Between: Fortunate Drift Ltd Plaintiff v Canterbury Securities, Ltd Defendant

• Jurisdiction: Cayman Islands
• Judge: Justice Kawaley
• Judgment Date: 14 September 2023
• Court: Grand Court (Cayman Islands)
• Year: 2023
• Docket Number: CAUSE NO: FSD 227 OF 2018 (IKJ)

Between:

Fortunate Drift Limited

Plaintiff

and

Canterbury Securities, Ltd.

Defendant

Before:

The Hon. Justice Kawaley

CAUSE NO: FSD 227 OF 2018 (IKJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

INDEX

Cross-applications by plaintiff and defendant for enforcement and stay of previous Information Order-partial compliance- reasons for non-compliance-need for proportionate approach- jurisdiction to make ancillary orders to ensure effectiveness of post-judgment enforcement of freezing orders-Grand Court Act (2015 Revision), section 11

Appearances:

Ms Katie Pearson, Claritas Legal Limited, for the Plaintiff

Mr Ben Tonner KC and Ms Sally Bowler, McGrath Tonner, for the Defendant

IN COURT

REASONS FOR DECISION

Background

1 The Defendant's case has taken a series of unfortunate steps over the last few months which have resulted in the Court:

• (a) being unable to place any reliance on certain aspects of its evidence relating to the location of the proceeds of sale of the YRIV shares it formerly held (subject to certain contingent security obligations) on behalf of the Plaintiff; and

• (b) being satisfied that the Defendant is the sort of litigant which is not embarrassed to engage in blatant acts of asset dissipation in circumstances which constitute a serious abuse of the processes of this Court.

2 The Plaintiff's 3 May 2023 Summons seeking a Freezing Injunction was granted in part on 22 May 2023 (“Freezing Order”). The application for supplementary disclosure was adjourned to trial. Shortly after the end of the trial, the Court made what has been referred to as the Information Order initially on 16 June 2023 as subsequently amended. For present purposes, the Order relevantly provided as follows:

“ 1. The Defendant shall provide the Plaintiff's attorneys (who may share the documents with the Plaintiff's other legal advisers) with the following documents by 4pm on 20 June 2023:

• 1.1. Bank account statements showing the location of the Proceeds from 6 December 2018 until either:

  • (a) the date that the Proceeds or part thereof left the Defendant's control or, to the extent that the Proceeds remain in the Defendant's control;

  • (b) the date of the last available statement(s). For the avoidance of doubt, such statements shall be statements of the bank account(s) in which the Proceeds have stood and/or are presently standing as a credit balance with the financial institution(s) at which the bank account(s) is (are) held, and shall not include merely the statements of Canadian Escrow Company Ltd and/or any other custodian used by the Defendant as a custodian of the Proceeds;

• 1.2 A screen shot showing the current location, precise value and registered custodian of the Proceeds insofar as those Proceeds remain in the Defendant's control; and

• 1.3. An affidavit sworn by a director of the Defendant within the jurisdiction of the Court confirming the accuracy of the documents referred to sub-paragraphs 1.1 and 1.2 above.”

3 As the Defendant's evidence was that the information sought under paragraph 1.1 was both not within its direct control and embraced a long period of time, it was understandable that compliance might be problematic. The same did not apply to paragraph 1.2 as the Defendant's evidence was that there were identifiable liquid assets held in an account for the Defendant's own benefit.

4 On 30 June 2023 I granted the Defendant an extension of time until 7 July 2023 to comply with the Information Order. It failed to meet the extended deadline it had sought or to draw up a formal Order in relation to the extension granted. By Summons dated 7 July 2023, the Defendant sought a further extension of time until 21 July 2023 but only belatedly supported the application with sworn evidence. On 17 July 2023, the Plaintiff filed its Unless Order Summons to enforce compliance with the Information Order. A Case Management Order was made on 18 July 2023 granting the Defendant the extension of time sought under its Summons.

5 Also on 18 July 2023, the Defendant filed the Fourth Winczura Affidavit which primarily sought to vary the Information Order by staying paragraph 1.1 without challenging its obligation to comply with paragraphs 1.2 and 1.3. It was hoped that the screenshot would be received and served “ in the next few hours”. If the stay sought was not granted, an extension of time for compliance with the entire Information Order was sought until 28 July 2023. This deadline came and went without any compliance. However, the Fifth Winczura Affidavit dated 25 July 2023 explained that Canadian Escrow were reluctant to supply the screenshot because of aspersions previously cast against them by the Plaintiff and averred:

• “ 8. In these circumstances, mindful of reassuring the Court that there are sufficient assets that could satisfy a judgment should the need arise, I have taken the additional measure of setting aside assets equivalent in value to the assets held by Canadian Escrow Ltd (being approximately US$15.5 million) and can now give discovery to the Plaintiff and the Court confirming the precise value and location of those assets. I note that this is in addition to the assets held by Canadian Escrow whom I still hope to persuade to cooperate with my inquiries.

