Bermuda-based shipping giant Frontline has been ordered shut down if it does not this week put nearly $8 million in the hands of the plaintiff in a wind up petition brought against it in Bermuda Supreme Court.

Chief Justice Austin Ward ruled last Wednesday that Frontline - the world's largest independent oil tanker company - had until this Thursday to ensure that plaintiff The Blad Foundation received the monies owed it. If not, Mr. Justice Ward said the wind-up order would take effect on Friday.

The dispute, which has now been heard and ruled on by both Swedish and Bermuda courts, dates back to the late 1990s when The Blad Foundation and Frontline came to an agreement whereby the former would help the latter in a hostile takeover bid for rival shipping company ICB.

In that deal, which would later turn sour, The Blad Foundation was to use its membership in a consortium to buy up shares of ICB and transfer them to Frontline in exchange for compensation above the value of the shares.

The wind up petition - under the provisions of the Bermuda Companies Act 1981 - claims that Frontline is insolvent based on its not having paid the judgment debt of nearly $8 million. If successful, the action would bring down Frontline's fleet of tankers - including some 40 Very Large Crude Carriers (VLCCs) and up to 30 Suezmaxes - majority controlled by Norwegian multi-billionaire shipping magnate John Fredriksen.

Last week, the court heard that the judgment debt owed - some 61 million Swedish Kroner or nearly $8 million - had been wired by Frontline into the account of law firm Conyers Dill & Pearman (CD&P) on behalf of its client, The Blad Foundation.

But in a twist that CD&P legal counsel Jeffrey Elkinson said could be "an elaborate ploy" by the defendant - neither the plaintiff, nor its counsel, can legally access the millions that were wired.

The wind up petition was again before the court after the matter was adjourned on July 25. At that time, Mr. Justice Ward ruled - on the basis of a faxed piece of paper from Frontline to its own lawyer, Appleby, Spurling & Kempe (AS&K) litigation manager Kelvin Hastings-Smith, said to be wire instructions received moments before the hearing for some 61 million Swedish Kroner - that it should be determined whether or not the debt had been paid, even as a "last second development".

But this week Mr. Elkinson told the court that although the money was wired into the CD&P account, a separate action prevented the firm accessing the money on behalf of its client.

He said: "On Friday, 25 July 2003, about two hours before the petition was due to be heard, AS&K, on behalf of the company (Frontline), delivered to the offices of CD&P a copy of an order that Frontline obtained in Liechtenstein against Blad."

That order, obtained by Frontline in Liechtenstein where The Blad Foundation is incorporated, cancelled CD&P's power of attorney - or its right to receive money on behalf of its client.

Mr. Elkinson told the court that as the wired funds could not actually be drawn down, CD&P had sought to make arrangements to return the money to Frontline.

However, the court heard from AS&K lawyer Mr. Hastings-Smith that "quite simply, payment has been made, albeit at the 11th hour".

He added that receipt of the funds had been confirmed with the bank.

Indeed, Frontline's chief accounting officer and company secretary, Kate Blankenship, was in court with an affidavit swearing that the monies owed had been paid and giving evidence of the company's solvency.

But Mr. Elkinson questioned the validity of the affidavit: "Miss Blankenship has sworn a disingenuous affidavit as she says the debt has been paid to Conyers Dill & Pearman. She omits any reference to the proceedings initiated by the company in Liechtenstein whereby they nullified the ability of CD&P to receive the money."

On the basis that the debt was still outstanding, Mr. Elkinson moved for the court to honour the petition and wind up the shipping giant: "The situation remains this morning that the debt is unpaid and accordingly the petitioner moves for a winding up of the company."

He continued: "It is important to note that this is a petition based on a statutory demand for a debt and that the statutory demand was never disputed.

"It is for the company (Frontline) to seek out and pay the petitioner the debt if they intend to avoid consequences of being deemed insolvent and this they have failed to do," he told the court.

Mr. Elkinson added: "It is not for the petitioner or for the court to fathom the reasons behind the actions of Frontline in purporting to pay the debt and then taking action which effectively nullifies this attempt; there could be many reasons, from in-fighting within the company to an elaborate ploy to avoid the winding up order being made and at the same time retain the monies."

Mr. Elkinson added that there was nothing to stop the wind-up of a company - even a large reportedly solvent company - for failure to pay its debts, no matter how small.

But Mr. Hastings-Smith countered that CD&P should be able to receive the funds and the action should be thrown out by the court: "Frontline's position is that the money was paid. This is a substantial, fully solvent company and in light of payment, my lord, I ask that the petition be dismissed," he said.

Mr. Elkinson responded that the legal wrangling put Frontline's legal counsel "on perilous ground, as the position he took (previously) was that CD&P must produce a power of attorney to receive the money, and for them to state the contrary now is quite extraordinary".

Siding with The Blad Foundation, Mr. Justice Ward said his ruling was that the wired funds could not be treated as payment to the judgment creditor as the money could not actually be received.

Mr. Justice Ward added however that he was "loath" to make the wind-up order that day on what appeared to be a solvent company. He said however that would be his course of action if the debt was not paid by this Thursday.

"Sort this legal wrangle out," Mr. Justice Ward told Mr. Hastings-Smith, adding that it was the debtor's responsibility to ensure that the money was not only paid but received by Blad as the judgment creditor.