinafter referred to as “the Company”), ```
```markdown demonstrates that progress towards a resolution of the problems which had become apparent between the various parties, continues to be elusive. By the present application by way of a Summons, the Company seeks the following orders:
That any disposition of the Company’s property or things in action that may occur pursuant to or consequent upon the execution and/or implementation of a proposed refinancing of the Company’s existing bank finance facilities (details of which will be provided in the evidence to be sworn in support of this Summons) shall not be avoided by virtue of section 99 of the Companies Law (2007 Revision) (as amended) in the event of an Order to wind up the Company being made on the Petition herein.
Such further or other order as the Court deems fit. It should be noted, en passant, that the present status of the petition is that it was struck out in a hearing before Henderson J. in his ruling of January 6, 2009 referred to above. However, that ruling is being challenged by Tempo in the Court of Appeal and is scheduled to be considered by that Court at its next sitting between November 20 and December 11, 2009. The effect of that ruling has, however, been stayed to enable this application to be brought. The application is a one to prospectively validate a proposed refinancing of One hundred and Thirty-Two Million Dollars ($132,000,000.00) of debt and any dispositions “pursuant to and consequent upon the execution and/or implementation of the refinancing agreement with a Taiwanese bank, Taipei Fubon Commercial Bank.” The plined by the ; and as te loan COMIX. purpose outhe directors :propos :rm of ed et in thethe agreement is to finance and reconstitute the debt portfolio of the company in order to rid Ruling – In the Matter of Fortuna Development Corporation Cause No. 356 of 2004 16.11.09 Page 2 of 23 ```
Ruling – In the Matter of Fortuna Development Corporation Cause No. 356 of 2004 16.11.09 Page 3 of 23 The application to the Court for validation is made pursuant to the section of the law now contained in section 99 of the Companies Law, (2009 Revision) which provides as follows: When a winding up order has been made, any disposition of the company’s property and any transfer of shares or alteration of status of the company’s members made after the commencement of the winding up is, unless the Court otherwise orders, void. The application to validate is opposed by Tempo, the petitioner in the Winding Up petition, and whose main shareholder is Dr. Chen Chih (Dr. Chen). At the commencement of the hearing, Mr. Makridakis, for the Respondent Tempo, applied to have the matter adjourned. The bases for that application were that at least one other contributory, Maxima Limited, had not been served with notice of proceedings and so was not able to participate; secondly, there was insufficient information available by way of the evidence to allow the Court to come to an objective view as to the reasonableness of the application for validation. The application concludes that there has been a need to adjourn the matter in order to ensure that the issue of the matter is dealt with adequately and substantively. At the same time, given the nature of the application, if the application was successful, the Court could make certain consequential orders while if it was unsuccessful it would
The document discusses the proceedings of a winding up petition for the company Fortuna Development Corporation, Cause No. 356 of 2004, dated 16.11.09. The text highlights the drawn-out nature of the proceedings, which have been before the Courts in this jurisdiction since 2004 and are due to be heard by the Court of Appeal in December 2009. It mentions that if Maxima opposed the application on the same basis as Tempo, the inadequacy of the information would not change the outcome. However, if Maxima opposed the validation based on allegations of fraud or mala fides of the company or its directors, it could provide a proper basis for reversing the grant of the application should it be granted. The document notes that there is no dispute that the Company remains solvent and hugely valuable. The winding up petition is a contributory's winding up petition and there is no provisional liquidator in place. It also states that this is not the first application for validation filed by the Company; one was previously filed in 2005. One of the directors of the Company, Steven Word Driscoll, has sworn several affidavits regarding the purpose to which the proceeds of the loan will be put, and these contents have been approved by Mr. Lii San-Rong, the other director. The affidavit evidence of Andrew Ching-Yun Tsai, the president of Central Trading and Development, supports the application. Additionally, affidavit evidence in support of the application is given by Mr. Stephen Kingsley, who purports to be an expert in commercial matters of the sort under consideration. The document concludes with the ruling in the Matter of Fortuna Development Corporation, Cause No. 356 of 2004, dated 16.11.09.
