Premier Assurance Group Spc Ltd (in Controllership)

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 29 September 2020
• Court: Grand Court (Cayman Islands)

IN THE MATTER OF PREMIER ASSURANCE GROUP SPC LIMITED (in controllership)

(Smellie, C.J.)

Grand Court, Financial Services Division (Cayman Islands)

Insurance — controllers — powers — controllers appointed by CIMA pursuant to Insurance Law 2010, s.24(2)(h) to assume control of licensee’s affairs wished to commence proceedings in US under Chapter 15 of US Bankruptcy Code — court made order, exercising inherent jurisdiction, confirming controllers’ powers under s.24(2)(h) — also granted declarat-ory relief confirming powers

Held, making the order sought:

(1) A person appointed as a controller in respect of a licensee pursuant to s.24(2)(h) of the Insurance Law would “have all powers necessary to administer the affairs of the licensee.” There was no statutory jurisdiction for the making of a confirmatory order of the kind sought, nor any direct case precedent. The court accepted that it had an inherent jurisdiction to confirm the powers of controllers vested under s.24(2)(h) of the Insurance Law. The court recognized that in the present circumstances the controllers would not simply by dint of their appointment be able effectively to fulfil their statutory mandate without the intervention of the court. It was therefore an appropriate case in which the court could and should exercise its inherent jurisdiction to supplement s.24(2)(h) of the Insurance Law and in order to fill the practical gap left by that provision. The obvious intent of s.24 of the Law was to confer on the Authority (and, following their appointment, controllers) extra-curial power in the circumstances described to act expeditiously in the public interest. All the powers sought to be exercised by the controllers must fall within the “powers necessary” to administer PAG’s affairs pursuant to s.24(2)(h) of the Insurance Law. However, s.24(2)(h) did not specify the “powers necessary.” It was accepted, as submitted by the controllers, that the proposed exercise of the court’s inherent jurisdiction in this case would not cut across or otherwise undermine the statutory regime. As s.24(2)(h) did not specify what constituted a necessary power for the purposes of that provision, it would be surprising if the court lacked jurisdiction to determine or give directions with respect to the scope of such powers. Further, it could not be right (or the intention of the legislature) that the court’s ability to give effect to the powers of controllers appointed under s.24(2)(h) as against the world at large be excluded as a result of the removal of the reference to s.18 of the Bankruptcy Law in the current revision of the Insurance Law. Accordingly, the court granted the order pursuant to its inherent jurisdiction to confirm that the controllers possessed the powers set out in the draft order in aid of the controllership and in order to give effect to their appointment by the Authority as against others so as to secure the assets of PAG and prevent the risk of dissipation. The court accepted that the powers sought to be confirmed were plainly “powers necessary” within the meaning of s.24(2)(h) (paras. 48–53).

(2) There was no doubt that the jurisdiction existed to grant declaratory relief. It was recognized expressly by GCR O.15, r.16. The limitations on this wide jurisdiction were well recognized. In the present case it was plain that a declaration in the terms sought, as to the legal rights of the controllers to assume control of the affairs of PAG, came well within the ambit of the jurisdiction and discretion of the court. Accordingly, the court accepted thatit should make an order granting the controllers declaratory relief in the terms of the draft order to confirm their necessary powers under s.24(2)(h) of the Insurance Law (paras. 54–61).

Cases cited:

(1)A Company v. A Funder, 2017 (2) CILR 710, considered.

(2)B (A child), In re, [2016] UKSC 4; [2016] 1 A.C. 606; [2016] 2 W.L.R. 557; [2017] 1 All E.R. 899; [2016] 1 FLR 561, referred to.

(3)Caledonian Bank Ltd., In re, 2015 (1) CILR 143, followed.

(4)F Bank & Trust Co., In re, 1994–95 CILR 531; on appeal, sub nom. Finsbury Bank & Trust Co. v. Att. Gen., 1996 CILR 349, considered.

(5)Gouriet v. Union of Post Office Workers, [1978] A.C. 435; [1977] 3 All E.R. 70, referred to.

(6)Governor v. Federated Intl. Bank Ltd., 1998 CILR N–1, considered.

(7)L (Vulnerable Adults with Capacity: Court’s Jurisdiction) (No. 2), Re, [2012] EWCA Civ 253; [2013] Fam. 1; [2012] 3 W.L.R. 1439; [2012] 3 All E.R. 1064; [2013] 2 FLR 511, referred to.

(8)Malone v. Metropolitan Police Commr., [1979] Ch. 344; [1979] 2 All E.R. 620, considered.

(9)Ojjeh Trust, In re, 1992–93 CILR 348, referred to.

