Re Pegasus Ins Company
| Jurisdiction | Cayman Islands |
| Judge | (Zacca, P., Collett and Taylor, JJ.A.) |
| Judgment Date | 30 July 2004 |
| Court | Court of Appeal (Cayman Islands) |
| Date | 30 July 2004 |
(Zacca, P., Collett and Taylor, JJ.A.)
D. Pannick, Q.C. and R.D. Alberga, Q.C. for the appellant (intervenor);
A. Beltrami and Ms. V. Ellis for the Attorney General as amicus curiae.
(1) AMP Enterprises Ltd. v. Hoffman, [2003] 1 BCLC 319, referred to.
(2) Adam Eyton Ltd., In re, ex p. CharlesworthELR(1887), 36 Ch. D. 299, referred to.
(3) Banco Del Progreso Ltd., In re, 2002 CILR N[33], referred to.
(4) Edennote Ltd., Re, Tottenham Hotspur plc v. Ryman, [1996] 2 BCLC 389; [1996] BCC 718; [1996] T.L.R. 348, referred to.
(5) Hollington v. F. Hewthorn & Co. Ltd., [1943] K.B. 587; [1943] 2 All E.R. 35, referred to.
(6) Johnson v. Cook-Bodden, 1999 CILR 399, dicta of Kellock, Ag. J. considered.
(7) Johnson v. Deloitte & Touche A.G., 1997 CILR 120; on appeal, sub nom.Deloitte & Touche A.G. v. Johnson, 1999 CILR 297; [1999] 1 W.L.R. 1605, referred to.
(8) Keypak Homecare Ltd., Re, [1987] BCLC 409; (1987), 3 BCC 558; 1988 PCC 115, considered.
(9) Latin American Bank, In re, ECASGrand Ct., Cause C651/97, unreported, considered.
(10) Liberty Capital Ltd., In re, 2002 CILR 606, referred to.
(11) Marseilles Extension Ry. & Land Co., In reELR(1867), L.R. 4 Eq. 692; 17 L.T. 61, referred to.
(12) Moore (Sir John) Gold Mining Co., In reELR(1879), 12 Ch. D. 325, referred to.
(13) Transworld Bank & Trust Ltd., In re, Grand Ct., Cause 281/97, unreported, considered.
(14) Uzzell v. Uzzell, 2001 CILR N[12], considered.
(15) Western Oceanic Bank, In re, Grand Ct., May 2nd, 2003, referred to.
Bankruptcy Law (1997 Revision) (Laws of the Cayman Islands, 1963, cap. 7, revised 1997), s.18:
‘At any time after a petition has been filed the Court may order that the Trustee become the receiver or manager of the property or business of the debtor, or of any part thereof, and the Trustee shall thereon enter upon and act in the performance of his office in relation to such property or business at such time, and in such manner and to such extent, as the Court may, from time to time direct, and if directed by the Court, and so far as the nature of the case will admit, do anything which might be done by a Trustee after an absolute order for bankruptcy under this Law, and shall, in relation to and for the purpose of acquiring or retaining possession of the property of the debtor, and in addition to any powers given to him by this Law, be in the same position in all respects as if he were a receiver appointed by the Grand Court, and the Court
may, on his application, enforce such acquisition and retention accordingly.’
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. 75.
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. 75.
Companies-liquidators-appointment-discretion to appoint to be exercised judicially on basis of sound evidence relevant to best interests of liquidation-evidence opposing appointment to have cogency and weight appropriate to seriousness of allegation particularly if concerns integrity of nominee-earlier criticisms of nominee lose cogency if followed by numerous appointments over succeeding years-suitability to be judged on basis of performance in those appointments
Companies-liquidators-appointment-not appropriate to consult other judges with previous personal experience of nominee before making appointment in individual case-other judges” opinions not relevant to making decision within judge”s own responsibility
The Cayman Islands Monetary Authority applied to the Grand Court 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 doubts about the fitness of J to be appointed joint official liquidator because of concerns raised by various judges which had not previously been considered collectively or otherwise, relating to his conduct (including failure to implement instructions of the court on more than one occasion and a lack of objectivity and independence) in cases dating back to 1999, some of which were liquidations. J had nevertheless been appointed as liquidator on 19 applications since then, although his conduct in these appointments was the subject of further judicial criticism and allegations were made of his dishonesty in testifying. 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.
The Grand Court (Henderson, J.) held that (a) J would not be appointed as joint official liquidator as the court felt deep concerns about his
suitability; (b) it was appropriate to address collectively for the first time various concerns raised by other members of the court based on their personal experience of J and extensive consultation with the other sitting Judges of the Grand Court was therefore entirely proper; (c) in exercising its discretion, the court had to have regard to the need to deal fairly with the reputation of J and conduct on prior appointments was relevant but not conclusive to deciding further appointments; and (d) fitness for appointment was primarily a question of fact to be decided anew each time an appointment was made, the circumstances 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 these orders must have satisfied themselves as to his fitness notwithstanding comments in earlier proceedings.
Held, setting aside the Grand Court”s decision:
(1) J would be appointed as liquidator in this matter. When considering the appointment or removal of a liquidator, the discretion of the court had to be exercised judicially, on the basis of sound evidence having relevance to the best interests of the liquidation. Where the ground for refusal to appoint went to the honesty or integrity of the nominee, the evidence should have cogency and weight appropriate to the seriousness of the allegation. A less demanding test would be applicable where the objection involved no reflection on the individual”s character. In this case, which concerned the honesty, integrity, reputation and professional future of J, a particular duty of fairness was necessarily imposed on the court. The concerns of other judges in 1999 did not constitute sound evidence to prevent his appointment in 2004 (paras. 44–45; para. 86; para. 99).
(2) The court was not bound to conclude that the judges who had previously appointed J had taken into consideration the decisions of others in earlier cases. Having decided, however, for whatever reason, to entrust him with further authority and powers on 19 subsequent occasions, despite ongoing criticism of his work, his performance fell to be judged by the manner in which he subsequently exercised the powers so entrusted to him, and the earlier decisions necessarily lost much of their relevance as a basis for impeaching his fitness (para. 48; para. 66; para. 99).
(3) The memoranda and discussions by the judges in this case went beyond the usual and acceptable discussions on policy and points of law. A particular case and the action that could be taken in the matter was being discussed and the discussion continued after the hearing was completed but before judgment, regarding the merits of submissions made by counsel in the matter. The judge was asking for an opinion on matters that required his own decision but this was not disclosed to counsel until after the judgment was delivered. Such a procedure should
not be adopted (per Zacca, P. and Collett, J.A., at paras. 104–105; Taylor, J.A. dissenting, at para. 46).
1 TAYLOR, J.A.: This is an appeal by Christopher Johnson, a chartered accountant who has practised in the insolvency field in the Cayman Islands for more than 30 years, against a Grand Court decision denying an application by the Cayman Islands Monetary Authority (CIMA) for his appointment as official liquidator in the insolvency of a Cayman-incorporated insurance company.
2 At the end of the sitting we allowed the appeal and said that reasons would later be provided in writing.
The hearing below
3 Mr. Johnson was acting as Government-appointed controller of Pegasus Insurance Co. when an application under s.11(1)(d) of the Insurance Law (2001 Revision) and s.94 of the Companies Law...
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