Bank of Nova Scotia v Emerald Seas Ltd

• Jurisdiction: Cayman Islands
• Judge: (Hull, J.)
• Judgment Date: 07 December 1984
• Court: Grand Court (Cayman Islands)
• Date: 07 December 1984

Grand Court

(Hull, J.)

BANK OF NOVA SCOTIA

and

EMERALD SEAS LIMITED, W.M. BECKER and M.L. BECKER

G. Ritchie for the plaintiff;

R. Alberga, Q.C. and A.J. Foster the defendants.

Cases cited:

(1) Barclay-Johnson v. Yuill, [1980] 1 W.L.R. 1259; [1980] 3 All E.R. 190; (1980), 124 Sol. Jo. 594.

(2) Ninemia Maritime Corp. v. Trave Schiffahrts G.m.b.H., The Niedersachsen, [1984] 1 All E.R. 398; [1983] 2 Lloyd”s Rep. 600; [1983] Com. L.R. 234; on appeal, [1983] 1 W.L.R. 1412; [1984] 1 All E.R. 413; [1983] 2 Lloyd”s Rep. 612; (1983), 127 Sol. Jo. 824; 81 L.SGaz. 198, considered.

(3) Third Chandris Shipping Corp. v. Unimarine S.A., [1979] Q.B. 645; [1979] 2 All E.R. 972; [1979] 2 Lloyd”s Rep. 184; (1979), 123 Sol. Jo.389.

Injunctions-Mareva injunction-factors to be considered-solid evidence required of risk of judgment in applicant”s favour remaining unsatisfied unless respondent barred from dealing with assets within jurisdiction-insufficient that respondent is foreign national experienced in international movement of assets, but proof of his previous commercial malpractice might justify injunction-applicant has burden of proof but may rely on respondent”s own evidence to draw adverse inferences

The plaintiff bank brought an action against the defendants claiming amounts guaranteed by them in respect of the bank”s loan to Paradise Manor Ltd., and at the same time applied for a Mareva injunction to restrain the defendants from dealing with any property owned or controlled by them within the jurisdiction and in particular with certain specifically identified assets.

The plaintiff bank made a substantial loan to Paradise Manor Ltd. over 4½ years previously, taking significant securities within the jurisdiction, and made demands for default nearly 2 years before it sought the injunction. The bank submitted that there was a real risk that judgment in its favour would remain unsatisfied if the injunction were not granted since, inter alia, (a) the second and third defendants (who controlled the first defendant company) were both Canadian citizens with no permanent ties in the Cayman Islands, and (b) they might dispose of their assets within the jurisdiction or else remove them entirely from the jurisdiction to avoid their obligations because (i) they had no current development interests in the Cayman Islands; (ii) the second defendant had Canadian and Hawaiian interests and (iii) the second defendant was experienced in the international movement of assets and could easily move or encumber assets in favour of foreign corporations. The Grand Court (Summerfield, C.J.) granted the injunction sought ex parte and the defendants then made the present application to discharge it.

The plaintiff bank resisted the application, alleging that the second defendant had acted improperly in previous business transactions and in particular that he had been guilty of fraud in obtaining control of another company and had stripped its assets in breach of a covenant not to reduce its assets below a certain level. The bank submitted that in view of the factors considered on its original application, together with these additional allegations against the second defendant, it would be proper to continue the injunction.

The defendants denied the allegations of impropriety made against the second defendant but acknowledged that the bank”s information concerning the transactions in question was, to some extent, accurate. They acknowledged that the second and third defendants were Canadian citizens but adduced evidence to show that they had permanent resident status in the Cayman Islands and alleged that they had their only residence in the Islands. They denied having any intention to remove or dissipate their assets, submitting that they would have acted as soon as they knew of the bank”s claim if they had intended to defeat it. They strongly asserted their own commercial reliability but did not disclose any assets other than those known to the bank.

Held, discharging the injunction:

The plaintiff bank had not produced sufficient solid evidence to support its claim that there was a real risk of the removal or dissipation of assets by the defendants and there was therefore no justification for the continuation of the injunction. The grounds on which the injunction was originally sought were not strong-the fact that the second and third defendants were foreigners with assets within the jurisdiction did not in itself warrant the injunction, nor did the fact that the second defendant had international experience in moving assets, particularly since this must have been revealed to the bank through its own inquiries before it made the loan. The injunction might properly have been continued, however, if the later allegations of misrepresentation and asset stripping had remained unchallenged, but the defendants had successfully undermined those allegations and had, moreover, adduced uncontradicted evdence of their permanent resident status. Although some aspects of the defendants” evidence did cast doubts on their commercial reliability, such as their failure to disclose assets, and could properly be relied on by the bank to support its case, there had also to be solid evidence of a real risk that judgment in the bank”s favour would remain unsatisfied if the injunction were not continued and in the absence of such evidence the injunction would be discharged (page 183, line 34 – page 184, line 19; page 185, lines 15–20; page 187, lines 5–37; page 188, line 27 – page 189, line 35; page 190, lines 20–24).

HULL, J.: This is an inter partes application by the three
defendants in this action-Emerald Seas Ltd., William Becker
and Marguerite L. Becker-to discharge the Mareva injunction
which was granted by the learned Chief Justice on November 1st,
5	1984, on the ex parte application of the plaintiff, the Bank of
Nova Scotia.
The plaintiffs writ had been issued on October 31st, 1984. The
nature of its claim is this. It alleges that Emerald Seas Ltd. is
indebted to it in the sum of US$15,288,721 plus interest, being
10	the amount due on a registered collateral charge given over Block
12C, Parcels 13 and 14, on Grand Cayman (‘the first block’) to
secure, to the extent of US$18m., a loan made by the bank to
Paradise Manor Ltd. on which that last-named company is
alleged to have defaulted. Against William Becker and his wife
15	Marguerite Becker, the bank claims US$11.3m., being the
amount guaranteed by them jointly and severally in respect of the
bank”s loan to Paradise Manor Ltd.
The writ included the application for the Mareva injunction. It
sought to restrain the defendants from dealing with any property
20	owned or controlled by them within this jurisdiction, and in par-
ticular with specific assets, namely, a Rolls Royce motor car and a
Mercedes Benz motor car registered in Mr. Becker”s name and all
furniture, goods and other items found on the first block, and a
second block of land, namely 35 acres of land comprising Block
25	12C, Parcel 3, in Grand Cayman owned by Emerald Seas Ltd.
The Chief Justice granted the Mareva injunction in the terms
prayed, the plaintiff giving an undertaking as to damages. The
present application to discharge the injunction was filed on
November 8th. Before dealing with the issues, I should like to say
30	that the quality of the argument from counsel has been extremely
helpful.
The evidence in support of the ex parte application was that set
out in Mr. Berven”s original affidavit, which had been sworn on
October 31st, 1984. It amounted to this. Mr. Becker is the princi-
35	pal of Paradise Manor Ltd. He and/or his wife also own Emerald
Seas Ltd. In any event, they both control that company. The
defendants have specifically identified assets within the jurisdic-
tion. Paradise Manor Ltd., which was developing a 290 room
hotel in Grand Cayman, has defaulted on the bank”s loan and is
40	now in liquidation. Demands have been made by the bank against
the three defendants.

The affidavit then went on,

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