ARC Systems case resumes in court
The matter of the now defunct firm ARC Systems Ltd will again be the subject of deliberations in court later this week, with one prominent lawyer expected to respond to arguments put forward by veteran attorney-at-law Dr Lloyd Barnett on behalf of the company.
The case will be heard by Justice David Batts in the Supreme Court on Thursday, and well-known attorney-at-law Gordon Robinson will make his submissions on behalf of his client, Exclusive Holidays of Elegancy Ltd and one of its directors, Fred Smith.
When the trial started a month ago, Dr Barnett urged the Supreme Court to strike out a claim by Exclusive Holidays and Smith, for ARC Systems to be wound up due to its non-payment of a debt. ARC Systems stopped trading in 2012.
ARC Systems, founded by businessman Norman Horne, has been fighting a five-year battle with Exclusive Holidays and Smith, which came to a head earlier this year when Exclusive Holidays and Smith brought an action to wind up operations of the Kingston-based company and use the proceeds to pay off a debt Smith said is owed to his organisation.
A winding up order was made in respect of Exclusive Holidays in the Supreme Court on May 8, 2014 under the Insolvency Act. On May 29, Exclusive Holidays filed a claim in the Supreme Court for ARC Systems to pay over a near $26-million debt that it said was owed to them by ARC Systems.
Dr Barnett argued in court last month that Exclusive Holidays and its directors had no right to bring an action to wind up the operations of ARC Systems, as Exclusive Holiday was placed into receivership at the time, and under the Companies Act it is illegal for companies that have been placed under liquidation to take action against another, unless it has been granted permission to do so by the court, or the designated liquidator, which, in this matter, was not done.
It followed a submission by directors of Exclusive Holidays to bring a summary judgment application against ARC Systems in July 2014 and pushed for enforcement proceedings, which would result in ARC Systems being placed in receivership. But Dr Barnett argued that Exclusive Holidays was in liquidation at the time and did not follow procedure to press for such a result.
Dr Barnett also argued that ARC Systems stopped trading in 2012 and there was no “potential revenue” from which the assets could be recovered.
The experienced attorney-at-law also took issue with the fact that the Office of Supervisor of Insolvency made a submission to the court after closing submissions were filed.
Section 223 (3) of the Insolvency Act states: ‘The supervisor may intervene in any matter or proceedings in court, where the supervisor considers it expedient to do so, as if the supervisor were a party to the matter of proceedings.”
The defence team, which also includes Debbie-Ann Gordon and Gillian Burgess, wants to know why it was expedient for the supervisor to intervene in this particular matter.
“A supervisor would rarely intervene in proceedings if only due to the cost associated with litigation,” Dr Barnett said. “Further, the distinguishing role of a supervisor, being an impartial administrative functionary, as opposed to a judicial functionary or an advocate, means that the supervisor has very little to contribute to court proceedings. However, a supervisor will intervene where it is necessary for the interest of justice or as a matter of public interest or where the supervisor wishes to obtain directions in a matter; although in the latter case, the supervisor would await the court’s ruling and thereafter, make a separate and independent application for directions in relation to its statutory duties.
“In my experience, the Supervisor/Regulator (FSC and BOJ) have intervened in liquidation proceedings as they were the petitioning party in one instance and in another, wanted to substitute a Receiver for another as the appointed Receiver had retired.
“You will note that in this case the supervisor has not ‘intervened’. Rather, it has been ‘invited’ by the court to give arguments for which I see no statutory authority. However, in such circumstances, I am of the view that the more appropriate course of action is for the supervisor to apply to intervene, albeit at the court’s invitation and to restrict it’s ‘submissions’ to its authority of administration, licensing and regulation of conduct of trustees,” Dr Barnett stated.
The case is being watched closely by legal and business interests as it is felt that the outcome could influence how business procedures are conducted in future.