In re Asia Strategic Capital Fund, LP - Reasons

¶ IN THE GRAND COURT OF THE CAYMAN ISLANDS FINANCIAL SERVICES DIVISION CAUSE NO. FSD 42 OF 2015 (NAS) IN OPEN COURT BEFORE THE HON JUSTICE NICK SEGAL ON THE 17TH MARCH 2015 IN THE MATTER OF SECTION 36(3) OF THE EXEMPTED LIMITED PARTNERSHIP LAW 2104 AND IN THE MATTER OF ASIA STRATEGIC CAPITAL FUND, L.P. APPEARANCE: Mr. Robert Levy QC instructed by Walkers for ORIX Corporation and New York Life Insurance Company Mr. Marc Kish of Harney Westwood & Riegels for Mr. Ferrigno, Mr. Bye and Mr. Nacson REASONS Introduction

¶ [1] These are my reasons for making the order which I made on 17 March appointing provisional liquidators in respect of Asia Strategic Capital Fund, L.P. (the Partnership).

¶ [2] At the hearing I gave brief reasons for my decision but stated that they were only in summary form and would be subject to further elaboration and explanation if needed. The Petitioners have subsequently requested that I provide written reasons which I now do.

¶ [3] The Partnership is an exempted limited partnership registered in the Cayman Islands. A winding-up petition was presented, and an application for the appointment of provisional liquidators was made, by two (of the four) limited partners of the Partnership. The Petitioners are ORIX Corporation (Orix) and New York Life Insurance Company (NYLC).

¶ [4] The general partner of the Partnership is Asia Strategic Capital Fund GP, Ltd (the General Partner). The General Partner is an exempted limited company registered in the Cayman Islands. The shares in the General Partner appear to be divided into two classes, class A shares and class B shares (I say appear to be divided because there is an issue arising from the failure to incorporate the class rights, which are included in a shareholders’ agreement, into the General Partner’s articles of association). The class A shares, as I explain further below, are held by a company controlled by Mr. Joseph William Ferrigno III (Mr. Ferrigno) while the class B shares are held by the Petitioners asnd an entity affiliated with Orix.

¶ [5] The Petition and the application for the appointment of provisional liquidators has resulted from disputes between Mr. Ferrigno and the limited partners. These disputes have given rise to allegations of mismanagement and breach of contract and duty. They have also involved steps being taken to remove directors from and appoint directors to the board of the General Partner, the validity and effect of which steps have been and continue to be challenged.

¶ [6] The Petitioners seek a winding up order on the basis that the alleged mismanagement and breaches of contract and duty by Mr. Ferrigno and the companies he controls have resulted in the Petitioners justifiably losing trust and confidence in the management of the Partnership and Mr. Ferrigno and his companies. They seek the appointment of provisional liquidators on the basis that urgent action needs to be taken, in order to protect the interests of the Partnership, to ensure that control and management of the Partnership’s assets are assumed by an independent party who can take the necessary action to protect and preserve them and who can restore certainty and stability to the management of the Partnership pending the hearing of the Petition. Opposition to the application

¶ [7] The winding-up petition and the summons seeking the appointment of the provisional liquidators were both issued and served on the General Partner on 10 March.

¶ [8] At the hearing on 17 March, the Petitioners were represented by Mr. Robert Levy QC. Mr Kish of Harneys also appeared at the hearing and made an application for an adjournment of the hearing of, and opposed, the application to appoint provisional liquidators. Shortly prior to the hearing an affidavit of Mr. Ferrigno had been sworn and a copy was provided to the Court at the commencement of the hearing.

¶ [9] There was some uncertainty and a dispute as to who Mr Kish was authorised to represent. Mr. Kish informed the Court that he had been instructed by Mr. Ferrigno and two others, namely Mr. Bye and Mr. Nacson (Mr. Ferrigno, Mr. Bye and Mr. Nacson being the *Purported Class A Directors*).

¶ [10] Mr. Ferrigno in his affidavit stated that he remained a director and believed that he was duly authorised to give evidence on behalf of the General Partner but acknowledged that “there is a current dispute as to the validity of [his] appointment as director.” Mr. Kish explained that it was the Purported Class A Directors’ position that they had been validly appointed as directors of the General Partner and constituted the majority of the General Partner’s board (since there were only two other directors still in office, namely Mr. Briscoe and Mr. Wong who are together referred to as the *Class B Directors*). Mr. Kish referred to and relied on a certified copy (dated 13 January 2015) of the General Partner’s register of directors which listed the Purported Class A Directors and the Class B Directors as being the remaining directors of the General Partner. Mr. Kish argued that the Class A Directors were therefore able to act on behalf of the General Partner (although it was not clear whether there had been any meeting of the General Partner’s board at which the directors had purported to pass resolutions and act as a board).

¶ [11] Mr. Levy on behalf of the Petitioners argued that none of the Class A Directors had been properly appointed and that they were not directors of the General Partner. They were therefore not entitled to represent the General Partner. In any event, there was a continuing dispute as to whether the Purported Class A Directors had been properly appointed as was evidenced by the fact that separate proceedings had recently been issued in this Court by the Partnership against the General Partner seeking, in substance, a declaration that the Purported Class A Directors had been properly appointed (although these proceedings had not yet been served).

¶ [12] In these circumstances it was clear that Mr. Ferrigno could not establish that he and the other Purported Class A Directors were authorised, and Mr. Kish could not establish that he had authority, to represent the General Partner. Nonetheless, the Purported Class A Directors could at least, in their personal capacities, as interested parties asserting that they were and remained directors of the General Partner, make submissions in relation to the application for the appointment of the provisional liquidators. For these purposes they would be treated and could be referred to referred to as the purported Class A Directors. The Petitioners did not object to Mr. Kish making submissions on this basis provided that it was clear that the Petitioners’ challenge to the validity of the appointment and authority of the Purported Class A Directors was unaffected.

¶ [13] The winding-up petition and the summons seeking the appointment of the provisional liquidators were both issued and served on the General Partner on 10 March. The General Partner had therefore been given the four clear days notice required by CWR Order 4, rule 1(2) and Mr. Kish confirmed that he did not wish to take any points regarding the effectiveness or timeliness of service.

¶ [14] What he did submit (and Mr. Ferrigno averred in his affidavit) was that first, in view of the substantial volume of the evidence filed in support of the Petition (the exhibits run to over 1,960 pages) the Purported Class A Directors had not had sufficient time to enable them to be in a position properly to oppose and to file full evidence for the purpose of opposing the application to appoint provisional liquidators; secondly that the evidence did not demonstrate that there was an urgent need to appoint provisional liquidators and thirdly that in the absence of access to the funds of the General Partner to fund the opposition, the General Partner and the Purported Class A Directors were not in a position to engage substantively with the hearing of the application (this was a point that Mr. Kish had made in correspondence with Walkers, the attorneys acting for the Petitioners).

¶ [15] After hearing detailed submissions from Mr. Kish and Mr. Levy and carefully considering the application I declined to order an adjournment of the hearing. The evidence did, in my view, establish that the application to appoint provisional liquidators did need to be dealt with urgently. The dispute between the Petitioners and Mr. Ferrigno had resulted in uncertainty as to whether anyone was properly able to act on behalf of and protect the assets and interests of the Partnership and therefore it was likely that the Partnership’s assets and interests could be at risk, and that action would need to be taken to preserve and protect these assets and interests, during the period of any adjournment. Furthermore, while Mr. Ferrigno (and Mr. Kish) had only been given a short period in which to prepare for the hearing, they had been able to file some evidence and were able to participate in the hearing. I was also of the view that it would not be appropriate, in a case in which the real dispute was been the partners in the Partnership (in substance the dispute was between the Limited Partners on the one hand and Mr. Ferrigno and the companies he controlled on the other - including AMCP which is the majority shareholder in the General Partner), to allow the assets and funds of the Partnership to be used to fund the costs of one of the parties to the dispute (although in the absence of the citation of any authority on this issue I declined to give a definitive ruling on this point). Background

¶ [16] The Partnership was registered in the Cayman Islands on 9 January 2008 as an exempted limited partnership pursuant to the Exempted Limited Partnership Law 2014.

