William Gayhart v Debra Buchanan as personal representatives of the estate of Myong-He M. Gayhart (Deceased)
| Jurisdiction | Cayman Islands |
| Judge | Kawaley |
| Judgment Date | 14 August 2020 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO: FSD NO. 206 OF 2018 (IKJ) |
and
The Hon. Justice Kawaley
CAUSE NO: FSD NO. 206 OF 2018 (IKJ)
AND FSD NO. 53 OF 2019
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Enforcement of domesticated foreign judgment — freezing order-default judgments — receivership order — determination of whether assets held by company owned and controlled by judgment debtor are available for execution — piercing the corporate veil — effect of resettlement of Florida revocable trust as an irrevocable Cook Islands trust on title to assets frozen by freezing order — application by foreign trustee for adjournment to intervene to assert claim to local assets — whether rights attached to shares capable of being assigned or delegated to receivers
Mr Harry Shaw of Campbells for the Plaintiffs
Mr Anthony Akiwumi of Etienne Blake for the Zhavorsa Glass Trust (“ZGT”), a Proposed Intervenor
Ms Alice Carver, Nelson & Co., for Cayman Management Ltd. (“CML”) and Wheels Up, Ltd (“Wheels Up”)
The Judgment Creditors are administrators of the estate of the late former wife of the Judgment Debtor. They divorced on July 16, 2015, and the Judgment Debtor was ordered to pay the Deceased US$2.5 million. Following her death on July 31, 2016, the Judgment Debtor ceased making the payments ordered by the Circuit Court, Fourth Judicial Circuit, Duval County (the “Florida Court”). On October 30, 2018, I granted a freezing order against the Judgment Debtor (“Freezing Order”) and on the same date the Writ which formally commenced the present proceedings was filed. The Freezing Order was continued on the Return Date until January 13, 2021.
In an ex tempore Ruling dated February 7, 2019, I dismissed the Judgment Debtor's jurisdictional challenge which was supported by his sworn assertion that he owned no assets in the Cayman Islands at that time. That decision was not appealed and on February 20, 2019, the Judgment Creditors were granted judgment in default of acknowledgement of service in the principal amount of US$558,828.82, plus interest. On September 6, 2019, a further judgment in default was obtained for the principal amount of US239, 416.82. On July 18, 2019, the Judgment Creditors obtained a Norwich Pharmacal Order against RBC which was believed to hold accounts linked to the Judgment Debtor.
On October 16, 2019, the Judgment Creditors applied by Summons to appoint receivers in aid of execution. Richard Lewis and Andrew Childe of FFP Limited were appointed as receivers on January 13, 2020 (the “Receivers”). Their investigations revealed that a St Kitts & Nevis company, JG Wheels Up LLC., beneficially owned by the Judgment Debtor had (through his interest in the John G Schanck Revocable Living Trust (the “JGS Trust”)) opened an investment account with RBC in the Cayman Islands in August 2016. The Judgment Debtor had deposited cash and securities in this account, acting either personally or through entities he controlled. In August 2017, this account was replaced with a new account held by a Cayman Islands company, Wheels Up, Ltd.
On November 6, 2018, the Receivers further told the Court, RBC Dominion Securities Global Limited (“RBC”), which had recently been served with the Freezing Order made by me roughly a week before, was requested by Wheels Up to transfer US$250,000 to an account in the name of the Judgment Debtor. This request was very properly refused by RBC. It is noteworthy that emails revealed that the request was made less than an hour after the Judgment Creditors' Florida attorneys had notified the Judgment Debtor's Florida attorneys of the Freezing Order. On June 18, 2019, the Judgment Debtor executed a Deed of Resettlement purportedly resettling the JGS Trust as a Cook Islands trust, Zhavorsa Glass Trust (“ZGT”). On or about September 13, 2019, the Judgment Debtor was served with the second Default Judgment. On September 16, 2019, he executed a Wheels Up Share Transfer instrument as Trustee of the JGS Trust purporting to transfer the 1000 shares in Wheels Up (the “Shares”) to the Nevis-based Zhauorsa Vorsa Trust, registered in Nevis on June 27, 2019 (“ZVT”). On September 24, 2019, the Nevisian Trustee of ZVT requested G.P. Limited (“GP”) as Director and CML as Secretary of Wheels Up to register the September 16, 2019 share transfer. This request was denied, not (ostensibly) because of the Freezing Order, but for customer due diligence reasons.
