Re Pegasus Ins Company
| Jurisdiction | Cayman Islands |
| Judge | (Henderson, J.) |
| Judgment Date | 04 February 2004 |
| Court | Grand Court (Cayman Islands) |
| Date | 04 February 2004 |
(Henderson, J.)
L.R.M. Sibblies, General Counsel and Ms. S. Tomkins for the Cayman Islands Monetary Authority;
R.D. Alberga, Q.C. and C.G. Quin for the intervenor.
(1) Adam Eyton Ltd., In re, ex p. CharlesworthELR(1887), 36 Ch. D. 299, referred to.
(2) Banco Del Progreso Ltd., In re, 2002 CILR N[33], referred to.
(3) Edennote Ltd., Re, Tottenham Hotspur Plc. v. Ryman, [1996] BCC 718; [1996] T.L.R. 348; [1996] 2 BCLC 389, referred to.
(4) Johnson, In re, 1996 CILR N–3; 1997 CILR N–8, referred to.
(5) Johnson v. Cook-Bodden, 1999 CILR 399, dicta of Kellock, Ag. J. considered.
(6) Johnson v. Deloitte & Touche A.G., 1997 CILR 120, referred to.
(7) Keypak Homecare Ltd., Re, [1987] BCLC 409; (1987), 3 BCC 558; 1988 PCC 115, considered.
(8) Latin American Bank, In re, Grand Ct., Cause C651/97, unreported, considered.
(9) Liberty Capital Ltd., In re, 2002 CILR 606, considered.
(10) Marseilles Extension Ry. & Land Co., In reELR(1867), L.R. 4 Eq. 692; 17 L.T. 61, referred to.
(11) Transworld Bank & Trust Ltd., In re, Grand Ct., Cause 281/97, unreported, considered.
(12) Uzzell v. Uzzell, 2001 CILR N[12], considered.
(13) Waterford Ins. Ltd., In re, 2003 CILR 328, referred to.
Banks and Trust Companies Law (2003 Revision) (Law 4 of 1989, revised 2003), s.3: The relevant terms of this section are set out at para. 25.
Companies Law (2003 Revision) (Laws of the Cayman Islands, 1963, cap. 22, revised 2003), s. 94:
‘A company may be wound up by the court if-
. . .
(c) the company is unable to pay its debts; or
(d) the Court is of the opinion that it is just and equitable that the company should be wound up.’
Insurance Law (2001 Revision) (Law 24 of 1979, revised 2001), s.11(1)(d):
‘(1) Where the Governor is of the opinion that-
. . .
(d) a person holding a position as director, manager or officer of a licensee”s business is not a fit and proper person to hold the respective position,
the Governor may require such licensee forthwith to take steps to rectify the matter or may suspend the licence of the licensee pending a full enquiry into the licensee”s affairs under paragraph (b) of section 5(1).’
Monetary Authority Law (2003 Revision) (Law 16 of 1996, revised 2003), s.3: The relevant terms of this section are set out at para. 25.
Companies-liquidators-appointment-fitness for appointment is question of fact on each new appointment-conduct on previous appointments relevant together with cumulative effect of concerns raised by that conduct-appropriate to consult other judges with previous personal experience of nominee
Companies-liquidators-appointment-broad discretion to appoint officers of court to be exercised carefully, having regard to need to deal fairly with nominee”s reputation-vital to appoint only individuals in whom court has high level of confidence-personal misconduct not necessary to justify refusal to appoint
The Cayman Islands Monetary Authority applied for the appointment of the intervenor and another as joint official liquidators in the winding up of Pegasus Insurance Co.
The Governor in Council, on the recommendation of the Authority, had appointed J (the intervenor) and F to assume control of Pegasus Insurance Co. under s.11(1)(d) of the Insurance Law (2001 Revision). They found the company to be insolvent and recommended it be wound up. The Authority petitioned for a winding-up order and applied for the appointment of J and F as joint official liquidators of the company.
The court expressed concerns about the fitness of J to be appointed joint official liquidator because of concerns raised relating to his conduct in five previous cases, three of which were liquidations. After consulting with other judges as to the issues they had considered in the previous cases the judge concluded, based on the information in memoranda they provided (both prior to the hearing and prior to final judgment), that the matters that were now of concern to him had not been previously addressed and that it was now appropriate to look at them collectively. J retained counsel independently of the Authority and was granted locus standi to enable him to make a full response. The Authority allowed him to carry the matter forward and took no active role in the proceedings.