¶ [17] The General Partner is the general partner of the Partnership. There are, as noted above, four limited partners (the *Limited Partners*). These are Orix, NYLC, Massachusetts Mutual Life Insurance Company (*Mass Mutual*) and Nippon Life Insurance Company (*Nippon Life*). Orix and NYLC together hold approximately 63.2 per cent of the limited partnership interests and Mass Mutual and Nippon Life hold 10.5 per cent and 26.3 per cent respectively. The Petitioners, Mass Mutual, Nippon Life and the General Partner are parties to an Amended and Restated Limited Partnership Agreement dated 24 April 2008 (the *LPA*).

¶ [18] The Petitioners and ORIX Asia Limited are also minority shareholders in the General Partner. NYLC holds 20 per cent, Orix holds 15 per cent and ORIX Asia Limited holds 5 per cent of the voting share capital of the General Partner. The remaining 60 per cent of the voting share capital is held by Asia Mezzanine Capital Partners, L.P. (*AMCP*), a Cayman Islands limited partnership. AMCP is in turn owned and controlled by Mr. Ferrigno and Asia Mezzanine Capital Group. On 12 September 2007, prior to the registration of the Partnership and the entry into of the LPA, the General Partner, NYLC, ORIX Asia Limited and AMCP had entered into an amended and restated shareholders agreement (the *SHA*) to govern the relationship between the shareholders in the General Partner. By a Deed of Amendment and Accession executed in August 2008, Orix agreed to observe, perform and be bound by the terms of the SHA.

¶ [19] Pursuant to the SHA (a) AMCP (as the only Class A shareholder) has the right to appoint up to five directors and (b) the Petitioners and ORIX Asia Limited (as the Class B shareholders) have the right to appoint up to two directors to the board of the General Partner. The articles of association for the General Partner however do not provide for these appointment rights (but instead provide for a board of not less than one person) and there is a dispute between the Limited Partners and Mr. Ferrigno as to which provisions have supremacy.

¶ [20] On 24 April 2008 the General Partner, the Partnership and Asia Mezzanine Capital Corporation, a Cayman Islands limited liability company, (\( AMCC \)) entered into a management agreement (the \( MA \)) pursuant to which the General Partner engaged AMCC and delegated to it the powers of the General Partner under and to the extent permitted by the LPA and engaged AMCC to assist the General Partner in the performance of its duties. The investment adviser to the Partnership was Asia Mezzanine Capital Advisers Ltd (\( AMCA \)), a company incorporated in Hong Kong. Both AMCC and AMCA are controlled by Mr. Ferrigno. The winding-up petition and the evidence in support

¶ [21] The Petitioners seek a winding-up order in respect of the Partnership on the ground that it is just and equitable that the Partnership be wound up.

¶ [22] They rely on section 92(e) of the Companies Law (2013 Revision) and section 36(3) of the Exempted Limited Partnership Law 2014. Pursuant to section 36(3) the provisions of Part V of the Companies Law and the Companies Winding Up Rules 2008 are applied to the winding up of an exempted limited partnership (except to the extent that such provisions are not consistent with, and subject to any express provisions of, the Exempted Limited Partnership Law). Pursuant to section 36(3)(b) of the Exempted Limited Partnership Law the limited partners of an exempted limited partnership are to be treated as if they were shareholders of a company and references to contributories in Part V are to be construed accordingly. Pursuant to section 36(3)(c) of the Exempted Limited Partnership Law references in Part V to a director or officer of a company are to include the general partner of an exempted limited partnership. Therefore the Petitioners are to be treated as contributories and the Petition is to be treated as a contributories petition for the purpose of Part V.

¶ [23] The principal ground on which the Petitioners rely is that they have justifiably lost trust and confidence in the management of the Partnership by Mr. Ferrigno, who they allege has, or has the ability to obtain, management and control of the General Partner (and therefore the Partnership).

¶ [24] The basis for this loss of trust and confidence is the alleged mismanagement and breach of contract and duty by Mr. Ferrigno and the companies he controls occurring in connection with the Partnership’s assets and affairs. The Petitioners assert that Mr. Ferrigno was in control of the Partnership and its assets until August 2013 by reason of being a director and having control of the General Partner, the manager of the Partnership’s affairs (namely AMCC) and certain wholly owned subsidiaries of the Partnership which hold assets of the Partnership in the form of loans made to certain borrowers. They assert that during that period Mr. Ferrigno and the companies he controlled acted in breach of contract and duty and in a manner prejudicial to the interests of the Partnership. As a result of this behaviour steps were taken in April 2014 to remove Mr. Ferrigno from the board of the General Partner and from positions of influence in the Partnership and to put the management of the Partnership’s assets and affairs in the hand of independent directors. However, Mr. Ferrigno has disputed the validity and effectiveness of the steps taken to remove him and since October last year has sought to re-establish control over the management of the Partnership’s assets and affairs. He has taken steps through AMCP to remove the Class A directors who had voted for his removal from office, to appoint three new Class A directors, including himself (so that such directors would represent the majority of directors on the General Partner’s board), and through AMCC and personally to involve himself in the activities of the wholly owned subsidiaries of the Partnership and the management and recovery of their investments and the loans owed to them. The Petitioners say that the positions of the Petitioners and Mr. Ferrigno are wholly incompatible and, as a result of these irreconcilable differences and Mr. Ferrigno’s conduct, there has been a complete breakdown in trust and confidence between the Limited Partners and Mr. Ferrigno - so that the management of the assets and affairs of the Partnership is not being properly conducted and those assets are in real and imminent danger if Mr. Ferrigno is permitted to continue with this current course of conduct and assert control over the Partnership.

¶ [25] The Petition also refers to other grounds (such as loss of substratum). However in their outline submissions and at the hearing the Petitioners relied primarily on their loss of trust and confidence resulting from their complaints and concerns regarding the conduct of Mr. Ferrigno and his companies and did not seek to develop a case based on loss of substratum.

¶ [26] The Petitioners’ petition is supported by the affidavits of Mr. Stephen Briscoe and Mr. Jonathan Hatch.

¶ [27] Mr. Briscoe is a director of the General Partner. He is one of the Class B Directors and was initially appointed by the Petitioners and ORIX Asia Limited. He has been a director of the General Partner since August 2013 and the validity of his appointment, although originally subject to challenge, is not disputed (and had been confirmed by unanimous resolution of the shareholders of the General Partner dated 19 August 2013).

¶ [28] Mr. Hatch was also appointed as a director of the General Partner in August 2013. However, he was nominated by AMCP (with the approval of Mr. Ferrigno) and also appointed by the unanimous resolution of the shareholders of the General Partner dated 19 August 2013. He has subsequently and recently resigned as a director (on 25 February 2015) although he continues to have a role in managing the investments of the Partnerships and sits on the boards of companies to whom loans have been made from Partnership funds.

