The Companies Act (2021 Revision) and Premier Assurance Group SPC Ltd (in Official Liquidation)
| Jurisdiction | Cayman Islands |
| Judge | Chief Justice Smellie |
| Judgment Date | 10 September 2021 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO: FSD 264 OF 2020 (ASCJ) |
The Hon. Chief Justice Smellie QC
CAUSE NO: FSD 264 OF 2020 (ASCJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Sanction application — Section 110(2)(b) of the Companies Act (2021 Revision) — proof of debt—alternative scheme for proving in the liquidation
Rupert Bell, Chris Keefe, Daisy Boulter and Will Waldron of Walkers for the JOLs (Jeffrey Stower and Jason Robinson of KPMG)
These are my reasons for granting the application dated 16 August 2021 (the “Application”) made by Jeffrey Stower and Jason Robinson of KPMG, the joint official liquidators (“JOLs”) of Premier Assurance Group SPC Ltd. (in Official Liquidation) (the “Company”). The Application sought the sanction of the Court of a proposed proving process to be adopted in respect of those participants who hold or have held insurance policies (the “Participants”) referable to the Premier Assurance Segregated Portfolio (“PASP”), one of the segregated portfolios of the Company, pursuant to Section 110(2)(a) of the Companies Act (2021 Revision) (the “ Companies Act”).
The Application was supported by the Fourth Affidavit of Mr Stower sworn on 13 August 2021 (“Stower 4”). The Application also had the unanimous support of the liquidation committee formed in respect of PASP.
For the reasons set out below, I was satisfied that the JOLs' proposal in respect of the proving process for the Participants would be in the best interest of the creditors referable to PASP as a whole.
The Company is a segregated portfolio company (“SPC”) which has two segregated portfolios, PASP and Global Assurance Segregated Portfolio (“GASP”). The Application relates solely to PASP.
Life insurance products were offered through PASP globally (with the exception of the United States) and sold to markets in the Latin American, Caribbean (except the Cayman Islands), European and Asian regions. A branch in Malaysia was operated as part of the business of PASP — Premier Assurance Group SPC Ltd., Labuan Branch (the “Labuan Branch”).
At the commencement of the winding up, there were a total of 11,160 Participants with insurance policies referable to PASP (including those Participants with policies through the Labuan Branch). Those Participants included:
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(a) 10,485 Participants with insurance policies governed by the law of the Cayman Islands (the “PASP Participants”); and
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(b) 675 Participants with insurance policies governed by the law of Malaysia (the “Labuan Participants”).
Information concerning the status of the insurance policies issued to Participants derives from the real-time databases of financial information of PASP known as Seriatim Valuation Reports (“SVRs”) which support the Company's accounting software.
The SVRs list the life insurance policies referable to PASP from inception to date. They also record the personal details of the Participants, the type of insurance policies issued to the Participants (including their status) and the account value of each policy (including, inter alia, surrender charges, premiums paid, administration charges and fees incurred under the terms of the respective policies). An SVR can be produced in respect of the Participants at any particular point in time.
The financial information in the SVRs was used to determine actuarial reserve referable to PASP and to compile monthly management accounts referable to PASP. In addition, the financial information accessible by Participants in respect of their policies referable to PASP and their account values derived from the financial information recorded in the SVRs.
Accordingly, the JOLs are able to determine the account values of any Participant at any particular point in time based upon the financial information and data recorded in the SVRs. This strict determination of account values is essential to the proper administration and resolution of claims referable to any particular portfolio of a segregated portfolio company, in keeping with sections 216 and 217 of the Companies Act, and as was recently recognized by this court in Re Skye Assets Fund SPC (in voluntary liquidation) FSD 93 of 2021 (ASCJ), judgment delivered 30 June 2021; at [6] and [7].
Up until 30 April 2021, 1 the SVR financial information was provided to Participants through an online portal (the “Portal”). The Portal contained a variety of financial information, including account values, cash surrender values, premiums paid, administration charges and returns on investment. The information on the Portal reflected the balance on a Participant's account at any particular time. Participants were also able to download copies of relevant documents, such as account statements at month end.