According to the evidence of Mr. Driscoll and Mr. Tsai, both have averred in their respective affidavits that the re-financing is in the best interests of the Company. It was submitted for the Company that the determination by the directors to this effect is in fact, a reasonable one. In any event, it was not the role of the Court in applications of this nature to second guess the directors. Rather, the Court had to apply the well-known principles enunciated by the case, **In Re Burton & Deakin Limited** [1977] 1 All ER 631, per Slade J (as he then was). As counsel for the company pointed out, the responsibility of managing the business of the company is entrusted by its articles of association to its directors. At least so long as a winding up petition has not been presented, the Court will not generally, save in the case of proven bad faith or other exceptional circumstances, interfere with the exercise of the discretion conferred on the directors by the company’s articles of association at the instance of a shareholder. Thus, if before the presentation of a petition a shareholder were to come to Court in an attempt to restrain a particular disposition of the company’s property contemplated by the board of directors and falling within their powers, he would not generally succeed, unless he could prove bad faith or other exceptional circumstances. He would not be able, merely by adducing prima facie grounds for criticizing the wisdom or beneficial nature of a particular transaction, to place on the company or its board of directors the onus of justifying the proposed disposition by detailed evidence. I can see no good reason why the rights of interference by a shareholder vis-à-vis the company or its directors should, in this kind of situation, for practical purposes be drastically improved during the interim period, merely because he happens to have presented a winding up petition which is not demurrable and has not yet been heard. Mr. Hacker, O.C. submitted that the decision by Henderson J in previous proceedings in **[redacted]** submitted the instance of averment in these proceedings. 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```html whether the reasons for the disposition are shown to be ones which an intelligent and honest director could reasonably hold. It was the further submission that the affidavit evidence on behalf of the Company clearly indicated that the proposed re-financing was motivated by reasons which an intelligent and honest director could reasonably subscribe to. By way of support for this proposition, the Company's counsel cited the opinion evidence contained in the affidavit of Stephen Michael Kingsley, a senior professional accountant and former advisor to international financial institutions. Mr. Kingsley whose credentials include being Senior Managing Director for Economic Consulting at FTI Consulting Inc, a London based consulting firm. He previously served as Global Managing Partner of Arthur Andersen's Financial Services Practice. He has served as non-executive director and chairman designate of the audit committee of Britannia Building Society, the second largest building society in the United Kingdom. While directly responding to some "concerns" on the part of Dr. Chen, he also reviews the affidavits in support of the application as well as financial statements of the Company. He comes to the view that the reasons put forward by the directors in support of the re-financing of the Company's debt, are reasonable. It should be noted that it is conceded on the part of the Company that there is no affidavit evidence which indicates that the reasons for the disposition are ones which an intelligent and honest director could reasonably hold. The affidavit evidence certifies to the af However, it was nevertheless submitted that subject to the weight which the Court may attach, the evidence is clearly admissible. By the same token, Tempo's counsel submitted ```
```html later that to the extent that the witness purported to give an answer to the ultimate question which the Court had to decide, the evidence is not admissible. With respect to this issue, I would hold that it is now clear that even in criminal cases, experts are allowed to opine on the ultimate issue which a Court or jury may have to decide. However, the arbiter of fact is not bound by that opinion and may accept or reject that opinion. In the circumstances, it is clear that notwithstanding the status to be accorded to Mr. Kingsley, whether expert or not, his opinion is not determinative of any issue upon which he may express an opinion and the Court must decide whether, and if so how much, weight is to be given to the evidence. According to the evidence, the Company’s existing indebtedness consists of $86 million in short term debts which are approaching maturity and another $46 million of medium term facilities. The intention is to replace this indebtedness with a $132 million medium term syndicated loan facility with funds from the Taipei Fubon Commercial Bank and a number of other banks. According to the sixth affidavit of Steven Driscoll, it is a term of the proposed loan agreement that: “The proceeds of the Facility shall be used exclusively for the refinancing repayment of the Co-Borrowers’ existing financial indebtedness including the existed facility ‘repaid in full’” ng syndicawhich is to be be The affidavit that it is prion of the new loan facility that the Company produce documents which would confirm ``` Ruling - In the Matter of Fortuna Development Corporation Cause No. 356 of 2004 16.11.09 Page 7 of 23 ```