¶ [29] The Petitioners, in reliance on the evidence of Mr. Briscoe and Mr. Hatch, make a number of serious allegations regarding the manner in which the business and affairs of the Partnership have been managed and the conduct of Mr. Ferrigno and his companies. In outline, Mr. Briscoe and Mr. Hatch aver that: (a). in the period prior to August 2013: (i). the management of the Partnership’s affairs had been under the control of Mr. Ferrigno. There had never been more than two directors of the General Partner (Mr. Ferrigno and Mr. Temple) both of whom had been appointed by AMCP. (ii). Mr. Ferrigno and his companies misappropriated or misapplied funds of the Partnership in a manner which benefitted his interests and prejudiced the interests of the Partnership (and the Limited Partners). (iii). Mr. Ferrigno and his companies failed to manage the Partnership in accordance with the corporate governance mechanisms built into the Partnership’s governing documents, which prevented the Limited Partners from having proper oversight of Mr. Ferrigno’s activities. (iv). Mr. Ferrigno and his companies acted in a manner prejudicial to the Partnership in his dealings with respect to various assets owned by and debts owed to the Partnership or wholly owned subsidiaries of the Partnership. In particular the allegations relate to action taken in relation first to a debt of US$ 25,000,000 owed by Yingliu International Holdings Limited (\( Yingliu \)) to a wholly owned subsidiary of the Partnership, ASCF (Cayman Islands) I Limited (\( ASCF\ I \)) and secondly to a debt of US$30,000,000 owed by CAAM Limited (\( CAAM \)) to another wholly owned subsidiary of the Partnership, ASCF (Cayman Islands) II Limited (\( ASCF\ II \)). The loan made to and debt owed by Yingliu is referred to as the \( Yingliu\ Investment \) while the loan made to and debt owed by CAAM is referred to as the \( Project\ King\ Investment \). Allegations are also made in relation to another investment of the Partnership, namely the convertible debentures issued by SFO Technologies Pvt. Ltd (\( SFO \)) which are held by another wholly owned subsidiary of the Partnership, ASCF L.P. (Mauritius) Company Limited (\( ASCF\ Mauritius \)). This investment is referred to as the \( Project\ Pantheon\ Investment \). (b). in August 2013 as a result of their concern regarding Mr. Ferrigno’s conduct the Petitioners, in the exercise of their rights under the SHA, sought to appoint two new directors to the board of the General Partner (Mr. Briscoe and Mr. Wong Teck Meng). AMCP and Mr. Ferrigno contested the validity of this appointment and they argued that (since the terms of the SHA had not been incorporated into the General Partner’s articles) all the shareholders of the General Partner (including AMCP) needed to consent to such appointments. Nonetheless in response to the appointment of Mr. Briscoe and Mr. Wong, AMCP sought to exercise its rights under the SHA to appoint further directors to the board of the General Partner and sought to appoint four professional directors (being Cosimo Borrelli, Jason Kardachi and Jacqueline Walsh of Borrelli Walsh and Mr. Hatch). After the initial disagreement, all these appointments were confirmed by a unanimous written resolution of the General Partner’s shareholders. (c). in the period between August 2013 and April 2014, the newly appointed directors investigated the concerns raised by the Petitioners and the other Limited Partners, and sought to protect the investments made by the Partnership. During this period, Mr Ferrigno did not cooperate with the board and failed to provide information and documents that had been requested by the newly appointed directors, and which he had promised to provide. Mr Ferrigno further sought to act unilaterally with respect to the Partnership’s investments without consulting the board and made payments out of the Partnership's funds without the board’s consent, and contrary to an undertaking that he had given to the board on 18 August 2013. (d). on 4 April 2014 as a result of these investigations and Mr. Ferrigno’s conduct, the board of the General Partner resolved at a board meeting to remove Mr. Ferrigno as a director of the General Partner (and ASCF II). (e). in the period after October 2014, Mr Ferrigno has contested his removal from office and sought to take control of the General Partner by convening board meetings to pass resolutions, the purpose of which has been to restore Mr Ferrigno to positions of influence with respect to the Partnership, and to unwind actions previously taken by the board of the General Partner during the prior period.

¶ [30] Mr. Briscoe identifies the various positions held by Mr. Ferrigno in relation to, and as a result of which he was able to control, the affairs of the Partnership. These were: (a). being the beneficial owner (presumably of the shares) and sole director of AMCC (the manager appointed by the General Partner to undertake certain management functions relating and to assist the General Partner in relation to the management of the Partnership’s affairs). (b). being the beneficial owner (presumably of the shares) and a director of AMCA (the investment adviser to the Partnership). (c). being the beneficial owner (presumably of the shares) and a director of AMCP (the limited partner that owns 60 per cent of the voting share capital of the General Partner). (d). being a director of ASCF I. (e). being a director of ASCF II and (f). being a director of ASCF Mauritius.

