Richard Fogerty (Joint Official Liquidator of Trade and Commerce Bank) v Island Point Properties SA

• Jurisdiction: British Virgin Islands
• Judge: Bannister J
• Judgment Date: 08 May 2009
• Docket Number: CLAIM NO. BVIHCV 2008/0259
• Court: High Court (British Virgin Islands)
• Date: 08 May 2009

IN THE EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE

CLAIM NO. BVIHCV 2008/0259

In the Matter of the Insolvency Act 2003

and

In the Matter of Island Point Properties SA

Between

Richard Fogerty (Joint Official Liquidator of Trade and Commerce Bank)

Applicant

and

Island Point Properties SA

Respondent

[Application for appointment of liquidator — statutory demand — whether statutory demand founded upon a debt due and payable at the time of the demand — IA 2003 s 155(2)(a) —whether still open to Respondent company to dispute the debt —Metalloyd Ltd. v Burwill Resources Ltd BVI HCV2006/0083 considered — whether sole shareholder has locus to oppose where Respondent company does not appear]

JUDGMENT IN OPEN COURT

1 Bannister J[ag]: This is an originating application issued on 28 August 2008 seeking the appointment of William Tacon and Richard Fogerty (“Mr Fogerty”) as joint liquidators of the respondent Island Point Properties SA (‘the company’). The application is made under section 162(1)(a) of the Insolvency Act 2003 (“the Act”) on the grounds of the company's insolvency and is founded on what is said to be an unsatisfied statutory demand in respect of which no, or at any rate no timely, application was made to have it set aside.

Bannister J

2 The original applicants were Mr Fogerty and Goronwy James Cleaver (“Mr Cleaver”), as Liquidators of Trade and Commerce Bank (“TCB”), but Mr Cleaver dropped out at some stage and the application is maintained by Mr Fogerty alone. Although it is clear that Mr Fogerty in his capacity as Liquidator of TCB has no personal standing to seek the winding up of the company, no point was taken on this and the hearing before me proceeded on the sensible footing that the real applicant is TCB.

3 TCB appears on the hearing by Ms Karen Troy with Mr Robert Nader. The company does not appear. Instead, one Jacob Ungar (“Mr Ungar”), who appears before me by Ms Robey and Mr Kenney, claims that he has standing to oppose the application on the grounds (a) that he is the sole shareholder of the company and (b) that he is a creditor in the sum of US$47,000. I can dispose of the latter contention at once by saying that when I asked Ms Robey what was the nature of Mr Ungar's debt and when it had been incurred by the company, she said that she had no instructions. I am not prepared to consider the opinions of someone claiming to be a creditor who neglects to put his counsel in possession of particulars of his debt. I ignore Mr Ungar's alleged standing as an opposing creditor.

4 So far as Mr Ungar's standing as a member is concerned, a mass of evidence was placed before me seeking to prove (1) on the part of Mr Ungar, that he is, by purchase, the solebeneficial owner of the company and (2) on the part of TCB that he is not. Although I read this evidence and received submissions upon it, I do not consider that an application for the appointment of a liquidator is the proper forum for the resolution of an issue such as this. It would be quite wrong for me to decide—or even to make any observations on—an issue which, if it is to be pursued, must be pursued in proceedings properly constituted for that purpose. For present purposes it is sufficient, in my judgment, that Mr Ungar has produced evidence that he is presently the sole registered shareholder of the company. He is thus entitled to the benefit of the presumption in section 42(1) of the Business Companies Act 2004 which, for the reasons I have just given, I am not prepared to go behind on this application.

5 Mr Ungar therefore satisfies me, for present purposes, that he is a member of the company. But Ms Troy says, and I agree with her, that in the absence of any other explanation, the failure of the company to contest these proceedings, while leaving its sole owner to oppose it in his character as a member, is nothing more than a forensic conjuring trick designed to avoid a perceived effect of the decision of Hariprashad-Charles J inMetalloyd Ltd. v Burwill Resources Ltd1 (“Metalloyd”) and that Mr Ungar has no standing as a mere member to challenge the validity of the demand or dispute the alleged debt.

