An island-based fund that invested in teak plantations in Brazil has been ordered to be wound up by the high court - as it is unable to pay its multi-million debts.

Deemster Andrew Corlett said the former directors of Quadris Environmental Forestry Fund PCC Plc had questions to answer about the company’s ’lamentable’ financial situation.

It owes its American lender between £17.5m and £52m but the scale of its total debts is as yet unknown.

Quadris Environmental Forestry Fund PCC plc, which has a registered office on Athol Street, Douglas, was launched in 2001 and had more than £100m invested in the teak plantations of Floresteca in Brazil.

But in 2016 it posted a $20m loss, with the auditors saying there were significant concerns about the company’s ability to continue as a going concern.

The following year, it was declared in default by US hedge fund Crestline Arvore who appointed a receiver. Quadris’s bank accounts were frozen, leaving around 1,200 investors fearing they will lose all or most of their investments.

The court this week heard that the regulator, the Financial Services Authority, had recommended that Quadris be wound up as the fund could not pay its debts as they fell due.

It had no assets or access to cash and it appeared that no compromise could be reached between the fund and its debenture holder.

Quadris’ directors had all resigned as had its registered agent, Estera Fund Services.

petition

The petition for the winding up of the company was made by Ethical Investors (UK) Ltd, who the court heard are contributors who were ’trying to get to the bottom’ of what happened.

Advocate for the claimants, Chris Webb, explained that the fund was set up to invest in teak forestry plantations in Brazil.

When it found itself with a liquidity issue, a lender was found, Crestline Arvore. This was owed somewhere between £17.5m and £52m but there was uncertainty over how much was lent and how much was owed.

With the fund in trouble, the FSA appointed Gordon Wilson of CW Consulting first as advisor and then in February 2017 as controller.

Mr Webb said there was a ’myriad of issues’ and it was ’just and equitable’ that the fund be wound up.

He said: ’This isn’t a straight forward winding up. What is clear is that everything is unclear here. It would appear all the assets are now with CL Arvore.’

He said there was a large number of investors who would have expected a return in terms of the teak being cultivated but it was now anticipated they will be receiving zero pence in the pound.

Ethical Investors Ltd had been seeking the appointment of two directors of Grant Thornton as joint provisional liquidators. It was prepared to pay the cost of the winding up, the court heard.

The directors named in the claim form - John Mudge, John Bourbon, Nicholas Sheard and Ernest Thorn - had all resigned between 2016 and 2018.

Ordering that Quadris be wound up, and joint provisional liquidators be appointed, Deemster Corlett said: ’The liquidators are going to try to delve into what’s happened here. They will investigate what the directors were doing. It needs looking into.’

Quadris was not represented at the high court hearing.

Some investors in Quadris opposed Crestline Arvore’s action to appoint a receiver, insisting the fund was not in default. They also criticised the regulator for ’sitting back and doing nothing’.