(10)Uppal v. Home Office, October 20th, 1978, unreported, referred to.

(11)Woods v. Thompson, 2016 (2) CILR 1, referred to.

Legislation construed:

Banks and Trust Companies Law (2020 Revision), s.18(1)(v): The relevant terms of this provision are set out at para. 28.

Grand Court Rules 1995, O.15, r.16: The relevant terms of this rule are set out at para. 59.

Insurance Law (2008 Revision), s.13(1)(vii): The relevant terms of this provision are set out at footnote 3.

Insurance Law 2010 (as amended), s.24(1): The relevant terms of this subsection are set out at para. 18.

s.24(2): The relevant terms of this subsection are set out at para. 19.

Controllers were appointed pursuant to s.24(2)(h) of the Insurance Law.

Premier Assurance Group (“PAG”) was regulated under the Insurance Law 2010. The Cayman Islands Monetary Authority (“the Authority”) appointed controllers pursuant to s.24(2)(h) of the Law to assume control of the affairs of PAG.

All or substantially all of PAG’s assets were located in the United States. In order to safeguard the interests of creditors and policyholders, the controllers intended, without giving notice to the directors of PAG, to commence proceedings in the United States under Chapter 15 of the US Bankruptcy Code or such other proceedings in the United States as they might consider necessary and appropriate for the recognition of their appointment as controllers of PAG and to seek a temporary restraining order and related relief in the Chapter 15 proceedings in respect of PAG’s assets located in the United States. The controllers had been advised by their US counsel that an administrative appointment by the Authority pursuant to the Insurance Law might not, by itself, be sufficient to amount to a “foreign proceeding” (as defined in Chapter 15 of the US Bankruptcy Code) for the purposes of seeking such recognition in the United States and safeguarding PAG’s assets. The controllers sought an order from the court confirming their powers under s.24(2)(h) of the Insurance Law. The controllers were advised that there would then be reasonable prospects that their appointment as controllers would be recognized under Chapter 15 of the US Bankruptcy Code. Further or alternatively, the controllers submitted that they were entitled to a declaration that they possessed the powers set out in para. 1 of the draft order.

The controllers submitted (relying in particular on In re Caledonian Bank, 2015 (1) CILR 143) that they had the necessary powers pursuant totheir appointment to administer the affairs of PAG to the exclusion of its directors and shareholders but they sought the court’s confirmation of their powers to ensure that they were effective as against the world at large.

The Authority supported the relief sought.

M. Miller, R. Caudeiron, A. Roe and J. Hydes on behalf of the Cayman Islands Monetary Authority;

R. Bell, C. Keefe and D. Boulter for the joint controllers.

1 SMELLIE, C.J.: This is the hearing of a petition by the joint controllers (“the controllers”) for confirmation by the court that they are authorized to exercise powers vested in them by virtue of their appointment by the Cayman Islands Monetary Authority (“the Authority”) and without further sanction of the court. The need for this confirmation arises in the light of earlier decisions of this court and of the Court of Appeal to be examined below, which, while confirming that controllers are entitled byvirtue of their appointment by the Authority immediately to assume control of the subject entities, they will nonetheless, in keeping with the respective statutory provisions under which they are appointed, require the sanction by the court of their powers in order to ensure the effectiveness of those powers as against the world at large; most recently, In re Caledonian Bank Ltd. (3). In the present case involving an entity regulated under the Insurance Law 2010 (“the Insurance Law”), in the absence of a statutory basis for the grant of confirmation of the powers vested in the controllers, their petition invokes the inherent jurisdiction of the court.

2 The immediate purpose of obtaining the order of confirmation is to enable the controllers to seek recognition in the United States of America under Chapter 15 of the US Bankruptcy Code (“the Chapter 15 proceedings”) and, thereafter, to seek a temporary restraining order (“TRO”) and other provisional and final relief in those proceedings. Such steps are intended to safeguard the assets of Premier Assurance Group SPC Ltd. (“PAG”) (which are all or substantially all located in the United States) and, specifically, to prevent the directors of PAG from potentially dissipating its assets upon being notified of the controllers’ appointment. For these purposes, it is also of juridical significance that, on the basis of legal advice they have received, the US Bankruptcy Court will likely accord recognition of the controllers’ appointment only if sanctioned in “foreign proceedings,” an issue to be more fully explained below.

3 The Authority supports the relief sought in the controllers’ petition.

Background

4 The controllers were duly appointed by the Authority on September 14th, 2020 pursuant to s.24(2) of the Insurance Law to assume control of the affairs of PAG.

5 PAG was registered as an exempted segregated...