Algosaibi Bros v Saad Invs

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 19 April 2010
• Court: Grand Court (Cayman Islands)
• Date: 19 April 2010

Grand Court, Financial Services Division

(Smellie, C.J.)

AHMAD HAMAD ALGOSAIBI AND BROTHERS COMPANY

and

SAAD INVESTMENTS COMPANY LIMITED and FORTY TWO OTHERS

E.A. McQuater, Q.C., D. Quest and P. Hayden for the plaintiff;

S. Smith, Q.C. and Ms. C. Wilkins for the Grant Thornton liquidators;

Cases cited:

(1) Abidin Daver, The, [1984] A.C. 398; [1984] 2 W.L.R. 196; [1984] 1 All E.R. 470; [1984] 1 Lloyd”s Rep. 339; (1984), 128 Sol. Jo. 99, referred to.

(2) Aro Co. Ltd., In re, [1980] Ch. 196; [1980] 2 W.L.R. 453; [1980] 1 All E.R. 1067, dictum of Brightman, L.J. applied.

(3) Bank of Credit & Commerce Intl. SA (No. 4), Re, [1994] 1 BCLC 419; [1995] BCC 453, dictum of Jonathan Parker J. applied.

(4) Berkeley Applegate (Investment Consultants) Ltd., In re, [1989] Ch. 32; [1988] 3 W.L.R. 95; [1988] 3 All E.R. 71; (1987), 4 BCC 274; [1989] BCLC 28, referred to.

(5) Bridge Trust Co. Ltd. v. Att. Gen., 2001 CILR 132, distinguished.

(6) Capital Cameras Ltd. v. Harold Lines Ltd., [1991] 1 W.L.R. 54; [1991] 3 All E.R. 389; [1991] BCLC 884; [1991] BCC 228, considered.

(7) Ciro Citterio Menswear plc, Re, [2002] BPIR 903; [2002] EWHC 897 (Ch), referred to.

(8) Claybridge Shipping Co. S.A., Re, [1997] 1 BCLC 572; [1981] Com. L.R. 107n, considered.

(9) Deputy Commr. of Taxation v. Advanced Communs. Technologies (Australia) Pty. Ltd., [2003] VSC 67, distinguished.

(10) Eastern Capital Futures, Re, [1989] BCLC 371; (1988), 5 BCC 223, referred to.

(11) Enron Metals & Commodity Ltd. v. HIH Casualty & Gen. Ins. Ltd., [2005] EWHC 485 (Ch), applied.

(12) Euro Bank Corp., In re, 2001 CILR 517, referred to.

(13) Four Pte. Invs. Funds v. Lomas, In re Lehman Bros. Intl. (Europe), [2009] 1 BCLC 161; [2009] BCC 632; [2008] EWHC 2869 (Ch), distinguished.

(14) Grosvenor Metal Co. Ltd., In re, [1950] Ch. 63; [1949] 2 All E.R. 948, applied.

(15) Grupo Torras S.A. v. Bank of Butterfield, 2000 CILR 441, referred to.

(16) Lawindi v. Elkateb, [2001] NSWSC 865, dicta of Young, C.J. applied.

(17) Local London Residential Ltd., Re, [2004] 2 BCLC 72; [2004] BPIR 599; [2004] EWHC 114 (Ch), referred to.

(18) Motorola Credit Corp. v. Uzan, [2002] 2 All E.R. (Comm) 945; [2002] C.P. Rep. 69; [2002] EWCA Civ 989, applied.

(19) Oriental Inland Steam Co., In re, Ex p. Scinde Ry. Co.ELR(1874), L.R. 9 Ch. App. 557; 43 L.J. Ch. 699, referred to.

(20) T.S.B. Private Bank Intl. S.A. v. Chabra, [1992] 1 W.L.R. 231; [1992] 2 All E.R. 245, applied.

(21) Telesure Ltd., Re, [1997] BCC 580, referred to.

(22) Texan Mgmt. Ltd. v. Pacific Elec. Wire & Cable Co. Ltd., [2010] 4 LRC 1; [2009] UKPC 46, distinguished.

(23) Totalise plc v. The Motley Fool Ltd., [2002] 1 W.L.R. 1233; [2003] 2 All E.R. 872; [2002] C.P. Rep. 22; [2001] EWCA Civ 1897, distinguished.

(24) Unilever plc v. ABC Intl., 2008 CILR 87, referred to.

(25) Westdock Realisations Ltd., Re, [1988] BCLC 354; (1988), 4 BCC 192, referred to.

Legislation construed:

Companies Law (2009 Revision), s.97: The relevant terms of this section are set out at para. 70.

Companies-compulsory winding up-proceedings against company-may lift stay of civil proceedings under Companies Law (2009 Revision), s.97 if right and fair to all parties-if involves competing proprietary claims, question is whether more appropriate to resolve in separate proceedings or winding-up process-separate proceedings more appropriate if good arguable case, judgment needed on which to base proprietary claim and unlikely to lead to spate of similar applications

Injunctions-Mareva injunction-discharge of injunction-usually discharged once liquidators appointed since regarded as capable of properly managing assets-may exceptionally continue if sufficiently strong justification e.g. if real risk assets will be dissipated because not secured by liquidators

The plaintiff brought claims against the second defendant and 42 companies controlled by him in respect of an alleged fraud.