¶ [31] The evidence in support of the Petition sets out the alleged misconduct and mismanagement in considerable detail. The further detail can be summarised as follows: (a). In the period prior to August 2013: (i). part of the alleged misconduct relates to action taken by AMCC whilst acting as the facility agent under the facility agreements pursuant to which loans were made to Yingliu and CAAM. It is alleged that sums were paid by Yingliu and CAAM to AMCC for the account and benefit of, but that AMCC failed to account for these sums to, ASCF I and ASCF II respectively. This, it is said, constituted a breach by AMCC of its obligations to account without deduction for these payments. It is further alleged that AMCC used the funds it had received for its own and unauthorised purposes. (ii). as regards the Yingliu Investment, Mr. Briscoe avers that part of the funds paid to AMCC in respect of the Yingliu Investment were improperly retained by AMCC and used to meet expenses of AMCC (including purported remuneration of US$2,428,429 paid to Mr. Ferrigno). The sum so retained is US$5,489,575 (the Yingliu Receivable). AMCC has acknowledged that the Yingliu is due and payable but it appears that AMCC is unable to pay that amount. (iii). as regards the Project King Investment, it is alleged that a closing fee of US$1,500,000 was paid by CAAM to AMCC under the facility agreement governing the Project King Investment but AMCC failed to account to ASCF II for the sums received by it as it was required to do under the terms of the facility agreement. Instead AMCC used the funds received to pay various expenses and liabilities which it is alleged AMCC was not authorised to do. It appears from the evidence that AMCC did in January 2015 account for, and make a payment for the account of ASCF II in respect of, part of the closing fee but it is alleged that further sums have yet to be accounted for. (b). In the period between August 2013 and April 2014: (i). the newly appointed directors reviewed the Limited Partners’ concerns (which had been summarised in briefing note prepared by Walkers, the attorneys advising the Petitioners) and conducted an investigation into the affairs and governance of the Partnership (which included meetings with and hearing representations from Mr. Ferrigno). (ii). in addition, following their appointment the directors sought to stabilise the Partnership and to establish appropriate safeguards and controls over the cash and proper corporate governance of the Partnership, including preparation of regular budgets and a cash flow forecast. (iii). one of the safeguards which was put in place was a written deed of undertaking from Mr Ferrigno and AMCC dated 18 August 2013. This was an undertaking not to deal in, transfer or otherwise dissipate any assets of the General Partner or the Partnership, and not to cause or allow any other third party to do so, unless such dealings, transfers or payments were approved by the board (the Undertaking). (iv). but Mr. Ferrigno did not co-operate with the investigation and failed to provide the information and copies of books and records as requested. (v). furthermore, it transpired that the safeguards did not prevent Mr. Ferrigno from acting unilaterally with respect to the Partnership’s investments or funds and he and AMCC were subsequently found to have breached the Undertaking on two separate occasions. (vi). as a result of the problems in securing Mr. Ferrigno’s co-operation and his lack of transparency the directors decided in November 2013 that Mr. Hatch would need to take on the role of meeting and working with Yingliu, CAAM, the Moraitis group and other relevant parties so that he could produce revised budgets, review valuations and establish and verify key information relating to the Partnership’s investments. (vii). however, throughout November 2013 and December 2013 Mr. Ferrigno continually delayed making himself available for meetings and had unauthorised and separate discussions with the entity that controls CAAM (Chevalier International Holdings Limited - Chevalier) regarding the debt owed by CAAM to ASCF II. Mr. Hatch alleges that Mr Ferrigno had, during discussions with CAAM, stated that AMCF II would exercise its right to accelerate the CAAM loan facility underlying the Project King Investment if satisfactory terms were not agreed but despite repeated questioning by Mr. Briscoe in board meetings, including a meeting on 16 December 2014, and Mr. Hatch’s own private questioning of him, Mr. Ferrigno had never disclosed the discussions he was having with CAAM or sought board approval before issuing such a threat. (viii). furthermore, at a series of meetings that Mr. Hatch attended with the Partnership’s auditors, PricewaterhouseCoopers (PwC), and Mr Ferrigno, on 29 November 2013, 2 December 2013, 12 December 2013 and 16 January 2014, PwC expressed a high level of dissatisfaction with the valuations that Mr. Ferrigno had provided in respect of the Partnership’s investments and the lack of progress that he had been made in respect of items that they had requested him to deliver. Mr Ferrigno's failure to provide such documents and information caused delays in finalising the audit of the financial statements of the General Partner and the Partnership. Despite Mr Ferrigno's statement to the General Partner’s board that he would provide the audit report by 18 October 2013, it was only eventually issued on 23 July 2014 (although it was dated 6 March 2014). (ix). at these meetings, Mr. Hatch was informed by the partner in charge at PwC that in 2012 PwC had by letter warned Mr Ferrigno about a significant and dangerous lack of proper controls and corporate governance at the General Partner and the Partnership. Mr. Hatch asserts that at no point did Mr Ferrigno inform the board of the General Partner or him of the existence of such a letter, nor has he ever provided a copy of this letter. PwC also told Mr. Hatch that they had serious misgivings regarding Mr Ferrigno and that they had retired as the auditor from his other companies the previous year. Mr. Hatch says that he had to persuade PwC not to resign as auditors of the Partnership. (x). there were particular problems that developed in relation to the Project King Investment (and the debt owed by CAAM). It appears that the purpose of the Project King Investment was to fund, in part, the acquisition of four companies forming the Moraitis Group. So the sums advanced to CAAM in respect of the Project King Investment were used to fund the acquisition. Thereafter, although financial support for CAAM was available from the entity that controls CAAM (Chevalier International Holdings Limited, as noted above) CAAM was dependent, at least in part, on funds being received from the Moraitis Group in order to enable CAAM to make interest and other repayments to ASCF II. (xi). following the advance of the loan to CAAM and the acquisition by CAAM of the Moraitis Group, the Moraitis Group suffered financial problems due to the adverse business conditions in its underlying business and as a result was in breach of certain covenants in its loan agreement with its senior lenders. It therefore became necessary for the Moraitis Group to enter into negotiations with its senior lenders to establish a basis for remedying the covenant breach and to restructure its debt. Such a restructuring was also likely to impact CAAM and CAAM’s ability to repay the Project King Investment and the restructuring negotiations were likely to give rise to demands from CAAM’s senior lenders for revisions to and a restructuring of CAAM’s liability to ASCF II. Mr. Hatch’s evidence is that Mr. Ferrigno, who had also been appointed a director of both CAAM and companies in the Moraitis Group (no doubt, I would interpose, at least in part in order to enable him to oversee and protect the Partnership’s interest in the Project King Investment), became involved in the restructuring negotiations with CAAM, Chevalier and the senior lenders to the Moraitis Group and had been, prior to the efforts to remove Mr. Ferrigno as a director of the General Partner in April 2014, negotiating a substantial restructuring of the Project King Investment without the knowledge or approval of the board of the General Partner and contrary to the wishes and instructions of other directors. The proposed restructuring would have involved a substantial capital injection by Chevalier provided that ASCF II and the General Partner agreed to certain amendments to and concessions in respect of the terms of the Project King Investment including the subordination of the Project King Investment to this new capital injection. Mr. Hatch says that Mr. Ferrigno failed to inform him and the General Partner’s board of a payment default by the Moraitis Group (which occurred in November 2013) until March 2014 and repeatedly held himself out to CAAM, Chevalier and others as having the authority of the board of the General Partner to agree to a restructuring despite having been repeatedly told that he had no such authority and must not represent himself as being authorised to reach an agreement on behalf of ASCF II and the General Partner. Mr. Hatch considered that the proposed restructuring of the Project King Investment would have potentially prejudiced the recoverability of the principal sum owing in respect of the Project King Investment and damaging to the interests of the Partnership. The restructuring proposed by Mr. Ferrigno ultimately did not proceed since (as is noted below) Mr. Hatch and Mr. Borrelli were able to prevent it being implemented and an alternative, more attractive, restructuring was agreed. (c). During the period from April to October 2014: (i). on 3 and 4 April 2014 (and in advance of a board meeting convened for 4 April) the independent Class A directors (Cosimo Borrelli, Jason Kardachi and Jacqueline Walsh and Mr. Hatch) met with Mr Ferrigno and requested that he provide an undertaking not to commit, bind or make any agreements to amend the terms of the Project King Investment without the approval of the General Partner’s board. Mr Ferrigno refused to provide the undertaking requested. (ii). at the board meeting on 4 April 2014 the board resolved to remove Mr. Ferrigno as a director of the General Partner. Following his removal Mr. Ferrigno was reminded of the removal of his authority to act on behalf of the General Partner and that he should communicate this to Chevalier. Mr Ferrigno was also asked if he had purported to make any commitments or arrangements with Chevalier in respect of proposed amendments requested by Chevalier or anything else, to which he responded that he had reached an in-principle agreement with Chevalier to restructure the Project King Investment, which was subject to documentation. (iii). following that meeting Mr Borrelli on behalf of the Partnership and the General Partner confirmed to Chevalier that Mr Ferrigno had no authority to make any agreement or commitment on behalf of the Partnership or any entity associated with it in respect of the proposed restructuring and that the Partnership and the General Partner were not aware of, and had not consented to any terms or proposals affecting the Partnership’s economic interests in the Project King Investment. Mr. Hatch, in his capacity as a director of ASCF II, on 5 April 2014 also sent a notice to Mr Ferrigno and Chevalier revoking any authority, if given, for AMCC, in its capacity as the facility agent, to consent to any amendments to the Project King facility agreement. (iv). at the 4 April board meeting it was also agreed by the board that steps would be taken to terminate the MA on notice in accordance with its terms. A termination notice was accordingly served on AMCC. (v). under the terms of the facility agreement relating to the Project King Investment ASCF II as "Majority Lender" was permitted to replace the security agent and the facility agent on notice. Given the prior conduct of AMCC in relation to the Project King closing fee, Mr Ferrigno's unwillingness to provide an undertaking not to commit the General Partner or the Partnership to any further agreements with respect to the Project King Investment, and notice having been served on AMCC to terminate the MA, in order to preserve the value of the Partnership and the Project King Investment, the board of directors of ASCF II decided that it was also necessary to remove AMCC from its position as facility agent and security agent in respect of the Project King facility agreement, and to appoint Madison Pacific as a successor facility agent and security agent. A letter was sent to AMCC on 22 April 2014 notifying AMCC of its replacement and instructing AMCC to resign as facility agent and security agent. (vi). despite further letters being sent to AMCC on 21 June 2014 and 25 June 2014, AMCC refused or failed to resign as facility agent and security agent. Therefore on 7 July 2014, proceedings were issued by ASCF II against AMCC in the High Court of Hong Kong seeking AMCC's resignation as facility agent and security agent and the delivery up of all books and records relating to the Partnership in AMCC's possession. ASCF II made an application for summary judgment, but shortly before the summary judgment hearing, Mr Ferrigno purported to convene a board meeting of the General Partner to pass resolutions (among other things) to replace the directors of ASCF II. (vii). in light of the continuing dispute as to who has the authority to act on behalf of ASCF II, the parties to the Hong Kong proceedings eventually agreed to an adjournment of the summary judgment hearing on condition that proceedings would be commenced in this Court to seek a determination of the validity of the resolutions purportedly passed by AMCP as the Class A shareholder in October 2014 to remove and appoint directors to the board of the General Partner (these resolutions are discussed below). Such Cayman proceedings were, as noted above, commenced by AMCP by way of a writ issued on 9 February 2015 but have not yet been served. (d). During the period from October 2014: (i). Mr. Ferrigno has taken steps to dispute and challenge his removal as a director and to obtain control over the Partnership and its affairs (this has included action taken in relation to the Project Pantheon Investment where it is alleged that Mr. Ferrigno sought to hinder efforts at reaching a settlement between SFO and the General Partner’s board). (ii). on 31 October Mr. Ferrigno, as the authorised signatory of the general partner of AMCP, signed what purported to be written resolutions of AMCP as the Class A shareholder of the General Partner (the October 2014 Resolutions). These resolutions revoked the appointment of Messrs. Borrelli, Walsh, Kardachi and Hatch and sought to remove them as the Class A directors with immediate effect. Further resolutions were passed replacing them by Messrs. Ferrigno, Nacson and Bye. (iii). in passing the October 2014 Resolutions, Mr Ferrigno and AMCP sought to rely upon a right purportedly conferred by resolutions passed at a board meeting of the General Partner held on 28 July 2005. The 2005 resolutions do not form part of the statutory records of the General Partner seen by Mr. Briscoe or Mr. Hatch or any of the Limited Partners prior to November 2014. (iv). both the directors of the General Partner who AMCP sought to remove and those who were not removed (the Class B Directors) have challenged and do not accept the effectiveness of the October 2014 Resolutions. They have also asserted that Mr. Ferrigno and AMCP did not have the authority to give instructions that the General Partner’s register of directors be updated without the authorisation of the Class B Directors. (v). nonetheless, Mr. Ferrigno has sought to act on the basis that the October 2014 Resolutions are effective. He sought to convene a meeting of the reconstituted board in order to pass resolutions which would have had the effect of changing the directors of ASCF II, the ASCF II nominated director on the board of directors of CAAM, King Holding Company I Pty. Limited (the Project King Investment project company) and the directors of ASCF Mauritius and re-appointing AMCC as manager of the Partnership and confirming AMCC as the facility agent and security agent under the Project King facility agreement (as well as acknowledging the amendments to the Project King facility agreement previously proposed by Mr Ferrigno as well as confirming the appointment of General Partner's purported investment committee). (vi). the Class B Directors, because they consider that Mr. Ferrigno, Mr. Nacson and Mr. Bye have not been properly appointed, have not co-operated and refused to attend or accept the validity of any board meetings convened by Mr. Ferrigno. Nonetheless, Mr. Ferrigno, Mr. Nacson and Mr. Bye have proceeded and sought to hold board meetings (in December 2014 and January and February of 2015), of the General Partner and pass resolutions thereat. These resolutions have included resolutions to change the signatories on the General Partner's bank accounts and to ratify the decision of the board at a meeting held on 13 September 2013 to amend the articles of association in order to incorporate the terms of the SHA. In addition, the General Partner’s register of directors has (as noted above) on the instructions of Mr. Ferrigno been updated to reflect the appointment of Messrs. Ferrigno, Nacson and Bye and the removal of Messrs. Borrelli, Walsh, Kardachi and Hatch. Furthermore, following the commencement by AMCP of the action in this Court seeking a declaration that the October 2014 Resolutions were validly made and in order to direct that the register of directors be suitably amended, Mr. Ferrigno sought to convene a special board meeting of the General partner’s board for the purpose of considering how the General Partner should respond to the action brought by AMCP. Mr Ferrigno subsequently indicated that the purported special board meeting was adjourned for a lack of quorum. (vii). the Class B Directors and the Class A directors purportedly removed by AMCP (Messrs. Borrelli, Walsh, Kardachi and Hatch) have themselves also sought to act as the board of the General Partner. On 24 February 2015 they, purporting to act as the board, passed unanimous written resolutions inter alia approving the payment of the expenses of the Partnership and distributions to the Limited Partners (including the Petitioners) (the "Distribution"). Mr. Briscoe states that as a result of the Distribution, there are now no material liquid assets remaining in the Partnership, and its sole remaining asset is a right to a future payment of principal and interest under the restructured Project King Investment and the claims against Mr Ferrigno and entities controlled by him arising out of their conduct with respect to the Partnership. There are, he says, no prospects of the Partnership, at least with the consent of the Petitioners, making any further investments. No doubt Mr. Ferrigno would wish to challenge and dispute the basis for and validity of such action. The jurisdiction to appoint provisional liquidators

