Between Rogelio Antonio Hawkins Appellant v Abarbanel Ltd Respondent
| Jurisdiction | Cayman Islands |
| Judge | Beatson JA,Martin JA,Goldring JA |
| Judgment Date | 11 January 2024 |
| Docket Number | CICA (Civil) Appeal No. 0001 of 2023 |
| Court | Court of Appeal (Cayman Islands) |
The Rt. Hon. Sir John Goldring, President
The Hon. John Martin KC, Justice of Appeal
The Rt. Hon. Sir Jack Beatson, Justice of Appeal
CICA (Civil) Appeal No. 0001 of 2023
(Grand Court Cause No. G 178 of 2018 (MRH))
IN THE COURT OF APPEAL OF THE CAYMAN ISLANDS
ON APPEAL FROM THE GRAND COURT OF THE CAYMAN ISLANDS
CIVIL DIVISION
Mr. Henry Orren Merren IV, attorney for the Appellant
Mr. Tom Lowe KC instructed by Mr. Nicholas Dixey and Mr. Colm Flanagan of Nelsons for the Respondent
This appeal concerns the enforceability of a loan agreement and the security provided to the lender for the loan in circumstances where the lender did not have the licences it was required to have by the Local Companies Control Act (2007 Revision) (the “LCCA”) and the Trade and Business Licensing Act (2007 Revision) (the “TBLA”).
The Appellant, Mr Rogelio Antonio Hawkins, a Caymanian businessman, is the borrower. In March and April 2014, he borrowed a total of US $407,000 from the Respondent, Abarbanel Ltd, a company incorporated in June 2012 and registered under the law of the Cayman Islands as a resident company. Abarbanel was incorporated for the express purpose of making loans and holding the security given for them: see J [66(viii)] and §§ 17–18 of Dr David Barker's witness statement. Dr David Barker and Mr Kelvin Latta are its sole directors. At all material times they were not Caymanians but citizens of the United States of America. Abarbanel's sole shareholder is Bardi Financial Ltd. (“Bardi”), a Cayman exempted company owned by Dr David Barker and his brother James of Iowa, USA.
Mr Hawkins appeals against the Order dated 29 December 2022 of Ramsay-Hale CJ following a trial on 23 and 24 November 2021. The Judge dismissed his claim that Abarbanel's loan to him and the registered charge securing it were illegal, void ab initio and unenforceable because Abarbanel did not have the licenses companies carrying on a trade or business within these Islands are required to have by the TBLA and the LCCA unless exempt. The relevant provisions of those statutes are set out or summarised and discussed at [10] – [22] of this judgment.
The reasons for Ramsay-Hale CJ's decision are contained in her judgment delivered on 16 December 2022 and an Addendum dated 20 December 2022. The paragraphs in them are respectively referred to hereafter as [**] and A [**]. Her judgment contains several limbs. Early in it, on the basis of the facts summarised at [26] – [31] below, and more fully summarised by her at [16] – [21] of her judgment, she rejected Mr Hawkins's submission that the loan agreement was an unconscionable bargain: see [22] – [29] and [40]. There is no direct appeal against that conclusion, although Mr Merren's submissions relied at times on what might be called “statutory unconscionability”.
Secondly, she rejected Abarbanel's contention that it was not carrying on business in these Islands and was therefore not required to be licensed. Abarbanel accepts the Judge's finding (at [66] to [68]) that the six secured loans it made to various people between June 2012 and the end of 2014 amounted to the carrying on of business in the Cayman Islands and that it did require licences. It is therefore not necessary to consider the statutory provisions and decisions discussed by her at [46] – [64]. This appeal concerns the consequences of Abarbanel carrying on business in the Islands without the licences and when prohibited from doing so.
In the third limb of her judgment the judge held that the licensing provisions of the LCCA and TBLA do not prohibit the loan contract and that the contract is not unenforceable as a matter of common law. The purpose of the LCCA was to control the local level of participation in businesses and that of the TBLA was primarily to raise revenue. Neither prohibited contracts made in breach of the statutory licensing provisions. Accordingly, the security given for the loan was enforceable: see [93] – [94]. As to what may be labelled common law illegality, 1 applying the approach of the UK Supreme Court in Patel v Mirza [2017] AC 467 at [120], the Judge stated that the purposes of the two statutes are not undermined by enforcing contracts made in breach of their licensing provisions: see [103] – [104]. These two questions are the primary focus of this appeal.
