Re Globe-x Canadiana Ltd
| Jurisdiction | Bahamas |
| Judge | Lyons, J. |
| Judgment Date | 23 February 2005 |
| Court | Supreme Court (Bahamas) |
| Docket Number | COM/BNK/1502 and 1503 of 2002 |
| Date | 23 February 2005 |
Supreme Court
Lyons, J.
COM/BNK/1502 and 1503 of 2002
(Appearances as noted below)
Company law - Winding up — Investment companies — Strategy for taxation and investment benefits — Compulsory liquidation — Primary objective of liquidation — Leave to disclose materials in liquidators' possession — Courts having capacity to voluntarily disclose information to competent foreign authority — Foreign Tribunal Evidence Act — Mutual Legal Assistance Act — Criminal Justice Act — Finding that leave to be granted to Cinar to pass on information to Canadian police in interest of proper carrying out of winding up.
(1) I have before me several applications. These relate to various files in which one or other of the Globe-X Companies (the Companies) is the plaintiff or applicant. For ease of reference I will, in the body of this judgment, set out the title of the particular file that I am dealing with and which summons/application I am dealing with there under.
(2) First I will set out the salient facts that are common to all files and applications. Any facts peculiar to each individual application will be set out as is appropriate.
(3) Cinar Films Incorporation (Cinar) of Montreal, Canada is engaged primarily in the entertainment area. I understand its forte is in the production of animated features.
(4) Between October 1998 and December 1999 Cinar transferred to accounts at the Royal Bank of Canada, Nassau for the benefit of Globe-X Management Limited (GXM) one hundred and twenty five million dollars US ($125,000,000.00 US). Transfers were effected under the direction of one or more of a Mr. Weinberg (Cinar's then president), Mr. Panju (then senior vice president) and a Mr. Ricci, its former financial controller and later a vice president of one of the companies in the Norshield group in Canada. These payments were made pursuant to an investment strategy designed, as I understand it, to achieve certain taxation and investment benefits.
(5) GXM was incorporated pursuant to the International Business Companies Act, (Ch. 309) (the IBC Act). I understand that GXM was incorporated solely for the purpose of facilitating the investment strategy of Cinar.
(6) As I understand it, the sole shareholder of GXM (at least until sometime in 2002) was Institutional Asset and Management Limited (IAM). IAM was incorporated in the Bahamas under the IBC Act. It appears that on the 17 April 2003 IAM ceased to be a company incorporated in the Bahamas but continued as a company incorporated in the Republic of Panama.
(7) Globe X Canadiana Limited (GXC) was a totally owned subsidiary of GXM. It, too, was incorporated pursuant to the IBC Act. It too was incorporated solely to facilitate the investment strategy of Cinar.
(8) GXM was promoted as the major investment entity. On receipt of the investment funds, GXM would (in most cases) transfer the funds across to GXC. GXC would then place the funds in the hands of other entities (that is, corporate bodies incorporated in the Bahamas), who would, in turn attend, either directly or as was sometimes the case, through the offices of a mutual fund or other investment company in the Bahamas, to invest those funds in various securities, bonds or other investment vehicles.
(9) One such entity that GXC placed its funds with was Mosaic Composite Limited (MCL). MCL (or its predecessors - it underwent several name changes) is also incorporated under the IBC Act.
(10) Mr. Thomas Muir (Muir) was the sole director of GXM and GXC. He was also a director of MCL. He was also an office-bearer of Norshield Mosaic Fund Limited (NMF). NMF was incorporated pursuant to the IBC Act. Muir also claims to be a beneficial owner of IAM.
(11) It appears that much of MCL's funds (being received from GXC and being Cinar's Investment Funds) were then channeled into Cardinal International Corporation Limited (Cardinal). Cardinal, similarly incorporated pursuant to the IBC Act, was a financial service provider and a fund administrator.
(12) Cardinal was the administrator of Olympus Univest Limited (Univest). Univest is an investment fund established pursuant to the Investment Funds Act of 2003.
(13) A Mr. Stephen Hancock (Hancock) was a director of Cardinal and NMF.
(14) As can readily be seen, the Bahamian companies had certain personnel common to all, or certainly more than one. It has not yet been explained to me as to why it was considered necessary to have so many incorporated companies handling what seems to me to be a fairly straightforward investment plan. It does seem, however, that Cinar's funds were passed around through and between these companies creating what perhaps could be best described as some “confusing book work”.