¶ [32] Section 104(1) of the Companies Law (2013 Revision), which is applied by the Exempted Limited Partnership Law 2014, states that the Court may at any time after the presentation of a winding-up petition but before the making of a winding up order appoint a liquidator provisionally.

¶ [33] Section 104(2) (read in conjunction with and as modified by the Exempted Limited Partnership Law) states that an application for the appointment of a provisional liquidator may be made under subsection (1) by, inter alia, a contributory (which includes a limited partner of an exempted limited partnership) on the grounds that: (a). there is a prima facie-case for making a winding-up order; and (b). the appointment of a provisional liquidator is necessary in order to- (i). prevent the dissipation or misuse of the partnership’s assets; (ii). prevent the oppression of minority partners; (iii). prevent mismanagement or misconduct on the part of the general partner of the partnership.

¶ [34] There are therefore two main issues. First, is the prima-facie case requirement satisfied? Secondly, if it is, is the appointment of a provisional liquidator necessary to achieve one or more of the purposes set out in section 104(2)(b)? The Petitioners’ submissions

¶ [35] In relation to the prima-facie case requirement, the Petitioners submit as follows: (a). the statutory test does not require the court to be satisfied that a winding up petition will be made; that would be to pre-judge the merits of the Petition, which, by definition has not yet come on for hearing. Rather the test is necessarily lower. (b). they are entitled to a winding-up order because they have justifiably lost trust and confidence in the management of the Partnership by Mr. Ferrigno and his companies – as noted above, the basis for this loss of trust and confidence is the alleged mismanagement and breach of contract and duty by Mr. Ferrigno and the companies he controls in connection with the Partnership’s assets and affairs. (c). the evidence filed in support of the Petition establishes and demonstrates that there has been such a loss of trust and confidence and establishes the obvious mismanagement or misconduct in the management of the Partnership and its assets by Mr Ferrigno and the entities he controls which justifies such a loss of trust and confidence. The evidence filed in support of the Petition sets out a series of *prima facie* serious complaints concerning Mr Ferrigno’s conduct. (d). Mr. Levy submitted that the evidence clearly showed that Mr Ferrigno had shown a complete disregard of the interests of the Petitioners and had acted solely for his own benefit, to the detriment of the Petitioners and is now taking active steps to regain control of the Partnership. Furthermore, there had been an admitted depredation from Partnership assets of more than US$ 5.34 million (this submission being based on the letter dated 12 December 2013 from AMCC, signed by Mr. Ferrigno as a director, confirming that AMCC was indebted to the Partnership) and no attempt had been made to repay that sum. (e). taking into account all the evidence there can be no real controversy as to whether a *prima facie* case has been made out. This is plainly not a frivolous application, or an application made to prevent some other stakeholder appointing a liquidator of its choice. It is case where the Petitioners have shown, on solid evidence, very real concerns.

¶ [36] In relation to the requirements of section 104(2)(b) the Petitioners submit as follows: (a). The Petitioners rely on subsections (i) (prevention of the dissipation or misuse of the partnership’s assets) and (iii) (prevention of mismanagement or misconduct). (b). As to the ground that the appointment of provisional liquidators is necessary in order to prevent the dissipation or misuse of the Partnership’s assets: (i). Mr. Levy relied on *Re a company (No 003102 of 1991)* ex parte *Nyckeln Finance Co Ltd* [1991] BCLC 539 for the proposition that in this context the Court is not concerned with dissipation in the *Mareva* sense; rather it is concerned with “any serious risk that the assets may not continue to be available to the [partnership].” (ii). Mr. Levy submitted that the evidence clearly demonstrated that this test was satisfied in the present case and that there was a serious risk that unless provisional liquidators were appointed Mr. Ferrigno and his companies would take action (and continue to take action) that would result in the dissipation of assets and be prejudicial and damaging to the interests of the Partnership. (iii). Mr. Levy relied on the evidence of Mr. Hatch and Mr. Briscoe relating to the action taken by Mr. Ferrigno to obtain and reassert control of the General Partner and deal with the assets and interests of the Partnership despite the validity of the Purported Class A Directors’ appointment being disputed and his action being inconsistent with the wishes of the Limited Partners. Mr. Levy submits that the evidence raised serious concerns that steps might be taken to unwind the Partnership’s existing contractual relationships and amend its rights and interests and to remove or transfer away Partnership assets. Mr Levy referred to the evidence suggesting that Mr. Ferrigno (and the other Purported Class A Directors) intended to change of the signatories to the General Partner’s bank accounts. He also indicated that substantial funds were due to be received in May from the Project King Investment and that should the Purported Class A Directors purport to pass a resolution (and assert that a board resolution had been properly passed) which changed the account signatories and gave Mr. Ferrigno control over the Partnership’s funds then there was a serious risk of those funds being misapplied and dissipated. (c). As to the ground that the appointment of provisional liquidators is necessary in order to prevent mismanagement or misconduct of the Partnership’s assets: (i). Mr. Levy submitted that this ground was established on the evidence for two reasons: first, because “on the (only possible valid) assumption that “mismanagement” in s104(2)(b)(iii) includes “non-management” or “incapable of proper management” it is clear that provisional liquidators should be appointed to prevent mismanagement and secondly because “there is a strong prima facie case that to the extent that Mr Ferrigno is properly to be considered a director of the General Partner, then there is cogent evidence of past misconduct on his part, such that an appointment should be made to prevent further misconduct.” (ii). accordingly Mr. Levy relied on the dispute as to the appointment and removal of the directors to and from the General Partner’s board and the resulting uncertainties as to who was authorised to act on behalf and bind the General Partner (and deal with the assets and interests of the Partnership) as satisfying the requirement for mismanagement. (iii). Mr. Levy submitted that “As matters stand there is a substantial question mark over who is properly appointed to the [General Partner’s] board…. Accordingly, the General Partner, and hence the Partnership, is rudderless. Therefore the company is incapable of proper management unless and until the question of the proper composition of the board is determined. Of course, if it should be determined that Mr Ferrigno’s interests should be entitled to control the board, then that merely feeds into the deadlock that exists between the competing interests in the General Partner, as the Petitioners have, in any event, lost all trust and confidence in Mr Ferrigno (and his corporate emanations).” (iv). he also referred to the recently issued (but currently unserved) proceedings in this Court between AMCC and the General Partner which “apparently seek to determine the proper composition of the board... But there is division within the General Partner and so it will not be possible to agree a response to those proceedings. That being the case there is a serious question mark over how those proceedings will be disposed of." (v). additionally, Mr. Levy relied on the evidence as demonstrating that there had been and was now a serious risk of continuing breaches of duty and contract and the misapplication of the assets of the Partnership by Mr. Ferrigno and his companies. Is the prima-facie case requirement satisfied?

