Banco International De Costa Rica S.A. v Banana International Corporation, Banacol De Costa Rica S.A. and Banacol Corporation

• Jurisdiction: Cayman Islands
• Judge: (Kawaley, J.)
• Judgment Date: 07 August 2018
• Date: 07 August 2018
• Court: Grand Court (Cayman Islands)

BANCO INTERNATIONAL DE COSTA RICA S.A.

and

BANANA INTERNATIONAL CORPORATION, BANACOL DE COSTA RICA S.A. and BANACOL CORPORATION

(Kawaley, J.)

Grand Court, Financial Services Division (Cayman Islands)

Injunctions — Mareva injunction — worldwide injunction — post-judgment worldwide freezing order granted if real risk of dissipation of assets and reason to believe defendants’ assets within jurisdiction insufficient to meet claim — broad disclosure of defendants’ Cayman bank information ordered

Evidence — banker’s books — inspection of banker’s books — may be granted under Evidence Law (2018 Revision), s.8 — procedure set out in GCR O.38, r.19 — may be granted for purposes of trial or post-judgment enforcement — judgment creditor to show banker’s books relevant to and admissible in enforcement proceedings, and not possible or convenient to obtain from party — banker’s books order granted ex parte, conditional on compliance with Confidential Information Disclosure Law 2016

Held, granting the orders sought:

The worldwide freezing order

(1) The principles governing the grant of ex parte freezing injunctions were well settled. Section 11 of the Grand Court Law conferred on this court the same jurisdiction as was conferred on the High Court of England and Wales and its various Divisions. Pursuant to s.37(1) of the Senior Courts Act 1981, the High Court could by order (whether interlocutory or final) grant an injunction in all cases in which it appeared to the court to be just and convenient to do so. GCR O.29, r.1(3) provided that an application for an injunction might only be made ex parte if the matter was one of urgency. In the present case it was acknowledged that due to the passage of time between the filing of the application and the hearing it was difficult to rely on urgency alone to justify an ex parte hearing. The court accepted the plaintiff’s 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 exercising its discretion to grant interlocutory injunctive relief, the court bore in mind four preliminary points: (i) the wide terms of s.37(1) of the 1981 Act empowered the English court to grant an injunction in all cases where it appeared just and convenient to do so; (ii) the basis of the jurisdiction was that, where a plaintiff had shown a good arguable case, the court had jurisdiction to grant an injunction restraining a defendant from disposing of or dissipating his assets in order to protect the plaintiff’s interests where refusal of an injunction would involve a real risk that a judgment obtained by the plaintiff would remain unsatisfied; (iii) the jurisdiction of the court should be exercised with caution and great care should be taken not to be oppressive to the persons restrained, in the carrying out of a business or the conduct of everyday life; and (iv) the practice of the court was evolving and had to remain flexible and adaptive to meet new situations when they arose (paras. 7–10).

(2) Post-judgment freezing orders could be sought and granted. The evidential bar that an applicant had to meet in terms of showing a risk ofdissipation of assets would generally be somewhat lower in the post-judgment context. The hurdle might be materially lower where the judgment obtained by the applicant itself provided support for the grant of a post-judgment freezing order by recording a judicial determination that a risk of dissipation existed. In the present case, the court’s interlocutory finding that the defendants were (as regarded the New York judgment) “non-cooperating judgment debtors” based on the evidence adduced at the pre-judgment phase of these proceedings went some way towards supporting a finding of a post-judgment risk of dissipation (paras. 11–14).

