Re F Bank & Trust Company

• Jurisdiction: Cayman Islands
• Judge: (Schofield, J.)
• Judgment Date: 24 October 1995
• Court: Grand Court (Cayman Islands)
• Date: 24 October 1995

Grand Court

(Schofield, J.)

IN THE MATTER OF F BANK AND TRUST COMPANY

W. Helfrecht, Crown Counsel, for the Crown;

A. Turner for the defendants.

Cases cited:

(1) Owen v. Tate, [1976] Q.B. 402; [1975] 2 All E.R. 129, followed.

Legislation construed:

Bankrutpcy Law (Revised) (Laws of the Cayman Islands, 1963, cap. 7, revised 1978), s.18: The relevant terms of this section are set out at page 534, lines 15–28.

Banks and Trust Companies Law, 1989 (Law 4 of 1989), s.14(1): The relevant terms of this sub-section are set out at page 534, lines 3–13.

Banking-control of banks-appointment of receiver-manager by Governor-person appointed by Governor under Banks and Trust Companies Law, 1989, s.14(1) to assume control of bank”s affairs cannot act without seeking directions from court

Contract-quasi-contract-payment for benefit of another-person making payment for another”s benefit without antecedent request not entitled to reimbursement unless payment by necessity in special circumstances of case

The Governor appointed B, a chartered accountant, to assume control of F Bank & Trust Company under s.14(1) of the Banks and Trust Companies Law, 1989, and gave him directions as to how to perform his duties. On receipt of B”s reports, he revoked the company”s licence and applied for its compulsory winding-up. By agreement between the Governor and the company, J and S were appointed joint receivers and managers. Subsequently, the company was placed in voluntary liquidation, J and D were appointed joint liquidators and the Grand Court later ordered that the liquidation continue subject to its supervision. The Governor had issued an indemnity for B”s fees and after he had paid them, the joint liquidators refused to reimburse the Government on the grounds that B had failed to seek directions from the Grand Court and that the Government had acted as a volunteer in paying B”s fees.

The Crown submitted, inter alia, that (a) the conduct of a receiver or manager appointed under s.14(1) of the Banks and Trust Companies Law, 1989 was governed not by the court but according to common law principles and therefore B had not acted improperly in failing to seek directions from the court; and (b) the Governor was entitled to be reimbursed by the respondents in respect of B”s fees because (i) such an entitlement was necessary in order for him to perform his statutory duties effectively; and (ii) s.14(1) stated that an appointment under that sub-section was ‘at the expense of the licensee.’

The respondents, in reply, submitted that (a) from the moment of B”s appointment he derived his powers in the same manner as a trustee in bankruptcy appointed as receiver under s.18 of the Bankruptcy Law (Revised) and therefore could not act without directions from the court, with the consequence that the Governor”s directions were void and of no effect; and (ii) the Governor, in giving B an indemnity and honouring it, had acted as a volunteer and could not recover B”s fees from the company.

Held, ordering the respondents to pay the fees incurred:

(1) It was clear from the wording of s.14(1) of the Banks and Trust Companies Law that, although the Governor had appointed B to assume control of the company”s affairs, from the time of B”s appointment he derived his powers in exactly the same manner as a trustee in bankruptcy appointed as receiver under s.18 of the Bankruptcy Law (Revised). Consequently, B”s powers derived from the court and he could not act in any manner without directions from the court. It followed that B had erred in failing to seek directions and that the directions issued by the Governor were void and of no effect (page 534, line 39 – page 535, line 2; page 535, lines 31–38).

(2) A person making a payment for the benefit of another without an antecedent request was ordinarily not entitled to be reimbursed unless in the special circumstances of the case there was some necessity for him to assume that obligation. The Governor”s power to give an indemnity in cases such as this was necessary in order for him to perform his duties and responsibilities effectively under s.14 of the Banks and Trust Companies Law and to ensure that appointments could be made under s.14(1) regardless of financial constraints. The Governor”s statutory duties therefore entitled him to reimbursement in the usual case. Moreover, in this case an antecedent request to the company to pay B”s fees would have been impracticable. B had performed his functions properly and in good faith and had he applied to the court for directions he would undoubtedly have been given the powers he in fact exercised and under s.14(1) his appointment would have been ‘at the expense of the licensee.’ It followed that the Governor was entitled to be reimbursed and the respondents would be ordered to pay the fees incurred (page 536, lines 19–38;page 536, line 41 – page 537, line 9; page 537, lines 15–17; lines 20–34).

SCHOFIELD, J.: On July 22nd, 1993, B, a chartered accountant, was
appointed by the Governor to assume control of the affairs of F Bank &
45	Trust Co. (‘the company’) pursuant to the provisions of s.14(1) of the

Banks and Trust Companies Law. In this judgment and in relation to the
Laws referred to herein ‘the Governor’ means the Governor in Council. In
Cause No. 356 of 1993 the Governor applied for the compulsory winding-
up of the company. By an order made by consent of the Governor and the
5	company, J and S were, on August 20th, 1993, appointed joint official
receivers and managers of the company. This order was made after B had
presented two

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