Between: Raiffeisen Bank International AG (a company incorporated in the Republic of Austria) Plaintiff/Respondent v (1) Scully Royalty Ltd (a company incorporated in the Cayman Islands) First Defendant (2) LTC Pharma (Int) Ltd (a company incorporated in the Republic of the Marshall Islands) Second Defendant (3) Merkanti Holding P.L.C. (formerly MFC Holding Ltd, a company incorporated in the Republic of Malta) Third Defendant (4) 1178936 B.C. Ltd (a company incorporated in British Columbia, Canada) Fourth Defendant (5) Gardaworld, CN. Ltd (a company incorporated in the Republic of the Marshal Islands) Fifth Defendant (6) 1128349 B.C. Ltd (a company incorporated in British Columbia, Canada) Sixth Defendant (7) IEM Services Company Ltd (a company incorporated in the Republic of the Marshal

• Jurisdiction: Cayman Islands
• Court: Grand Court (Cayman Islands)
• Judge: Raj Parker
• Judgment Date: 19 March 2024
• Docket Number: CAUSE NO. FSD 162 OF 2019 (RPJ)

Between:

Raiffeisen Bank International AG (a company incorporated in the Republic of Austria)

Plaintiff/Respondent

and

(1) Scully Royalty Ltd. (a company incorporated in the Cayman Islands)

First Defendant

(2) LTC Pharma (Int) Ltd. (a company incorporated in the Republic of the Marshall Islands)

Second Defendant

(3) Merkanti Holding P.L.C. (formerly MFC Holding Ltd, a company incorporated in the Republic of Malta)

Third Defendant

(4) 1178936 B.C. Ltd. (a company incorporated in British Columbia, Canada)

Fourth Defendant

(5) Gardaworld, CN. Ltd (a company incorporated in the Republic of the Marshal Islands)

Fifth Defendant

(6) 1128349 B.C. Ltd. (a company incorporated in British Columbia, Canada)

Sixth Defendant

(7) IEM Services Co. Ltd. (a company incorporated in the Republic of the Marshall Islands)

Seventh Defendant

(8) LTCM Assets Private Limited (a company incorporated in the Republic of Liberia)

Eighth Defendant

(9) Michael John Smith

Ninth Defendant/Applicant

Before:

The Hon. Justice Raj Parker

CAUSE NO. FSD 162 OF 2019 (RPJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

HEADNOTE

Application for recusal by person pending challenge to the jurisdiction-whether fair minded well informed observer would conclude that there was a real possibility of bias or predetermination-evidence-law

Appearances:

Mr Tim Penny KC of counsel instructed by Mr Christopher Levers and Mr Jordan Constable of Ogier on behalf of the Plaintiff

Mr Alex Potts KC of counsel instructed by Mr Jonathon Milne and Ms Alecia Johns of Conyers Dill Pearman LLP on behalf of the Ninth Defendant

Mr Mark Russell and Mr Rupert Wheeler on behalf of the KSG Defendants

RULING

Introduction

1 Mr Smith (or D9) applies by paragraph 1 of his Summons dated 27 September 2023 for an Order without prejudice as to his pending challenge to the jurisdiction of this Court, that I (the Judge) should recuse myself from hearing the balance of the applications contained in his Summons dated 27 September 2023 and/or from hearing any further applications involving claims being made by the Plaintiff (RBI) against him, on the basis of ‘apparent bias’ and ‘predetermination’ (for the reasons set out in the First Affidavit of Michael John Smith (Smith 1) 1 and the Second Affidavit of Michael John Smith (Smith 2) 2.

2 By the same Summons, Mr Smith seeks at paragraphs 3–10 to set aside the permission given by the June 2023 Order (following a hearing on that date attended by RBI and the KSG Defendants and ex parte concerning Mr Smith) for Mr Smith to be joined to these proceedings and served out of the jurisdiction in Hong Kong (the “Jurisdiction Application”).

3 This litigation has been ongoing for over 4 years and there have been many interlocutory hearings. There have also been appeals to the Court of Appeal. Mr. Smith has not been hitherto an individual named defendant to the litigation. He is a director and the Chairman of D1 (which is the ultimate parent company of each of the KSG Defendants), having until around May 2021 been the President and CEO of D1.

4 It is to be noted that KSG continue to act for the First and Third to Seventh Defendants (“D1” and “D3–D7”, collectively the “KSG Defendants”), whose position is that the Recusal Application “ is a matter between RBI and Mr Smith” and they have filed no evidence 3.

