Re Euro Bank Corporation

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 04 April 2001
• Court: Grand Court (Cayman Islands)
• Date: 04 April 2001

Grand Court

(Smellie, C.J.)

IN THE MATTER OF EURO BANK CORPORATION

A. Malek, Q.C. and C.D. McKie for the liquidators.

Cases cited:

(1) Aro Co. Ltd., In re, [1980] Ch. 196; [1980] 1 All E.R. 1067, considered.

(2) Briton Medical & Gen. Life Assur. Assn., In reELR(1886), 32 Ch. D. 503; 55 L.J. Ch. 416, considered.

(3) Brooks v. D.P.P., [1994] 1 A.C. 568; [1994] 2 All E.R. 231; (1994), 44 W.I.R. 332, followed.

(4) Burrows (J.) (Leeds) Ltd., In re, [1982] 1 W.L.R. 1177; [1982] 2 All E.R. 882, considered.

(5) Connelly v. D.P.P., [1964] A.C. 1254; [1964] 2 All E.R. 401.[1964] A.C. 1254; [1964] 2 All E.R. 401.

(6) D.P.P. v. HumphrysELRUNK, [1977] A.C. 1; [1976] 2 All E.R. 497; sub nom. R. v. Humphrys, [1977] Crim. L.R. 421.

(7) Deloitte & Touche A.G. v. Johnson, 1999 CILR 297; [1999] 1 W.L.R. 1605, considered.

(8) Fiallo v. R., 1986–87 CILR 253.

(9) Food Controller v. Cork, [1923] A.C. 647; (1923), 92 L.J. Ch. 587.

(10) General Rolling Stock Co., In re, Joint Stock Discount Co.”s Claim(1872), L.R. 7 Ch. App. 646; 41 L.J. Ch. 732.

(11) Grant v. D.P.P., [1982] A.C. 191; (1981), 30 W.I.R. 248, dicta of Lord Diplock applied.

(12) Langley Constrs. (Brixham) Ltd. v. Wells, [1969] 1 W.L.R. 503; [1969] 2 All E.R. 46, dicta of Widgery, L.J. applied.

(13) Linkrealm Ltd., Re, [1998] BCC 478.

(14) Nadan v. R.ELR, [1926] A.C. 482; sub nom. R. v. Nadan, [1926] 1 W.W.R. 801; [1926] 2 D.L.R. 177.

(15) National Employers Mutual Gen. Ins. Assn., In re, [1995] 1 BCLC 232; [1995] BCC 774.

(16) Oak Pits Colliery Co., In reELR(1882), 21 Ch. D. 322; 51 L.J. Ch. 768, dicta of Lindley, L.J. applied.

(17) R. v. Dickson, [1991] BCC 719; (1991), 94 Cr. App. R. 7, followed.

(18) R. v. Eldermire, 2000 CILR 97; on appeal, sub nom. Att. Gen. v. Eldermire, 2000 N–10, considered.

(19) Rhondda Waste Disposal Ltd., In reELR, [2001] Ch. 57; sub nom.Environment Agency v. Clark (Admor. of Rhondda Waste Disposal Ltd.), [2000] BCC 653, dicta of Scott Baker J. applied.

(20) Tapper v. D.P.P. & Att. Gen. of Jamaica, Jamaican Constitutional Ct., February 8th, 1999, unreported.

(21) Thames Plate Glass Co. v. Land & Seas Tel. Co.ELRELR (1870), L.R. 11 Eq. 248; 40 L.J. Ch. 165; on appeal (1871), L.R. 6 Ch. App. 643; sub nom. Re Land & Seas Tel. Constr. Co., Thames Plate Glass Co. v. Land & Seas Tel. Constr. Co., 25 L.T. 236.25 L.T. 236.

Legislation construed:

Companies Law (2000 Revision) (Laws of the Cayman Islands 1963, cap. 22, revised 2000), s.99: The relevant terms of this section are set out at para. 5.

s.101: The relevant terms of this section are set out at para. 5.

s.151: The relevant terms of this section are set out at para. 6.

s.154: The relevant terms of this section are set out at para. 6.

Grand Court Law (1995 Revision) (Law 8 of 1975, revised 1995), s.11(1): The relevant terms of this sub-section are set out at para. 40.

s.25: The relevant terms of this secton are set out at para. 59.

Cayman Islands (Constitution) Order 1972 (S.I. 1972/1101), Schedule 2, s.16A, as added by the Cayman Islands (Constitution) (Amendment) Order 1993 (S.I. 1993/3143), s.5: The relevant terms of this section are set out at para. 37.

s.49H(1): as added by the Cayman Islands (Constitution) (Amendment) Order 1993 (S.I. 1993/3143), s.22: The relevant terms of this sub-section are set out at para. 40.

s.57(2): The relevant terms of this sub-section are set out at para. 34.

s.57(4): The relevant terms of this sub-section are set out at para. 34.

Cayman Islands (Constitution) (Amendment) Order 1993 (S.I. 1993/3143), s.1: The relevant terms of this section are set out at para. 36.

