Banco International De Costa Rica, S.A. v Banana International Corporation
| Jurisdiction | Cayman Islands |
| Judge | Kawaley |
| Judgment Date | 07 August 2018 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO. FSD 222 OF 2017 (IKJ) |
| Date | 07 August 2018 |
The Hon. Justice Kawaley
CAUSE NO. FSD 222 OF 2017 (IKJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Ex parte application for post-judgment freezing injunction and bankers books inspection order-governing principles
Ms Kate McClymont and Ms Sally Bowler of Broadhurst LLC on behalf of the Plaintiff/Judgment Creditor
On October 27, 2017, the Plaintiff issued a Writ of Summons and Statement of Claim seeking to enforce a money judgment obtained against the Defendants in the New York State Court on September 8, 2015. On October 31, 2017, the Plaintiff filed an Ex Parte Summons seeking leave to serve out under GCR Order 11 rule 1(1) (m). On November 23, 2017, I granted that application. On January 23, 2018 the Defendants applied to set aside that Ex Parte Order. I dismissed that application on April 11, 2018 for reasons which were delivered on April 23, 2018. The Plaintiff entered judgment in default on May 28, 2018 for principal and interest totalling more than US$24 million.
On June 15, 2018, the Plaintiff/Judgment Creditor filed an Ex Parte Summons seeking:
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(a) an injunction freezing the Defendants'/Judgment Debtors' assets within and without the Cayman Islands (“Worldwide Freezing Order”); and
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(b) a disclosure order pursuant to section 8 of the Evidence Law (2011 Revision) as against Banco Colpatria Cayman Inc. (the “Bank”) in respect to any and all bank accounts held by the 1 st Defendant at the Bank (“Banking Books Order”).
Due to my unavailability, that Ex Parte Summons was not heard until July 23, 2018 when I granted Orders substantially in terms of both Orders sought. I now give reasons for that decision.
The main rationale for the present proceedings was to enable the Plaintiff to domesticate its New York judgment and use enforcement tools to ascertain what funds entered and left the bank account the 1 st Defendant admitted it recently had in the Cayman Islands. An important aspect of the Plaintiff's pre-judgment jurisdictional case was that this account had been used by the 1 st Defendant to evade its core contractual obligation to pay the proceeds of fruit sales into an escrow account established in New York as part of the repayment mechanism under agreements pursuant to which monies were lent by the Plaintiff to the 1 st Defendant.
Correspondence placed before the Court for the purposes of the present application demonstrated that when the 1 st Defendant notified the Plaintiff in early 2014 that it was no longer going to adhere to another contractual obligation designed to secure its repayment obligations, the Plaintiff promptly responded by commencing the New York proceedings. It was admitted in the jurisdictional hearing that during the same broad timeframe leading up to the commencement of the New York proceedings, substantial sums which should have been paid into the escrow account established under the finance agreements, were being paid into the 1 st Defendant's Caymanian account. It also emerged at the end of the jurisdictional hearing, that although the Defendants purported to exhibit copies of “bank statements” in evidence, the exhibited documents had been created by the Defendants from actual bank documents. This was highly suspicious and indicative of the fact that the 1 st Defendant was unable or unwilling to produce true copies of its Bank statements. The suggestion that this was merely done because difficulties had been experienced in accessing original bank statements after the Bank ceased operations was unconvincing. In rejecting the proposition that the Plaintiff had failed to show that any useful purpose would be served by obtaining and enforcing a Caymanian judgment, I ruled:
“18. Ms King fairly argued that it was unclear precisely what enforcement tools the Plaintiff would be able to deploy in this jurisdiction as her clients were domiciled elsewhere. That uncertainty is a far cry from providing positive support for this Court finding that the benefits of enforcement are so clearly futile that the Plaintiff should be denied the chance to place itself in a position to be able to initiate enforcement procedures altogether. The remedies which may potentially be deployed are not only flexible; their purpose often entitles the judgment creditor to apply ex parte without notice for various forms of relief. This Court should be slow to stifle enforcement efforts before they have been even initiated, particularly at the instance of non-cooperating judgment debtors.”