```html details of the amounts owed under the Existing Syndicated Facility and of amounts owed to other financial institutions (other than under the Existing Syndicated Facility) which will be repaid from the proceeds of Advances under the Facility”. It is the contention of the directors of the Company that it does not have and will not have the resources to deal with all its maturing obligations as well as satisfying its cash flow requirements without the re-financing. In addition, there are uncertainties about the extent to which the Vietnamese operational subsidiaries will be able to transfer funds to the Company. Moreover, the Company has stated a need to have access to additional funds to ensure adequacy of resources for the purpose of current and anticipated projects. It is in these circumstances that the Company has determined that it is in its interests to refinance its current indebtedness. As noted above, the approach is endorsed by Mr. Kingsley on the basis of his own experience in such matters. The key terms of the pending agreement are also set out in the affidavit of Mr. Tsai. It is also the evidence of the Company that the terms are competitive and in line with market standards. Mr. Tsai also depones that, given the Taiwanese market’s lack of liquidity earlier this year which made it impossible to structure a facility then, and the continuing uncertainty in that as well as global markets for the future, the timing of the loan is propitious. Both Mr. Driscoll and Mr. Lii, as well as Mr. Tsai, are firmly of the view that to enter into the proposed facility at this time is appropriate and in the best interests of the Company. It was by Mr. J the Court is for questioning the honesty or integrity of the directors and the terms of their averments. In addition, the Court has also had the benefit of the opinion of Stephen Kingsley, an Ruling - In the Matter of Fortuna Development Corporation Cause No. 356 of 2004 16.11.09 Page 8 of 23 ```
The document discusses the court's ruling in the matter of Fortuna Development Corporation, Cause No. 356 of 2004, dated 16.11.09. The text is a legal submission by the company's counsel, addressing objections raised by Tempo regarding the proposed re-financing of the company's debt. The counsel argues that the directors' approach is reasonable and appropriate, supported by the opinion of an "enormously experienced financial advisor." They contend that Tempo's evidence, if any, is irrelevant to the court's determination of the issue at hand. The evidence, they suggest, questions the purpose of the facility and implies that there might be better ways to achieve the proposed outcome. The counsel references the case of *In Re Burton & Deakin* to argue that the respondent's opposition is misconceived. Regarding specific objections raised by Tempo, the counsel asserts that the view that new funds are being raised to facilitate or support subsidiaries, some of which are not wholly owned by the company, is without basis. This is denied by the affidavit evidence of Mr. Driscoll and Mr. Tsai. The counsel reiterates that the re-financing is solely for the purpose of enabling the company to restructure existing debt. They argue that it is irrelevant that successful subsidiaries may be able to leverage additional borrowings on their own account. The counsel further submits that the directors believe it is more advantageous to re-finance the company's existing debt and extend the current maturity profile rather than seek funds from operating subsidiaries, as curtailing their operations would, in their judgment, negatively affect the future prospects of the group. The counsel also states that the company has provided support for the subsidiaries in respect of old lending that it has on-lent to subsidiaries and that those previous loans are not subject to binding obligations to repay.
```markdown pure speculation. Indeed, it is incorrect as no such loan is being made to the subsidiaries. Counsel for the Company also dismisses the submission by Tempo that there is just insufficient information provided by the Company for the Court to be able to make a determination on the question which the Court must decide. Finally, in response to why the particular structure and terms are included in the proposed facility, it is stated that these are based upon specific demands of the lenders. In summary, the Company submits that based upon the authorities, there is no basis for the Court to deny the application. ## Submissions of the Respondent As noted above, as a preliminary matter, Tempo sought an adjournment of the hearing. I have set out above the bases upon which it sought that adjournment and my reasons for denying that preliminary application. It was submitted on behalf of Tempo that the validation now being sought by the Company should be denied by the Court. Not only should validation be denied, it was suggested that the Court should order the Company to seek validation of “certain positions of property whired since 2005”. It is not clear what is on which the Court is being asked to make a determination. There is simply no evidence to indicate what those dispositions are, or, if in fact, there are indeed such dispositions. There is nothing in the affidavits from Tempo which indicate what such ``` This text is a transcription of the content visible in the image, maintaining the original structure and language.
