THE REPUBLIC OF TRINIDAD AND TOBAGO IN THE HIGH COURT OF JUSTICE Claim No: CV 2012-04837 BETWEEN R. A. HOLDINGS LIMITED Claimant AND RAMDATH DAVE RAMPERSAD, LIQUIDATOR OF HINDU CREDIT UNION CO-OPERATIVE SOCIETY LIMITED Defendant Before the Honourable Mr Justice James C. Aboud Dated: 13 March 2014 Representation Mr Ravi Mungalsingh for the claimant Mr Dharmendra Punwasee instructed by Ms Theresa Hadad for the defendant JUDGMENT 1. In this action the claimant seeks only one relief: an order for specific performance. The right to this order is said to be created by a transaction that took place between Hindu Credit Union Co-operative Society Limited ( HCU ) and the claimant in 2002. The transaction involved the sale of a majority of the claimant s shares in Bankers Insurance Limited ( Bankers Insurance ) to HCU. The claimant alleges that when it sold its controlling interest in Bankers Insurance, two of that company s assets were not intended to be sold under the terms of the written agreement, and were to be held instead on trust for its benefit by Page 1 of 13
Bankers Insurance. The two assets are some 5 million shares in a related company and a leasehold property at 177 Tragarete Road, Port of Spain. The claimant is asserting a contractual right to have the property at Tragarete Road ( the property ) assigned to it by Bankers Insurance. The defendant is the liquidator of HCU. He is therefore sued in order to compel him to pass the requisite resolution of the board of Bankers Insurance, using HCU s majority shareholding. The liquidator has hitherto refused to do so. 2. On 9 October 2008 the Commissioner for Co-operative Development ( the CCD ) directed that HCU be wound up and on 10 October 2008 the liquidator was appointed. The liquidation is still ongoing. 3. The claim was filed some four years later on 27 November 2012, without the leave of the CCD. On 21 December 2012 the liquidator filed an application to strike it out on the ground that the court does not have any jurisdiction to hear the case in the absence of leave first being sought from the CCD. Alternatively, the liquidator seeks an extension of time to file the Defence. 4. Before analysing the liquidator s application it is necessary to get a better understanding of the transaction between HCU and the claimant. 5. All the particulars are found in an unregistered deed of agreement dated 18 September 2002 made between HCU and the claimant. In it, the claimant sold 4,493,776 ordinary and preference shares to HCU for $12,000,000. Clause 6 of the agreement is in these terms: Page 2 of 13
6. The parties have agreed that prior to the sale of the shares all of the real estate of the company [i.e. Bankers Insurance] and 5,000,000 shares in Bankers Property Limited (hereinafter together called the excepted assets ) will be transferred out of the company and in the meantime the company will be trustee of the excepted assets and that no consideration was paid by the purchaser for the acquisition of the excepted assets and that the consideration herein expressed to be paid by the purchaser to the vendor is not based on the value of the company s real estate. 6. Clause 9 (c) and (e) provide: 9 (c) Notwithstanding the completion of the sale and purchase of the said shares the provisions hereof and the undertakings and agreements herein contained shall continue to subsist for so long as may be necessary for the parties to give effect to each and every of those clauses in accordance with the terms hereof. (e) The parties hereto shall have the unequivocal right to enforce specific performance of this agreement. 7. The claimant pleads in its Statement of Case that it and its assigns continued in occupation of the property after the sale of its controlling interest. On the basis of the wording of clause 6 and the fact of its continued occupation it now seeks to compel the liquidator to assign the leasehold interest of Bankers Insurance in the property to the claimant, or to whom it may direct. 8. As stated earlier, the majority of the shares in Bankers Insurance (4,575,026) is vested in HCU. There are two other shareholders. Robert Amar holds one share, and Aurora Investments Limited holds 2,314,975 shares. The claimant alleges that Aurora Investments Limited is owned by Robert Amar. Both minority shareholders in Bankers Insurance support the passing of a resolution to assign the property to the claimant. The liquidator, Page 3 of 13
who controls the voting rights of HCU on the board, is refusing to do so. This is the basis of the claim.. 9. Attached to the Statement of Case is a legal opinion that was sought by Bankers Insurance. The attorney at law went into great detail, and pointed out some serious issues arising out of the trust said to be created by clause 6. In a nutshell, the bona fides of the share sale agreement is questioned and the advice is that the property is not beneficially owned by the claimant. The liquidator allegedly instructed the board of directors to follow the advice. 10. However, the claimant s attorneys at law wrote a contrary opinion asserting that the issue is one of pure contract law, not involving any question of trusts. The claimant has sued on the basis of this opinion. The claim is strictly contractual. 