Exclusive Holidays of Elegance Ltd v ARC Systems Ltd

• Jurisdiction: Jamaica
• Judge: Batts J.
• Judgment Date: 07 May 2021
• Court: Supreme Court (Jamaica)
• Docket Number: CLAIM NO. SU2019IS00003

[2021] JMCC Comm 14

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

CLAIM NO. SU2019IS00003

In the Matter of Sections 213A(3)(b), 213B, 220 & 222 of the Companies Act

and

In the matter of Sections 58 & 71 of the Insolvency Act

and

In the matter of an Application by Exclusive Holidays of Elegance Limited for an Order to Wind up ARC SYSTEMS LIMITED or for an Order appointing a Receiver/Manager.

Between

Exclusive Holidays of Elegance Limited

Applicant

and

ARC Systems Limited

Respondent

Gordon Robinson and Keri Walcott instructed by Winsome Marsh for Applicant.

Lloyd Barnett, Jacqueline Cummings, Gillian Burgess, Debbie Ann Gordon, Clifton Campbell and Stephanie Sterling instructed by Archer Cummings & Co. for the Respondent.

Ariel Von Corke and Fayola Evans Roberts for Supervisor of Insolvency.

Nicola-Ann Brown Pinnock and Gabrielle Munza for the Government Trustee.

Howard Harris, Stacy Mitchell, Anisha Brown and Rachel Lodge instructed by Foga Daley & Co. for the Intervenor, Atradius Credit Insurance N.V.

Maurice Manning QC instructed by Nunes Scholefield Deleon & Co. for Mr. Kenneth Tomlinson (Interim Receiver).

Insolvency — Application to Appoint Receiver — Judgment creditors unpaid — Whether Respondent “ceases to meet liabilities generally as they become due” — Whether act of bankruptcy occurred within 6 months immediately preceding filing of claim — Whether continuing act of bankruptcy — Whether claim form properly constituted — Whether Applicant in liquidation at time claim filed — Whether claim therefore null and void and to be struck out — Interim Receiver's report — Whether evidence of fraudulent preference — Whether court to act at this stage.

In Open Court

Coram: Batts J.

Preliminaries

1 On the 20 ^th June 2019 this Fixed Date Claim was listed as a hearing in Chambers. I adjourned it into open court as matters concerning bankruptcy and winding up ought, in the public interest and unless there are compelling reasons to the contrary, to be heard in public. There was no objection to this course of action and the 12 ^th July 2019 was fixed for the hearing.

2 On that date Mr. Howard Harris appeared on behalf of Atradius Credit Insurance N.V. He sought leave to intervene and asserted that his client was a judgment creditor who had seen the matter reported on in the newspapers. Over the objection of the Respondent I, acceded to the application and, granted the intervenor permission to file an affidavit which was done, see the affidavit filed on the 26 ^th August 2019 and sworn to by Karl Patrik Olsson. My reason for allowing the intervention is simply that proceedings in bankruptcy and for winding up are held in public for that very reason. That is to allow any person with an interest to attend, state their case, and thereby seek relief.

Point in Limine

3 On the 12 ^th July 2019, also, the Respondent made an application to strike out the proceedings. The application was based on the standing of the Applicant. The Respondent asserted that two orders to wind up had been made against the Applicant, in other proceedings, and had not been discharged. It was contended further that, by failing to disclose the existence of the winding up orders, the Applicant had committed an act of material non-disclosure. The application to wind up the Respondent should therefore be dismissed.

4 Having heard submissions from all parties I dismissed the preliminary point. The two orders, for liquidation of the Applicant, are found at Tab E (the 2003 order) and Tab O (the 2014 order) of the Bundle. Miss Debbie Ann Gordon, who argued the point, submitted that only the liquidator, and in his absence the Trustee in Bankruptcy, could commence a claim in the name of a company in liquidation. Liquidation she reminded us commences from the date of the filing of the petition. She pointed to the letter dated 8 ^th July 2019 from the Government Trustee, exhibit SB 2 to the further affidavit of Sholton Brown dated the 11 ^th July 2019, and submitted that the appointment of a liquidator not having been revoked this action is null and void. Counsel further submitted that the Trustee cannot continue a claim commenced ultra vires and relied on sections 227(2), 264 and, 312 of the Companies Act. Mr. Gordon Robinson submitted, on the other hand, that the winding up order was never enforced. It was never even served on the Government Trustee or the company. The petitioner, in the 2014 proceedings, was represented by Nigel Jones & Co who had negotiated and obtained a payment which discharged the debt, see affidavit of Okelia A. Parredon filed on the 2 ^nd July 2019 with attached exhibits. Even assuming that there is a defect in proceedings, Mr. Robinson submitted, this litigation is an asset of the Company which the liquidator/Trustee in Bankruptcy has a right to continue. He relied on Section 228 of the Companies Act. As regards non-disclosure Mr. Robinson indicated that his client could have no duty to disclose that of which they were unaware.

