Akai Holdings Ltd (in Compulsory Liquidation) v Brinlow Investments Ltd and Others
| Jurisdiction | British Virgin Islands |
| Judge | HARIPRASHAD-CHARLES J |
| Judgment Date | 01 November 2006 |
| Docket Number | Claim No. BVIHCV2006/0134 |
| Court | High Court (British Virgin Islands) |
| Date | 01 November 2006 |
THE EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE (CIVIL)
Before: Her Ladyship Justice Indra Hariprashad—Charles
Claim No. BVIHCV2006/0134
In the matter of Independent Enterprises Limited
And in the matter of the International Business Companies Act, Cap. 291
And in the matter of the Insolvency Act, 2003
1. Re Rodencroft [2004] EWHC 862 Ch D.
2. Twinsectra Ltd v Yardley [2002] AC 164 [2002] AC 164.
3. Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37—Judgment delivered on 10 October 2005.
4. Ebrahimi v Westbourne Galleries Ltd [1973] A.C. 360.
5. Choon v Tahansan Sdn. Bhd. (Privy Council Appeal No. 8 of 1985).
6. Re Millennium Advanced Technology Ltd [2004] 1 W.L.R. 2178.
7. Law Society v Sephton & Company (a firm) & others [2006] 2 WLR 109.
Commercial Law — Petition to wind-up company on just and equitable grounds — Whether applicant is a creditor — Dishonest assistance — is there sufficient evidence to wind up Company on just and equitable grounds
On 15 June 2006 at an exparte hearing the Court appointed joint provisional liquidators over several International Business Companies (‘IBC’) incorporated in the BVI. On 12 July 2006 the Court heard the application to appoint Joint Liquidators over all the IBC except International Enterprise Limited (‘IEL’). IEL applied at that hearing to discharge or stay the appointment of the joint provisional liquidators over it. On 14 July 2006 the Court appointed joint liquidators over the IBCs except IEL. In respect of IEL the order appointing joint provisional liquidators remained
On 25 July 2006 the Court heard the application to appoint joint liquidators over IEL. At the hearing, Akai asserted that it is a creditor of IEL because US$1 million was transferred from Akai to IEL without any commercial purpose and without consideration. Akai further contended that it was just and equitable to wind-up the company because of the massive fraud committed on the creditors of Akai. It argued that Mr. Tam, the beneficial owner and shareholder of IEL, had no locus to oppose a creditors petition on behalf of the company as IEL can only oppose the application by its directors and presently it has no directors as the two companies which were its directors are struck off the register of companies. Additionally he cannot oppose the application as a member unless he can show that the company is solvent. It was also argued that IEL dishonestly assisted Mr. Ting in placing funds out of the reach of creditors.
According to IEL, Akai is not its creditor because the US$1 million that was transferred to IEL from Akai through HIL was a repayment of a loan Mr. Tam made from lEL's account to Mr. Ting. He had paid the money to Evora as directed but did not know from where he was repaid. Akai has now stated that US$1 million was in fact transferred from IEL to Evora and then to Akai. US$1 million was subsequently transferred from Akai to HIL then to IEL. IEL submitted two resolutions, one removing the two companies that are struck off the register and appointing Mr. Tam as only Director and the other ratifying all acts taken in respect of this application.
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1. Pursuant to the resolutions, Mr. Tam is the director of IEL and is properly clothed to bring this application.
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2. The wish to investigate whether Akai had a claim is not a basis upon which to bring an application for the appointment of liquidators.
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3. Akai did not qualify as a ‘creditor’ pursuant to S.9 of the Insolvency Act as the allegations did not particularize any ‘claim’ with sufficiency or certainty for the purposes of the Insolvency Rules (R 184).
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4. The US$1 million was transferred from IEL to Evora then to Akai. It was subsequently transferred back to IEL through HIL. It therefore follows the US$1 million that is the subject of the debt was actually the return of money IEL transferred to Akai via Evora and is consistent with Mr. Tam's explanation for the transfer. Akai is therefore not a creditor of IEL.
