Spanish Steps Holdings Ltd v Point Investments Ltd

• Jurisdiction: Bermuda
• Judgment Date: 17 November 2021
• Docket Number: Commercial Jurisdiction 2020 No 300
• Court: Supreme Court (Bermuda)

Between:

Spanish Steps Holdings Ltd

Petitioner

and

Point Investments Ltd

Respondent

[2021] Bda LR 97

Commercial Jurisdiction 2020 No 300

In The Supreme Court of Bermuda

Appointment of joint provisional liquidators — Validation order — Company owned by trustee of trust involved in extensive litigation

The following cases were referred to in the judgment:

Raswant v Centaur Ventures Ltd [2019] Bda LR 67

Westport Trust Co Ltd v Paragon Trust Ltd [2010] Bda LR 35

Mr K Robinson for the Petitioner

Mr M Diel, Ms K Tornari and Mr C Snell for the Respondent

JUDGMENT of Hargun CJ

Introduction

1. At the conclusion of the hearing on 29 October 2021 the Court ordered that Andrew Childe and Richard Lewis of FFP Limited, Cayman Islands and Mathew Clingerman of Krys Global, Bermuda be appointed as Joint Provisional Liquidators (“JPLs”) of Point Investments, Ltd (“the Respondent”) and that the powers of JPLs shall not be limited, pursuant to section 170(3) of the Companies Act 1981 (“the Act”).

2. This Judgment sets out the Court's reasons for the appointment of JPLs and also deals with the Respondent's application seeking, inter alia, a validation order pursuant to section 166(1) of the Act.

3. In support of these applications the Petitioner relied upon three affidavits of Kiernan Jane Bell, a former director of the Petitioner, and three affidavits of Peter Goddard, a director of BCT Directors Limited, which is now the sole director of the Petitioner. The Respondent relied upon seven affidavits of James Alexander Fortescue Watlington, a director of the Respondent.

Background

4. The background to these winding up proceedings is helpfully set out in the written submissions prepared by Mr Robinson on behalf of the Petitioner.

5. The Petitioner is ultimately wholly owned by the trustee of the A. Eugene Brockman Charitable Trust (“the Trust”). While the Respondent commenced its existence as a BVI company, it became a Bermuda company on 30 November 2009. The Respondent is thus a corporate investment vehicle for the Petitioner and ultimately the Trust. It continues to hold at the date hereof extremely valuable assets (in the region of US$1.8 billion) the vast majority of which are represented by investments in Cayman Islands funds.

6. The share structure of the Company is unusual and means that the Petitioner, while holder of all of the economic interest in the Respondent (save for US$100) represented by 4,900,000 common shares of par value US$0.001, has no right to vote its shares. The holder of the single “Manager Share” with par value of US$100 has all of the voting power (bye-law 4(1)).

7. The Trust has been embroiled in extensive litigation in Bermuda and the United Kingdom since 2018. The beneficiaries of the Trust are certain members of the Brockman family, including Robert Brockman, and charity.

8. The trustee of the Trust is BCT Limited (“BCT” or “the Trustee”) which is a controlled subsidiary of Maples FS Limited. BCT was appointed as trustee of the Trust in place of Medlands PCT Limited (“Medlands”) by Order of the Court of Appeal dated 2 February 2021 with its appointment to take effect on such date and on such terms as Justice Subair Williams was to appoint. Justice Subair Williams, by Order dated 26 March 2021, appointed 1 April 2021 as the date on which BCT would commence its trusteeship of the Trust. While BCT is a Cayman Islands company, it has irrevocably submitted to the jurisdiction of this Court with respect to the administration of the Trust.

9. The Petition was presented on 16 September 2020 at which point in time the shares of the Petitioner were ultimately held by Medlands as trustee of the Trust and the Board of the Petitioner was made up of Medlands' appointees. Medlands had also been appointed by Order of the Supreme Court dated 19 December 2019. Upon BCT's appointment as trustee, the Board of the Petitioner was changed and is now made up of BCT's nominees.

10. Medlands was appointed as trustee in place of St Johns Trust Company Limited (“SJTC”) which had been in office since 1995. By Order dated 19 December 2019 Subair Williams J declared that SJTC had not been properly appointed as trustee of the Trust and rather had at all material times been a trustee de son tort.

11. Prior to 28 September 2018, Mr Evatt Tamine had been a director of SJTC together with Mr James Gilbert. Mr Tamine was also, until 28 September 2018, a director of the Respondent. On that date, Mr Tamine resigned, inter alia, from these directorships. Mr Tamine had been a director of SJTC from 2010 until 28 September 2018 and the sole director of SJTC between 2013 and 23 June 2017.

