Treehouse Investments Ltd v Carl Stuart Jackson

• Jurisdiction: British Virgin Islands
• Judge: Farara JA
• Judgment Date: 23 June 2022
• Judgment citation (vLex): [2022] ECSC J0623-2
• Docket Number: BVIHCMAP2021/0020
• Court: Court of Appeal (British Virgin Islands)
• Year: 2022

THE EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Before:

The Hon. Mde. Gertel Thom, Justice of Appeal

The Hon. Mr. Gerard St. C Farara, Justice of Appeal [Ag.]

The Hon. Mr. Trevor Ward, Justice of Appeal [Ag.]

BVIHCMAP2021/0020

Between:

[1] Treehouse Investments Limited

[2] GAC Holdings Limited

Appellants

and

[1] Carl Stuart Jackson

[2] Andrew Hosking

[3] Simon Bonney

[4] Greig Mitchell (In their Capacity as Joint Liquidators of Glen Moar Properties Limited (In Liquidation), Unicorn Worldwide Holdings Limited (In Liquidation), Ballaugh Holdings Limited (In Liquidation) and Sulby Investment Holdings Limited (In Liquidation)

Respondents

Appearances:

Mr. John McCarroll, SC for the Appellants

Mr. Andrew Willins for the Respondents

Interlocutory appeal — Joinder of parties — Section 273 of the Insolvency Act, 2003 — Whether the court had jurisdiction to make an order for joinder of parties in insolvency proceedings — Whether the judge erred on the hearing of the joinder application in proceeding to consider and to determine the merits of the section 273 application — Whether the judge erred in holding that the appellants were making the application to join in the section 273 Application not as aggrieved persons but for the ulterior motive and improper purpose of attempting to prevent the respondents from proceeding with the claim in the Isle of Man against Mr. Simon McNally — Whether the judge erred in holding that the section 273 application faces an uphill battle and was bound to fail on the basis that the joint liquidators were exercising their commercial assessment in bring the Ise of Man proceedings and the Court will only interfere if a high degree of unreasonability can be shown in their decision — Whether the judge erred in concluding that the more appropriate remedy in the circumstances was for the appellants to bring an application seeking the removal of the respondents as joint liquidators — Whether the judge erred in failing to order joinder having heard submissions as to the effect and scope of the rule in Cherry v. Boultbee — Whether the judge erred in refusing to join Treehouse Investments Limited on the ground that it was not a creditor because it had failed to produce a copy of its proof of debt in the liquidation

On 26 ^th May 2021, the appellants, Treehouse Investments Limited (“Treehouse”) and GAC Holdings Limited (“GACH”) made an application in the Commercial Division of the High Court to be joined as co-applicants (the “Joinder Application”) to an application filed on 19 ^th March 2021 by two directors, Simon John McNally, (“S McNally”) and Simon Nicholas Hope Cooper (“S Cooper”) (collectively “Messrs. McNally and Cooper”), of four companies in the Territory of the Virgin Islands (“BVI”), namely, Glen Moar Properties Limited, Unicorn Worldwide Holdings Limited (“Unicorn”), Ballaugh Holdings Limited and Sulby Investment Holdings Limited (collectively “the BVI Companies”), pursuant to section 273 of the Insolvency Act, 2003 (the “section 273 Application”).

The section 273 Application was brought against the respondents who are the joint liquidators (“the JLs”) of the BVI Companies and sought certain relief challenging the decision of the JLs to commence an action in the Isle of Man against Messrs. McNally and Cooper as defendants (“the Isle of Man Proceedings”). In the Ise of Man Proceedings, the Manx Claimants allege breaches, by Messrs. McNally and Cooper, of fiduciary duties which they owed as directors to each of the Manx Claimants. The reliefs sought include orders for the return of certain payments and/or distributions improperly made or their traceable proceeds (on the basis of a constructive trust); an account of any profits received by Messrs. McNally and Cooper in respect of such improper payments; equitable compensation and/or damages and/or restoration of payments against the first defendant S McNally in the aggregate sum of approximately £77.6 million, and against the second defendant S Cooper in the sum of approximately £11.6 million. A judgment in default was entered against the first defendant, S McNally, on 28 ^th September 2020, and is the subject of a set aside application.

