Alexander M. Fundora Applicant v Nigel Hamilton-Smith Peter Wastell (Joint Liquidators) Respondents [ECSC]

• Jurisdiction: Antigua and Barbuda
• Judge: Thomas, J.
• Judgment Date: 08 June 2010
• Judgment citation (vLex): [2010] ECSC J0608-1
• Court: High Court (Antigua)
• Docket Number: CLAIM NO. ANUHCV2009/0149
• Date: 08 June 2010

[2010] ECSC J0608-1

THE EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE

CLAIM NO. ANUHCV2009/0149

In The Matter Of Stanford International Bank Limited (in Liquidation)

In The Matter Of The International Business Corporation Act, Cap 222 Of The Revised Laws Of Antigua And Barbuda

In The Matter Of An Application For The Removal Of The Liquidators

Alexander M. Fundora

Applicant

and

Nigel Hamilton-Smith

Peter Wastell (Joint Liquidators)

Respondents

Appearances:

Mr. Anthony Astaphan, SC and with him Ms. Nicolette Doherty and Mr. Craig Christopher, instructed by Mr. Dan Wise of Martin Kenney & Co. of the British Virgin Islands, for the Applicant.

Mr. Douglas Mendes, SC and with him Mr. Kendrickson Kentish.

DECISION

Thomas, J.

1 The Joint Liquidators of Stanford International Bank (SIB) are at the centre of these proceedings.

The context of SIB

2 SIB is an International Corporation incorporated in Antigua and Barbuda under the International Business Corporations Act 1 ("the IBC Act") and engaged in International Banking. It attracted investors from several countries over the years of its operation. SIB's chairman and sole shareholder is R. Allen Stanford. SIB is now in the process of liquidation.

3 The SIB liquidation is a large multi-jurisdictional process. In this regard, the evidence is that SIB had some 27,000 investors/creditors from 113 countries who invested in excess of US $7 billion principally in a wide variety of certificates of deposit (CDs).

4 It is alleged that SIB is at the centre of a massive Ponzi scheme fraud, which involve many other entities and companies owned or controlled by R. Allen Stanford.

5 Ms. Karyl Van Tassel, a certified US Public Accountant, who gave evidence in the proceedings before the English High Court stated in her second affidavit gives this description of the alleged Ponzi scheme:

"Although S.I.B was part of the fraud, it is also the case that the flow of funds between and among the companies was such that their assets and liabilities will be exceedingly difficult, expensive and time consuming to unscrable … S.I.B was the mouth of the Ponzi scheme … the other Stanford banker dealer entities and [Stanford Trust Company} … all helped feed the scheme. Thereafter, the funds were shunted around the Stanford Financial Group many times among multiple entities."

6 Nigel Hamilton-Smith and Peter Wastell were on 19th February, 2009, appointed Receiver-Managers of SIB by the Financial Services Regulatory Commission (FSRC) pursuant to Section 287 2 of the International Business Corporation Act 3 ("the IBC Act"). And on 26th February, 2009, Ralph Janvey was appointed US Receiver by a US Court of all entities owned or controlled by R. Allan Stanford

which are located both in the United States of America and in Antigua and Barbuda.

7 On 15th April, 2009, the same persons who were appointed Receiver-Managers were appointed Joint Liquidators of SIB by the High Court upon the application of the FSRC.

8 The Joint Liquidators are in the process of having the Order of the High Court of Antigua and Barbuda registered and recognized in the various jurisdictions where SIB has assets. This quest is being opposed by the US Receiver.

9 Thus far, the Joint Liquidators have succeeded in the UK where the High Court granted an Order recognizing and enforcing the Order of the High Court of Antigua. But in the Province of Quebec, Canada, the Joint Liquidators did not succeed in obtaining a similar Order. Instead, the recognition was granted to the US Receiver and the appeal to the Quebec Court of Appeal was unsuccessful.

The Application

10 Before the Court, is an Application made pursuant to the IBC Act and/or the Banking Act 4, ("the Banking Act") and or the inherent jurisdiction of the Court. The Applicant is Alexander M. Fundora who seeks:

• 1) the removal of the Joint Official Liquidators of Stanford International Bank Limited ("SIB"), Nigel Hamilton-Smith and Peter Wastell from their roles as Joint Official Liquidators forthwith in accordance with the draft Removal Order al Annexe "A" to the said application;

• 2) the appointment of Marcus A. Wide of Price Waterhouse Coopers LLP, Canada as sole Liquidator of S.I.B with all the powers, duties and responsibilities of a liquidator as contained in the IBC Act and any other relevant legislation and in accordance with the powers, duties and

  responsibilities set out in the draft appointment Order al Annexe "B" to the said application.