dispositions were. The only disposition which it appears is the subject of any proof is in relation to an advance of $18 million to HPPC, one of the subsidiaries. Mr. Makridakis, for Tempo, submits that before the Court validate the entry into the refinancing facility, it should demand an explanation from the Company as to how the indebtedness which it now seeks to re-finance, arose. In his submissions counsel says that the dispositions which have been made “appear to have been made to subsidiaries of the Company and the directors of the Company have not (with one exception) put in place any binding obligations on the subsidiaries to repay the disposals”. Accordingly, the Court should “order the Company to seek validation of the dispositions which have occurred since 2005”. By way of background Tempo’s counsel refers to the terms of the petition filed in 2004 and to the Report of the Inspectors which chronicled certain shortcomings in the Company’s operations prior to the presentation of the petition. It is worth noting that counsel for the Company in responding to this submission pointed out that those allegations concerned a time when the present directors and managers were not in charge of the Company. Tempo’s objections also focus on the proposition that the proposed re-financing, while it may be in the interest of the Group, is not necessarily in the best interests of “the Company”. In that regard, the submissions point out that the affidavit evidence of Mr. the pre loan is so finance tbbliat while s s coll “refers” to the Group, it does not disclose the purpose of tbley to re-ftha gations, tioay that Drisextensivelyup. It is not disclose that some additional $84 to $104 million of debt has been incurred by the Company since 2005, “in the form of significant short-term borrowings and has disposed Ruling – In the Matter of Fortuna Development Corporation Cause No. 356 of 2004 16.11.09 Page 11 of 23
```html of significant assets to HPPC". There is however no averment which proves, on a balance of probabilities, that this is so. At best, the submission is that this is a possible interpretation of the relevant financial statements. But there is also the direct evidence of Mr. Driscoll (Sixth affidavit) that the liabilities of the Group have in fact been reduced while shareholders’ equity has remained more or less constant. There is, however, no evidence that there has been any lending to the subsidiaries in the period 2005 to 2009 save for the sum of about $18 million that was used to support HPPC. Tempo’s submissions point to a number of “concerns” which it has. Among those concerns was the fact that the evidence in this application does not explain how the proceeds of a previous loan facility had been disposed of. In that regard, it is submitted that “the New Loan is seeking to re-finance some $86 million of debt incurred by the Company since 2005. For this reason, the Court is required (my emphasis) in considering whether the New Loan is necessary or expedient in the interests of the Company, to consider the manner in which the Company has deployed the proceeds of the Short Term loans”. It may not be inappropriate to enquire here whether this would require the Court to make an evaluation of a business decision of the management of the Company and whether there is authority for such a proposition. At paragraphs 40-41, the submissions of the counsel for Tempo seem to fly in the face of its gement of this issue as above. Tho stse parag the followi
It is therefore important for the Court to consider, in forming a view as to whether the refinancing is necessary or expedient in the interests of the Company: a) How it is that the Company came to have incurred such significant levels of debt; b) The benefits (if any) to the Company in having incurred these debts; and c) Whether any binding arrangements are in place between the Company and its subsidiaries to secure repayments of these debts.
Absent any evidence that the "dispositions" comprising the Short Term loans (and the HPPC loan discussed below) and the use of the proceeds thereof were necessary or expedient in the interests of the Company and absent any detailed reasons for the dispositions, the Court should not validate the Short Term Loans. On the contrary, the Court should declare the disposition of the proceeds of the Short Term loans to the subsidiaries void, unless and until validated." Mr. Makridakis reviews the affidavit evidence of Messrs. Driscoll and Tsai and concludes that Company has incurred debt "to support" the subsidiaries. He further concludes that there has been a failure to disclose in "detail the financial support given to subsidiaries; the Company appears to have failed to put in place any binding repayment obligations on the part of the subsidiaries (possibly with the exception of HPPC). As such, any repayment of the Company’s debt, is at the discretion of the subsidiaries". But that distances ex., it is that nobody den of c hese circumst. Rather the real lom s nent that instances ex., it is unat i understood thour is that the Respondent does not have the information which would allow it to make its