11. The liquidator relies on section 63 of the Co-operative Societies Act Chap 81:03: 63. Save in so far as is expressly provided in this Act, no Court shall take cognisance of any matter connected with the reconstruction within the meaning of Part V, winding up or dissolution of a society under this Act, and when a society has been reconstructed or a winding up order has been made no action or other legal proceeding shall lie or be proceeded with against the society except by leave of the Commissioner and subject to such terms as he may impose. 12. Section 74 of the Act provides as follows: 74. A party aggrieved or adversely affected by any order or decision of the Commissioner under this Act may appeal therefrom to the Minister within two months of such order or decision, and a further appeal may lie therefrom to a Judge in Chambers within one month of such order or decision of the Minister. Page 4 of 13
13. According to the authors of Bennion on Statutory Interpretation, 5 th ed. p. 549:...where the legal meaning is plain it must be followed. For this purpose a meaning is plain only where no relevant interpretative criterion (whether relating to material within or outside the Act or other instrument) points away from that meaning. As it is put in Halsbury s Laws of England: If there is nothing to modify, alter, or qualify the language which a statute contains, the words and sentences must be construed in their ordinary and natural meaning. In other words, the plain meaning must be given effect, but only where there is nothing to modify, alter, or qualify it. 14. Sections 63 and 74 create a statutory regime for commencing or continuing an action against a society in the course of being wound up. The claimant must first seek the permission of the CCD. If he is dissatisfied with the CCD s refusal or any terms he might impose, a claimant possesses a right of appeal to the Minister of Labour. If he is still dissatisfied, a claimant has a further right of appeal to the High Court. Parliament has therefore set out a procedure and provided the High Court with specific jurisdiction. The question is whether the claimant is bound to follow this procedure in the circumstances of this case. There are two questions to ask: Is this the type of claim to which section 63 refers? Is the claim, in any event, brought against the society per se? 15. The claimant s argument is that section 63 is no bar to this action. Its attorney filed submissions that contend that this action has nothing to do with preserving the assets of the society, and is not connected to the winding up. Further, it is not the type of action that Page 5 of 13
requires leave of the CCD. He submitted that section 63 must be read together with section 67, which defines the types of disputes that arise in the course of running the business of a society, over which the CCD has jurisdiction. This is not one of them, he said, as the CCD has no jurisdiction. 16. The claimant also relies on a transcript of the hearing of a procedural appeal before the Court of Appeal in Khatic v HCU, Civ. App. No. 204/2008, dated 24 November 2008, before Mendonça and Jamadar JJA. During the course of the exchanges between the court and counsel in that matter it was suggested in passing that during the course of a liquidation, the function of the CCD is to protect the assets of the society so that there would not be a run on them. The suggestion was that section 63 is meant to protect the assets with a view to ensuring an equitable distribution amongst the members and creditors of the society. The claimant s argument is that this action for specific performance does not involve the members or the creditors, and that, in any event, the subject assets do not belong to either of them or to the liquidator. Further, it was submitted that the action was brought against the liquidator and not the society. 17. The facts disclosed on the Khatic transcript show that it involved a depositor who alleged that she had been fraudulently led to believe that she was dealing with the society and, in fact, was dealing with a related company, bearing a similar name to the one registered under the Act. In their Lordship s view this was regarded as a dispute connected with the business of the society and fell within section 67 of the Act. In the circumstances, it was held that the proper procedure was to refer the dispute to the Commissioner for determination. Page 6 of 13
