How much is a licence to sell alcohol in the Cayman Islands worth? Does it have any assessable monetary value at all?
Legal wrangling between a shuttered downtown hotspot and the company’s liquidators sparked potentially significant questions around what is typically a routine application before the Liquor Licensing Board.
During the board’s quarterly meeting Thursday, Stefan Baraud, the former owner of Senor Frogs, requested that the board allow his retail liquor licence, restaurant liquor licence and music and dancing licence to be transferred to Matthew Wight, for use at a new establishment planned north of Rackham’s Pub and Restaurant on the North Church Street waterfront.
“The variation, Mr. Chairman, is simply the change of location, which is no more than a standard process that happens quite often from one licensee to the other, or one premises to another,” Mr. Baraud told the Board. “So what I’m asking is nothing outside the realm of what is the norm.”
Mr. Baraud said the reason for the transfer of the licence is because it has not been in use since Senor Frogs closed in May 2010. The Grand Court of the Cayman Islands placed the company in liquidation in response to a petition filed by major creditor dms Properties, which claimed in late October 2010 that Senor Frogs owed it more than US$57,000 after failing to pay rent from February to May 2010.
From 2004-2010, Senor Frogs rented two units at Madison Place on Fort Street in downtown George Town. In 2006, dms purchased those two units and became the landlord for Senor Frogs.
Court-appointed liquidator Timothy Le Cornu of Krys & Associates argued before the board that the licence issued to Mr. Baraud for Senor Frogs was an asset of the company and therefore should not be transferred until the winding up process is complete.
To the contrary, Mr. Baraud said the licence belongs to him personally, not the company. His mother Betty Baraud told the board that the licence was initially issued to her when she owned an establishment where Coconut Joe’s is located. Characterising the transaction as a “loan”, Ms Baraud said she had the licence transferred to her son with the understanding that she could have it back whenever she chose.
“It is still my licence,” she said.
Board Chairman Mitchell Welds said, “I tend to disagree, Ms Baraud. It is really Stefan’s licence at the moment. I understand the history of the licence, but I tend to disagree that it’s still your licence. A licence is issued to an individual and Stefan is the sole licensee at this point.”
Ms Baraud said, “I’m presuming that if I allowed him to operate under the licence that it has always been my licence, and therefore it is my licence. The board certainly has the right to see it whichever way, but that is my opinion.”
She said, “I don’t know if I need a legal opinion about it. I certainly don’t want to go into that sort of expense. But it was the understanding with him and myself that if tomorrow I wanted to operate, he’d have to transfer it back to me because it was my licence.”
Mr. Welds said again that Mr. Baraud is the sole licence holder under the law, and that the situation might be different if Ms Baraud had also been listed as a co-licensee, but she is not.
From the liquidators’ perspective, Mr. Le Cornu said that whether the licence is determined to be an asset of the company or of Mr. Baraud, either way they still object to its transfer.
“We believe that the licence is an integral part of the business. Without the licence, the business would be unable to operate and generate its revenue. There are creditors of a large amount of outstanding debts due from the company, and we consider this is an asset that should be realised by the liquidators for the benefit of the creditors,” Mr. Le Cornu said.
He said, “The liquidators also have plans against Mr. Baraud in his personal capacity, and in that case will also seek to object to any transfer of the licence in the event that there may be some value attached to it.”
Board member Neil Bryington said, “The reality is that a liquor licence essentially does not, is not supposed to have a monetary value. It’s not supposed to be taken as a goodwill within the business within the context of the Cayman Islands, I believe. I am aware of liquor licences that had been transferred for monetary value, but I do not believe that’s allowed, so therefore I don’t believe there’s a financial attachment that can be made against a liquor licence.”
Mr. Welds noted, “The law does not prohibit the sale of a liquor licence or music and dancing licence, and in the past we have had people that have received monetary contributions for the licences.”
After retiring for private discussions on all the items on Thursday’s agenda, board members chose to defer their decision on whether to allow Mr. Baraud to transfer his licence to Mr. Wight.
The next time the board convenes will be for its annual meeting in September.