own assessment, not only of the *bona fides* of the Company management, which it clearly does not trust, but of the quality and wisdom of the business decision. There is also an attack on the issue of fees payable to individuals who guarantee loans to the Company. It cannot reasonably be doubted that fees have been and continue to be paid to persons who guarantee the Company’s loans. Indeed there is some indication that Dr. Chen had been the beneficiary of such payments when he had guaranteed such loans. It would appear that the Court is being asked by the Respondent to make a business judgment on the question of whether the amounts paid are or are not appropriate in terms of the amounts paid. Among the other complaints made by Tempo is the failure of Appleby, attorneys for the Company, to answer 17 specific questions posed by Tempo’s attorneys. To the extent that this is being put forward as a basis for denying this application, it seems to be an attempt by the Respondent to determine the issue on which this Court must adjudicate. A further complaint made by Tempo is that Mr. Driscoll, in answer to an averment of Dr. Chen that the Group’s Short Term lending had increased from approximately $24.6 million in 2007 to approximately $114.9 million in 2008, had rejected that assertion and pointed out that those figures were in relation to the Group and not the Company. The mission is ce fact that,ted the cor, one on ther relevant ar for the C subritical of th having ind. Driscoll J icanad not g to give the nd appros
The themes running through the submissions are an expression of "concerns" about specific questions which are posed almost rhetorically, and a complaint about a lack of information. Thus, for example, the submissions refer to the Sixth Driscoll affidavit which reiterates the point that "the purpose of the proposed refinancing is solely to enable the Company to refinance its existing debt". On account of that position taken by the Company management, "the evidence does not provide any proper answer to Tempo's concerns about: a) The application of the proceeds of the Short Term loans or the HPPC loan; or b) The apparent absence of obligations upon the subsidiaries to repay the debt of the holding company." The submissions are also critical of the fact that the Company seeks to justify the decision to refinance the short term debt on the basis that it does not have the cash flow at the present time to repay the loans coming to maturity. It is suggested that the Court should be concerned that "the directors of the Company have allowed it to amass $132 million in debt in circumstances where it itself does not have sufficient cash reserves to repay it". Generally, the submissions are critical of the evidence of Mr. Driscoll and raise questions about it without providing any evidential basis for a challenge to that evidence. Finally, it was submitted that, with respect to the evidence of Stephen Kingsley, that evidence was of value and should be considered. The evidence submitted by Mr. Kingsley supports the proposition that the directors have a duty to the Company and that the evidence should be considered. It is then submitted that: Ruling – In the Matter of Fortuna Development Corporation Cause No. 356 of 2004 16.11.09 Page 15 of 23
```html “For the reasons articulated in this skeleton, whether or not the refinance will be used to repay debt is not the real issue in dispute”. I would only observe on this submission, that it is difficult to conceive of an issue more central to the instant application. It is useful to note that in its concluding submissions Tempo’s counsel articulates its concerns in the following terms: “Tempo is concerned that the Respondents (that must be the respondents to the Petition) have intentionally engineered a strategy aimed at maintaining large (and seemingly ever increasing) amounts of debt at the Company level, with no direct recourse to the subsidiaries, for the purposes of the winding up litigation alone. The directors’ failure to make adequate and binding arrangements for the subsidiaries to repay the Company’s current high levels of debt in the circumstances outlined in the skeleton argument are (sic) matters of utmost concern on any objective view”. Even if the foregoing were the case, Tempo has failed to adduce any evidence to support its “concern”. Its final submission that if the proposed refinancing is validated, it would allow the Company to increase its current indebtedness to $253 million represents a clear misunderstanding of what is being applied for here. The truth is that there is no single averment in any affidavit filed by Tempo of bad faith on the part of the directors nor any other exceptional circumstances based upon which the should reficication. Couruse the appl Ruling – In the Matter of Fortuna Development Corporation Cause No. 356 of 2004 16.11.09 Page 16 of 23 ```
The Law I start by saying that no evidence has been led to contradict the table of the Company’s debts set out by Mr. Tsai in his affidavit. Nor is there any evidence led to contradict the averments of Messrs Driscoll and Lii as to the purpose of the refinancing. Indeed, Mr. Chen’s Eleventh Affidavit appears to concede this. He states: “Put simply, I accept that the refinancing might appear to be needed to cover the short term loans to the Company.” He goes on to say “obviously those loans are for its subsidiaries” but provides no evidence for that assertion. It is accepted by both sides that **In Re Burton & Deakin** (citation given above) articulates the principles which this Court must apply. I will not re-state the judgment of Slade J., which has already been set out. Those principles were addressed and adopted by Henderson J. in previous validation proceedings in this case (In Re Fortuna Development [2004-05] CILR 533 at page 535) and the Company here relies upon his lordship’s judgment therein. In that judgment Henderson J. having cited **In Re Burton & Deakin** and the support of the judgment given by Brightman J in the later case of **In Re J.N. Ltd.