The JOLs are satisfied as to the accuracy of the SVRs as compared to the information available to Participants via the Portal, having performed a comparison of the information contained in the statements sent to Participants, to the SVRs, noting no exceptions.
In the event that the JOLs are required to adjudicate each of the proof of claims filed by over 11,000 Participants, the JOLs submit that the cost to the Company referable to PASP is likely to be significant and cause delay. As explained in Stower 4, if the JOLs are required to separately consider and adjudicate each proof of debt filed by such a substantial number of Participants, this is likely to substantially increase the time it takes to adjudicate claims and, in turn, the costs of administering the estate.
Given that the SVRs contain a real-time database of the financial information of PASP (and, in particular, the account values of the policies of the Participants), the JOLs proposed a method to stream-line the process of proving and adjudicating claims in respect of the Participants in reliance on the information contained in the SVRs. In summary, the JOLs sought approval for the following:
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(a) Firstly, for the JOLs to admit to proof the claims of the Participants in respect of the amounts recorded as due to them in the SVRs without requiring them to lodge proofs of debt. Effectively, this dispenses with the requirement that over 11,000 Participants submit a
separate proof of debt (together with supporting documentation) for separate adjudication by the JOLs. -
(b) Secondly, where the JOLs have admitted a Participant to proof without requiring him to submit a proof of debt, for the JOLs to send a Notice of Admission in the form (or substantially the same form) appended to the draft Order (the “Draft Notice”) informing the Participant of this fact. This is intended to operate in a similar manner to the process applied in respect of depositors of licensed banks pursuant to O.16, r.7 of the Companies Winding Up Rules, 2018 (“CWR”).
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(c) Finally, in the event that a Participant disputes the amount admitted to proof, that such Participant may within 21 days of such notice submit a proof of debt form in the usual way pursuant to the CWR with all of the consequential rights of appeal. This is intended to alleviate any concerns held by Participants who have the option to submit their own proof of debt if they consider this necessary.
Broadly speaking, the JOLs estimated that the above method would achieve a cost saving to the PASP insolvent estate in the region of US$2.6 million and enable the JOLs to complete the adjudication process of the claims of the Participants within a much shorter timescale.
Pursuant to Section 110(2)(a) of the Companies Act, liquidators may, with the sanction of the Court, exercise any of the powers specified in Part I of Schedule 3, including “ Power to deal with all questions in any way relating to or affecting the assets or the winding up of the company…” (paragraph 7). As explained below, this provision empowers the Court to sanction (among other matters) an alternative format for proof of debts or to dispense with proof of debts in their entirety.
In respect of proof of debts relating to insolvent companies, O.16, r.1 (2) of the CWR provides that a person claiming to be a creditor of such a company and wishing to recover his debt must (subject to rule 7 relating to licensed banks) submit his claim in writing to the official liquidator.
Pursuant to O.16, r.2(1) and (2) of the CWR, the JOLs may prescribe their own form of proofs of debt and may prescribe different forms for different classes of creditor. O.16, r.2(1) and (2) of the CWR provide that:
“(1) A proof of debt shall be in CWR Form No 24 or such other form or forms as the official liquidator may prescribe having regard to the nature of the claims against the company.
(2) The official liquidator may prescribe different forms of proof of debt for use by different classes of creditor” (emphasis added).
In Re Centaur Litigation SPC and its segregated portfolios (unreported, Grand Court of the Cayman Islands, Mangatal J, 28 November 2017), Mangatal J sanctioned an alternative form of proofs of debt prescribed by the liquidators in respect of creditors and investors.
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(a) Firstly, in respect of creditor claims, the liquidators proposed “the use of an online portal for completion and submission of proof of debts which departs from the traditional approach under Cayman Islands Law” (at [84]). It was intended that the online portal would “require (or auto-complete) the statutorily prescribed creditor details set out in CWR O.16, r.2(3) and (4)” (at [84(b)]). In sanctioning this form of proof of debts, Mangatal J held at [166] that this seemed to be “an appropriate, efficient and cost-effective way of...
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