The High Court granted three counterclaim plaintiffs limited leave to continue part of their counterclaim against Hibernation Therapeutics Global Ltd., which is in liquidation. The permission covers claims about ownership of shares and possible correction of the company’s share register, subject to conditions intended to protect the liquidation and its creditors.
The judgment, delivered by Ms Justice Finlay Geoghegan on 24 January 2014, concerns proceedings in which the company had been added as a plaintiff and was also a defendant to a counterclaim. Hugh Franklin Smisson III applied under section 222 of the Companies Act 1963 on his own behalf and for Trimax Medical Management Inc. and Chelsea Worldwide LLC. The application was made on notice to the Official Liquidator.
The counterclaim plaintiffs sought permission to pursue only the part of their counterclaim seeking a declaration that they were the legal or beneficial owners of shares held by Chelsea Worldwide Ltd. and/or Gibro Nominees Ltd., and an order requiring the company to rectify its share register if necessary. They did not seek leave to continue other parts of the counterclaim against the company.
The company had been wound up in April 2013, and the Official Liquidator had sold its intellectual property for €1.61 million. The judgment records that the parties agreed the creditors would receive only a small distribution and that no surplus would be available to shareholders. The judge said the shares appeared, at first sight, to have no value. Smisson nevertheless stated in affidavits that establishing share ownership could help him and Chelsea Worldwide LLC defend separate proceedings in Ohio. Those background statements were not findings of fact, and the judge expressly said they were assumed true only for this application.
The Official Liquidator raised concerns that allowing the counterclaim to continue could delay the creditor distribution and finalisation of the winding up, and could add costs. The court concluded that the complex share ownership dispute could not conveniently be determined within the winding up. It considered it just and fair to grant leave, with terms addressing costs and delay.
The leave is limited to the hearing of the Official Liquidator’s application for final orders in the winding up. The counterclaim plaintiffs may not seek costs against the company unless the Official Liquidator later defends the claims. Their solicitors must undertake to discharge reasonable costs, remuneration and expenses incurred by the Official Liquidator because of the leave or any relief obtained; disputes over the amount are for the court. If the counterclaim remains unresolved when the final-orders application is brought, that application must be on notice to the counterclaim plaintiffs. They may then apply for further leave, and the Official Liquidator may seek additional terms.
The court said it would make the order only after receiving the required undertaking from the counterclaim plaintiffs’ solicitors, because the plaintiffs were understood to be outside the jurisdiction and their own undertakings could be difficult to enforce.