Re Inco Bank & Trust Corporation

• Jurisdiction: Cayman Islands
• Judge: (Smellie, J.)
• Judgment Date: 18 March 1994
• Court: Grand Court (Cayman Islands)
• Date: 18 March 1994

Grand Court

(Smellie, J.)

IN THE MATTER OF INCO BANK AND TRUST CORPORATION (in voluntary liquidation)

A. Turner for the liquidator.

Cases cited:

(1) Aramco. Ltd., In re, 1980–83 CILR 202, considered.

(2) CITV–33, In re, 1992–93 CILR 332.

(3) Compania de Electricidad de Buenos Aires Ltd., In re, [1980] Ch. 146; [1978] 3 All E.R. 668, applied.

(4) Handlingair Douglas Ltd. v. Aetna Casualty & Surety Co., 1986–87 CILR 441.

(5) Jones v. Bellgrove Properties Ltd., [1949] 2 K.B. 700; [1949] 2 All E.R. 198.

Legislation construed:

Limitation Law, 1991 (Law 12 of 1991), s.34(5):

‘. . . [W]here any right of action has accrued to recover-

(a) any debt or other liquidated pecuniary claim . . .

and the person liable or accountable for the claim acknowledges the claim or makes any payment in respect of it the right shall be treated as having accrued on and not before the date of such acknowledgment or payment.’

s.34(7): ‘. . . [A] current period of limitation may be repeatedly extended under this section by further acknowledgments or payments, but a right of action, once barred by this Law, shall not be revived by any subsequent acknowledgment or payment.’

Companies (Winding-up) Rules 1949 (S.I. 1949/330), r.106: The relevant parts of this rule are set out at page 105, line 33 – page 106, line 12.

Companies-voluntary winding up-law applicable-liquidator may require proof of debt under Companies (Winding-up) Rules 1949 though less favourable to creditors than Insolvency Rules 1986-under Companies Law (Revised), s.173 current English rules not necessarily applicable to winding up-ad hoc orders may be made under either 1949 or 1986 Rules

Companies-voluntary winding up-creditors-proof of debt-need proof, formal or informal-liquidator not entitled to admit debts merely because appear on company”s books

Limitation of Actions-recovery of debt-debt owed by bank in voluntary liquidation-limitation period six years after last acknowledgement, since action founded on simple contract unless company”s articles prescribe otherwise-not extended by liquidator declaring trust of money owed for benefit of liquidation as whole

Limitation of Actions-recovery of debt-acknowledgement of debt-mere appearance of debt on bank”s books not acknowledgement under Companies Law (Revised), s.35-acknowledgement must be written, signed and communicated to creditor

Companies-voluntary winding up-creditors-proof of debt-under Companies Law (Revised), ss. 120 and 140 court may fix date for final submission of proofs of debt

The liquidator of a banking company sought directions for the proper disposition of funds held by him on trust representing deposits from unknown creditors.

The company went into voluntary liquidation on December 29th, 1989 and the liquidator published notices and advertisements concerning unclaimed deposits in accordance with r.106 of the Companies (Winding-up) Rules 1949. He had required creditors to submit their claims in proof of debt in the form prescribed by the 1949 Rules but no claims had been submitted in respect of these deposits. On January 27th, 1993 the funds in question were declared to be held on trust, the trust being due to expire on December 30th, 1995. If no satisfactory proofs of debt were lodged by December 29th, 1995 any balance would be paid to contributories.

The liquidator sought directions as to (a) whether he retained discretion

to require creditors to submit claims in proof of debt under the 1949 Rules; (b) whether he was bound to admit debts merely because they appeared on the books; (c) the limitation period for claims based on these debts; and (d) the final date for the submission of claims.

Held, giving the directions sought:

(1) Although the application of the Companies (Winding-up) Rules 1949 was more to the detriment of a banking company than that of the Insolvency Rules 1986-since under r.106(2) the liquidator was only required to send notice to creditors where there was a known address or place of abode, whilst under the 1986 Rules, r.4.74 he had to give notice to every known creditor-the liquidator retained the discretion to require creditors to submit their claims in proof of debt under the 1949 Rules. He was at liberty to act under either body of rules since under s.173 of the Companies Law (Revised) the current English rules did not necessarily apply to a winding up; instead a flexible approach for ad hoc orders had been generated under which some windings up proceeded with reference to the 1986 Rules and others to the 1949 Rules and notwithstanding pronouncements by the Grand Court and the Court of Appeal that the 1986 Rules applied in the Cayman Islands, the 1949 Rules had never been excluded (page 102, line 3 – page 103, line 17).

(2) The liquidator was not bound or entitled to admit debts merely because they appeared on the bank”s books. Depositors could not be treated as having proved in the winding up unless they submitted some proof of debt, formal or informal (page 105, line 26 – page 107, line 28).

(3) Under s.34 of the Limitation Law, 1991, the limitation period for actions to recover these deposits was six years from the date of the last acknowledgement, since they would be actions founded on simple contract, there being nothing in the company”s articles to suggest that they would be actions upon a specialty. The date of the last acknowledgement would be at the latest when the winding up began but was likely to be earlier since the mere appearance of deposits on the books did not qualify as an acknowledgement under s.35 of the Limitation Law, 1991, which required an acknowledgement to be written, signed and communicated to the creditor. The limitation period was not extended by the liquidator”s declaration that the funds were to be held on a two-year trust since the trust was for the benefit of the liquidation as a whole and therefore no cause of action based on the trust could accrue to an apparent creditor who had failed to submit the requisite proof (page 104, line 30 – page 105, line 21; page 107, line 41 – page 108, line 3).

(4) It was therefore appropriate under ss. 120 and 140 of the Companies Law (Revised) to fix the final date for the submission of claims as December 29th, 1995, which was six years from the winding-up resolution since (i) six years was sufficient time within which to prove a debt; (ii) it

was the date the trust expired; and (iii) in the absence of proof, the funds would remain company assets and be available in the ordinary way for distribution to contributories (page 108, lines 4–27).

SMELLIE, J.: This is an application on behalf of the liquidator of the
above-mentioned banking company for directions pursuant to s.140 of the
Companies Law (Revised). The directions are sought as to the proper
35	disposition of funds now held by the liquidator on trust, representing
deposits from certain depositors of the bank.
The company was placed in voluntary liquidation on December 29th,
1989. Notices from the liquidator requiring creditors to file their claims
with particulars were published in the local Gazette and in a local
40	newspaper advertisement on January 15th, 1990, setting a deadline of
March 31st, 1990 for the submission of claims. No claims were submitted
in respect of any of the deposits in question.
The affidavit evidence in this matter, in addition to the foregoing, states
that no forwarding address for any of those depositors exists in the bank”s
45	records and that the liquidator had concluded it is impossible to locate

them. All other known creditors of the bank have been paid in full and the
net surplus assets have been distributed to contributories.
Notwithstanding that this is a banking company and as such the subject
liabilities would readily be apparent on its books, the liquidator retained
5	the discretion to require creditors to submit their claims in proof of the
debt in the form required by the liquidator”s notice of January 15th, 1990.
This discretion is retained in the case of a voluntary liquidation and this is
so whether the liquidator acted in accordance with the Companies
(Winding-up) Rules 1949, r.106 which is based on the English Companies
10	Act 1948-the model legislation for our local Companies Law (Revised)
-or in accordance with the Insolvency Rules 1986, rr. 4.73 and 4.74. (see
5 Palmer”s Company Law, 21st ed., paras. G.1509 and G.1510 at
[G]–0422 and 7(2) Halsbury”s Laws of England, 4th

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