Ms McClymont took the Court through a detailed review of documents evidencing a course of conduct by the 1 st Defendant designed to evade its pre-judgment obligations to the Plaintiff. In the Third Affidavit of Stephanie Feldman, the following conclusory averments were made. These averments I considered were supported by the material before this Court and the Defendants' conduct earlier in these proceedings:
“57. To date the Defendants have gone to great lengths and expense in the Cayman Islands and New York to wilfully evade enforcement of the NY Judgment…”
Although the principles governing the grant of ex parte freezing injunctions are well settled, counsel rightly placed a broad array of relevant authorities before the Court.
Section 11 of the Grand Court Law confers on this Court the same jurisdiction as is conferred on the English High Court and its various Divisions. Section 37 of the Senior Courts Act 1981 (UK) provides:
“(1) The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so”
GCR Order 29 rule 1 provides:
“ (1) An application for the grant of an injunction may be made by any party to a cause or matter before or after the trial of the cause or matter, whether or not a claim for the injunction was included in that party's writ, originating summons, counterclaim or third party notice, as the case may be.
(2) Where the applicant is the plaintiff and the case is one of urgency such application may be ex parte on affidavit but, except as aforesaid, such application must be made by motion or summons.
(3) The plaintiff may not make such an application before the issue of the writ or originating summons by which the cause or matter is to be begun except where the case is one of urgency, and in that case the injunction applied for may be granted on terms providing for the issue of the writ or summons and such other terms, if any, as the Court thinks fit.”
Ms McClymont acknowledged that the passage of time between the filing of the application and the hearing made it difficult to rely on urgency alone to justify an ex parte hearing. I accepted her alternative submission that there was a risk that if prior notice was given of the application some (admittedly ill-defined) steps might be taken by the Defendants to undermine the efficacy of the relief sought.
In terms of the exercise of the discretion to grant interlocutory injunctive relief, counsel relied upon this Court's decision in Walker International Holdings Limited and another v Olearius Limited and others [ 2003 CILR 457]. Smellie CJ, considering the discretion to grant injunctive relief against a party in respect of whom no substantive cause of action was asserted by the applicant, approved the following statement of Mummery J in T.S.B. Private Bank Intnl.S.A. v Chabra [1992] 1 W.L.R. 231 at 241:
“In considering this submission I bear in mind four preliminary but important points. I first take note of the wide terms of section 37(1) of the Supreme Court Act 1981 which empowers the court to grant an injunction in all cases where it appears to the court to be just and convenient to do so. Secondly, the whole basis of the Mareva jurisdiction is that, where a plaintiff has shown a good arguable case, the court, in order to protect the plaintiff's interests, has jurisdiction in a proper case to grant an interlocutory injunction restraining a defendant from disposing of or dissipating his assets, where the refusal of such an injunction would involve a real risk that a judgment obtained by the plaintiff would be stultified and remain unsatisfied.
Thirdly, the jurisdiction of the Court should be exercised with caution and great care should be taken not to be oppressive to the persons restrained, either in the carrying on of a business or in the conduct of everyday life.
Fourthly, the practice of the court on the grant of Mareva injunctions is an evolving one which has to remain flexible and adaptable to meet new situations as and when they arise.”
I considered that in the present case the need for caution was somewhat diluted as even though at the pre-judgment stage the Plaintiff did not assert a substantive cause of action against the 2 nd – 3 rd Defendants, those Defendants were for all enforcement purposes now Judgment Debtors. Moreover, the judicial statement set out above provided indirect support for the now well-recognised principle that post-judgment freezing orders may indeed be sought and granted. Two brief citations of authority not placed before me provide support for this broad proposition. They also illustrate how the evidential bar an applicant has to meet in terms of showing a risk of dissipation of assets will generally be somewhat lower in the post-judgment context.
Firstly, Burton J held in Nomihold Securities Inc. v Mobile Telesystems...
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