** [1978] 1 W.L.R. 183 [1977] 3 All E.R. 1104, said: Thus, there are four elements which must be established before an applicant is entitled to a validation order. First, the proposed disposition must appear to be within the powers of the directors. There is no dispute about that. Secondly, the evidence must show that the directors believe the dispositions are expedient in the best interests of the Company. Thirdly, there must be a reasonable belief that the directors have acted in good faith. Fourthly, the reasons for the dispositions must be shown to be ones which an intelligent and honest director could reasonably hold. Ruling – In the Matter of Fortuna Development Corporation Cause No. 356 of 2004 16.11.09 Page 17 of 23
It is the submission of the applicant Company that, in this application as in the previous one, there is no dispute about the first two conditions. In order to refuse the validation application therefore, the Court must either have evidence provided by the Respondent herein that the directors have acted in bad faith, or form the view that the decision is one which no “intelligent and honest director could reasonably hold”, it must be unreasonable in Wednesbury terms. The Company has submitted that Tempo has not provided a scintilla of evidence of bad faith or exceptional circumstances to satisfy the burden under the third condition stated by Henderson J. above and the Court on the basis of the evidence, including that of Stephen Kingsley, cannot but come to the view that the reason given for the application is one that “intelligent and honest directors could reasonably hold”. Tempo, for its part, points to two issues which should lead this Court to the view that the grant of the application was not as automatic as the submissions of the Company would suggest. It was still up to the Court to exercise its discretion. The issues were firstly, the decision by Henderson J. to adjourn the previous application for the applicant to provide additional information and secondly dicta in a decision of Smellie C.J. in **In the matter of Cybervest Fund** [2006] CILR 80. The petitioner has provided in argument a shopping list of documents not in evidence, which it says are necessary. These include financial
```html statements, cash flow projections, documents evidencing the amounts outstanding on the present facilities and all of the loan documentation and correspondence leading up to the agreement or agreements for the proposed new facility. At page 537 and paragraph 10 of his judgment, his lordship set out those pieces of information which he felt were necessary to be provided in order to allow him to make an informed decision. Those included consolidated financial statements; cash flow projections done to support the new financing; particulars of amounts owing under the present facility; a description of any approaches made by the Company to existing lenders and details of the proposed refinancing. The learned judge opined: “This is far from the list requested by the petitioner. Much of the balance which I am not directing be produced goes beyond what a Court might reasonably expect in an application of this sort, given the limited nature of the question before me”. (My emphasis) While Tempo has not in the instant proceedings produced a “laundry list” of information sought, it has, in it submissions, submitted that the proposed facility “should not be validated until a detailed explanation with supporting financial documents of the manner in which the Company’s existing debt has been incurred and the proceeds thereof utilized”. In my view this is not information which is necessary for this Court given the nature of the application and the narrow threshold question which it raises. Indeed, the adequacy of the information provided (by reference to what Henderson J. had asked for in the previous validation application) seems to be accepted by Tempo’s witness, meth Atkinsourth affidavit paragraph 16.3(e) “ Kenron in his fovit. He savA copy of is the draft facility agree US $132) is and Mr. Tsai discusses this at paragraphs 27-31 of his affidavit. It appears that this covers most of the points set down by Henderson J. as regards interest rates, repayment ```
The evidence I accept is that the purpose of the refinancing is to lengthen the maturity of the Company’s debt obligations. I accordingly do not accept the submission that this Court needs the information sought to make a determination on the application. Similarly, Tempo referred the Court to the decision of Smellie C.J. in **In the matter of Cybervest Fund** [2006] CILR 80. There, his lordship in considering a validation Summons, had also considered the dicta of Slade J. in **In Re Burton & Deakin** and stated: There is another consideration to add to this list in light of concerns raised in this matter although arguably it is subsumed within the third and fourth elements. This would be whether irregularities in the conduct of the affairs of the company can be shown, even if the company is solvent, as is alleged here. In **Re a Company** (No: 007130 of 1998) [2000] 1 BCLC 382, such concerns motivated the Secretary of State to petition