18. The Khatic claim was filed before the CCD s winding-up order, but the hearing of the procedural appeal in the Court of Appeal occurred about a month after the liquidator was appointed. In one of his remarks, Mr. Justice Mendonça JA suggested that section 63 would not apply to a case involving the particular frauds alleged by Mrs. Khatic. The claimant s counsel relied on that comment to unhook the instant dispute from the conditionalities of section 63. However, it is unsafe to treat something said in passing during the course of an open discussion in court as a binding judicial precedent. The development of the common law depends upon the doctrine of stare decisis. A precedent creates certainty. The doctrine would be undermined by reliance on remarks made otherwise than in reasoned written judgments. To my mind, the transcript should be regarded as part of the record-keeping in the particular case out of which it emanated and not ordinarily as a statement of law of general application. This is especially so when the accuracy of the transcript is not verified by the presiding judges of the court. In any event, the comment does not form part of the ratio decidendi of that case, insofar as it was accurately captured by the transcriptionist. The matter before the Court of Appeal involved a procedural and not a substantive point of law. I must look elsewhere for guidance. What is the position in the case of companies in liquidation under the Companies Act? 19. The CCD stands virtually in the same shoes as the High Court, insofar as the winding-up of a society or a company can be equated. Like in a company winding-up, the appointment of the liquidator under the Act, is an extraordinary remedy, designed to benefit the shareholders/members and the creditors of the entity. The appointment is justified when the entity is allowed to deteriorate to the extent where emergency repairs are necessary and Page 7 of 13
where there is good reason to suspect that the property of the entity is going to be wasted unless the CCD (or in the context of a company, the Court) does not make an order to preserve it. The rationale for the intervention does not, not my mind, cease after the winding up order is made. It subsists during the winding up as well. 20. The upshot of the claimant s argument is that the property does not form part of the assets of HCU or the liquidator who has charge of them in the name of the society. He is sued in his capacity as the liquidator of an entity that has a controlling interest in Bankers Insurance, which is not itself a society registered under the Act. The minority shareholders of Bankers Insurance have indicated their willingness to pass a resolution assigning the leasehold property to the claimant. There is therefore a stand-off within Bankers Insurance between the majority and minority shareholders. The claimant, who claims that a proper construction of clause 6 is that no title in the property was passed to HCU, is seeking specific performance of the contract between itself and HCU, but he has sued the liquidator. I do not accept the claimant s submission that it has sued him in his personal capacity. A defence has not been filed so the liquidator s attitude to these matters is unknown. 21. On the day set aside for decision the question arose as to whether the transaction was connected with the business of the society or its winding up. On that day, it was my view that, in the absence of a Defence, little was known about the liquidator s approach to the allegations, or indeed, what his records said about them. I was prepared to adjourn the decision and to order the filing of a Defence, so as to better appreciate the nature of the transaction. Mr. Punwasee, who appeared for the liquidator, reminded me that the court s Page 8 of 13
jurisdiction was in issue, and that the nature of the transaction, as pleaded by the claimant, must be taken at face value. He further submitted that there were authorities that confirm that the nature of the suit is not relevant to the interpretation of the ouster provisions in section 63, and that even in a case of automobile negligence, permission to sue was still required. I therefore thought it prudent to suspend my decision and gave directions for further written submissions on the specific point. 22. Upon further consideration of the written submissions of both parties I have come to the conclusion that the claimant s arguments about the nature of the transaction do not carry weight. Admittedly, the liquidator is sued for the purpose of compelling him to honour a contractual obligation said to be owed by Bankers Insurance (which is not a society) to the claimant (which is not a member of the society), but it nonetheless involves assets of the society over which he has control as liquidator. The assets are the shares of HCU in Bankers Insurance, and the value of those assets will naturally diminish if the resolution is passed. As mentioned before, it cannot rightly be said that he is sued in his personal capacity. He has no personal stake in the proposed resolution. He is exercising voting rights but he is doing so on behalf of, and in his capacity as liquidator of the society. 23. In any event, there are cases that have established that the plain meaning of the ouster clause must be applied. In The Official Receiver v All Trinidad General Workers Trade Union and Bel Air International Airport Limited Civil Appeal No. P084 of 2013, judgment dated 10 February 2014, the Court of Appeal, in dealing with a company liquidation under the Companies Act, applied the plain meaning of section 364. That section is drafted in similar terms to section 63 of the Act. It was held that the proceedings which required the Page 9 of 13
