(1) Cesar Hotelco (Cayman) Ltd (2) Cesar Properties Ltd (3) Condoco Grand Cayman Resort Ltd (4) Condoco Properties Ltd (5) Endless Service Ltd Plaintiffs v (1) Michael Ryan (2) Orion Developers Ltd (3) Deckhouses Construction Company Ltd (4) I.R.R Ltd (5) Endless Service Management Ltd (6) Bluet1P Watersports Ltd Defendants
| Jurisdiction | Cayman Islands |
| Judgment Date | 19 December 2012 |
| Judgment citation (vLex) | [2012] CIGC J1219-1 |
| Date | 19 December 2012 |
| Docket Number | CAUSE NO FSD: 58 OF 2012 (PCJ) |
| Court | Grand Court (Cayman Islands) |
Mr. Hector Robinson of Mourant Ozannes for the Plaintiffs
Mr. Ian Huskisson of Thorp Alberga for the Defendants
| 1. | THE PRELIMINARY ISSUES |
| 2. | INTRODUCTION |
| 3. | SUMMARY OF CLAIMS AM) COUNTERCLAIMS IN THIS ACTION AND RELATED LITIGATION |
| 4. | AGREED FACTS |
| 5. | THE CHRONOLOGY OF NOTICES, APPOINTMENTS, LETTERS ETC. |
| 6. | THE DEBENTURES |
| 7. | AGREED LIST OF QUESTIONS FOR PRELIMINARY ISSUES |
| 8. | THE RLL ISSUE |
| 9. | THE STANDING ISSUE |
| 10. | THE ESTOPPEL ISSUE |
| 11. | THE AUTHORITY ISSUE |
| 12. | CONCLUSION |
On 14 August 2012 I directed that there should be a trial of a preliminary issue as to whether the Receivers were validly appointed in terms of the Registered Land Law (2004 Revision) (�the RLL�), (the �Preliminary Issue �).
On 19 September 2012 I directed that the Preliminary Issue be expanded to include the question whether the Receivers have authority to bring this proceeding. This direction reflected an issue raised in paragraph 12.4 of the Amended Defence.
The earlier ruling in this action dated 25 September (security for costs) and the judgment in FSD 98/2012 dated 1 November (application for an injunction) set out the background to this action (the Receivers' action) and to FSD 98 (the Guarantee action).
The Defendants' position in this action is that if the Court were to hold that there was an event of default by P2 and P4 and a valid demand under the guarantees given by PI and P3, the Lender would be entitled to appoint receivers under the Debentures.
The Defendants say however that such an appointment could not extend to the exercise of powers which are inconsistent with the RLL without first complying with the notice provisions thereof, and that the powers reserved to the Receivers under the Debentures do not entitle them to bring the claims in this action.
Issues as to whether there was an event of default by P2 and P4 and a valid demand under the guarantees given by PI and P3 are not considered in this judgment. The Court will, after delivery of this judgment, give case management directions in both actions to ensure that all parties in both actions are bound by the result of the determination of the event of default and demand issues.
This judgment addresses preliminary issues as to whether the Defendants arc correct in their contentions (a) that the appointment of the Receivers could not extend to the exercise of powers which are inconsistent with the RLL without first complying with the notice provisions thereof and (b) that the powers reserved to the Receivers under the Debentures do not entitle them to bring the claims in this action.
This judgment considers (among others) an issue of considerable general importance in the Cayman Islands � Does the RLL contain a mandatory statutory code, the effect of which is that a Receiver may only he appointed in respect of income from land upon the expiry of three months following service of a valid notice under S.72(1) of the RLL and do S.75(2) and S.78 of the RLL further restrict the right of entry of a lender's receiver onto charged land until after a bid has been accepted for the sale of the land at an auction, as the Defendants contend, or were the Receivers validly appointed in respect of income from and entitled to enter onto the charged land because the appointment was out with the RLL, because (as the Plaintiffs contend) the appointment was pursuant to contractual rights under the Debentures or rights arising in equity and such an appointment is not subject to the RLL? It is conceded by the Plaintiffs that if the RLL applies, it was not complied with.
Before turning to consider the agreed list of questions for the preliminary issues it is convenient to set out/ refer to:
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� SUMMARY OF CLAIMS AND COUNTERCLAIMS IN THIS ACTION AND RELATED LITIGATION (chapter 3);
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� AGREED FACTS (chapter 4);
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� THE CHRONOLOGY OF NOTICES, APPOINTMENT S. LETTERS ETC.(Chapter 5): and
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� THE DEBENTURES (chapter 6).