¶ [37] I am satisfied that there is a prima case for making a winding-up order on the just and equitable ground in section 92(e) of the Companies Law.

¶ [38] The only authority to which Mr. Levy referred on this issue was the judgment of Mr. Justice Jones in In the Matter of Orchid Developments Group Ltd [2012] (2) CLR N 14. He cited this case in support of the proposition that the statutory test does not require the court to be satisfied that a winding up petition will be made and stated, in his Outline Submissions, that Jones J had explained in [Orchid Developments] that the purpose of the limitations in s104(2) [was] to “prevent petitioners from abusing the ability to appoint provisional liquidators and so make it more difficult for other stakeholders to appoint a liquidator of their choice.” However this judgment, only briefly reported as a note in the Cayman Island Law Reports, does not appear to deal with the prima-facie case requirement but instead addresses the “restrictions” (i.e. the separate and additional requirements) imposed by section 104(2)(b), which on the facts of that case (having regard to the reasons supporting the application for the appointment of provisional liquidators) were not satisfied.

¶ [39] To the extent that guidance is required or useful as to what needs to be established in order to satisfy the prima-facie case requirement I would refer to the well-known decision of Plowman J in Re Union Accident Insurance Co Ltd [1972] 1 All ER 1105. In that case Plowman J, when considering the jurisdiction to appoint provisional liquidators under English law (where the statutory power to appoint, currently in section 135 of the Insolvency Act 1986 but at the time of the judgment in section 238 of the Companies Act 1948 and in similar terms to section 135, makes no reference to the need for there to be a prima facie case) held that a good prima-facie case was established by showing first that the allegations in the petition were supported by the evidence (at least to the extent of a good prima facie case) and secondly that it was not possible to say that the allegations had been disproved, bearing in mind that conflicts of evidence cannot be resolved until the substantive hearing of the petition.

¶ [40] Union Accident is not, of course, a decision directly on section 104 and indeed Rimer L.J. in the English Court of Appeal has recently said (in Revenue and Customs Comrs v Rochdale Drinks Distributors Ltd [2012] 1 BCLC 748 at [77]) that he regards the continued use of the phrase “good prima facie case” as unsatisfactory – as being elusive – and substituted a (probably higher) requirement for a petitioner to demonstrate that he is likely to obtain a winding up order on the hearing of the petition. Accordingly, the decision in Union Accident needs to be treated with caution and I refer to it only by way of illustration of an approach which has been adopted when deciding whether a (good) prima facie case for a winding-up order has been made out.

¶ [41] In any event, it seems to me that the prima facie case requirement is satisfied in the present case: (a). while no authorities were cited to me to support the proposition that this was a case in which a loss of trust and confidence would be a proper and sufficient basis on which a winding up order could be made, it seems to me that it clearly is. This case involves an exempted limited partnership which was established as a closed-end private investment fund. The relationship between the General Partner and the Limited Partner, governed both by the LPA and the Exempted Limited Partnership Law, is such that it clearly gives rise to a legitimate expectation that the Partnership will be conducted on the basis of a personal business relationship between the General Partner and the Limited Partners involving mutual trust and confidence. I note that Mr. Justice Jones remarked in Re Cybernaut Growth Fund, L.P. (Unreported, FSD 73 of 2013) that “it [was] not disputed [in that case] that [the] principles [in Ebrahami v Westbourne galleries [1973] AC 360] apply to the liquidation of an exempted limited partnership in the same way as they apply to a company.” (b). affidavits have been filed by Mr. Yamaguchi on behalf of Orix and Mr. Haubenstricker on behalf of NYL in support of and confirming the truth of the statements made in the petition. The petition, as noted above, states that “The Petitioners and the other [Limited Partners] have lost all trust and confidence in Mr Ferrigno’s ability or willingness to manage the Partnership’s affairs in the best interests of the Partnership as a whole, without favouring his own interests over those of the Limited Partners.” (c). the affidavits of Mr. Briscoe and Mr. Hatch establish the basis on which the Limited Partners have lost trust and confidence in Mr. Ferrigno and demonstrate why this is a reasonable response to the action taken by Mr. Ferrigno and his companies. (d). I recognise and take into account that Mr. Ferrigno disputes the account of events given by Mr. Briscoe and Mr. Hatch and, as his affidavit explains, he considers that he has not had time to prepare and file a full and proper response (as he notes in paragraph 6 of his affidavit: “This affidavit responds only in brief to the various allegations made by the Petitioners in the lengthy affidavit evidence filed in support of the Petition and only as is necessary in the context of the adjournment application. This affidavit is not a substantive response to the evidence filed by the Petitioners and the General Partner specifically reserves its right to respond in full in due course.”). (e). accordingly, I take into account the fact that the evidence remains incomplete and that further evidence may be filed by Mr. Ferrigno and others in advance of the hearing of the Petition – and that conflicts in the evidence filed to date can only be resolved at the substantive hearing of the Petition. (f). however, the breakdown in the relationship between the Limited Partners and Mr. Ferrigno (and its damaging effect on the conduct and management of the Partnership’s business) is beyond dispute and I give considerable weight to the evidence of Mr. Hatch who was at one time a nominee of Mr. Ferrigno and who appears to have carefully and patiently investigated the Limited Partners’ allegations against and concerns relating to Mr. Ferrigno’s conduct and avoided any rush to judgment. His evidence, which includes a series of very serious allegations against Mr. Ferrigno, sets out in a clear and credible manner the reasons and justifications for the Limited Partners’ loss of trust and confidence and is balanced and convincing. Mr. Hatch has clearly concluded that Mr. Ferrigno has not acted properly and in accordance with his obligations and cannot be trusted to act properly in the future. (g). without wishing to select or rely only on parts of Mr. Hatch’s evidence, I would highlight certain of his critical conclusions (in paragraphs 15, 105 and 106 of his affidavit) as follows: “After Mr Ferrigno’s removal as a director in April 2014, the Board sought at all times to operate with the knowledge and approval of its stakeholder Limited Partners, including with respect to sale and restructuring of the Investments of the Partnership. As Mr Ferrigno demonstrated at the time of the original Project King Investment, in diverting the Yingliu Receivable and the Project King Closing Fee to his own improper use (indeed, not even notifying the Limited Partners of the transaction itself that resulted in the diverted Yingliu Receivable) and in numerous other instances culminating in the secret deal with Chevalier discovered by the Board in early April 2014, Mr Ferrigno prefers to operate in secret and without seeking or listening to any valid input from other stakeholders. In my experience with the Partnership to date, Mr Ferrigno acts only in the interest of himself and ignores any conflicting considerations, including the best interests of the Partnership.” [paragraph 15] “It is my belief that Mr Ferrigno’s and AMCC’s interest are in a critical conflict with those of the Partnership. AMCC, in its capacity as former manager of the Partnership, owes at least US$6,667,708.63 to the Partnership (being the total amount of the Yingliu Receivable plus the amount of the Project King Closing Fee misused by AMCC) and only has two sources of income pursuant to the LPA, namely management fees and carried interest, which is a percentage of profits of the Partnership. As detailed in paragraph 46 of my Initial Investment Summary (at pages 149 to 191), these two sources will almost certainly be insufficient to make any substantial repayment of the amount due and owing to the Partnership. [paragraph 105] “As there is no possibility for AMCC to increase assets under management or earn any further management fees from the Partnership, AMCC’s only prospect for repaying the amounts owing to the Partnership is to gamble with the principal amount of the Investments in the hope of achieving a speculative profit sufficient to repay the amounts outstanding (including, but not limited to, the Yingliu Receivable and the funds that it used out of the Project King Closing Fee).” [paragraph 106] (h). Mr. Briscoe’s and Mr. Hatch’s evidence, taken together, establish the facts that support a finding of a prima facie case for the winding-up of the Partnership on the basis of a justifiable loss of trust and confidence by the Limited Partners in the management of the Partnership (by the General Partner, Mr. Ferrigno and his companies).

