Stephen John Hunt v Transworld Payment Solutions U.K. Ltd

• Jurisdiction: Bermuda
• Judge: Hargun,Chief Justice Hargun
• Judgment Date: 06 March 2020
• Neutral Citation: [2020] SC Bda 14 Com
• Date: 06 March 2020
• Docket Number: CIVIL JURISDICTION 2019: No. 238,CIVIL JURISDICTION
• Court: Supreme Court (Bermuda)

In the Matter of the Companies Act 1981

And in the Matter of Transworld Payment Solutions U.K. Limited (In Liquidation)

Between:

Stephen John Hunt

Applicant

and

Transworld Payment Solutions U.K. Limited

(In Liquidation)

Respondent

[2020] SC (Bda) 14 Com

Before:

Hon. Chief Justice Hargun

CIVIL JURISDICTION

2019: No. 238

In The Supreme Court of Bermuda

Cross-border insolvency; recognition of a liquidator appointed in the jurisdiction of incorporation of the company; application to set aside the recognition order on the ground that the purpose of such recognition was to obtain evidence in relation to contemplated proceedings in a foreign court; alleged failure to make full and frank disclosure at the application to obtain the recognition order

Appearances:

Mr Lewis Preston, Kennedys Chudleigh Ltd, for the Applicant

Mr Tom Smith QC, Mr Keith Robinson, Carey Olsen Bermuda Limited, for Transworld Payment Solutions Limited

Introduction

1 On 19 July 2019 the Court made an ex parte Order that the appointment on 17 November 2014 in England and Wales of Stephen John Hunt, a partner of Griffins, (the “Liquidator”) as liquidator of Transworld Payment Solutions U.K. Limited (the “ Company”) pursuant to a compulsory winding up Order made in the High Court of England and Wales on 22 September 2014, be recognised in this jurisdiction.

2 The Court also made an order that, save with the leave of the Court or with the consent of the Company:

• 1. No proceedings may be commenced within the jurisdiction of the Court for the winding up of the Company;

• 2. No receiver or administrative receiver over any part of the property or undertaking of the Company within the jurisdiction shall be appointed;

• 3. No attachment, sequestration, distress or execution shall be put in force against the property or effects of the Company within this jurisdiction;

• 4. Where any claim against the Company secured by a charge on the whole or any part of the property, effects or income of the Company within this jurisdiction, no action may be taken to realise the whole or any part of such security;

• 5. No steps may be taken to repossess goods within the jurisdiction in the Company's possession under any hire purchase agreement; and

• 6. No proceedings within this jurisdiction may be commenced or continued in relation to the Company by any person other than the Liquidator or the Company.

3 By summons dated 11 October 2019, Transworld Payment Solutions Limited ( “TWPS”), a company incorporated in Bermuda, applies for an order discharging the ex parte Order made by the Court on 19 July 2019 on the grounds that:

• 1. The recognition of Mr Hunt's appointment in Bermuda is inappropriate and would serve no legitimate purpose because the principal purpose of the recognition is to facilitate the use of the powers of the Bermudian Court for information gathering, but the Bermudian Court would be bound to refuse such a relief since the information is sought in support of litigation which Mr Hunt has already determined to bring.

• 2. Further, the information requests are barred by the terms of certain settlement agreements entered into by Mr Hunt and the issue as to the effect of these agreements is presently pending before the Curaçao courts.

• 3. There was a breach by Mr Hunt of his duty to provide full and frank disclosure at the hearing at which the ex parte Order was made.

The Background

4 The background to this matter is set out in the First Affidavit of Richard Charles East dated 11 September 2019 sworn on behalf of TWPS. The Company is one of a number of Transworld companies which are ultimately owned by Mr John Deuss. Through his ownership of Transworld Energy Limited (“ TEL”), which is a Bermuda entity, Mr Deuss was the ultimate beneficial owner of the Company. Mr Deuss was not at any stage a director, officer, employee, consultant or agent of the Company.

5 Mr Deuss was also the President and CEO of the First Curaçao International Bank NV (“ FCIB”). FCIB was formerly a commercial bank in Curaçao and has been subject to a statutory winding down mechanism since 2006. As part of this procedure, the Central Bank of Curaçao and Sint Maarten (“ CBCS”) exercises FCIB's managing and supervisory powers through proxy holders who were appointed on its behalf to run FCIB. Pursuant to a service agreement with FCIB, prior to 2006, the Company introduced prospective customers and intermediaries to FCIB and its products and services.