permission of the High Court during a company liquidation included proceedings initiated by the referral of a trade dispute to the Industrial Court. 24. The Court of Appeal preferred a wide construction of the word proceeding in section 364 of the Companies Act. Their Lordships said that where the proceedings seek to attach liability to the company or its assets then it would amount to proceedings against the company. In discussing the purpose of section 364, the Court of Appeal held at para 23 that it...seeks to regulate the affairs of the company being wound up by providing some restriction on the actions and proceedings against the company in a winding-up. This is part of the winding up jurisdiction that is vested only in the High Court by the provisions of the Companies Act. Further at para 24 the court said this: What the section seeks to do is to preserve the assets of a company being wound up for the benefit of the entire body of creditors by imposing some fetter on a person s ability to continue or commence proceedings or actions against the company. The Court of Appeal went on to examine a number of authorities, among them, the Canadian case of Andrew Stewart, Liquidator of the Dominion Trust Company v Le Page and Ors (1916) 53 S.C.R. 337. 25. In that case the issue was whether the liquidator of an insolvent company could be sued to compel the company to transfer certain monies said to be held on trust for the respondents. The plaintiffs did not first seek the court s approval before bringing the suit. Section 22 of the Canadian Winding-up Act provided: After the winding-up order is made, no suit, action or other proceeding shall be proceeded with or commenced against the company, except with the leave of the court and subject to such terms as the court imposes. Page 10 of 13
26. The Supreme Court of Canada, by a majority decision, held that the purpose of the section was to avoid reckless and undesirable litigation that would cause waste and ruin to the assets (per Idington, J p 346). Brodeur, J said this at p 352: This is a suit in which all the creditors of the company might be interested, because its purpose is to have a declaration that some funds should belong exclusively to the plaintiffs and should not be disposed of for the benefit of the creditors. 27. In Spivak v Lee [1932] CarswellMan 61, another Canadian case, the requirement of leave to bring on action against a company in liquidation was held to exist in a case involving the negligent driving of a vehicle in the custody and control of the liquidator. 28. In this action the proceedings cannot properly be described as proceedings not brought against the society simply because the liquidator is named as the sole defendant. That argument adopts a narrow interpretation of the words of section 63 of the Act that no action or other legal proceeding shall lie or be proceeded with against the society. The liquidator is the representative of the society and has charge of its assets. The claim is, in substance, aimed at those assets and seeks an order for him to be deprived of them to the detriment of the members and creditors of HCU. These proceedings therefore fall within the actions or proceedings described in section 63 of the Act. 29. In my view, Section 63 does not oust the jurisdiction of the court only in relation to the types of disputes described in section 67 of the Act. No such qualification is expressed in its Page 11 of 13
language. It is drafted in very wide terms. While the liquidator has powers under section 61 to compromise or make any arrangement with creditors or persons alleging to have any claim for which the society may be rendered liable (section 61 (e)) it does not mean that the permission of the CCD can be bypassed by direct approach to the court to compel him to exercise his powers. It seems to me that any claim against a liquidator that directly affects the assets held by the him, and is capable of diminishing their value, would be a matter connected with the winding-up. To my mind section 63 is designed, not only as a means of preventing a deleterious run on the assets by a slew judgment creditors, but also to provide an orderly and systematic framework for the management of all claims that will affect the assets in the liquidator s hands. This is not limited to the types of disputes between a society and its members set out in section 67. 30. Moreover, the statutory obligation to seek the permission of the CCD is no bar to an action. It is a filtering mechanism to reject abusive or prejudicial litigation. The CCD has power under section 68 (1) to refer any question of law for the opinion of the High Court. The technicalities of any question of law involved in the claim before me are therefore not beyond his powers to unravel. In addition, in the event that a proper claim is intended to be advanced and the CCD wrongly refuses to give leave, his decision can be reviewed using the built-in appeal mechanisms of the Act. The CCD must exercise his statutory powers in accordance with law and he can be compelled to do so. 31. In this matter, the claimant did not seek the requisite permission of the CCD and it ought to have done so. Page 12 of 13
32. In the circumstances, the Claim Form and the Statement of Case are struck out. The costs of the action and the defendant s notice of application shall be paid by the claimant to the defendant to be assessed in default of agreement. James Christopher Aboud Judge Page 13 of 13