• 9. Accordingly, I attach at page 1 a screenshot 2 which confirms the precise value 3 and location of a treasury bill purchased by Canterbury's trader, Canaccord Genuity Corp, on behalf of Canterbury on 24 July 2023 (the ‘Screenshot’).”

6 What was decidedly odd about this evidence was the implication that the Defendant had no right to compel its own agent to supply a screenshot of the Defendant's own account and the implausibility of an agent managing a client's account being reluctant to comply with such a straightforward request. The suspicious bystander might at this early juncture have raised an eyebrow quizzically and wondered whether or not the supposed Canadian Escrow funds were actually there.

7 In what appeared to come close to a tacit acknowledgment of these obvious concerns, the Defendant offered what I regarded as a voluntary, informal undertaking to ensure that sufficient identifiable assets existed to meet any judgment the Plaintiff might obtain. Interestingly, this ‘reasonable responsible litigant’ proposal came at a time when the Court was considering its decision on the Unless Order Summons. On 2 August 2023, the Defendant filed the Sixth Winczura Affidavit sworn on 29 July 2023 explaining the latest attempts which had been made to comply with the Information Order. A 28 July 2023 letter to Canadian Escrow referred to the Defendant as having “ recently requested” a screenshot of the “ Escrow Assets” by 28 July 2023 at the latest in compliance with the Information Order. The initial request was apparently repeated with no hint that Canadian Escrow was obliged to meet such a simple client request which would, in the ordinary course of modern digital affairs, take very little time to comply with.

8 The Plaintiff's response was to file a Summons before 9am on 9 August 2023 seeking to freeze the Treasury Bill. Later that day, a draft of the Court's Judgment, allowing the Plaintiff's main claims, was circulated to counsel for editorial comments. This application for further freezing relief was disposed of, in summary, in the following way:

• (a) on 10 August 2023, McGrath Tonner communicated the Defendant's proposal that the Treasury Bill should be frozen in place of the Canadian Escrow funds;

• (b) on 11 August 2023, Claritas argued that in light of the draft Judgment there was no justification for releasing any funds and so the Defendant's proposal should be rejected, and the additional freezing order sought should be granted forthwith subject to leave to vary being granted to the Defendant, if necessary. I directed that the proposed form of order be submitted to McGrath Tonner for comments;

• (c) on 14 August 2023, an unsworn version of the Seventh Winczura Affidavit responding to the Plaintiff's Unless Order Summons was filed. The Plaintiff's counsel's emailed response later that day reiterated its request for freezing relief in relation to the Treasury Bill;

• (d) on 15 August 2023, when I was due to commence a 2 day hearing on another matter, my Personal Assistant, pursuant to my request, contacted McGrath Tonner for comments on the draft order. I was keen to ensure that their right to be heard was respected. The response was that it was not agreed but that comments would be provided as “ soon as possible”;

• (e) on 16 August 2023 at 2:52 pm, I instructed my Personal Assistant that if no comments or a request for more time to comment had been received, the draft order should be “ finalised today”. Shortly thereafter I was forwarded the unsworn version of the Eighth Winczura Affidavit which averred that the Treasury Bill should not be frozen because it would be disproportionate to do so in light of the Plaintiff's likely scale of recovery. It was indicated that Canadian Escrow had refused to supply the screenshot. I decided to take time to consider this Affidavit after I had concluded my other hearing, rather than freezing the Treasury Bill forthwith;

• (f) on 17 August 2023, Claritas responded to the Eighth Winczura Affidavit. I decided to grant the Further Freezing Order, a sealed version of which was emailed to counsel at 12:37 pm that day with the following summary reasons:

  “ The Judge has granted the Injunction Order in terms of the draft submitted by the Plaintiff in relation to the Treasury Bill. He will afford the Defendant a final chance to comply with the existing Information Order before considering the need to make a further Information Order.

  Until such time as the Court has evidence before it confirming the existence of the Canadian Escrow funds (or explaining their non-existence), it is premature to consider the...