J submitted, inter alia, that (a) in relation to the first previous liquidation none of the criticisms that were of concern to the judge-including being aggressively adversarial on all issues, being supportive of and reluctant to investigate the activities of former management, being unwilling to consider a global approach to liquidation, and total disregard
for the wishes of 90% of creditors-had been levelled against him personally and there was no reason for them to have been; he had received consistent legal advice confirming that there was no reason for him or his colleague to resign and no ground for their removal; he was in no way at fault for the conduct of the liquidation and any other conclusion would be ‘both inaccurate and unfair’; (b) letters produced by two attorneys involved in the second case were at odds with the concern raised that when he gave evidence he had not behaved as an impartial or neutral expert should and had been adversarial and expressed improper opinions on the credibility of others; (c) it was unclear what part of his evidence in the third case was said to have been disbelieved and if the judge had disbelieved him he had been wrong to do so; (d) in relation to the fourth liquidation there had been no obligation on him to report to the court as had been suggested; (e) the concern regarding delay in the fifth liquidation was regretted but had been unavoidable and that, in any event, despite the delay, the requested responses had been provided; and (f) the information received from the other judges could not properly be taken into account and should be ignored by the court.
Held, dismissing the application:
(1) The appointment of J as joint official liquidator would not be confirmed as the court felt deep concern about his suitability. While the manner in which J”s evidence in one case was rejected was unflattering, it did not bear significantly on his fitness for appointment as a liquidator in the present case; additionally, although an official liquidator is expected to report on his activities from time to time, in the circumstances, there had been no obligation on him to do so. However, in one case, the judge had disbelieved J”s sworn evidence and found that he testified untruthfully during the trial; the court had no power to inquire into the correctness of that decision and therefore could not consider J”s submission on the finding. In another case, there had been extraordinary and inappropriate delay suggesting that J had been too busy with other matters to attend to his court-appointed duties. Additionally, J”s failure to apply the code of his profession and his disregard of professional obligations raised substantial concerns about his suitability for further appointment. The key issue was the cumulative effect of the concerns relating to suitability that had been raised and the cumulative effect of these concerns took on a weight and character which was perhaps lacking when each was viewed in isolation (paras. 44–47; paras. 49–52; paras. 54–57).
(2) The various concerns raised had not been collectively addressed previously and it was appropriate now to do so. To that end, the views of sitting members of the court based on their personal experience with the nominee were highly material so that consultation with other judges was entirely appropriate; any potential unfairness in that regard had been alleviated by allowing J an opportunity to respond to the information so obtained (paras. 34–36; paras. 39–42; para. 57).
(3) It was vital for the court, in exercising its discretion, to appoint only individuals in whom it had a high level of confidence since the duties of a liquidator, as an officer of the court, were so important. In exercising this discretion due regard was to be had to the need to deal fairly with the reputation of the nominee. While there was no need to show a specific act of misconduct to justify a refusal to appoint a liquidator, conduct on prior appointments was relevant, though not conclusive, to deciding whether further appointments should be made (paras. 27–28; paras. 36–42).
(4) Fitness for appointment was primarily a question of fact to be decided anew each time an appointment was made. The circumstances in which the court would refuse an initial appointment were, to some extent, broader than those in which it would act to remove a liquidator it had already appointed (para. 29; para. 37).
1 HENDERSON, J.: On December 13th, 2002, the Governor in Council, upon the recommendation of the Cayman Islands Monetary Authority (‘the Authority’), appointed Christopher Johnson and Nicholas Freeland of PriceWaterhouseCoopers to assume control of Pegasus Insurance Company under s.11(1)(d) of the Insurance Law (2001 Revision). The company is insolvent, in default of its net worth requirements, and has no officers or directors. It has failed to maintain proper books of account. Messrs. Johnson and Freeland have recommended that it be wound up.
2 The Authority now petitions for an order under s.94 of the Companies Law (2003 Revision) for a winding up and for the appointment of Messrs. Johnson and Freeland as joint official liquidators of the company.
3 When the application for the appointment of Messrs. Johnson and Freeland came before me for the first time on September 5th, 2003, I advised counsel in my chambers that I had concerns about the fitness of Mr. Johnson to be appointed a joint official liquidator. I identified the following five matters that collectively have given rise to these concerns:
(a) In re Transworld Bank & Trust Ltd. (11)...
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Re Pegasus Ins Company
...for removal from appointment being slightly narrower than for initial appointment. The proceedings in the Grand Court are reported at 2004–05 CILR 57. On appeal, J submitted that the concerns of the court had not prevented it appointing him on 19 occasions since 1999 and the judges who made......