It was against this background that the Judgment Creditors applied by Summons dated June 3, 2020 for an Order (in summary):
-
(1) transferring the 1000 shares in Wheels Up to the Receivers, on the basis that these assets are covered by the Receivership Order;
-
(2) transferring all assets in the RBC account to the Receivers, on the basis that these assets are covered by the Receivership Order, with any assets that cannot be transferred to be liquidated by RBC;
-
(3) empowering the Receivers, at their sole discretion, to become signatories to any relevant accounts at RBC;
-
(4) assigning and/or delegating to the Receivers all powers enjoyed by the Judgment Debtor under the JGS Trust in relation to the assets for the purposes of enforcing the Judgments;
-
(5) authorising the Receivers to settle any liabilities owed to or claims made by CML;
-
(6) ordering the Judgment Debtor to pay the costs of the application to be taxed on the indemnity basis.
It appeared on the eve of the hearing that the application would not be opposed by the Judgment Debtor. It seemed that CML and Wheels Up would simply be appearing to address the Court (a) on the form of order to be made and (b) to seek an immediate costs award in their favour. On June 13, 2020, the Trustee of ZVT confirmed that it would not be participating in the hearing of the June 3, 2020 Summons. However, in the Third Affidavit of Andrew Childe sworn on the last working day before the hearing, it was deposed that Jackson Russell, a New Zealand law firm, had on July 15, 2020 written to CML on behalf of Ora Trustees Limited (“Ora”). Ora was said to be the Trustee of ZGT. ZGT had apparently been registered as a Cook Islands Trust on June 18, 2019, which is the same date that the Judgment Debtor purportedly resettled the JGS Trust as ZGT. Ora asserted that “ZGT regards itself as the legal owner of the Wheels Up shares”, by virtue of the Resettlement of the JGS Trust as ZGT on June 18, 2019. Campbells by letter dated July 16, 2020 to Jackson Russell warned that the ZGT claim was misconceived in light of the Freezing Order and the Receivership Order and that the July 23, 2020 hearing would proceed. Nelsons, on behalf of CML, responded (on July 17, 2020) that the Judgment Debtor had in September 19, 2019 given contrary instructions about the same shares.
It was against this further background that Mr Akiwumi made a dramatic late entrance to the stage, not instructed to rescue a delinquent debtor in distress, but rather to seek an oral adjournment on behalf ZGT, a party whose connections with the present application seemed at first blush to be very tenuous indeed. The application was advanced with such calm conviction that I was persuaded, despite my strong provisional view that the application to adjourn should be summarily dismissed, to reserve judgment on both the merits of the Judgment Creditors' Summons and ZGT's adjournment application. The instinctive feeling that ZGT lacked sufficient standing to intervene was not anchored to a solid understanding of what the underlying ownership rights actually were.
I also reserved judgment because I lacked an intuitive grasp of the principles governing the precise form of relief which was sought. The controversy between the Judgment Creditors and CML/Wheels Up as to what form of order was appropriate turned in large part on whether the Judgment Debtor should be found to own the Wheels Up assets or whether piercing the corporate veil was an available alternative remedy. The ownership question was complicated by the unexpected ZGT claim. Finally, Ms Carver's submissions in relation to the costs and expenses of CML/Wheels were not easy to summarily resolve.
The Freezing Order most importantly for present purposes provided as follows:
“A PROHIBITION AGAINST DISPOSAL OF ASSETS
3 The Defendant must not remove from the Cayman Islands any of the assets referred to in Paragraph 5 below which are in the Cayman Islands, whether in his own name or not and whether solely or jointly owned.
4 Paragraph 3 above applies to all the Defendant's assets whether or not they are in his own name and whether they are solely or jointly owned. For the purpose of this order the Defendant's assets include any asset which he has the power, directly or indirectly, to dispose of or deal with as if it were his own. The Defendant is to be regarded as having such power if a third party holds or controls the assets in accordance with his direct or indirect instructions.
5 This prohibition includes the following assets in particular…”
The drafting is (in hindsight) mildly askew; the reference in paragraph 3 to paragraph 5 is anomalous. But paragraphs 3 and 4 the Freezing Order clearly prohibited the then Defendant from removing any of his assets from the Cayman Islands “whether or not they are in his own name”. Paragraph 5 identified particular assets, all securities, which the then Plaintiffs were aware of at that stage had been transferred to a Cayman Islands account. This “extended definition of assets” 1 is only engaged in relation to assets over which the Defendant “has the power, directly...
To continue reading
Request your trial