to wind up. Partly, the concerns were for the lack of honesty in the conduct of the affairs of the company and above all, for concerns for the interests of the members who had been persuaded to part with their money on the basis of a false prospectus, not unlike the allegations here. It was held, among other things, that it by no means followed that because the company was solvent and able to pay its debts as they fell due, the conduct of the company’s business should be at the expense of the members. The application for the validation of payments to be made was dismissed. The paynspect of wn is sought to be regarded within two cit here, mainly in rehich validay be as coming wategorieatic. The petes a rty pro other fees fees or aditiidfirst, thirfesmiscellae and seconement fees.d pm fees) nego objec (e.g. audit: lministror oner raistiosional or validation of the first category, subject to there being properly documented records of the transactions. Ruling – In the Matter of Fortuna Development Corporation Cause No. 356 of 2004 16.11.09 Page 20 of 23
His lordship then considered the specific management fees proposed to be validated and stated: Given the nature of the allegations, the history of this matter and the evidence which I have seen, I need only state that I do not consider the making of such an order to be appropriate at this time. I do not consider that the directors could properly hold that these dispositions are necessary or expedient in the interests of the company at this time. There is no doubt that the Court exercises a discretion in applications of this nature. However, as the Company’s counsel said in response to this submission, the Court must exercise that discretion judicially. The decision to grant or refuse an application for validation must depend upon the particular facts of the case and must be underpinned by a robust examination of the evidence adduced against the tests outlined in **In Re Burton & Deakin**. I have formed the view that the decision of the learned Chief Justice cited above does not provide any basis for denying the application for validation in the instant case and that it should be granted. I am strengthened in that view by the dicta of Henderson J. in his judgment in the previous validation application, the citation for which has been given before. I respectfully adopt those dicta for the purposes of this judgment. At page 538 of the judgment, his lordship had said: The test the applicant must satisfy is not high. Nevertheless, there must be a body of evidence which, viewed objectively, establishes that the decision is one which a reasonable director, having only the best interests of the company in mind, might endorse. His lordship also stated at page 5: The issues which determine what is a reasonable decision are to be determined out of the context of the circumstances in which the decision was made. His lordship commented in the judgment: "I am not called upon here to answer the question 'Is this in the best interests of the Company?' or even 'Is this a reasonable decision?' The question is a narrow one. Might an intelligent and honest director acting
```html reasonably come to such a conclusion? I find for the reasons given in Ms. Tsien's affidavit that he or she might. The decision has been demonstrated to fall within the realm of reasonableness. The applicant will therefore be granted a validation order. The invitation by Tempo that this Court should declare void, previous dispositions, not here identified, is not only not the subject of any application before the courts and devoid of merit or any evidence to support such a decision, but seems to reveal a lack of appreciation for the role and effect of section 99 of the Companies Law, which is intended to protect mainly creditors against the bad faith dispositions of a company against which a winding up petition is extant. I am satisfied that the case for the grant of the validation order has been made out and I grant the order sought in paragraph 1 of the Summons dated August 6， 2009. I also see no reason for not awarding the successful party， (the Company)， its costs of this application， such costs to be taxed if not agreed. I make the following orders： 1) Any disposition of the Company's property or things in action that may occur pursuant to or consequent upon the execution and/or implementation of a proposed refinancing of the Company's existing bank finance facilities as described in the Fifth Affidavit of Steven Word Driscoll dated 14 October 2009， shall not be avoided by virtue of section 99 of the Companies Law (2009 Revision) in the event of an order to wind up the Company being made on the Petition herein. 2) A copy of this Order shall be served by the Company on Bates Group Ltd by delivery at its registered office and on Maxima Resources Corporation by delivery to the offices of Maples and Calder. 3) The Petitioner shall pay the Company's costs of and incidental to the Summons on an indemnity basis to be taxed if not agreed. ```
```html 4) Cause 356 of 2004 shall be transferred to the Financial Services Division and be assigned to Mr. Justice Henderson sitting as a Judge of that Division and the Petitioner, and the Respondents, shall each be liable to pay 50% [of] the transfer fee. Dated this 16th day of November, 2009 Anderson, R.K. Judge of the Grand Court (Actg.) Ruling - In the Matter of Fortuna Development Corporation Cause No. 356 of 2004 16.11.09 Page 23 of 23