(15) I am told that Cinar became a little concerned (and understandably so) and filed action in the Supreme Court of the Bahamas against the Globe-X Companies and two other parties claiming damages for deceit and seeking an immediate return of the monies paid, together with an accounting. Apparently this action was compromised in October 2000 under which the companies admitted liability for a sum of approximately fifty one million dollars US ($51,000,000 US) subject to a further claim by Cinar for potentially another twelve million dollars US ($12,000,000 US).
(16) In due course the companies defaulted in the payment of the monies due under the compromise agreement.
(17) On the 18 December 2001 Cinar served a demand dated the 14 December 2001 on the companies. I am told that Muir, as sole director of GXM had, as early as January 2002 commenced efforts to sell the companies. An Anguillian company, Silicon Isle Limited was one foreign corporation that showed interest. Silicon Isle Limited (Silicon) also expressed interest in purchasing GXM's voting shares in GXC and also expressed an interest in purchasing an alleged debt held by IAM in GXM.
(18) Not surprisingly Cinar saw the need to move rather quickly. On the 12 July 2002 Cinar, after having given notice that very morning to the companies of its intention, filed a creditor's petition to wind up GXM and GXC. The companies' immediate reaction to the service of that notice of Cinar's intention, was to close down its operations in the Bahamas and move immediately to Anguilla. By immediately I mean “immediately”, because by the mid to late afternoon of the 12 July 2002 the move to the foreign jurisdiction in Anguilla had been effected.
(19) On the 5 September 2002 the Court ordered that the companies be wound up. Mr. W. Aranha and Mr. C. Johnson were appointed the official liquidators (the liquidators)
(20) It is not disputed that Cinar are by far the major creditor of the companies. Muir claims to be a creditor but has yet to provide any details in respect thereof.
(21) Comprehensive Investor Services Limited (CIS) with which Muir also had an interest at least as a former office holder, claims an amount owing to it by the companies in the sum of approximately 2.5 million dollars.
(22) Silicon claims to be owed somewhere in the vicinity of twenty-five (25) to thirty-five (35) million dollars. This is very much in dispute. The documentation concerning this alleged debt owed by the company to Silicon is, I might use a neutral term, “interesting.”
(23) I am told that a Mr. John Xanthoudakis (Mr. X) is owed fifty seven thousand dollars ($57,000) in respect of legal costs awarded in his favour in December of 2004. I will be coming to that particular case (it was in Canada) in due course. I am told that the decision in that case is under appeal. If the appeal is successful then Mr. X's costs may no longer be owed by the companies. Mr. X is alleged to have been at the heart of discussions had with Cinar back in 1998, which led to Cinar investing money in the Bahamian companies. I will discuss this more fully later in this judgment.
(24) The important thing to note at this juncture is that Cinar is funding the winding up. The other “creditors” are, as shall be seen, appear to be doing their best to make the liquidators task difficult.
(25) The liquidators have expressed grave concern over the manner in “which the funds provided by Cinar were applied to activities clearly inconsistent with the terms of the original agreement”. (See Joint Liquidators' Report - part A paragraph 12.5 filed 7 July 2004). The liquidators also are of the opinion that they are not getting the results nor cooperation they consider they should be getting. They have brought several summons aimed at overcoming some apparent obstacles so that they can then establish the way forward to conclude this winding up.
(26) I turn now to the summonses.
“Commonwealth of The Bahamas 2004
In The Supreme Court Com/bnk/00052
Commercial Division
Between
Globe X Management Limited (In Compulsory Liquidation) plaintiff
And
Cardinal International Corporation Limited 1st defendant
and
Silicon Isle Limited 3rd defendant”
Appearances:
Mr. E. Knowles with Mr. D. Gibson and Ms. C. Bonamy for the Liquidators.
Mr. T. Evans Q.C. with Mrs. Dorsett and Ms. Sawyer for Cardinal.
Ms. T. Cooper for Univest.
Mr. B. McCartney with Mr. Saunders and Mr. Horton for Silicone Isle Limited.”
(27) By summons filed the 30 September 2004, the liquidators sought the following relief.
“1. A Declaration that the plaintiff was as of the 12th day July, 2002 and at all material times thereafter the beneficial owner of 46.1269 Class B Preferred Shares of par value US$1.00 each and 36.1897 Class C Preferred Shares of par value C$1.00 each of the Second defendant.
2. An Order requiring the first and second defendants to forthwith amend the Register of Shareholders of the second defendant to show that the said shares were as of the 12th day of July, 2002 owned by the plaintiff.
3. An...
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