Re Kruger

• Jurisdiction: Cayman Islands
• Judge: (Smellie, J.)
• Judgment Date: 23 September 1997
• Court: Grand Court (Cayman Islands)
• Date: 23 September 1997

Grand Court

(Smellie, J.)

IN THE MATTER OF KRUGER

A.J. Jones for the petitioner;

J.R. McDonough as amicus curiae.

Cases cited:

(1) Al-Sabah v. Maples & Calder, 1994-95 CILR 471.

(2) Cooke v. Charles A.Vogeler Co., [1901] A.C. 102; (1900), 70 L.J.Q.B. 181.

(3) Crispin, Ex p., In re Crispin(1873), L.R. 8 Ch. App. 374; 28 L.T. 483.

(4) Debtors (No. 836 of 1935), In re, [1936] Ch. 622; (1936), 154 L.T. 592, dicta of Lord Wright, M.R. applied.

(5) Heyworth, Ex p., In re RhodesELR(1884), 14 Q.B.D. 49; 54 L.J.Q.B. 198, applied.

(6) Maxwell Communications Corp. PLC, Re, [1992] BCLC 465; [1992] BCC 372.

(7) Schuppan (No. 1), Re, [1996] 2 All E.R. 664; [1997] 1 BCLC 211, applied.

(8) Theophile v. Sol.-Gen., [1950] A.C. 186; [1950] 1 All E.R. 405.

Legislation construed:

Bankruptcy Law (Revised) (Laws of the Cayman Islands, 1963, cap. 7, revised 1978), s.2: The relevant terms of this section are set out at page 427, line 41 – page 428, line 3.

s.14: ‘A single creditor or two or more creditors…may present a bankruptcy petition to the Court against a debtor, alleging as the grounds of the petition any one or more of the following acts or defaults, in this Law deemed to be and included under the expression “acts of bankruptcy”-

…

(8) that the creditor presenting the petition, has obtained final judgment against the debtor in an action in the Grand Court for a sum of not less than forty dollars, and has served on the debtor in the Islands a bankruptcy notice in writing, in the prescribed manner and form, requiring him to pay the amount for which judgment has been obtained, and the debtor has not within seven days after the service of notice paid such amount…;

…

Provided that-

(a) the alleged act of bankruptcy must have occurred within six months before the presentation of the petition….’

s.29: The relevant terms of this section are set out at page 428, lines 37–41.

s.75: The relevant terms of this section are set out at page 431, lines 5–11.

s.150: The relevant terms of this section are set out at page 431, lines 12–24.

Bankruptcy and Insolvency-jurisdiction-foreign debtor-court may, by Bankruptcy Law (Revised), ss. 2 and 14, make bankruptcy order against foreign debtor ordinarily resident or present in Islands based on act of bankruptcy committed here-failure to satisfy judgment debt following service of bankruptcy notice in Islands suffices

Bankruptcy and Insolvency-trustee in bankruptcy-assistance from petitioning creditor”s attorneys-may be appointed to advise trustee in bankruptcy in proceedings to trace and recover assets if have relevant knowledge from related proceedings and in all creditors” interests-court may require undertaking as to use of information and may review appointment if conflict of interest arises

Bankruptcy and Insolvency-trustee in bankruptcy-assistance from petitioning creditor”s attorneys-under Bankruptcy Law (Revised), s.150 court may order attorneys to produce documents acquired in related proceedings against debtor for use in bankruptcy proceedings

Bankruptcy and Insolvency-stay of proceedings-stay pending appeal against judgment debt-court may stay bankruptcy proceedings based on non-payment of judgment debt pending appeal against judgment

The petitioner applied for a provisional order of bankruptcy against the respondent.

The Grand Court gave summary judgment in favour of the petitioner against the respondent, a Swiss national, to enforce debts due in Switzerland, and the respondent appealed. As the respondent was ordinarily resident in the Cayman Islands, the petitioner then served a bankruptcy notice on him here. He failed to satisfy the judgment within seven days of service of the notice on him and the petitioner applied for a bankruptcy order under s.14(8) of the Bankruptcy Law (Revised), and also an order sanctioning the appointment by the trustee in bankruptcy of attorneys who acted for the petitioner in related proceedings to establish the fraudulent nature of transfers of property by the respondent to his wife. The respondent, in the meantime, was returned to Switzerland to face criminal charges relating to his bankruptcy there.

The petitioner submitted that (a) the court had jurisdiction to make a provisional bankruptcy order against the respondent since, as a person ordinarily present or resident in the Islands, the respondent could be a ‘debtor’ for the purposes of s.2 of the Bankruptcy Law (Revised), he had

committed an act of bankruptcy within the jurisdiction by failing to satisfy the judgment debt and the petitioner had served a bankruptcy notice on him within the time prescribed by the Law; (b) since the trustee in bankruptcy would need to consider whether to be joined in the existing proceedings in which the petitioner”s attorneys were acting, or to commence proceedings in her own name, it would be cost-effective and in the interests of the respondent”s other creditors to use the information already obtained by discovery by instructing those attorneys to act in the bankruptcy proceedings.

The respondent submitted in reply that (a) the court lacked jurisdiction to make a bankruptcy order against him since he was a foreign national living overseas and was not therefore ordinarily present or resident in the Islands; (b) the petitioner”s own attorneys should not be permitted to act in the bankruptcy since there was a risk of conflict between the interests of the petitioner and those of the other creditors and also a danger that confidential information would be used for purposes outside the bankruptcy proceedings; and (c) if a bankruptcy order were to be made, it should be stayed pending the outcome of his appeal against the summary judgment against him.

Held, making a provisional order of bankruptcy:

(1) The court had jurisdiction under the Bankruptcy Law (Revised) to make an order against the respondent since he qualified as a ‘debtor’ within the meaning of s.2 by virtue of committing an act of bankruptcy whilst ordinarily present and resident in the Islands. Furthermore, it was settled law that a foreigner committing an act of bankruptcy within the Islands, such as failure to satisfy a judgment debt under s.14(8) of the Law, fell within the jurisdiction of the court (page 428, lines 4–25; page 429, lines 3–6).

(2) The appointment of the petitioner”s attorneys to act in the bankruptcy proceedings would aid progress and also save costs, thereby benefiting both the trustee in bankruptcy and the respondent”s other creditors, by the sharing of information relating to the allegedly fraudulent conveyances. Since all the creditors” claims had already been adjudicated upon in bankruptcy proceedings in Switzerland, and since the petitioner accepted that he would rank alongside them in proceedings here, there was no...