(3) To obtain a post-judgment worldwide freezing order, the court must be satisfied that there was a real risk of dissipation of assets and reason to believe that the defendants’ assets within the jurisdiction might be insufficient to meet the plaintiff’s claim. In the present case, evidence put before the court on the inter partes application to set aside leave to serve the defendants out of the jurisdiction suggested that the assets within the jurisdiction were likely to be insufficient to meet the default judgment. Proof of a risk of dissipation was the key requirement that had to be made out in all the circumstances. In establishing a risk of dissipation of assets, the following general principles were to be applied: (a) The plaintiff must demonstrate a real risk that the defendant would engage in activities outside the usual and ordinary course of its business which would have the effect of dissipating its assets and making it more likely that a judgment in favour of the plaintiff would go unsatisfied; and (b) the plaintiff must adduce solid evidence of a real risk of the judgment remaining unsatisfied unless the defendant was prevented from dealing with his assets within the jurisdiction. The requirements of (a) were met in the present case. The first defendant had failed to pay moneys it had contracted to pay into an escrow account to secure its repayment obligations both before and after the New York judgment was obtained. It had also concealed or disguised its true financial position in relation to its account with the bank and generally failed to co-operate with judgment enforcement efforts. The requirements of (b) did not need to be met on the present facts. For essentially the same reasons that the court had found the plaintiff to have made out a jurisdictional case against the second and third defendants (namely their close commercial and corporate ties to the first defendant), the court was satisfied that a case for post-judgment injunctive relief had been made out against all three jointly and severally liable defendants/judgment debtors (paras. 15–17).

(4) The fact that broad disclosure of the defendants’ current and historic asset position was sought was also relied upon as justifying modification of the usual requirement that proof of dissipation of assets within the jurisdiction was required. Although the Cayman Islands were not the defendants’ home jurisdiction, the evidence established and the defendants admitted that they had assets within the jurisdiction and the plaintiff had established that it was likely that there was valuable information about the assets within the jurisdiction. Disclosure was the most important part ofthe relief sought in the present proceedings and this was no less the case because it was not the defendants’ home jurisdiction. The need for flexibility in the Mareva jurisdiction was an enduring requirement whenever the court was called upon to grant interim injunctive relief. The court had previously held it to be acceptable at the ex parte stage to seek broad disclosure, leaving it to a defendant to seek appropriate modifications of the relief initially granted. The worldwide freezing order sought disclosure of up-to-date and historic information and copies of statements relating to any accounts held in the Cayman Islands within 21 days. Due to the limited information available to the plaintiff as to the likely volume of documents the defendants would be required to disclose, and their history of non-cooperation, it was appropriate to impose a period of 21 days for compliance. Modifications could be made in due course if the need arose (paras. 18–20).

The banker’s books order

(5) The primary statutory jurisdiction for a banker’s books order was the Evidence Law (2018 Revision). Section 8 provided, in sub-s. (1), that a court could order that a party to a legal proceeding be at liberty to inspect and take copies of any matter in a banker’s book for the purpose of such proceedings. Sub-section (2) provided that any such order “shall be without prejudice to the Confidential Information Disclosure Law, 2016 . . .” The procedure for such an order was set out in GCR O.38, r.19, which made clear that (i) applications must be supported by affidavit evidence explaining the nature of the proceedings and why the evidence was needed; (ii) applications could be made ex parte; (iii) applications must indicate how the information sought would be admissible “at the trial of the action”; and (iv) applications must indicate whether the accountholder had consented and if not whether any directions had been made under s.4 of the CIDL (paras. 21–26).

(6) It was not the case that an application under s.8 of the Evidence Law could only be made prior to judgment for the purposes of a trial. The court was satisfied that the jurisdiction conferred by s.8 applied to both the pre-judgment and the post-judgment phase of civil proceedings. The phrase “trial of the action” in O.38, r.19(3)(b) could not properly be construed as reducing the scope of the jurisdiction conferred by the primary legislation which the rule was designed to support (paras. 27–29).

(7) The same general test applied to an application under s.8 made for judgment enforcement purposes as applied at the pre-judgment stage. The judgment creditor must show both that the banker’s books which were sought to be inspected and copied were relevant to the enforcement process and admissible in the enforcement proceedings. It must also surely be demonstrated, where the relevant account belonged to a party to the proceedings, that (a) it was not possible or convenient to obtain the documents from the party, and (b) there were good grounds for seeking an order ex parte. In the present case it was obvious that the prospects of effectively obtaining the bank statements from the first defendant wereslim: it had sought to prevent judgment being entered and filed what purported to be bank statements but were in fact its own iteration of the original documents. It was likely that original documents or electronic...