6 In those circumstances, I expressed reservations, at the outset of the hearing, as to whether I should listen to submissions from Mr Ungar at all. Given the stage the proceedings had reached and given that she had already appeared in the case at an earlier stage, I decided that I would hear Ms Robeyde bene esse and I have been assisted by her submissions. It remains the case, however, that the application has never been opposed by the company and that is a fact that I have to keep in mind in deciding it. Mr Ungar has never had locus in his character as a member to apply to set aside the demand, because he is not the person who was served with it.2 Similarly, I very much doubt whether the court should entertain submissions from a member about the truth of a

person's claim to be a creditor of a company or about any dispute that the company might have had about a creditor's debt. That seems to me to be something for the company and its directors (and, perhaps, for other creditors), but not a matter on which members should ordinarily be entitled to be heard separately in their character as such. The approach of Lord Justice Giffard in re Times Life Assurance and Guarantee Company (1870) LR 5 Ch App 3813 seems to me to cover the point and to be correct in principle.

7 At the outset of the hearing Ms Troy applied for permission to amend the originating application to include reliance upon section 162(1)(b) of the Act—the just and equitable ground. I disallowed this amendment because it seemed to me that if Ms Troy established her debt and non-compliance with the statutory demand, then she was entitled (subject to the Court's residual discretion) to the order she seeks without additional specific reliance upon the just and equitable ground. Whatever the principal ground relied upon, the court never winds up a company otherwise than on the underlying ground that it is just and equitable to do so. If, on the other hand, Ms Troy failed to establish her debt and the insolvency of the company as a result of non-compliance with the statutory demand, then it did not seem to me that any stand alone just and equitable ground was available to her. The just and equitable ground in its stand alone role is a carry over from the law of partnership and is available to members of companies who are dissatisfied with the manner in which company's affairs are being conducted. Ms Troy sought to justify reliance on the just and equitable ground by asserting that there were matters about the company that cried out for investigation. That fact that there are matters to be investigated may persuade the court, in reliance upon the just and equitable ground in its ancillary sense, to make an order on a creditor's petition where opposing creditors, for example, urge that no order should be made, but the person invoking the ground in such circumstances must first establishlocus. If Ms Troy cannot establish locus as a creditor, she has no standing to invoke the just and equitable ground at all.

8 The statutory demand upon which TCB relies was dated 5 February 2008 and it is common ground that it was served at the company's registered office on the same day. It

appears that that address was also the address of the company's registered agent. It is not known whether the registered agent informed the directors of the company of the service of the statutory demand, but if it did, they took no steps on the company's behalf to have it set aside within the prescribed 14 day period. Mr Ungar says that he was unaware of the service of the statutory demand until about 18 March 2008, when the registered agents (mistakenly) informed him that the demand had been served on about 17 March 2008. He says that an application to set aside the statutory demand was afterwards made but subsequently withdrawn when it became clear that 5 February 2008 was the actual date of service.

9 The material parts of the statutory demand are as follows:

“The Creditor claims that the Company owes the sum of at least US$5,379,167.00, exclusive of interest…and that it is payable immediately and that such debt is unsecured.”

The “Particulars of Debt” supplied on page two of the demand are:

• “1. The Company is indebted to the Creditor in the total sum of at least US$5,379,176.00 (“the Debt”) as at the date of this demand, exclusive of interest.

• 2. The Creditor is a company placed into liquidation in the Cayman Islands on 29 August 2002. During the course of the liquidation, the liquidators of the Creditor have determined that, as at 28 February 2001, the sum of the Debt was owed to the Creditor by a third company: “Tarbet SA”. This liability is reflected on Tarbet SA's Balance sheet to 28 February 2001 (the “Balance Sheet”), a copy of which is attached to this Statutory Demand.

• 3. The Balance Sheet further indicates that Tarbet SA's total assets to February 2001 amounted to US$5,768,052.00 of which US$4,300,000.00 was comprised of property held by the Company.

• 4. The Balance Sheet also identifies the sum of US$1,326,674 as an asset—that sum being entered under the heading “External Debtors” and corresponding to an entry under the notes in the Balance Sheet by which “External Debtors” appears to be a description of the Company.

• 5. From investigations carried out by the liquidators of the Creditor, it appears that the sum of the Debt was gratuitously transferred by the Creditor to Tarbet SA and that this money was then used to purchase property which was held by the Company. The Company appears primarily to be a vehicle by which Tarbet SA purchased and held property. The Liquidators of the Creditor believe that the Company was the ultimate recipient of the sum of the Debt.

• 6. In the light of the...