Centaur Litigation SPC & Ors v Terrill

An English insolvency court should ordinarily assist a foreign insolvency court which has made a request under Insolvency Act 1986, section 426, although the court retains a discretion. A request from the foreign court is a significant, but not determinative, factor.

For interim relief against an alleged de facto director, the applicant must show a good arguable case that the defendant formed part of the company’s governing structure and assumed the role of a director. A worldwide freezing order also requires assets within or outside the jurisdiction and a sufficient connection between properly founded allegations of dishonesty and a risk that enforcement will be defeated. Delay and an insolvent applicant’s cross-undertaking do not necessarily prevent relief.

Three Caymanian companies in liquidation sought English assistance at the request of the Grand Court of the Cayman Islands under section 426 of the Insolvency Act 1986. They also sought a worldwide freezing order against Mr Terrill in respect of approximately £13.25 million allegedly misappropriated through three transactions.

The applications concerned whether the English court should recognise the Cayman liquidators’ standing, whether there was a good arguable case that Mr Terrill was a de facto director who owed fiduciary duties, and whether the requirements for freezing relief were satisfied despite delay and the companies’ insolvency.

1. Assistance under section 426. The court granted the request from the Grand Court of the Cayman Islands. Section 426(4) imposed a strong imperative to assist a court in a relevant territory, while section 426(5) conferred a discretion. The Cayman court’s decision to issue the Letter of Request was a significant factor, though not determinative. This was a plain case for recognising the liquidators’ representation of the companies and their standing to seek interim relief.
2. Good arguable case. The alleged fiduciary duties were to be judged effectively by English law because the evidence indicated that Cayman courts looked to English appellate decisions where there was no relevant Cayman authority. Mr Terrill’s role as director and shareholder of the corporate director did not, by itself, make him a director of the claimant companies. The evidence nevertheless gave a good arguable case that he formed part of their corporate governing structure, held himself out as a director and assumed a role carrying the fiduciary duties of a de facto director.
3. The transactions provided a good arguable case of breaches of duty and personal benefit. The court was satisfied that assets existed against which relief could operate and that a worldwide order was warranted.
4. Risk to enforcement and dishonesty. Mere allegations of dishonesty were insufficient. Thane v Tomlinson [2003] EWCA Civ 1272 did not make such allegations irrelevant; as Jarvis Field Press v Chelton [2003] EWHC 2674 (Civ) clarified, a connection had to be shown between properly founded allegations of dishonesty and the relief sought. That connection was established by the alleged concealment of transactions benefiting Mr Terrill and his failure to provide detailed explanations.
5. The delay was adequately explained by the liquidators’ inability to locate Mr Terrill and the need to obtain advice, creditor approval and Cayman authority. Relief was therefore not withheld. Nor was the court dissuaded by the fact that the cross-undertaking in damages came from insolvent companies, given the circumstances in which the companies’ disordered affairs had arisen.
6. The worldwide freezing order was granted, with the form of order reflecting the inability to identify precisely which company could claim which sum.