Cayman Islands Court of Appeal provides guidance on the winding up jurisdiction and contingent creditor claims

The Cayman Islands Court of Appeal (the CICA) has delivered a decision regarding the Court’s winding up jurisdiction, contingent creditor claims, and ‘need for an investigation’ as a free-standing ground under the just and equitable jurisdiction.

Background

The case, In the Matter of Petrosaudi International [2026] CICA (Civ) 14, arose in connection with the 1MDB fraud and forms part of the wider international efforts to investigate the movement of assets misappropriated from Malaysia’s sovereign wealth fund, 1MDB.

PetroSaudi International (PSI or the Company) is a Cayman Islands exempted company which forms part of the PetroSaudi Group based in Saudi Arabia.  The Petition alleged that PSI, along with its parent company and wholly owned subsidiaries, were used by perpetrators of the 1MDB fraud, including the Appellant, Mr Tarek Obaid (the ultimate beneficial owner of the Group and a former director of PSI), to launder some US$1.8 billion in stolen funds.  Mr Obaid has separately been convicted for his involvement in the fraud by the Swiss Federal Court and is appealing that conviction.

In December 2024, the former attorneys acting for the Petitioner, Bridge Global Absolute Return Fund SPC (in Official Liquidation) (the Petitioner) applied ex parte for orders restoring PSI to the companies register and for the appointment of provisional liquidators.  In January 2025, they then applied for PSI to be wound up, and that the usual requirements as to advertisement, notice and service be dispensed with, in order to avoid tipping off Mr Obaid. This led to the Petition being determined administratively on the papers (without an oral hearing), and without notice to PSI.  The Winding up Order was granted and Mr Obaid filed an application seeking to set it aside.  His application was dismissed by the Grand Court, a decision which he then appealed.

Court of Appeal Key Findings

In departing from the approach taken by two Grand Court judges at first instance, the CICA found that the Court had no jurisdiction to wind up the company without notice or a hearing.  The CICA observed that a winding up order is among the most consequential of orders and before such relief can be granted the petition must be served and advertised.

The CICA then went on to consider the Petitioner’s standing to wind up the Company on the basis that it was a contingent creditor. In this case, the Petitioner’s case was that it was a contingent creditor because it had suffered loss as a result of an unlawful means conspiracy perpetrated by PSI and others, including Mr Obaid. The Court endorsed the definition that a ‘contingent creditor’ is ‘a person to whom, under an existing obligation the company may or will become subject to a present liability upon the happening of some future event or at some future date‘¹. Nevertheless, the CICA was not satisfied that the unlawful means conspiracy was sufficient to establish standing in circumstances where Mr Obaid disputed the claim and where, because Mr Obaid’s application had been dismissed by the Grand Court, he had had no opportunity to file evidence explaining why the Petitioner’s claim was disputed. However, in reaching this conclusion, the Court did not go as far as to say that a contingent debt claim could never be a tort claim which would support a winding up order. Further, the Court did not clarify the threshold to establish standing to obtain a winding up order as a contingent creditor, which as it was suggested, must be less than on a balance of probabilities.

The Court rejected the Appellant’s challenge that a ‘need for an investigation’ did not constitute a basis for winding up on the just and equitable ground. Instead, the CICA held that provided the petitioner has standing, the Cayman Courts have, and have always had, the jurisdiction to make winding up orders on the just and equitable ground where there is a need for an investigation.  In doing so, the CICA has confirmed that this ground remains an important tool for fighting fraud within the jurisdiction.

Finally, despite the Appellant having made submissions before both the Grand Court and the CICA challenging the liquidators’ independence, the Court held that there was no basis for overturning the appointment of the Liquidators on the ground that they lacked the necessary independence.

Conclusion

It should be borne in mind that the steps taken by the Petitioner arose as a result of fraud, criminal mismanagement and money laundering on a massive scale and the associated attempts to recover the stolen funds.  The Grand Court was satisfied that it had jurisdiction to make the orders and the office holders, at all times, acted pursuant to those orders.  In reaching its decision the CICA have taken a starkly contrasting view overturing existing precedent