• 3) the applicant be awarded his reasonable costs arising from, and incurred in, "the preparation" of both applications to be paid by [the outgoing Joint Liquidators] [out of the Antiguan Estate of S.I.B in Liquidation], such costs to be assessed if not agreed.

11 The pleaded grounds of the application are as follows:

• 1. The Joint Liquidators have failed to act in the best interests of the Estate and/or the creditors and should accordingly be removed by this Honourable Court.

• 2. In summary, the Joint Liquidators have, inter alia:

  • a) destroyed, and employed improper practices in relation to computer and electronic data in Canada;

  • b) failed to co-operate with foreign agencies and office holders, notably the U.S. Receiver, the S.E.C. and the Canadian Autorite des Marches Financiers (the "A.M.F.");

  • c) acted outside of the remit of Receiver-Managers;

  • d) demonstrated a disregard for the Canadian jurisdiction and courts; and,

  • e) as a result, occasioned serious harm to the liquidation Estate and the creditors.

• 3. A number of instances of the Joint Liquidators' wrongdoing were recognized and censured by the Superior Court (Commercial Chamber) Province Quebec, District of Montreal (the "Canadian Court") in two decisions of Auclair J of 11 September, 2009, in Case No. 500-11-036045-090 (the "Auclair J Judgment" and the "Second Auclair J Judgment").

• 4. Inter alia, the Canadian Court found, by the Auclair J's judgment, that:

  • a) the Joint Liquidators do "not deserve the trust of the Court" ([37]);

  • b) the conduct of Mr. Hamilton-Smith personally was "reprehensible" and "in no way offers any assurances for the future of this case" ([37]);

  • c) the Joint Liquidators were disqualified from acting in Canada (para. [59]);

  • d) it "did not believe" the Joint Liquidators (para [60]);

  • e) the Joint Liquidators did "not deserve the confidence of the Court" as they acted with "an absence of good faith" and had questionable motives (paras. [58] and [61]; and,

  • f) the Joint Liquidators acted "with an absence of respect towards the Canadian public interest, represented by the Court and the regulatory authorities" (para [61]).

• 5. The Applicant contends that the Joint Liquidators should therefore be removed from office because, inter alia:

  • a) the US Receiver has already taken steps to have the Auclair J Judgments recognized in the US and England. If so recognized, this potentially offers other jurisdictions a reason to prefer recognition of the Receiver over the Joint Liquidators (if they remain in office), meaning that assets which would otherwise come into the Antiguan Estate may be lost;

  • b) the reputation of the Joint Liquidators will now hinder them as they pursue recognition and asset recovery in other jurisdictions and attempt to work with law enforcement and regulatory authorities globally;

  • c) the Joint Liquidators have lost the confidence of the jurisdiction where the majority of payments of interest and capital redemptions were made in relation to the alleged fraud;

  • d) the Joint Liquidators' conduct has already caused loss of around US $20 million from the Antiguan Estate. Any such further losses must be prevented;

  • e) the risk of recurrence of improper actions is extremely high, given the nature of the ongoing liquidation, involving as it will, similar tasks involving computer data and liaising with foreign regulatory bodies;

  • f) the gravity of Joint liquidators' actions is so serious that the Joint Liquidators must be removed from office to demonstrate that this Honourable Court will not tolerate or condone its officers acting in such a manner;

  • g) they have lost the confidence of the creditors of the estate, in particular of creditors totaling over US $77 million;

  • h) the Joint Liquidators have caused the estate to incur further costs and lose time as a result of the Canadian Court's Order for them to provide a report into their actions in Canada; and,

  • i) the Joint Liquidators' misunderstanding of their remit is so fundamental, that the risk of further grave errors is high.

• 6. The Applicant accordingly submits that this Honourable Court should treat the factual findings of Auclair J as res judicata and, based on those factual findings, should remove the Joint Liquidators in accordance with the legal test for removal of a liquidator, namely that there is due or sufficient cause.

• 7. Alternatively, in the event that this Honourable Court is not minded to treat Auclair J's factual findings as res judicata the Applicant contends that this Honourable Court should in any event reach the same factual conclusions as Auclair J with regard to the Joint Liquidators' conduct. Based on those factual findings, the Joint Liquidators should nevertheless be removed, applying the legal test for removal of Liquidators to those factual conclusions.

• In terms of the appointment of Marcus A. Wide the following is stated:

• 8. In the event that this Honourable Court grants the Application for the removal of the Joint Liquidators, the Applicant also makes an application that Marcus A. Wide of Price Waterhouse Coopers LLP, Canada, be appointed as sole Official Liquidator.

• 9. The Applicant contends that Mr. Wide has the requisite experience and integrity to undertake this appointment, and that he is also a suitable choice in terms of cost, as further set out in the written submissions, Consent to Act of Mr. Wide and the...