(Cayman Islands) The Board was asked whether a debtor or alleged debtor of a company in liquidation can apply for the removal of a liquidator, in whom the creditors and contributors of the company appear to have confidence, on the ground that he is subject to a conflict of interest.
Held: A debtor does not have standing to apply to have a company liquidator removed, even though he might claim a conflict of interest because, for example, he was defendant in an action. Here, the liquidator had the confidence of the creditors and should stay.
Lord Millett said: ‘In their Lordships’ opinion two different kinds of case must be distinguished when considering the question of a party’s standing to make an application to the court. The first occurs when the court is asked to exercise a power conferred on it by statute. In such a case the court must examine the statute to see whether it identifies the category of person who may make the application. This goes to the jurisdiction of the court, for the court has no jurisdiction to exercise a statutory power except on the application of a person qualified by the statute to make it. The second is more general. Where the court is asked to exercise a statutory power or its inherent jurisdiction, it will act only on the application of a party with a sufficient interest to make it. This is not a matter of jurisdiction. It is a matter of judicial restraint. Orders made by the court are coercive. Every order of the court affects the freedom of action of the party against whom it is made and sometimes (as in the present case) of other parties as well. It is, therefore, incumbent on the court to consider not only whether it has jurisdiction to make the order but whether the applicant is a proper person to invoke the jurisdiction.
Where the court is asked to exercise a statutory power, therefore, the applicant must show that he is a person qualified to make the application. But this does not conclude the question. He must also show that he is a proper person to make the application. This does not mean, as the plaintiff submits, that he ‘has an interest in making the application or may be affected by its outcome.’ It means that he has a legitimate interest in the relief sought. Thus even though the statute does not limit the category of person who may make the application, the court will not remove a liquidator of an insolvent company on the application of a contributory who is not also a creditor: see In re Corbenstoke Ltd. (No. 2) [1990] B.C.L.C. 60. This case was criticised by the plaintiff: their Lordships consider that it was correctly decided.
The standing of an applicant cannot therefore be considered separately and without regard to the nature of the relief for which the application is made. Section 106(1) does not limit the category of persons who may make the application. The plaintiff, therefore, does not lack a statutory qualification to invoke the section. But the question remains whether it has a legitimate interest in the relief which it seeks. It is not asking the court to appoint a liquidator to fill a vacancy. It is asking the court to remove incumbent liquidators for cause. The English cases relied upon by the plaintiff show that an interest which is sufficient to support an application of the former kind may not be sufficient to support an application of the latter kind.
The company is insolvent. The liquidation is continuing under the supervision of the court. The only persons who could have any legitimate interest of their own in having the liquidators removed from office as liquidators are the persons entitled to participate in the ultimate distribution of the company’s assets, that is to say the creditors. The liquidators are willing and able to continue to act, and the creditors have taken no step to remove them. The plaintiff is not merely a stranger to the liquidation; its interests are adverse to the liquidation and the interests of the creditors. In their Lordships’ opinion, it has no legitimate interest in the identity of the liquidators, and is not a proper person to invoke the statutory jurisdiction of the court to remove the incumbent office-holders.’
Judges:
Lord Slynn of Hadley, Lord Hope of Craighead, Lord Hobhouse of Woodborough, Lord Millett, Sir John Balcombe
Citations:
Times 16-Jun-1999, [1999] UKPC 25, Appeal No 44 of 1998, [1999] 1 WLR 1605, (1998-99) 1 ITELR 771, [1999] BCC 992, [2000] 1 BCLC 485
Links:
Statutes:
Companies Law of Cayman Islands (1995 revision), Insolvency Act 1986 108
Cited by:
Cited – Wood and Another v Mistry ChD 10-Jul-2012
A director’s disqualification order was sought. The order was sought on the basis of allegations of conduct as liquidator of several companies. . .
Lists of cited by and citing cases may be incomplete.
Insolvency, Commonwealth
Updated: 01 June 2022; Ref: scu.159358