5 Messrs. Manning and Harris joined with Mr. Robinson's submissions. Mrs. Brown — Pinnock for the Government Trustee submitted that her office had no interest in the matter. Her office had never been served with the order of 2014. They became aware of it in 2016 by email communication from an alleged creditor. The Trustee at that time by letter dated 28 ^th July 2016 referred the alleged creditor to Messrs. Nigel Jones & Co., see exhibit NBP5 to the affidavit of Nicola -Ann Brown Pinnock filed on the 11 ^th July 2019. The files of the Government Trustee therefore remained open. She referenced sections 228 (2) and 227(2) of the Companies Act and rule 42.8 of the Civil Procedure Rules (hereinafter referred to as the CPR) to support a submission that a winding up order takes effect from the date it was made. As regards the present proceedings the Trustee indicated a desire to seek to intervene with a view to continuing the matter.

6 My ex tempore ruling, and the reasons stated at the time, were as follows:

“The application to set aside the appointment of the interim receiver is refused because:

• a) I find there was no material non-disclosure. The 2003 Order was stayed and, although the 2014 Order was not, it was not served and there is no evidence as to actual knowledge.

• b) The 2003 Order having been “stayed altogether' is no longer effective and is not a bar to the company pursuing this application.

• c) The 2014 Order however remains valid unless and until set aside. The failure of the Petitioner in 2013HC V06734 to serve it, in accordance with section 228(1) of the Companies Act, does not render the order of the court nugatory. On the other hand, the company not having been served; as also the Registrar of Companies not having been served and the company having settled that debt; clearly did not “wilfully” act in breach of section 229, which prohibits the commencement of proceedings without the leave of the Court. If necessary, it is manifest that leave to commence and/or continue these proceedings will be granted.

• d) The Order to wind up however remains valid until set aside. The court cannot ignore the existence of this order. The Trustee in Bankruptcy is therefore authorised to associate itself with the continuation of this claim.

• e) The Trustee in Bankruptcy having indicated its intention to continue the Claim, if necessary, I grant such permission.

7 After having heard further submissions on costs I ordered that costs of the day and costs thrown away were to be paid by the Respondent. The costs were to be taxed forthwith if not agreed. The Applicant, as well as the respective clients of Mr. Manning and Mr. Harris were also beneficiaries of the costs order. The Trustee indicated that she wished no costs awarded in her favour. Permission to appeal was requested and refused.

The Substantive Hearing

8 The substantive hearing resumed on the 24 ^th July 2019. On this occasion Dr. Lloyd Barnett, Jacqueline Cummings, Debbie Ann Gordon and Gillian Burgess appeared instructed by Archer Cummings & Co. for the Respondent. The appearances for the other parties remained the same.

9 Mr. Robinson opened the case for the Applicant by stating his reliance on written submissions filed on the 18 ^th June 2019. He indicated that the only remedy being pursued was a receiving order pursuant to section 58 of the Insolvency Act and that sections 57 (1) (c) and (j) were being prayed in aid. He submitted that the acts of bankruptcy were continuing acts and did not cease the day after the judgment was entered. The Respondent, submitted Mr. Robinson, had ceased to honour its liabilities. In this regard he referred to the affidavit of Sholton Brown filed on the 16 ^th May 2019 at paragraph 13. He submitted that if, which is denied, the Respondent was not trading and owned no assets the evidence was clear that the company had been stripped of assets to avoid its lawful debts. He relied on the reports of the interim receiver to support the latter submission.

The Evidence

10 The affiants were then made available for cross-examination on their respective affidavits. I will briefly review the evidence. Mr. Fred Smith swore affidavits filed on 29 ^th March 2019, 13^th June 2019 and, 14 ^th June 2019. He is a director of the Applicant (Exclusive Holidays of Elegance). He outlines the fact that in the year 2014 the Applicant commenced a suit against the Respondent (claim 2014CD00095) and, on 11 ^th July 2017, obtained summary judgment in the amount of $25,835,040.00 with costs to be agreed or taxed. The judgment was served by registered post on the Respondent under cover of letter dated 31 ^st October 2018. The judgment remains unsatisfied. In paragraph 8 of his affidavit filed on 29 ^th March 2019 Mr Fred Smith states in part:

“… The Applicant has reason to believe that the Respondent's principals have formed associated companies and are in the process...