Mr Merren also raised a number of other matters on which he submitted the Judge erred. His submissions on those other matters were based on Abarbanel's lack of statutory capacity to make the loans, its contravention of section 3 of the Registered Land Act, 2018 Revision, (the “RLA”) and the Judge's failure to take account of sections 75(a) and 164 of that Act, the Proceeds of Crime Act (the “PCA”), and the legislation governing Special Economic Zones. Mr Merren submitted that the failure to take account of such legislation meant that the Judge's analysis of the objectives behind the LCCA, the TBLA, and the RLA was flawed in not recognising what he stated is an established public policy in the Cayman Islands favouring a multi-faceted culture of compliance with local statutory requirements. He also submitted that Abarbanel had been unjustly enriched or would be by enforcing its rights under the loan agreement and the charge, and that it should have but did not file a counterclaim.
In sections C – E of this judgment I set out or summarise the material provisions of the TBLA and the LCCA, the terms of the loan agreement, and the background to the transaction and what happened after the loan was made. Section F contains the Judge's reasoning on the matters that are under appeal, and section G the grounds of appeal.
Section H contains my discussion of the questions before this court. For the reasons given at [42] – [62] below, I have concluded that the Judge did not err in her conclusion that the legislation
does not expressly or impliedly prohibit contracts made in breach of the licensing provisions and at [72] – [73] that the loan agreement was not unenforceable as a matter of common law. Accordingly, I would dismiss the appeal on those grounds. I also reject the submissions based on lack of statutory capacity, the provisions of the RLA, the PCA, and the legislation governing Special Economic Zones, and unjust enrichment. I deal relatively briefly with those matters because the first was not pleaded and not properly before the judge and because the premise on which the other submissions were made was that the loan contract was not enforceable. Section I contains a summary of my conclusionsThe TBLA is concerned with those “ carrying on a trade or business mentioned in the Schedule” and the LCCA with those carrying on “ business in the Islands”. Each covers all persons and companies so doing. The LCCA is concerned with companies which do not qualify as local companies because of insufficient control or ownership by Caymanians. As (see [5] above), it is now accepted by Abarbanel that it was at the material time carrying on a business in these Islands, it is not necessary to set out section 2(2) of the LCCA which provides a broad inclusionary definition but with eight excluded categories, notably carrying on business “ exterior to the Islands” or the implications, if any, of the absence of a definition in the TBLA, a point noted by the Judge at [50].
I observe that, although now only of historical relevance, the 1971 precursors of the TBLA and the LCCA had memoranda of objects and reasons which indicated their original purposes. The TBL Law 1971's memorandum states that its main object “ was to protect existing businesses” and that persons of Caymanian status who conform to its requirements are automatically granted a … licence on application”. The LCC Law 1971's memorandum states that it sought to prevent the avoidance of the effect of the Work Permit Law by requiring all companies doing business locally to be under the control of local people or to be licensed to carry on business here”.
Section 12 of the TBLA requires persons carrying on a trade or business mentioned in the Schedule to the Act to take out an annual licence unless exempted by Section 3. The Schedule lists a large number of professions, trades and technical activities, and industry and agricultural
activities, and “ any other business or trade not specified herein in which a service is offered for reward”. It also specifies the prescribed fees for each activity. The Judge stated at [45] that although moneylending was not a business activity mentioned in the Schedule it was “ swept up by the provision which stated that the Schedule applied to ‘ any other business or trade not specified’”. Section 3 exempts certain categories of trade or business from the TBLA, in particular “ those licensed to be carried on as such under any other law without reference to this law”By section 26(b) of the TBLA, whoever carries on or attempts to carry on a business which requires a licence under it without one is guilty of an offence and liable on conviction to a fine of $5,000 or to imprisonment for 12 months.
Section 4 of the TLBA establishes a Trade and Business Licensing Board (“the Board”) to consider and grant or refuse all applications for licences, to respond to appeals against its decisions and to exercise any other functions conferred upon it by the TBLA or any other statute or regulation. Section 16(1) provides that, subject to certain exceptions, if the Board is satisfied that an application for a licence has been properly made and the correct fee tendered, it is required to grant the licence within 90 days of an application for...
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