The Missing Trader Intra-Community Fraud

6 Before this Court Mr Hunt maintains that the Company has been presented with a number of claims from companies involved in the missing trader intra-community fraud (“ MTIC”) VAT fraud. In short, MTIC fraud involves the theft of VAT from the government by exploiting the differences in how VAT is treated in different jurisdictions. In simple MTIC cases, fraudsters sell the goods and charged the VAT to buyers without remitting the value to the tax authorities. In more complex cases, known as carousel frauds, the goods are imported and sold through a series of companies before being exported again with the first company in the domestic chain charging VAT to a customer, but not paying this to the government, becoming what is known as a “missing trader”. The subsequent exporters of these goods then claim and receive the reimbursement of VAT payments that never occurred.

7 In the present case, it has been alleged that the fraud was facilitated by the banking services provided by FCIB. It is also said that the Company has liability “ for dishonestly assisting in the frauds by, amongst other things, “on boarding” them as customers of FCIB without conducting effective due diligence and without properly carrying out the compliance duties assigned to the Company by FCIB”.

The Earlier Settlement Agreements

8 TWPS considers the proposed claims to be particularly surprising as Mr Hunt has previously participated in settlement arrangements with FCIB (and it is asserted by extension, Mr Deuss) concerning the same MTIC fraud.

9 Mr East explains that the British authorities' investigations into some of FCIB's customers for MTIC fraud led to the British authorities asking the Dutch authorities to investigate and prosecute FCIB in connection with the alleged MTIC fraud, to which the Dutch public prosecutor agreed. Since FCIB could no longer function as a bank because of the actions of the Dutch public prosecutor, FCIB voluntarily underwent “emergency measures” whereby it was subject to the direct control of the CBCS and wound down. There arose the question of what to do about the account balances of the companies that had engaged in MTIC fraud, many of which were placed into liquidation on account of the sums owed to HMRC. Whilst the companies sought access to the deposits held on their behalf, FCIB sought recompense for the companies' role in its collapse.

10 Both Mr Hunt and his colleague at Griffins, Mr Bramston, are, or have been, liquidators (both jointly and individually) of a number of these companies that allegedly engaged in the MTIC fraud and held accounts at FCIB (the “ Griffins Companies”). Throughout 2014, Mr Hunt, Mr Bramston and/or their English solicitors took the lead to engage in negotiations with FCIB and the Central Bank in respect of the Griffins Companies' involvement in MTIC fraud. There were other companies in a position similar to that of Griffins Companies that were in liquidation and their respective insolvency practitioners (from firms such as Baker Tilly, Grant Thornton and Kingston Smith) also participated in parallel negotiations throughout 2014. These negotiations culminated in a series of settlements entered into on or about 6 February 2015 (the “ Settlement Agreements”) between, inter alia, the Griffins Companies and their officeholders and FCIB under which the companies released FCIB and related parties from any and all claims and demands in exchange for receiving a percentage of account balances held at FCIB.

11 Mr East contends that the intended effect of the Settlement Agreements was to release, inter alia, FCIB, its former officers, directors and employees, and any corporation or entity under common control with any of them from any new claims or demands, such as requests for examination, from insolvency practitioners such as Mr Hunt or Mr Bramston. The IP Settlement Agreements, which are subject to Curaçao law and the jurisdiction of the Curaçao courts, were entered into almost a year before the present claims were asserted on behalf of the Company.

The Appointment of Mr Hunt as the Liquidator

12 The appointment of Mr Hunt, as the liquidator of the Company, took place in unusual circumstances. On 27 May 2010, the directors of the Company applied for voluntary striking off under section 1003 of the English Companies Act 2006. On 5 October 2010, pursuant to that application, the Company was dissolved. Mr East explains that unbeknownst to the directors of the Company, Chubb Electronic Security Ltd (“ Chubb”) had obtained a judgment in default in the sum of £1,833.06 in the Kingston-upon-Thames County Court on 26 May 2010.

13 On 27 June 2014, and for reasons that remain unclear to TWPS, the judgment debt is said to have been assigned by Chubb to TC Catering Supplies Limited (in liquidation) (“ TC Catering”). Mr Bramston of Griffins was the liquidator of TC Catering at the time and has since been replaced by Mr Kevin Goldfarb, also of Griffins. Instead of approaching the former directors of the Company with a request to pay the £1,833.06 judgment debt, in a petition dated 6 August 2014, TC Catering applied to restore the Company to the register of companies and to wind it up on the basis that the judgment debt assigned by Chubb remained outstanding. Mr Bramston paid £1, 250 (by way of deposit for the winding up petition) in respect of the recovery of the debt of £1,833.06. On 22 September 2014,...