Bancredit Cayman v Pellerano

• Jurisdiction: Cayman Islands
• Judge: (Henderson, J.)
• Judgment Date: 10 June 2010
• Court: Grand Court (Cayman Islands)
• Date: 10 June 2010

Grand Court, Financial Services Division

(Henderson, J.)

BANCREDIT CAYMAN LIMITED

and

PELLERANO

M. Crystal, Q.C. and M.J. Crawford for the liquidators;

T. Lowe, Q.C. and Ms. C.J. Bridges for the defendant.

Cases cited:

(1) Att.-Gen. (Zambia) v. Meer Care & Desai, [2006] 1 CLC 436; [2006] EWCA Civ 390, dicta of Clarke, M.R. and May, L.J. applied.

(2) Bank Geselleschaft Berlin Intl. SA v. Zihnali, [2001] All E.R. (D) 192, applied.

(3) Brink”s Mat Ltd. v. Elcombe, [1988] 1 W.L.R. 1350; [1988] 3 All E.R. 188; [1989] 1 F.S.R. 211, applied.

(4) Hagen, The, [1908] P. 189; [1908–10] All E.R. Rep. 21, applied.

(5) McLean v. Buchanan (Procurator Fiscal, Fort William), [2001] 1 W.L.R. 2425; [2001] H.R.L.R. 51; [2001] UKPC D 3, referred to.

(6) Seaconsar Far East Ltd. v. Bank Markazi Jomhouri Islami Iran, [1994] 1 A.C. 438; [1993] 3 W.L.R. 756; [1993] 4 All E.R. 456; [1994] 1 Lloyd”s Rep. 1, applied.

(7) Spiliada Maritime Corp. v. Cansulex Ltd., The Spiliada, [1987] A.C. 460; [1986] 3 W.L.R. 972; [1986] 3 All E.R. 843; [1987] 1 Lloyd”s Rep. 1, applied.

Legislation construed:

Cayman Islands Constitution Order 2009 (S.I. 2009/1379), Schedule 2, s.7(1): The relevant terms of this section are set out at para. 32.

Civil Procedure-fair trial-appearance-no automatic right to physical presence at civil trial under Cayman Islands Constitution 2009, s.7(1) or European Convention, art. 6(1)-whether trial fair to be determined by reference to measures taken in individual case, e.g. video-link evidence; real-time court reporting; early disclosure of evidence; faxing new evidence; appointment of special examiner-if not demonstrated that trial would be unfair, absent party may be allowed to re-apply closer to trial

The plaintiff bank”s liquidators brought an action to recover damages and compensation for alleged breaches of duty by the defendant.

The defendant was convicted in the Dominican Republic (of which he was a citizen and resident) of fraud and imprisoned there for eight years commencing in 2008. He had been a director and signing officer of the plaintiff bank, which was incorporated in the Cayman Islands (although most of its customers were located in the Dominican Republic, and many important documents relating to it were in Spanish). The bank ran into serious financial difficulties, and the Cayman Islands Monetary Authority appointed liquidators to wind it up. They identified three transactions in respect of which they would seek damages and equitable compensation from the defendant. They subsequently abandoned the claims on the second and third of the transactions, continuing only with the first: that the defendant allowed the bank to enter into one-sided transactions, running

up a large unsecured overdraft in favour of another entity for his own personal benefit, and in doing so failed to act in good faith with regard to the bank”s creditors, breached his fiduciary duties as a director of the bank, used his powers for an improper purpose and breached his common law duty to the bank to exercise a proper level of care, skill and diligence.

The Grand Court (Smellie, C.J.) found that there was a good arguable case to justify service out of the jurisdiction and made an ex parte order granting the liquidators leave to do so. It also held that the Cayman Islands were the appropriate forum for the trial of the action, noting the defendant”s imprisonment in the Dominican Republic and suggesting that it might justify a future stay of proceedings pending his release.