12. While Mr Tamine had resigned his directorship of SJTC, he had not relinquished control of the shareholding of SJTC that was held via a Nevis company called Cabarita. In events which have been examined in the Judgment of this Court dated 26 March 2020 (2019 No. 447), Mr Tamine used his ultimate control of SJTC to appoint Mr James Watlington and Mr Glenn Ferguson as directors of SJTC. Messrs. Watlington, and Ferguson remain in this position today.

13. The Petitioner and BCT are pursuing proceedings in this Court against Mr Tamine and his associated company, Tangarra Consultants Limited (2018 No. 300), for the return of approximately US$28 million which it is alleged to have been taken wrongfully by Mr Tamine from the Trust while he had control over SJTC. Mr Tamine has denied any wrongdoing in this regard.

14. SJTC unsuccessfully appealed the order of 19 December 2019 to the Court of Appeal. It was in these Court of Appeal proceedings in which BCT was appointed as an independent fiduciary to take over the trusteeship. The Court of Appeal has dismissed SJTC's appeal with reasons which are awaited. Mr Tamine intervened in the Court of Appeal proceedings and supported SJTC's (unsuccessful) appeal.

15. SJTC has filed an application seeking leave to appeal to the Privy Council. Accordingly, the present position is that whilst Mr Watlington and Mr Ferguson are continuing with SJTC's proposed appeal (in which Marshall Diel & Myers Limited (“MDM”) are SJTC's counsel) by which they seek to remove BCT as trustee of the Trust, they also remain the sole directors of the Company and thus control one of the Trust's most valuable assets.

16. Mr Watlington and Mr Ferguson also owe their position as directors of the Respondent to Mr Tamine, mirroring the position with SJTC. The holder of the Manager Share in the Respondent is another Nevis company, Point Investments LLC (“PI LLC”). The shares of PI LLC are held by the Point Purpose Trust the trustee of which the Petitioner understands to be or to be controlled by Mr Tamine.

17. Mr Tamine has denied in correspondence that the Manager Share is held ultimately and beneficially for the Trust but does accept that the Respondent is an asset of the Trust. In a memorandum sent by Mr Tamine, in his capacity as a director of the Respondent, to PwC dated 13 August 2017 Mr Tamine advised PwC that “Point Investments Limited … is a closely held investment vehicle for Spanish Steps Holdings Ltd, which in turn is an asset and investment holding vehicle for the A. Eugene Brockman Charitable Trust.”

18. Mr Tamine is presently a co-operating witness with the United States Department of Justice in respect of the prosecution of one of the beneficiaries of the Trust, Mr Robert Brockman. It appears that Mr Tamine has received immunity from prosecution by the United States' authorities.

19. The directors of the Respondent have made it clear in the affidavit evidence filed by Mr Watlington that they consider that it is their duty to remain in office so that they, rather than the JPLs as officers of the Court, can deal with any claim, which has yet to be brought, but which may be brought by the United States authorities against the Respondent.

The Petition

20. The winding up Petition in this matter was presented by the Petitioner on 16 September 2020. The Court should note that there is an outstanding application filed by the Respondent on 11 August 2021 seeking a declaration that the parties agreed that the Petition will be withdrawn and in the circumstances the Court should either dismiss or alternatively strike out these proceedings on the grounds that they or vexatious and/or an abuse of process. Mr Watlington in his third affidavit accepts that it would be open to the Petitioner to withdraw this Petition, on the terms agreed inter partes in December 2020 and file a fresh Petition making the same allegations.

21. It appears to the Court that it is a pointless exercise to require the Petitioner to withdraw this Petition and to refile a fresh Petition in identical terms. Such a course would be wholly wasteful of the parties' resources and contrary to the Overriding Objective. The Court of course accepts that the Respondent may wish to, if so advised, pursue an application for wasted costs or agreed costs arising out of the alleged agreement to withdraw the Petition.

22. The Court should also mention that there is an outstanding application dated 11 August 2021 seeking leave to amend the Petition. Some of the proposed amendments seek to update the Petition to plead circumstances giving rise to change of control over the Petitioner.

23. Paragraph 19A of the draft Amended Petition pleads that, subsequent to BCT's appointment, it called upon Mr Tamine (via his ultimate control of the holder of the Manager Share in the Respondent) to transfer the Manager Share to a nominee of BCT's choosing. Mr Tamine has refused to do so asserting that BCT has no right to demand the transfer of Manager Share and asserting that his role in respect of the Manager Share did not arise as a result of his role as a director of SJTC.

24. Paragraphs 57–59 of the draft Amended Petition plead that by letter dated 12 May 2021 MDM forwarded to the Petitioner's counsel a letter from Mr Tamine's counsel by which he asked for an indemnity...