Belvedere Insurance Company Ltd ((in Liquidation)) v Caliban Holdings Ltd

• Jurisdiction: Bermuda
• Judgment Date: 30 March 2001
• Date: 30 March 2001
• Docket Number: Civil Appeal No. 15 of 2000
• Court: Court of Appeal (Bermuda)

The Court of Appeal for Bermuda

Astwood, P.

Clough, J.A.

Worrell, J.A.

Civil Appeal No. 15 of 2000

BETWEEN:

Belvedere Insurance Company Limited (In Liquidation)

Appellant

-and-

Caliban Holdings Limited

Respondent

Attride-Stirling & Woloniecki—Ms. Kehine A.L. George for the Appellants

Appleby Spurting & Kempe—Mr. J. Pachai—Attorneys for the Respondent

Attorney General v Mutual Tontine Westminster Chambers Association LtdELR [1876] 1 Ex D 469

Vickers Sons & Maxim Ltd v EvansELR [1910] AC 444

R v Immigration Appeal Tribunal ex parte JeyeanthanUNK [1999] 3 All ER 231

Petch v Gurney (Inspector of Taxes)UNK [1994] 3 All ER 731

Insurance Act 1978, s. 31C(4)

Dividend payment caused Belvedere to become insolvent — Approval by Minister for reduction of statutory capital — Retroactive approval — Strict compliance — Preliminary matter

JUDGMENT

Worrell, J.A.

Belvedere Insurance Company Limited (in liquidation) (‘Belvedere’) is an exempted company incorporated in Bermuda in 1978 and is licensed as a Class 3 insurer under the Insurance Act, 1978. Belvedere is the wholly owned subsidiary of Caliban Holdings Limited (‘Caliban’) which is also an exempted company incorporated in Bermuda.

On the 26^th of June, 1996 the Board of Directors of Belvedere declared a dividend of $2.2 million. On the same day the Board of Directors of Caliban declared a dividend of just over $2 million. The dividend declared by Belvedere was paid to Caliban on the 28^th June, 1996. On the same day Caliban paid the dividend it had declared on the 26^th June to its shareholders.

In June, 1997, Belvedere's auditors submitted its audited financial statements as at 31^st December, 1996. These statements showed that as a result of the dividend paid to Caliban, Belvedere's total statutory capital was reduced by $662,500, an amount in excess of 15% of the said capital. No ministerial approval was sought before the reduction of the total statutory capital as required by section 31C (4) of the Insurance Act, 1978.

In July, 1997, the President of Belvedere wrote to the Registrar of Companies requesting retroactive ministerial approval. He attributed the non-compliance with the section to an oversight on the part of the directors. In September, 1997, the Registrar of Companies replied to the President of Belvedere that the Minister of Finance had granted approval of payment of the dividend. Belvedere became insolvent as a result of the payment of this dividend and a winding-up order was made against it on the 9^th October, 1998, on the petition of the Registrar of Companies.

In March, 1999, Belvedere by its liquidators presented a petition for the winding-up of Caliban. In this petition it is alleged that Belvedere's insolvency resulted from the payment of the dividend of $2.2 million to Caliban in 1996. It is also alleged that Belvedere's failure to obtain the prior approval of the Minister of Finance rendered the payment of the dividend unlawful. Consequently, Caliban is liable to repay the dividend either in its entirety or at least the sum of $662,500. The petition further alleges that Caliban is insolvent and gives as the reasons; that Belvedere is the principal asset of Caliban...