¶ [42] I would add one further point. The evidence in support of the Petition, and Mr. Levy’s submissions, have highlighted the breakdown in the business relationship between the parties to the LPA and the SA and between the Limited Partners and Mr. Ferrigno and the serious effects of this breakdown. It could be said that the management of the Partnership’s affairs has been paralysed and that the refusal by these parties to co-operate has resulted in the kind of deadlock that may also be a basis for making a winding up order on the just and equitable ground. To the extent that deadlock is a separate ground for making, as opposed to just an alternative way of formulating the Petitioner’s case in support its Petition seeking, a winding-up order in this case I would hold that there is also a prima facie case for making a winding up order on that ground. Is the appointment of provisional liquidators necessary in order to prevent dissipation or misuse of the Partnership’s assets?

¶ [43] Section 104(2)(b)(i) requires the Petitioners to demonstrate that the provisional liquidators are needed (necessary) to prevent dissipation or misuse of the Partnership’s assets.

¶ [44] In Re a company (No 003102 of 1991) ex parte Nyckeln Finance Co Ltd, cited by Mr. Levy and referred to above, Harman J considered the circumstances in which a provisional liquidator would be appointed to protect assets in the context of a creditor’s winding up petition. He said that: “If there is a risk of assets being dissipated – that is made away with other than by the rateable distribution amongst all the company’s creditors at the date of the presentation of the winding-up petition – there must be a good case for the court appointing its own officers .. It is not a dissipation” in the Mareva [freezing injunction] sense of deliberately making away with the assets but any serious risk that the assets may not continue to be available to the [partnership].

¶ [45] On a contributory’s petition, as in the present case, it is sufficient if is shown that the assets of the company (or partnership) are being, or are likely to be, dissipated to the detriment of the petitioners (see Levy v Napier 1962 SC 468; South Downs Packers v Beaver (1984) 8 ACLR 990; Re Nerang Investments (1985) 9 ACLR 646 and Re Bike World (1992) 6 ACSR 681).

¶ [46] The evidence of Mr. Briscoe and Mr. Hatch demonstrates that there is at least a serious risk that Mr. Ferrigno and his companies will take further steps and action in relation to the Partnership’s assets and interests (in particular its investments) which could result in funds being paid away and the rights of the Partnership (including its wholly owned subsidiaries) being amended in a way that makes them less valuable. This evidence establishes that the appointment of provisional liquidators is necessary to protect the assets and rights of the Partnership and to ensure that during the period before the hearing of the Petition a person with proper and undisputed authority to deal with the assets can take steps to preserve and protect them and prevent any unauthorised dispositions or dealings with the assets that could result in them being transferred or rights being amended in a prejudicial manner.

¶ [47] Mr. Briscoe states that it is necessary for provisional liquidators to be appointed to the Partnership pending the hearing of the Petition in order to safeguard the assets of the Partnership and to ensure that Mr Ferrigno does not engage in any further mismanagement or misconduct which would be contrary to the interests of the Limited Partners and the Partnership as a whole. He asserts that the action which Mr Ferrigno has indicated that he wishes and intends to take if he is able, or while seeking, to obtain control of the General Partner would result in the assets and rights of the Partnership being damaged and reduced in value. Mr Briscoe states that if a provisional liquidator is not appointed there is a serious risk that Mr Ferrigno will take steps to unwind the arrangements that have been put in place to safeguard the value and protect the assets of the Partnership particularly the Project King Investment and seek to appropriate such assets and any future funds received for his own purposes (unrelated to the General Partner and the Partnership), as he has done in the past with the Yingliu Receivable and the Project King Closing Fee.

¶ [48] These views and concerns are supported and reinforced by Mr. Hatch. He avers that through his negotiations with third parties, Mr Ferrigno has shown that he is prepared to prejudice the interests of the Limited Partners (and the Partnership) in favour of his own interests and that he is concerned that Mr Ferrigno may seek to take actions to prejudice the interests of the Limited Partners and the Partnership, including, but not limited to interfering with the Project King Investment to the detriment of the Partnership. He agrees with Mr. Briscoe and also says that he is concerned that Mr Ferrigno will take steps to unwind the arrangements that have been put in place in order to safeguard the assets of the Partnership, and appropriate such assets and any funds received for his own purposes. He states that he is particularly concerned that if Mr Ferrigno were able to re-establish control of the Partnership, he would act in his own interest and against the interests of the Partnership. Particularly with respect to the Project King Investment, Mr Ferrigno could, for example: (a). reappoint AMCC as manager, resulting in unnecessary fees to the Partnership; (b). appoint AMCC as the Facility Agent under the Project King Investment Facility Agreement, enabling him to unlawfully retain and misappropriate future interest and amortization payments to his controlled companies as he did with respect of the Yingliu Receivable and Project King Closing Fee; (c). as there is currently no possibility of earning carried interest from the Partnership, Mr Ferrigno could seek to rescind or vary the restructuring that has been agreed in relation to the Project King Investment or renegotiate the terms in order to seek potential speculative returns instead of protecting the value of the asset. He believes that Mr Ferrigno could negotiate with Chevalier for the Partnership to subordinate the Project King Investment to the approximately AUD28 million Chevalier has loaned to CAAM to date in return for warrants in the CAAM entity. This would jeopardise the principal of the Project King Investment, but in certain unlikely scenarios could potentially yield profits significant enough for Mr Ferrigno’s controlled entities to earn carried interest (and pay monies owing by them). This scenario is not remote or speculative as it is similar to the earlier deal Mr Ferrigno was trying to document in secret in April 2014 before he was removed as a director of the General Partner.

¶ [49] Mr. Hatch concludes that he believes that the risks he has described are not only real, but are very likely to transpire if Mr Ferrigno is given the opportunity and if provisional liquidators are not appointed.

¶ [50] Mr. Ferrigno, in his brief evidence in response denies that there is any risk of dissipation or misuse of the Partnership’s assets. He refers to the Project King Investment as the principal asset of the Partnership and states that due to the dispute with the Petitioners he and the other Purported Class A Directors have made and are continuing to make efforts to come to a consensual agreement to avoid further dissipation of the value of the Partnership (emphasis added). Mr. Ferrigno says that the Purported Class A Directors have not continued to challenge the appointment of Mr. Hatch to the board of CAAM or the designations of the authorised signatories of the bank accounts of ASCF II and the General Partner, so that these accounts are under the control of representatives of the Petitioners. In these circumstances the Purported Class A Directors submit that since the Partnership’s principal asset is under the control of the Class B Directors and the Petitioners there can be no urgency or justification for the appointment of provisional liquidators – with Mr. Hatch on the board of CAAM and its cash under the control of the CAAM board there can be no risk of Partnership assets being dissipated or misused.

¶ [51] While it is not possible to resolve conflicts of evidence before the hearing of the petition and I acknowledge that Mr. Ferrigno and Mr. Kish on behalf of the Purported Class A Directors have made it plain that there is further evidence which they would wish to file on this issue, I am satisfied that the Petitioners’ evidence in support establishes a serious risk of dissipation. Even if Mr. Ferrigno were correct that as matters currently stand the Class B Directors have control of CAAM and the Project King Investment (including the cash and other funds paid and payable to CAAM and ASCF II), there remains a material risk that he will take further action to change or interfere with the status quo and seek to obtain control of ASCF II and funds payable in respect the Project King Investment and seek to arrange for the amend the terms of agreements which affect the value of the Partnership’s interest in the Project King Investment. The evidence of Mr. Briscoe and Mr. Hatch shows that Mr. Ferrigno has continued to be active and to be seeking in January to have the Purported Class A Directors pass resolutions that would change the signatories to the Partnership’s bank accounts. In his evidence, as noted above, Mr. Ferrigno refers to continuing efforts to reach new agreements – while this may be a reference to agreements with the Petitioners it may also be a reference to new agreements with Chevalier. In any event the evidence of Mr. Briscoe and Mr. Hatch demonstrates a serious concern that Mr. Ferrigno will seek, and a risk of Mr. Ferrigno seeking, to enter into discussions and new agreements with Chevalier. In the absence of a clear basis for being able to conclude that Mr. Ferrigno will not seek and continue to take action to deal with, dispose of, amend or affect the rights of the Partnership in relation to the Project King Investment the evidence of Mr. Briscoe and Mr. Hatch demonstrate a real and material risk of further action by Mr. Ferrigno and his companies that would result in dissipation or a misuse of the Partnership’s assets and rights. I find Mr. Briscoe and Mr. Hatch’s evidence persuasive and that their challenge to the integrity and motives of Mr. Ferrigno gives rise to substantial concerns as to what may happen to the Partnership’s assets if provisional liquidators are not immediately appointed. Is the appointment of provisional liquidators necessary in order to prevent mismanagement or misconduct on the part of the general partner of the partnership?