The second defendant had been the manager of one of the businesses of the plaintiff company. The plaintiff alleged that, while he was in control of the business, he fraudulently caused the plaintiff to suffer a loss of US$9.2bn. On an ex parte application by the plaintiff to the Grand Court (Henderson, J.), the court made a world freezing order against all the defendants prohibiting the disposal of assets up to the value of US$9.2bn. and ordering the disclosure of information pertaining to assets over which the plaintiff asserted proprietary claims. The defendants included 17 Cayman companies controlled by the second defendant which, by the time of this proceeding, were already in liquidation in the Grand Court. As a result, a stay of proceedings against them had been imposed by s.97 of the Companies Law (2009 Revision).

The Cayman world freezing order was upheld by the Grand Court (Henderson, J.) after a contested inter partes hearing. The liquidators, however, did not manage to locate or secure all the assets over which the plaintiff asserted proprietary claims, and the disclosure of information pertaining to them was sporadic and incomplete. Furthermore, the second defendant, as well as denying the allegations of fraud, refused to submit to

the jurisdiction of the Cayman court, and sought a declaration that Saudi Arabia was the proper forum for the resolution of the dispute between himself and the plaintiff. It was not proposed that any of the defendant companies be party to proceedings in Saudi Arabia. The jurisdictional challenge was due to be heard some time after the present proceeding.

The plaintiff applied to lift the statutory stay in order to proceed with its claims against the 17 defendant companies in liquidation, submitting that (a) it had a good arguable case that each of the companies was a fraudulent co-conspirator with the second defendant and a good arguable proprietary claim against each of them; (b) it would be unfair were its proceedings against the companies, commenced as of right in the Cayman Islands and not dependent on the outcome of the second defendant”s jurisdictional challenge, stayed indefinitely; (c) civil litigation, and not the winding-up process, was the appropriate way for it to establish its proprietary claims to the assets given the procedural benefits including full discovery, the avoidance of the risk of inconsistent findings, and lower costs; (d) continuing the proceedings would give it no advantage over other parties; (e) lifting the stay now would avoid unnecessary delays; and (f) the fact that the liquidators would be inconvenienced by having to defend its claim only justified an extension of time for the filing of a defence. The plaintiff further applied for the continuation of the world freezing order and the enforcement of the order for the disclosure of information, contending that (g) given that the liquidators had not secured all the relevant assets, there remained a real risk that the assets were or would come under the control of the second defendant and be dissipated; and (h) the disclosure it had so far received had not given it sufficiently specific information as to the location and security of the assets.

The liquidators of some of the defendant companies submitted in reply that the stay should not be lifted, at least until the second defendant”s jurisdictional challenge had been resolved, since (a) until the jurisdictional challenge were resolved, the scope of the plaintiff”s action would be unclear; (b) their work would be made more onerous if they had to defend a claim against the plaintiff, which would distract them from carrying out the liquidations; (c) lifting the stay could result in a spate of further applications for leave to sue the companies; (d) the plaintiff”s title to sue could be challenged; (e) the plaintiff”s pleadings, including those of Saudi Arabian law, were insufficient; (f) the plaintiff”s case was insufficiently certain; and (g) there had been incomplete disclosure. In reply to the application for the continuation of the world freezing order and the enforcement of the disclosure provisions, the liquidators submitted that (h) once liquidators had been appointed over a company, any restraining order over the assets of that company should be discontinued, since the liquidators should be viewed as being capable of dealing with the property; (i) since the asset tracing and securing exercise was the liquidators” responsibility, provisions for the disclosure to the plaintiff were unnecessary, and (j) the duty of disclosure was unduly onerous and/or prejudicial to them. They also applied for the costs of disclosure to be paid

by the plaintiff on the basis that they were an innocent party which had become ‘mixed up’ in a civil dispute between others.

Held, granting the application:

(1) The plaintiff would be granted leave to proceed with its claim against the 17 defendant companies in liquidation, it not being necessary to await the outcome of the second defendant”s challenge to jurisdiction before allowing the plaintiff to proceed with its claim. Although the jurisdictional challenge might have resulted in a finding that Saudi Arabia, and not the Cayman Islands, was the appropriate forum for proceedings between the plaintiff and the second defendant, the defendant companies in liquidation were not, nor proposed to be, party to such proceedings, nor had they shown any intention to submit to the Saudi Arabian jurisdiction. They would not be bound by any proceedings in Saudi Arabia, and no issues of estoppel would arise in relation to them. Instead, they were sued in the Cayman Islands as of right by the plaintiff-and it was on the basis that this claim had merit that the plaintiff”s application to proceed was based (paras. 74–78).

(2) When determining whether to lift a stay of proceedings imposed by s.97 of the Companies Law (2009 Revision), the question for the court would be what was right and fair to all parties in...