The claims in the Re-Amended Statement of Claim (and the defences) are as follows.
It is alleged that assets belonging to the Plaintiffs have been sold in a transaction with no or illusory consideration. In response to this, the Defendants say that the market price was paid and that consideration was then spent on the Resort's day to day operations in accordance with the contractual arrangements in place.
It is alleged that the Defendants hold rental deposits received from tenants of condo properties at the Resort on trust for the Plaintiffs. The Defendants deny the deposits were held on trust for the Plaintiffs (or the relevant tenants) and say that when Orion was managing the rental programme, it would utilise the deposits to meet the expenses of the Resort. The Defendants claim that when the deposits were due to be repaid, the repayments were funded out of the current cash flow. It is further claimed that this system only stopped when the Receivers cancelled Orion's authority to continue managing the rental programme.
It is alleged that the Defendants owe the Plaintiffs commission in relation to condo rentals. The Defendants deny this. The Defendants claim that the commissions due to the relevant Plaintiffs have been accounted for and utilised to meet legitimate business expenses.
It is alleged that Mr Ryan improperly transferred a valuable asset of the Receivership Companies to his benefit. This claim is disputed.
It is alleged that significant sums have been paid to Mr Ryan from the Hotelco and the CGCR bank accounts for which Mr Ryan has failed adequately to account to the Receivers. These claims are disputed.
It is alleged that significant sums having been paid to Orion from the Hotelco, CGCR and Cesar Properties bank accounts for which Orion has failed adequately to account to the Receivers. These claims are disputed.
It is alleged that agreements for the sale of properties belonging to the Receivership Companies were entered into for consideration amounting to hundreds of millions of dollars, for which Mr Ryan has failed to adequately account to the Receivers. These claims arc disputed.
It is alleged that Orion collected �Tourism Tax� on behalf of the Receivership Companies and failed to pay it over to the appropriate government authority or adequately to account to the Receivers. This claim is disputed.
It is alleged that Mr Ryan and Orion are in possession of significant books and records of the Plaintiffs which, despite demands, they have failed to deliver up to the Receivers. This claim is disputed.
The Defendants' Counter Claims are as follows.
By Mr. Ryan
It is alleged that Mr Ryan is owed outstanding salary of $1,228,938 and loans of $550,000. The Plaintiffs do not admit that Mr Ryan is entitled to any salary or other compensation from the Receivership Companies. Nor do the Plaintiffs admit the existence of any �loans� from Mr Ryan or any liability to repay Mr Ryan any amount.
By Orion
Orion claim $4,354,438 in outstanding fees and expenses pursuant to the Development Management Agreement (�DMA�) and damages for breach and unlawful termination of the DMA. None of the claimed fees and expenses are admitted by the Plaintiffs. The Plaintiffs also do not admit that the DMA is binding and enforceable.
By Bluetip
Bluetip claim declarations, damages, and an injunction for a claimed breach of the Asset Purchase Agreement dated 21 October 2011 (�APA�) and interference with Bluetip's rights under an alleged Licence to operate the water sports business from the Docks. None of Bluetip's claims are admitted by the Plaintiffs.
FSD 98/2012
The judgment in FSD 98/2012 dated 1 November (application for an injunction) sets out the background to FSD 98 (the Guarantee action).
The following facts are agreed.
Mr Ryan has been the principal owner and developer of the project since its inceptions, as part of that he has overseen the construction and development of the Resort beginning in 1997. He procured the acquisition of the beachfront site (previously a Holiday Inn) and combined it with land on the opposite side of the West Bay Road into a single 144-acre parcel stretching from Seven Mile Reach to the North Sound. The Ritz-Carlton Hotel is on both sides of West Bay Road connected by a gallery. The east side of the property also includes the 9 hole Greg Norman Golf Course, the tennis facility, canals, Exclusive Island, the Deckhouses, the parcel designated for Secret Harbour, and also the Marina Towers parcel. Amongst other things, he led the clean up and repair operations following Hurricane Ivan in 2004 and ensured that the hotel was able to open for business in late 2005.
The real estate and associated services offered at the Resort included the design, construction, sale and rental of residences, the design, construction and operation of a golf course and the provision of a suite of luxury services (under the �Endless Services� brand, a concept created by Mr. Ryan) and including internal fit-out of their Residences, a fleet of cars and boats to participating owners of the condominiuins/residences offered for sale as part of the...
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