Point Cruz Yacht Club Registered Trustees (Incorporated) v Beldon [2008] SBHC 32; HCSI-CC 158 of 2008 (11 August 2008)

HIGH COURT OF SOLOMON ISLANDS

Civil Case Number 158 of 2008

POINT CRUZ YACHT CLUB REGISTERED
TRUSTEES (INCORPORATED)
CLAIMANT

-V-

CARL WARREN BELDON (AS COMMODORE) AND THOSE
PERSONS PURPORTING TO BE ACTING AS THE GENERAL
COMMITTEE OF THE POINT CRUZ YACHT CLUB
DEFENDANT

High Court of Solomon Islands
(Palmer CJ.)

Civil Case Number 158 of 2008

Date of Hearing: 8th August 2008
Date of Ruling: 11th August 2008

Sol-Law for the Claimant
A. Radclyffe for Gregory John Thompson and Ivan Noelous Dyer (as Receivers and Managers)
A & A Legal Service for the Defendants.

Palmer CJ.:

On 2nd June 2008, this court granted ex parte orders for the appointment of Gregory Thompson and Ivan Dyer as Receivers and Managers ("the Receivers") of the property and income of Point Cruz Yacht Club ("the Club").

The crucial issue raised in the statement of claim of the claimants ("the Trustees") filed 2nd June 2008, is that in their considered opinion the Club was headed for collapse and unless stringent steps are taken now this prestigious club which once held prominent place among clubs in Honiara will be wound up and closed and its registration cancelled by the Registrar of Companies. As responsible Trustees they do not want to see that happen and so had initiated court action to assist them in coming up with a scheme to take it out of immediate financial collapse. To do that however, they would require a full audit to be carried out and then to have a scheme of arrangement put in place which should get it back on track in terms of getting its priorities right with regards to its principal objectives for which it had been incorporated and saving it from being wound up and cancelled.

In their defence, the defendants deny that the Club was insolvent, that the members were at risk and that an audit was warranted. They say there was available cash in the bank to run the affairs of the Club and that outstanding debts were much less than $505,000.00 alleged. They say the actions taken by the Trustees were premature, unwarranted and will merely incur unnecessary costs and inconvenience on the affairs of the Club and the members. They say that a special general meeting ought to have been convened instead and members given opportunity to decide the future of the Club.

They rely on the affidavit of Carl Beldon ("Beldon") and Selwyn Talasasa. In his sworn statement, Beldon confirms that he had received a requisition for a special general meeting to be convened around mid-May 2008. While he was making arrangements to convene that meeting he was served with a copy of an ex parte order from this court. He felt the right course of action should have been to convene a special general meeting and let the members decide the way forward for the Club rather than the Trustees pre-empting the situation which will incur unnecessary costs on the Club assets. The sworn statement of Selwyn Talasasa simply reiterates what was stated by Beldon that a special general meeting should have been convened as soon as possible instead of running to court.

Since the appointment of the Receivers an interim financial statement for the period ending 2nd June 2008 has been carried out by FPS Business Consultancy (SI) ("the Auditor") with relevant comments attached.

The financial report of the Auditor is consistent with the views expressed by the Trustees and the Receivers. Greg Thompson and Ivan Dyer both gave oral evidence as well at the hearing before this court. Both reiterated their views that the Club was insolvent or heading towards insolvency and needed immediate intervention to save it from financial ruin. The Auditor’s report confirmed that the Club’s liability stood at $1,298,608.00 while its liquid cash stood a mere $612,617.00. His conclusion was:

"The Club is not in a position to trade itself out of its current debt situation, given the limited liquidity it has at the present.

...

Recommendations.

(a) Do something about settling the current liabilities of the club.
(b) Enter into some arrangements with creditors including the government and NPF as to how their accounts are to be settled."

This conclusion has not been challenged in any way in this hearing and merely re-affirms the initial report of the Trustees as to the position of the Club on 2nd June 2008.

The Receivers propose a scheme of arrangement as the way forward for the Club to weave its way out of insolvency back to normalcy. Having considered the proposed orders put forward I sanction this course of action. The proposed scheme of arrangement must be put forward before the Creditors and Members for their approval as soon as possible. However, there must also be a clear time limit within which the scheme must be realized and this must not be later than a period of six months from date of approval by the court.

This brings me to the application for strike out by the Receivers against their inclusion as second Claimants in this action by the defendants in their statement of defence and counter-claim filed 1st July 2008. I accept submissions of Mr. Radclyffe on this point that the inclusion of the Receivers as second claimants is misconceived and should be removed from the statement of defence and counter-claim. No application for joinder has been made, as well as the fact that the Receivers are not parties but court appointed officers to administer the affairs of the Club and to report back to the Court.

On the other issue raised as to whether or not the Club was insolvent or not and unable to pay its debts as at 2nd June 2008, I accept that is a triable issue which can be dealt with at trial.

On the submission that the affairs of the Club should be transferred to the Committee of Inspection, I am not convinced on the material before me that such order is justified in the circumstances. The original orders of the court were for the Receivers to take charge of the affairs of the Club and to manage the affairs of the Club. The committee of inspection was set up by order of the court to work with the Receivers and provide such advice as is necessary as to the future conduct of the Club. I am not satisfied that the transfer of powers conferred on the Receivers to a committee of inspection is the right course of action to take. The powers of the Receivers require qualified and experienced persons who can do the job properly and account to the court and the members as to all the steps taken to safeguard the property of the Club and to manage its affairs from hereon. I reject that submission.

I direct that the statement of defence and counter-claim be amended to reflect the original names of the parties to the case.

Orders of the Court.

1. Grant order sought by the Receivers that the defendants have no cause of action against the Receivers as parties to this case.
2. Grant order for the statement of defence and counter-claim to be amended.
3. Refuse application of defendants to have the interim orders made on 2nd June 2008 to be discharged.
4. Refuse order for the transfer of all matters pertaining to the Club to the Committee of Inspection.
5. Sanction scheme of arrangement proposed by the Trustees and Receivers.
6. Costs in the cause.
   

The Court.