On the inter partes review of the order, the defendant submitted that it should be set aside on the basis that (a) there were no serious issues to be tried, as there was no evidence that the overdraft was created on instructions from the defendant; (b) the Cayman Islands were not the appropriate forum for the trial, since many of the relevant documents were written in Spanish, many witnesses and the company”s records were located in the Dominican Republic, and the defendant was imprisoned in the Dominican Republic; (c) his right to a fair trial (as guaranteed by the Cayman Islands Constitution 2009, s.7(1) and the European Convention on Human Rights, art. 6(1)) and the fact that his character and conduct were in issue meant that he had a right to physical presence at the trial, which would be violated if the trial proceeded in the Cayman Islands whilst he remained in a foreign prison; and (d) there had been material non-disclosure on the part of the liquidators concerning the second and third transactions, the principles arising from the case-law, his probable responses, what he could have done, and the relevance of his imprisonment.

The liquidators submitted in reply that the order should be upheld as (a) there were serious issues to be tried, since the evidence was capable of supporting an inference that the defendant was at least aware of the overdraft, and since there was also an issue concerning his common law duties; (b) the Cayman Islands were the appropriate forum since the bank was a Cayman company, the applicable law on the duties of directors was that of the Cayman Islands, the relevant books and records were (or should be) in the Cayman Islands, and the difficulties posed by the defendant”s imprisonment would have arisen wherever the trial took place; (c) the defendant”s right to a fair trial did not entitle him to be physically present since measures could be taken to alleviate any unfairness arising from his absence (although no submissions were made as to the effect of any such measures); and (d) there had been no material non-disclosure, as none was needed in relation to the second and third transactions (this action only concerning the first), and their disclosure had been otherwise adequate.

The court considered whether any of the grounds for leave to serve out of the jurisdiction had been satisfied.

Held, dismissing the application:

(1) The ex parte order granting leave to serve the defendant in the Dominican Republic would be upheld. Given that the defendant was a director at all material times and that his fiduciary obligations were defined by Cayman law, the ground for leave to serve out of the jurisdiction contained in the GCR, O.11, r.1(1)(ff) was satisfied. Moreover, there were serious issues to be tried. The evidence was capable of supporting an inference that the defendant, as a signing officer, was aware of the increasing overdraft and the lack of security for it, and also aware of the disputed transactions. There was also an issue to be tried concerning the defendant”s common law duties (paras. 16–20).

(2) Further, the Cayman Islands were ‘clearly and distinctly’ the appropriate forum, subject only to the question of whether a fair trial was possible whilst the defendant remained imprisoned in the Dominican Republic. This was so-in spite of many of the relevant documents being written in Spanish and the defendant and many witnesses being located in the Dominican Republic-because the bank was a Cayman company, the applicable law on the duties of directors was that of the Cayman Islands and the relevant books and records were (or should be) in the Cayman Islands. Moreover, some of the difficulties posed by the defendant”s imprisonment (e.g. the fact that all of his communications were monitored) would have arisen wherever the trial took place (paras. 22–30).

(3) The right to a fair trial (as guaranteed by the Cayman Islands Constitution 2009, s.7(1) and the European Convention on Human Rights, art. 6(1)) did not necessarily entitle a party to be physically present at a civil trial, even when his character and conduct were in issue. Whether the defendant”s inability to be present made the trial unfair depended on the circumstances and in particular the measures which might be taken to alleviate any unfairness arising from his absence. In the Cayman Islands, these included taking evidence by video-link; the use of real-time court reporting; early disclosure of documentary evidence; faxing new documentary evidence; and the potential appointment of a special examiner to take evidence in a foreign jurisdiction. Since there had been no submissions as to whether these measures would ensure a fair trial, the application for a stay would be dismissed, but the defendant given leave to re-apply when the action was closer to trial, at which point the parties would need to address the issue (para. 32; paras. 37–40).

(4) Furthermore, there had been no material non-disclosure by the plaintiff on the ex parte application to the Chief Justice, since (a) any non-disclosure relating to the second and third transactions was not material, this action only concerning the first; (b) no elaboration would have been needed on the principles arising from the case-law, of which the Chief Justice would already have been well aware; (c) the plaintiff had-given the difficulty of predicting such responses-adequately summarized the defendant”s probable responses to the claim; (d) elaboration on the question of what the defendant could have done could not have

prevented a finding that there was a serious issue to be tried; and (e) the order had not been induced by any non-disclosure relating to the relevance of the defendant”s imprisonment. The court would therefore uphold the order (paras. 41–46).

1 HENDERSON, J.: The plaintiff, Bancredit Cayman Ltd. (‘Bancredit’)...