Canadian Arab Financial Corporation v Player

• Jurisdiction: Cayman Islands
• Judge: (Zacca, P., Carberry and Carey, JJ. A.)
• Judgment Date: 14 May 1984
• Court: Court of Appeal (Cayman Islands)
• Date: 14 May 1984

Court of Appeal

(Zacca, P., Carberry and Carey, JJ. A.)

CANADIAN ARAB FINANCIAL CORPORATION (trading as KILDERKIN INVESTMENTS GRAND CAYMAN) and KILDERKIN INVESTMENTS LIMITED (both by CLARKSON COMPANY LIMITED, Receiver and Manager)

and

PLAYER

Jonathan Sumption for the appellant;

Nicholas Patten for the respondent.

Cases Cited:

(1) Burt, Boulton & Hayward v. Bull, [1895] 1 Q.B. 276; [1891–4] All E.R. Rep. 1116; (1894), 71 L.T. 810; 64 L.J.Q.B. 232; 43 W.R. 180; 11 T.L.R. 90; 39 Sol. Jo. 95; 2 Mans. 94; 14 R. 65, applied.

(2) Carter v. Fey, [1894] 2 Ch. 541; (1894), 70 L.T. 786; 63 L.J. Ch. 723; 10 T.L.R. 486; 38 Sol. Jo. 491; 7 R. 358, applied.

(3) Chief Constable of Kent v. V., [1983] Q.B. 34; [1982] 3 All E.R. 36; (1982), 126 Sol. Jo. 536, dicta of Lord Denning, M.R. considered.

(4) Del Zotto v. International Chemalloy Corp.UNK(1976), 14 O.R. (2d) 72; 22 C.B.R.(N.S.) 268, dicta of Van Camp J. applied.

(5) Gawthorpe v. Gawthorpe, [1878] W.N. 91.

(6) Hadmor Prods. Ltd. v. Hamilton, [1983] 1 A.C. 191; [1982] 1 All E.R. 1042; (1982), 126 Sol. Jo. 134; [1982] I.C.R. 114; [1982] I.R.L.R. 102.

(7) Kennedy (C.A.) Co. Ltd. and Stibbe-Monk Ltd., ReUNK(1976), 74 D.L.R. (3d) 87; 23 C.B.R.(N.S.) 81.

(8) Moss S.S. Co. Ltd. v. Whinney, [1912] A.C. 254; [1911–13] All E.R. Rep. 344; (1911), 105 L.T. 305; 81 L.J.K.B. 674; 27 T.L.R. 513; 55 Sol. Jo. 631; 12 Asp. M.L.C. 25; 16 Com. Cas. 247, applied.

(9) Newhart Devs. Ltd. v. Co-operative Comm. Bank Ltd., [1978] Q.B. 814; [1978] 2 All E.R. 896; (1977), 121 Sol. Jo. 847, distinguished.

(10) Schemmer v. Property Resources Ltd., [1975] Ch. 273; [1974] 3 All E.R. 451; (1974), 118 Sol. Jo. 716, dicta of Goulding J. applied.

Legislation construed:

Confidential Relationships (Preservation) Law (Law 16 of 1976), s.2, as amended: The relevant terms of this section are set out at page 91, line 41 – page 92, line 15.

s.3(1), as amended: The relevant terms of this sub-section are set out at page 91, lines 3–8.

(2), as substituted by the Confidential Relationships (Preservation) Amendment) Law, 1979 (Law 26 of 1979), s.3: The relevant terms of this sub-section are set out at page 91, lines 11–19.

s.3A(1), as added by the Confidential Relationships (Preservation) (Amendment) Law, 1979 (Law 26 of 1979), s.4: The relevant terms of this sub-section are set out at page 91, lines 21–27.

s.4(1), as amended: The relevant terms of this sub-section are set out at page 91, lines 32–36.

Grand Court (Civil Procedure) Rules, r.59(3): The relevant terms of this sub-rule are set out at page 121, lines 19–24.

Grand Court Law (Law 8 of 1975), s.13(1): The relevant terms of this sub-section are set out at page 82, line 39 – page 83, line 9.

s.20: The relevant terms of this section are set out at page 83, line 35 – page 84, line 2.

Rules of the Supreme Court 1965 (England, S.I. 1965/1776), O.30, r.1: The relevant terms of this rule are set out at page 83, lines 32–33.

Supreme Court Act 1981 (England, c.54), s.37(1): The relevant terms of this sub-section are set out at page 83, lines 24–27.