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5. Akai has expressly abstained from making any allegations in evidence of dishonesty against either Mr. Tam or IEL, therefore Akai asserts no facts capable of supporting a claim that IEL (whether through Mr. Tam or otherwise) acted dishonestly according to the objective standard. Dishonesty means acting as an honest person would—an objective standard which is assessed in light of what an alleged “assister” or accessory actually knew at the relevant time, as distinct from what a reasonable person would have known or appreciated, taking into account any personal attributes of the alleged accessory such as his intelligence and experience and the reason why he acted as he did.
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6. It would be draconian to wind up IEL and to sound its death knell since there is no evidence to show that IEL was involved in any fraud, massive or otherwise.
The decisive issue in this application is whether or not Akai Holdings Limited (In Compulsory Liquidation) (‘Akai’) is a creditor of the 11th Respondent, Independent Enterprises Limited (‘IEL’).
On 9 June 2006, Akai applied to appoint liquidators over the Respondents which are International Business Companies incorporated in the British Virgin Islands including IEL on the grounds that it is just and equitable to do so. At an ex parte hearing on 15 June 2006, the Court appointed Mr. Meade Malone of MWM Corporate Services Limited, Geneva Place, Tortola, British Virgin Islands and Mr. Cosimo Borrelli of Alvarez & Marsal Asia Limited, Hong Kong to be Joint Provisional Liquidators until further hearing of the application on 12 July 2006.
On 12 July 2006, the Court had to consider two applications namely:
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a) an application by Akai to appoint Joint Liquidators over the 26 Respondents save IEL and
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b) an application by IEL to discharge or stay the appointment of the Joint Provisional Liquidators over it.
Judgment on both applications was reserved to 14 July 2006. On 14 July, the Court appointed Mr. Malone and Mr. Borrelli Joint Liquidators over the 26 Respondents on theground that it was just and equitable to do so. lEL's application to discharge or stay the appointment of Joint Provisional Liquidators was dismissed. The Order made on 15 June 2006 appointing Joint Provisional Liquidators over IEL still remains in place. In the interim, the Court fixed the substantive application for a hearing on 25 July 2006.
On 25 July 2006, the Court heard Akai's application for the appointment of Joint Liquidators over IEL on the ground that it is just and equitable to do so pursuant to section 162 (1) (b) of the Insolvency Act 2003 (‘the Act’). IEL fervently opposes the application. The crux of lEL's case is that Akai is not its creditor and therefore lacks standing to apply for a winding up order.
The evidence on behalf of Akai is contained in the 11th, 28th, 29th and 30th affidavits of Mr. Borrelli. The substance of Mr. Borrelli's evidence in respect of IEL is to be found in his 28th, 29th and 30th affidavits. The essence of Mr. Borrelli's 11th, 28th and 29th affidavits has already been encapsulated in a written judgment of this Court delivered on 21 July 2006. In a nutshell, they state that Mr. Tam held diverse executive positions within the Semi-Tech group of companies including (i) Executive Director and Chief Financial Controller of Akai from 1987 to November 1999; (ii) Director and Executive Vice President of Semi-Tech Corporation since 1987 and until after the Company's bankruptcy filing on 7 September 1999 and (iii) Director and Vice Chairman of The Singer Company N.V. from August 1991 to December 1997.
Mr. Borrelli states that the information available to the Liquidators indicates that Mr. Tam's role was to oversee all of the accounting and finance processes and procedures of the Companies in Canada and Hong Kong and held the title of ‘Finance Director’. Mr. Tam held various directorships of 14 companies in the Akai group and after Mr. Ting, together with Clara Loh, he was the next most senior executive involved in the affairs and operations of the Companies.1 In short, the Liquidators believe that Mr. Tam was closely involved in the implementation of and in the accounting for numerous suspicious
transactions. The Liquidators say that there is no evidence in Akai's books and records of IEL having any role in respect of Mr. Tam's compensation as suggested in his affidavits. Further, the financial statements of the Akai group for the year ending 31 January 1999 makes no reference to IEL or its role, either directly or indirectly.2The 30th affidavit of Mr. Borrelli was filed six days after this Court had dismissed lEL's application to discharge or stay the appointment of Joint Provisional Liquidators. Mr. Borrelli asserts that there is...
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