By the Joinder Application, the appellants sought to be joined as co-applicants in the section 273 Application on the grounds that: (i) the appellants are both significant creditors in the liquidation of Unicorn and as such, have standing to bring an application pursuant to section 273 of the Insolvency Act; (ii) the grounds upon which the appellants seek to bring a section 273 Application “are the same as those asserted by [Messrs. McNally and Cooper] in the 273 Application”; (iii) in the interest of the appellants' claim and the Messrs. McNally and Cooper claim being dealt with expeditiously “it is appropriate for [the appellants] to be joined in the 273 Application”; and (iv) despite the appellants' joinder application having been prepared as expeditiously as possible it was not proper to serve the said application on the respondents ahead of the directions hearing scheduled for 26 ^th May 2021 and, accordingly, the court was requested to abridge time for service of the said application.

On 15 ^th June 2021, the learned judge heard an application previously filed by the JLs, seeking the court's sanction of their fees and remuneration in the Liquidation Proceedings (collectively “the Remuneration Application”). The appellants were given notice of the hearing of the Remuneration Application. At the said hearing, the judge agreed to hear, de bene esse, three “knock-out points” raised by counsel on behalf of the respondents and gave an ex tempore judgment (“the 15 ^th June 2021 judgment”). On the issue of whether Treehouse had standing to appear at the hearing of the Remuneration Application, the judge found that Treehouse had not only had the opportunity to submit a proof of debt in the liquidation of Unicorn, as they were required to do, but to produce or to file evidence that it had indeed done so. Accordingly, the learned judge, made the declaration that Treehouse does not have standing to appear at the hearing of the Remuneration Application, and directed that the said order not to be sealed for 7 days to enable Treehouse to file any evidence which establishes that it made a timeous claim in the liquidation of the Companies. Treehouse did not file any such evidence within the stipulated period in the 15 ^th June 2021 Order; and they had not done so by the hearing of the Joinder Application or up to the hearing of this appeal.

On 6 ^th July 2021, the judge heard the Joinder Application and found, in relation to Treehouse, that despite the period afforded to it by his 15 ^th June 2021 order to provide evidence of its proof of debt submitted in the liquidation of Unicorn, it had not done so, and it is, accordingly, debarred from making a claim in the liquidation of Unicorn. Accordingly, the judge concluded that Treehouse is not a creditor and has no locus standi to make an application under section 273 of the Insolvency Act, 2003. He therefore dismissed Treehouses' application to be joined as a co-claimant in the section 273 Application, it not being ‘a person aggrieved’ having standing to bring such an application against the JLs of the BVI Companies. The learned judge concluded that the application by GACH to be joined in the section 273 Application, was done for an ulterior and improper motive in seeking to join the section 273 Application and, in any event, the section 273 Application was hopeless. The judge, accordingly, directed that his order made on 15 ^th June 2021 be sealed.

Being dissatisfied, the appellants appealed against the order dated 6 ^th July 2021 dismissing the appellant's Joinder Application. The following issues arise for this Court's determination: (i) whether the judge erred in proceeding to seek to consider and to determine the merits of the section 273 Application on a procedural joinder application; (ii) whether the judge erred in holding that the appellants were making the application to join in the section 273 Application, not as aggrieved persons, but for the ulterior purpose of attempting to prevent the respondents from proceeding with the claim in the Isle of Man against Mr. Simon McNally; (iii) whether the judge erred in concluding that the section 273 Application was bound to fail as the appropriate remedy, having regard to the allegations of lack of bona fides made therein against the JLs, was not to invoke the court's supervisory powers under section 273, but to bring an application pursuant to section 187 of the Insolvency Act to remove the JLs.; (iv) whether GACH had satisfied the learned judge that its interest in joining the section 273 Application is aligned with the interests of the creditors of Unicorn, and is not adverse to such interest; and (v) whether Treehouse is a creditor in the liquidation of Unicorn. A preliminary issue also arises on the respondents' counter appeal as to whether the court had jurisdiction to make an order for joinder of parties in insolvency proceedings.

Held: dismissing the appeal, with costs to the respondents of no more than two–thirds of the costs in the court below, to be assessed by a judge of the Commercial Court if not agreed by the parties within 21 days, and dismissing the respondents' counter notice with no order as to costs, that:

• 1. Insolvency proceedings are a not ‘civil proceedings’. They are a specific type of legal proceedings governed by a discrete statutory regime under the Insolvency Act and the Insolvency Rules, 2005 in the BVI. There is no specific provision in the Insolvency Act or in the Insolvency Rules which addresses, concerns or confers on the court, whether substantively or procedurally, jurisdiction to order a joinder of parties in existing insolvency proceedings. Further, while by Rule 1 of the Insolvency Rules the provisions of the Civil Procedure...