Re Bancredit Cayman Ltd
| Jurisdiction | Cayman Islands |
| Judge | (Levers, J.) |
| Judgment Date | 02 April 2007 |
| Court | Grand Court (Cayman Islands) |
| Date | 02 April 2007 |
(Levers, J.)
T. Lowe and Mrs. C.J. Bridges-Giglioli for the applicants;
S.M.P. Dawson for the first respondent;
B.D. Mays for the liquidators;
J.R. McDonough for the Central Bank of the Dominican Republic (watching brief).
(1) C.T. Bowring & Co. (Ins.) Ltd. v. Corsi & Partners Ltd., [1994] 2 Lloyd”s Rep. 567; [1995] 1 BCLC 148, applied.
(2) Condliffe v. Hislop, [1996] 1 W.L.R. 752; [1996] 1 All E.R. 431, followed.
(3) Jones v. Brien(1995), 13 ACLC 99, applied.
(4) Pretoria Pietersburg Ry. Co. (No. 2), In re, [1904] 2 Ch. 359; (1904), 73 L.J.Ch. 704, not followed.
(5) Rosseau Pty. Ltd. v. Jay-O-Bees Ltd. (2004), 50 ACSR 565; sub nom. In re Jay-O-Bees, [2004] NSWSC 818, applied.
(6) Unisoft Group Ltd. (No. 1), In re, [1993] BCLC 528; [1992] BCC 494, referred to.
Companies Law (2004 Revision), s.74: The relevant terms of this section are set out at para. 12.
Grand Court Rules 1995, O.23, r.1: The relevant terms of this rule are set out at para. 12.
O.102, r.17: The relevant terms of this rule are set out at para. 13.
Insolvency Rules 1986 (S.I. 1986/1952), r.7.2: The relevant terms of this sub-rule are set out at para. 13.
r.4.83: ‘(1) If a creditor is dissatisfied with the liquidator”s decision with respect to his proof (including any decision on the question of preference), he may apply to the court for the decision to be reversed or varied.’
r.4.85: ‘(1) The court may expunge a proof or reduce the amount claimed-
(a) on the liquidator”s application, where he thinks that the proof has been improperly admitted, or ought to be reduced; or
(b) on the application of a creditor, if the liquidator declines to interfere in the matter.’
Companies-compulsory winding up-costs-security for costs-no security ordered in appeal against liquidators” rejection of proof of debt-no jurisdiction either inherent or under Insolvency Rules 1986-no jurisdiction under Grand Court Rules, O.23, r.1 or Companies Law (2004 Revision), s.74, since application made in course of ongoing winding–up proceedings, rather than by invoking jurisdiction by originating process
The applicants appealed against the refusal of the liquidators of Bancredit Cayman Ltd. to accept proofs of debt submitted by the applicants, and against their refusal to expunge other proofs of debt.
In 2003, the Bancredit group became insolvent. At that time, Banco Leon S.A. took over Bancredit and promissory notes were transferred to the first applicant, which therefore claimed to be a creditor of the company. The liquidators of Bancredit Cayman refused to admit the applicants” proof of debt, alleging fraud on the part of the applicants” directors in obtaining the promissory notes, but did admit proofs of debt from two other companies, which the applicants claimed were invalid.
The applicants appealed against the refusal of their own proof of debt,
and applied to expunge the proofs of debt in favour of the two other companies which had been admitted by the liquidators. The liquidators sought an order for security of costs from the applicants, which was opposed by the applicants on a number of grounds, including that the court lacked jurisdiction to order security in appeals under the Insolvency Rules. The court proposed to decide the question of jurisdiction as a preliminary issue.
The applicants submitted that the court lacked jurisdiction to order security for costs against them because (a) the applications were made under the Insolvency Rules, which contained no provision allowing the court to order security; (b) the court had no inherent jurisdiction to order security since the power was controlled by statute, namely the Grand Court Rules and the Companies Law; and (c) the Grand Court Rules, O.23, r.1 only allowed security to be ordered against a plaintiff on the application of a defendant to ‘an action or other proceedings’ and the Companies Law (2004 Revision), s.74 only where the company was ‘plaintiff in any action, suit or other legal proceedings’-indicating that security could only be granted where parties were invoking the original jurisdiction of the court by originating process and not, as here, where they were seeking the determination of a question in the course of a winding up which had already commenced.
The respondents submitted in reply that the court did in fact have jurisdiction to order security because (a) its inherent jurisdiction remained unaffected by the existence of statutory provisions and there was specific, though older, authority that the court had such jurisdiction in relation to proofs of debt by overseas creditors in windings up; and (b) alternatively, their appeal and application constituted an ‘action or other proceedings’ within the literal meaning of the Grand Court Rules, O.23, r.1 and an ‘action, suit or other legal proceedings’ within the literal meaning of the Companies Law (2004 Revision), s.74, thereby conferring jurisdiction on the court.
Held, refusing to order the applicants to give security for costs:
The court had no jurisdiction to order security for costs to be provided by the applicants. There was no power to make such an order under the Insolvency...
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Re Bancredit Cayman
...and in reply the liquidators sought an order for security of costs. The Grand Court (Levers, J.) dismissed (in proceedings reported at 2007 CILR 46) the liquidators application on the ground that the court had no jurisdiction to grant security for costs since this was not an originating app......