Colonial Laws Validity Act 1865 (28 & 29 Vict., c.63), s.2: The relevant terms of this section are set out at para. 39.

D.F. Ballantyne, Attorney General, A.R. Mitchell, Q.C. and S. Hall-Jones, Senior Crown Counsel, for the Crown;

Companies-winding up under court”s supervision-proceedings against company-court”s leave under Companies Law (2000 Revision), s.101 required equally in compulsory and supervised windings up and requirement applies to both civil and criminal proceedings

Companies-winding up under court”s supervision-proceedings against company-requirement of court”s leave under Companies Law (2000 Revision), s.101 not in breach of Attorney General”s constitutional right to prosecute without restriction-s.16A(5) of Constitution designed to prevent political interference, not to restrict court”s powers to control own process

The Attorney General sought to bring criminal charges against a bank being wound up under the supervision of the court.

The bank was placed in controllership by the Governor-in-Council on the recommendation of the Monetary Authority, and then entered volun-tary liquidation under the supervision of the court. The Attorney General brought criminal charges against several employees and officers of the bank and then summonsed the bank itself to answer charges. The liquidators applied to the court for a ruling on whether the Crown required leave under s.101 of the Companies Law (2000 Revision) to institute criminal proceedings against the bank, whether such leave should be granted, and what, if any, conditions should be attached.

They submitted that (a) under s.154 of the Companies Law, the order that the bank should be wound up under the court”s supervision conferred on the court all the powers available to it on a compulsory winding up, including the power to grant or refuse leave under s.101; (b) in the absence of an express limitation, the words ‘suit, action or other proceeding’ in s.101 were to be widely construed to include criminal as well as civil proceedings; (c) the court”s power under s.101 did not offend against the Attorney General”s right under s.16A of the Constitution to institute criminal proceedings, since s.49H preserved the Grand Court”s existing statutory jurisdiction; and (d) since the court”s inherent juris-diction to stay proceedings was limited to cases of abuse of process, the court would be unable properly to preserve company assets and ensure equity between creditors and shareholders, without the statutory power to prevent the commencement of proceedings.

The Attorney General submitted in reply that (a) s.101 did not apply to the bank, since s.154 expressly mentioned the power to stay proceedings but not the power to grant or refuse leave to bring them, and the power to stay under s.99 or alternatively s.141 sufficed to protect the bank”s interests; (b) s.101 applied only to civil and not criminal proceedings; (c) even if applicable, s.101, as a legislative provision first introduced prior to the enactment of the Constitution, should be construed as subject to the Attorney General”s exclusive constitutional powers to institute criminal proceedings free of the direction or control of others; and (d) alternatively, the section was void and inoperative under s.2 of the Colonial Laws Validity Act 1865, as being repugnant to the Constitution.

Held, making the following ruling:

(1) It was clear from s.154 of the Companies Law that the s.101 require-ment of leave to commence or continue proceedings against a company applied equally to voluntary liquidations continuing under the supervision of the court as to liquidations begun by an order for winding up by the court. Under s.154 the court could exercise in relation to the bank all powers relevant to a compulsory liquidation, including but not limited to those expressly mentioned, e.g. the power to stay proceed-ings. The powers applicable to a voluntary winding up ceased to apply. Moreover, the rationale behind s.101 was no less imperative in the present context than in a compulsory winding up (paras. 5–11; paras. 14–15).

(2) Furthermore, s.101 included criminal as well as civil proceedings. English authorities showed that similar legislative provisions covered not only quasi-criminal proceedings for the recovery of statutory penalties from companies in liquidation and under administration, but also other criminal proceedings. The policy reasons behind this construction applied equally here. The court, which had access to detailed information about the bank, was well placed to weigh the public interest in allowing a prosecution to be pursued against possible prejudice to creditors and shareholders, and could review its decision later if it initially refused leave (para. 16; paras. 28–32).

(3) Section 101 did not offend against the Attorney General”s constitutional power to institute and undertake criminal proceedings free of the direction or control of other persons or authorities. The purpose of s.16A(5) of the Constitution was to ensure his independence from political or other extraneous intervention in the exercise of the right to prosecute. It did not govern the court”s intervention in the exercise of its inherent jurisdiction or statutory powers to control its own process. Evidence of this was to be found in the Constitution itself. Although s.57(2) stated that all existing laws (including s.98 of the 1961 Com-panies Law-now s.101) should be construed in conformity with the Constitution, s.49H provided that the court should have the jurisdiction conferred by any other law. This included, inter alia, the powers conferred

by the Companies Law and the general jurisdiction contained in s.11(1) of the Grand Court Law. For the same reason, s.101 was not invalidated as a legislative provision repugnant to the Constitution by s.2 of the Colonial Laws Validity Act 1865 (paras. 38–44; paras. 52–60; paras. 63–67).

(4) Furthermore, since the policy considerations for the supervising court in exercising its discretion to grant leave to commence criminal proceedings were the same as when exercising the power to stay them, an anomalous situation would arise if the statutory power under s.101 to prevent the commencement or continuation of proceedings were regarded as unconstitutional whilst the court”s statutory and...