Re Millard
| Jurisdiction | Cayman Islands |
| Judge | (Jones, J.) |
| Judgment Date | 03 June 2013 |
| Court | Grand Court (Cayman Islands) |
| Date | 03 June 2013 |
(Jones, J.)
K. Broadhurst and J. Broadhurst for the debtors;
(1) Al Sabah, In re, 2004–05 CILR 373, observations of Lord Walker of Gestingthorpe referred to.
(2) India (Govt.) v. Taylor, [1955] A.C. 491; [1955] 2 W.L.R. 303; [1955] 1 All E.R. 292, dicta of Viscount Simonds applied.
Bankruptcy Law (1997 Revision), s.2: The relevant terms of this section are set out at para. 6.
s.13(1) ‘The Trustee may, on such terms as to remuneration and otherwise as may be prescribed, and with the approval of the Court, appoint a proper person to act as his agent in respect of any estate vested in or administered by him under this Law, or in respect of any part of the business thereof.’
s.15: The relevant terms of this section are set out at para. 8.
s.17(1): The relevant terms of this sub-section are set out at para. 8.
s.119(2): ‘Save as aforesaid, all debts and liabilities . . . to which the debtor is subject at the date of of the provisional order . . . shall be deemed to be debts provable under a bankruptcy petition under this Law.’
s.121: ‘“Liability” shall, for the purposes of this Law, include . . . any obligation or possibility of an obligation to pass money . . . on the breach of any express or implied covenant, contract, agreement or undertaking. . .’
s.138: The relevant terms of this section are set out at para. 8.
s.170(1): The relevant terms of this sub-section are set out at para. 8.
Bankruptcy and Insolvency-petition-petition for own bankruptcy-debtor may petition for own bankruptcy under Bankruptcy Law (1997 Revision), s.15-under s.17(1) required to file memorandum of affairs explaining ‘causes of insolvency’-debtor to show cause why bankruptcy order may be made but not required to satisfy any specific definition of insolvency-sufficient if shows worldwide liabilities exceed worldwide assets
Bankruptcy and Insolvency-petition-petition for own bankruptcy-striking out-not ‘improper purpose’ justifying striking out if sole purpose of debtor petitioning against himself is to enable trustee in bankruptcy to be treated as ‘foreign representative’ for purpose of US Bankruptcy Code-trustee may then present ancillary petition to US Bankruptcy Court and seek temporary stay of multiple enforcement proceedings in United States until legal issues concerning validity of foreign default judgments resolved
Conflict of Laws-application of foreign law-foreign revenue law-foreign judgment for unpaid tax not enforceable in Cayman at common law or under Foreign Judgments Reciprocal Enforcement Law (1996 Revision)-not provable debt in Cayman under Bankruptcy Law (1997 Revision), s.119, or ‘liability’ enforceable by Grand Court by virtue of s.121
The debtors, who were husband and wife, presented petitions against themselves in which they stated that they were unable to pay their debts, wished to be declared bankrupt and have their estates distributed according to the Bankruptcy Law (1997 Revision).
The debtors had been ordinarily resident in the Cayman Islands for more than 20 years and the majority of their assets were shares in wholly-owned Cayman investment holding companies; the companies” assets were in turn mainly invested in real estate in the Islands, with smaller property holdings in the United States and Europe. The realizable value of the debtors” worldwide assets was substantially smaller than their worldwide liabilities, principal amongst which were default judgment debts which had been owing to the Government of the North Mariana
Islands since 1994 in respect of unpaid taxes and amounting, with interest, to approximately US$59m. That Government had taken no steps to enforce these judgments until 2011 but at the time of the present hearing there were seven separate enforcement proceedings pending in different courts in the United States.
The apparent purpose of the present petitions was that, if they were granted, the trustee in bankruptcy (or her agent) would be treated as a ‘foreign representative’ who could present an ancillary petition under Chapter 15 of the US Bankruptcy Code; this would enable the US Bankruptcy Court to impose a stay in the various proceedings pending against the debtors in the US courts, until issues about the validity of the original default judgments had been determined.
The Government of the North Mariana Islands submitted that the petitions should be struck out on the grounds that, as foreign judgments in respect of taxes were not enforceable in the Cayman Islands, (a) the debtors were not entitled to petition because they were not ‘insolvent’-in the narrow sense that the realizable value of their assets in the Cayman Islands was greater than the sum of the liabilities enforceable against them in the Islands; (b) the petitions were an abuse of process as being presented for an improper purpose; and (c) even if the debtors were entitled to petition, the petitions should be struck out in the discretion of the court, as orders for bankruptcy made in the Islands would serve no useful purpose and the court should not make futile orders.
The debtors resisted the strike-out applications on the grounds that (a) since s.15 of the Bankruptcy Law (1997 Revision) specifically enabled a debtor ‘to present a bankruptcy petition against himself without stating any grounds,’ neither of them was obliged to allege insolvency or to prove it; (b) although s.17(1) required each of them to file a statement of his or her assets, liabilities and affairs generally and pre-supposed-but did not require proof of-insolvency, it was sufficient for them to explain why they believed they were insolvent in some sense, without indicating the sense required; (c) the petitions had not been presented for an improper purpose, since it was legitimate for them to seek the stay of the US enforcement proceedings against them given that there was no evidence had been presented to show why attempts to progress the proceedings had taken so many years and it was clear that fundamental legal issues remained to be resolved in the United States and the North Mariana Islands; and (d) it would not be futile for the court to make the orders sought since they were essential steps in allowing an officer of the court and her approved agents to use the procedures of the US Bankruptcy Code to seek the temporary stay of the enforcement proceedings.
Held, granting the...
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Northern Mariana Is v Millard
...the purpose behind the petitions was to allow them to apply for ancillary orders in the US courts. The court (in proceedings reported at 2013 (2) CILR 83) accepted that foreign judgments in respect of taxes could not be enforced in the Cayman Islands. As the respondents had shown that they ......