Companies-directors-effect of appointment of receiver-directors” functions vest in receiver, who takes control of management and assets of company-legal proceedings by directors in company”s name after appointment of receiver require leave of court if would interfere with or jeopardise company”s assets in receiver”s possession

Companies-receivers-receiver appointed by court-receiver entitled to defend proceedings on behalf of company whether or not specifically authorised by order of appointment-not entitled to institute proceedings on behalf of company without specific authority

Companies-receivers-foreign-appointed receiver-court may recognise receiver appointed by foreign court if sufficient connection between company ana jurisdiction appointing him-sufficient connection defined-power to refuse recognition exercised only if strong and compelling reasons

Companies-receivers-foreign-appointed receiver-procedure for recognition-English Supreme Court Act 1981, s.37(1) and O.30, r.11ay down procedure-defendant or other applicant with sufficient interest may apply ex parte for recognition in existing proceedings if sufficient connection with plaintiffs claim-sufficient connection defined

Confidential Relationships-consent of principal-receiver and manager of company-court-appointed receiver displaces directors, acts on behalf of company and may therefore consent to divulging confidential information as ‘principal’ for purposes of Confidential Relationships (Preservation) Law,.s.3(2)(b)(i)

The appellant, having been appointed the receiver and manager of a company by the Supreme Court of Ontario, applied to the Grand Court for an order recognising it as such receiver and manager within the Cayman Islands and authorising it to identify and locate all the assets of the company within the jurisdiction.

The plaintiffs were trust companies incorporated in Ontario. The second defendant was also a company incorporated in Ontario and the

third defendant, Mr. Player, was its sole director and the person principally interested in its funds. The first defendant was a Cayman registered company; the fourth defendant was incorporated in Ontario.

The plaintiffs were persuaded to finance a series of speculative property deals in Ontario, the ultimate purchaser of the property being the fourth defendant. It allegedly became apparent to the plaintiffs that their investments were illusory and that the ultimate beneficiaries from the property deals would be the defendants. The plaintiffs therefore instituted proceedings against the defendants in the Supreme Court of Ontario and applied ex parte for an order appointing the present appellant as the receiver and manager of the second defendant. The Supreme Court of Ontario granted the order and authorised the appellant to apply to it for direction and guidance or additional powers in respect of the discharge of its duties. By subsequent orders the court authorised the appellant to identify the assets of the second defendant and to receive notice of any proceedings affecting that company and, following an interim report by the appellant, authorised it to commence proceedings to preserve and recover any assets situated in the Cayman Islands.

Since the second defendant had apparently made substantial deposits in banks in the Cayman Islands, the plaintiffs instituted proceedings against the defendants in the Grand Court to recover all or part of these funds which, they alleged, were derived from the property deals in Ontario; they also claimed damages for a fraudulent conspiracy to commit a breach of trust. The plaintiffs also successfully applied for an order freezing the second defendant”s assets in the Cayman Islands pending the outcome of the litigation.

The appellant then made an ex parte interlocutory application to the Grand Court in the proceedings commenced by the plaintiffs for an order recognising it as the receiver and manager of the second defendant, authorising it to act on behalf of the second defendant within the jurisdiction and authorising it to identify and locate all the second defendant”s assets within the jurisdiction. The Grand Court (Summerfield, C.J.) granted an order in the terms sought.

Acting in pursuance of the order the appellant obtained confidential information from Cayman banks relating to the second defendant”s assets. The appellant reported its discoveries to the Supreme Court of Ontario, not intending that they should be made public but they were revealed during a court hearing and received wide publicity in Canada.

Meanwhile, the third defendant, Mr. Player, applied to the Grand Court for rescission of the order recognising the appellant as receiver and manager of the second defendant, submitting, inter alia, that as sole director of the company and the person principally interested in its funds, he was the proper person to conduct its litigation and defend its assets, that the circumstances did not warrant an ex parte application for recognition of the appointment of the appellant, and that its application for authority to identify and locate the second defendant”s assets went far beyond what was required for the purposes of defending the action brought by the plaintiffs and such application should therefore have been made by originating summons, not by an interlocutory application

in the proceedings brought by the plaintiffs.

The Grand Court (Summerfieid, C.J.) rescinded its previous order recognising the appellant as receiver and manager of the second defendant, on the grounds that (i) the Supreme Court of Ontario had authorised the appellant only to institute proceedings in the Cayman Islands on behalf of the second defendant, not to defend proceedings; (ii) it was not open to a defendant to apply to the court for the appointment of a receiver and manager, and the ex parte interlocutory procedure adopted by the appellant under O.30, r.1of the English Rules of the Supreme Court was inappropriate and wholly unrelated to its purpose since there was no connection between the suit brought by the plaintiffs against the second defendant and the appellant”s acquisition of control over the second defendant”s assets in the Cayman Islands; (iii) the appellant”s application should have been made by originating summons with the second defendant, and possibly Mr. Player too, as parties to the process with an opportunity to oppose the application; (iv) the appellant was no longer entitled to be recognised as receiver and manager of the second defendant within the jurisdiction, since it had deliberately acted in breach of the Confidential Relationships (Preservation) Law, s.4(1)(a)(i), having publicised confidential information relating to the second defendant”s assets, without ‘the consent, express or implied, of the relevant principal’ within the meaning of s.3(2)(b)(i), as amended, and...