¶ [52] In view of my conclusion that the evidence establishes that the appointment of a provisional liquidator is necessary in order to prevent the dissipation or misuse of the Partnership’s assets it is not, strictly speaking, necessary for me to deal with the need to establish mismanagement or misconduct. However, I propose to set out briefly my conclusions on whether the requirements of section 104(2)(b)(iii) of the Companies Law are also satisfied in this case.

¶ [53] Section 104(2)(b)(iii) of the Companies Law, when read with section 36(3)(c) of the Exempted Limited Partnership Law, requires the Court to be satisfied that the appointment of a provisional liquidator is necessary to prevent mismanagement or misconduct on the part of the general partner (section 104(2)(b) refers to mismanagement or misconduct on the part of the company’s directors and section 36(3)(c) says that references to a director shall include the general partner). There is an issue in the present case as to whether the action taken and likely to be taken by Mr. Ferrigno and his companies can be treated as conduct taken or threatened by the General Partner.

¶ [54] The Petitioners argue that there has been and continues to be a real risk of mismanagement and misconduct by Mr. Ferrigno (and Mr. Nacson and Mr. Bye who it is suggested are acting in accordance with Mr. Ferrigno’s wishes) and his companies in relation to the affairs of the Partnership. Some of the conduct giving rise to the alleged mismanagement and misconduct took place while Mr. Ferrigno was a director of the General Partner and before his purported removal in April 2014. Some of the alleged mismanagement and misconduct took place and the concerns regarding further and future action that might be taken by Mr. Ferrigno relate to action that would take place, after his purported removal. It is future and not past mismanagement and misconduct which is relevant for these purposes (allegations of past misconduct are insufficient to justify the appointment of provisional liquidators). If Mr. Ferrigno’s removal was valid and effective then he would not be acting as a director of the General Partner and would not have the actual authority to bind it although the fact that he is recorded in the register of directors may mean that third parties dealing with him are able to argue that he has ostensible authority to bind the General Partner. In any event, in the present circumstances, where the evidence shows that there is an unresolved dispute as to whether Mr. Ferrigno is able to, and he asserts that he does have authority to, act on behalf of the General Partner (and Partnership) it seems to me that I may and should have regard to his conduct and threatened conduct, even after his purported removal, as evidence of mismanagement and misconduct for the purpose of section 104(2)(b)(iii). The allegation is that, even though Mr. Ferrigno and his companies are not currently entitled to exercise control they may acquire such right or through their actions exercise de facto control by being able to deal with the Partnership assets and third parties as if they were authorised to act on behalf of the Partnership.

¶ [55] In the evidence in support of the Petition allegations are made that the General Partner while under the control of Mr. Ferrigno or Mr. Ferrigno while having de facto control of the assets and affairs of the Partnership misappropriated or misapplied Partnership assets and funds and acted in breach of contract or duty by applying such funds for their own benefit and to prejudice the interests of the Partnership. I have already summarised these allegations and this evidence above.

¶ [56] Mr. Ferrigno has denied that the General Partner or he misappropriated funds belonging to the Partnership. He asserts that the action taken by the General Partner (and presumably AMCC) while acting as facility agent in respect of facility agreements regulating the Yingliu Investment and the Project King Investment) was permitted by and in accordance with the LPA. Mr. Ferrigno states that the General Partner had received legal advice from highly reputable and leading law firms to the effect that the General Partner was able to retain and withhold part of the proceeds of an investment and delay distributing such proceeds to the Limited Partners where the General Partner considered that doing so was in the interests of the Partnership, disclosure was made to the Limited Partners and the funds would be distributed before the end of the life of the Partnership in 2020. He says that there was a proper basis for not distributing and for using the funds which the Petitioners allege were misappropriated

¶ [57] Once again, it is not possible to resolve the conflicts in the evidence at this stage. In order to be able to form a firm view on whether the failure by AMCC whilst acting as a facility agent to account immediately and without deduction for, and its use of, payments received from Yingliu and CAAM gave rise to breaches of AMCC’s contractual obligations and whether any breaches involved breaches of the LPA and breaches of fiduciary or contractual duties to the Partnership by AMCC, the General Partner and Mr. Ferrigno I would need to see further submissions and possibly further evidence.

¶ [58] I note however that there is strong evidence of other examples of mismanagement or misconduct by the General Partner, Mr. Ferrigno and AMCC. The following are examples: AMCC has acknowledged its liability and the unpaid debt owed to the Partnership in respect of the Yingliu Receivable; that there is strong evidence that AMCC and Mr. Ferrigno were both in breach of the undertaking dated 18 August 2013 that required them to obtain the approval of the board of the General Partner before disposing of Partnership assets; that the Partnership’s auditors (PwC) had warned Mr. Ferrigno about a significant and dangerous lack of proper controls and corporate governance at the General Partner and Partnership (including the lack of segregation between the accounts of the Partnership and the General Partner on the one hand and AMCC on the other); that there have been delays in finalising the Partnership’s audited financial statements in breach of the LPA; that Mr. Ferrigno had been uncooperative in the investigation conducted by the board after August 2013 and had repeatedly failed to keep the board informed of relevant matters or deliver up and failed to deliver up books and records.

¶ [59] It seems to me to be clear that these matters constitute evidence of past mismanagement and misconduct for these purposes. Nothing that Mr. Ferrigno has said persuades me that this evidence should be treated as disproved. Furthermore, and importantly, the evidence suggests that there is a serious risk that if Mr. Ferrigno and his companies were to be permitted to continue to seek to be involved in dealings with, or to assert control over, the Partnership’s assets and affairs in the period before the hearing of the Petition, similar conduct would be repeated. The risk of further failures of governance and breaches of applicable agreements, combined with the risk of further action which would be damaging to the interests of the Partnership and instead promote the separate interests of Mr. Ferrigno and his companies, is established by the evidence and is sufficient in my view to satisfy the requirements of section 104(2)(b)(iii) of the Companies Law.

¶ [60] Mr. Levy, as I have noted above, also submitted that mismanagement in section 104(2)(b)(iii) includes “non-management” or “incapable of proper management.” I do not need to decide this point for the purpose of this application. However, I would note that section 104(2)(b)(iii) refers to mismanagement or misconduct on the part of (or by) the general partner (or, in the case of a company, directors). This, as it seems to me, connotes culpable behaviour involving a breach of duty or improper behaviour that involves a breach of the Partnership’s governing documents and governance regime. This could involve inaction where such inaction would give rise to a breach of duty and action was needed and possible to protect the interests of the Partnership. But I doubt that mere paralysis is sufficient where there is a dispute between the partners and uncertainties as to the authority of the General Partner to act on behalf of the Partnership. Of course such a situation, as in the present case, can and often will give rise to a risk of assets being dissipated or misused and justify the appointment of provisional liquidators on the basis of section 104(2)(b)(i). The impact of and need for provisional liquidators in the present circumstances

¶ [61] Accordingly I hold that the requirements of section 104(1) and (2) are satisfied and that in all the circumstances it is necessary and appropriate to appoint provisional liquidators in respect of the Partnership and its assets. The precise powers of the provisional liquidators are set out, and the terms on which the provisional liquidators are appointed are dealt with, in an order which I settled after the hearing of this application and discussions between Mr. Levy and Mr. Kish. DATED 30 DAY OF April 2015 The Hon. Justice Nick Segal JUDGE OF THE GRAND COURT