5 Mr Potts KC acts for Mr Smith on this application and Mr Penny KC for RBI. I raised at the outset of the hearing that RBI and Mr Smith were proceeding on the basis that I myself was the Judge who would hear argument, review the evidence and determine the recusal application although it was open to Mr Smith to have the matter determined by another first instance Judge. Mr Potts KC said that his client, Mr Smith, took the view that it was appropriate for me to deal with the application. I confirmed that I would do so and had no difficulty or embarrassment in doing so.

Mr Potts KC submissions

6 Mr Potts KC said that Mr Smith submits, in summary, that it would now be impossible for me (the Judge) to preside over a fair hearing, or a fair trial, involving the RBI's claims and applications against him or his applications against RBI.

7 He stressed that the application was put on the basis of a real possibility of apparent bias and a real possibility of predetermination having regard to the following matters:

• a) the Plaintiff's reliance on inadmissible, and prejudicial, evidence in the context of various interim hearings that have taken place on an ex parte basis (to Mr Smith) to date;

• b) a failure to give any reasons when granting the ex parte Order dated 27 June 2023; and/or

• c) adverse findings, reasoning, and conclusions expressed to date with respect to the affidavit evidence that Mr Smith has given to date on behalf of the existing Defendants, and with respect to the other Defendants' applications to contest the jurisdiction of the Court and/or the applicable governing law.

8 Mr Potts KC submitted that these areas of concern should be viewed cumulatively and although they could be analysed individually, it was the cumulative effect that was important.

9 Actual bias was not alleged and Mr Potts KC submitted that he did not need to show as a matter of probability that matters had in fact been predetermined against his client. All that he needed to establish objectively was a real possibility of predetermination and a real possibility of apparent bias, which amounts to the same thing.

10 If that is established, the ex parte Order dated 27 June 2023 should be set aside, whereby the Plaintiff was given permission to join Mr Smith as the ninth defendant, on the grounds that I should have recused myself from hearing the Plaintiff's ex parte application (of my own motion), on the grounds of ‘apparent bias’ and ‘predetermination’.

11 Mr Smith relies upon a number of rulings or judgments or orders in these proceedings, including the following matters of record which I have listed below, grouped for ease of reference below certain headings.

Adverse findings, reasoning, and conclusions expressed to date with respect to the affidavit evidence that Mr Smith has given to date on behalf of the existing Defendants, and with respect to the other Defendants' applications to contest the jurisdiction of the Court and/or the applicable governing law.

• a) An ex parte freezing injunction Order dated 30 September 2019 against the First Defendant (without a reasoned, written judgment or ruling) with orders for service out of the jurisdiction on the original foreign Defendants (the Second to Fourth Defendants);

• b) An order dated 4 November 2019 whereby the Court refused to stay the freezing injunction application against the First Defendant pending a discharge application;

• c) A note of ruling dated 3 February 2020 (following a contested 3 day hearing on 23, 24 and 29 January 2020) continuing a freezing injunction against the First Defendant, and making a freezing injunction against the Fifth Defendant, both ‘uncapped’ as to amount, while also granting leave to the Plaintiff to proceed against the Sixth to Eighth Defendants as additional Defendants; A written set of reasons for the ruling dated 3 February 2020, in a judgment dated 7 July 2020 in which it was expressly held that “ [t]here [was] a clear juridical advantage to having all [the] alleged conspirators [including D4] at the same trial… That would be fair to all parties and in the interests of justice” (at paragraph 94). Having so held, Mr Potts KC submitted that it was hard to see objectively how the Judge could approach that issue again with a completely open mind.

• d) He also referred to the Judge's refusal (wrongly, as the Court of Appeal subsequently held) not to impose a “maximum sum” or a “cap” on the Mareva injunction orders that were granted in favour of the Plaintiff (see paragraph 187).

• e) As part of the judgment dated 7 July 2020 it was noted that the Plaintiff alleged that “ only two individuals were behind the scheme: Mr. Smith and Mr. Morrow” (see paragraph 21); as well as the following comments by the Court:

  “A permanent feature of this case has been that notwithstanding the detailed and extensive narrative that has been provided by Mr Penny QC both extensively in writing and orally which support the submission that all of the material activity that has been detailed was intended to put D2's assets out of the reach of RBI, no overall counter narrative has been advanced by Mr McMaster QC. There is no positive case advanced explaining the purpose and legitimacy of the transactions and conduct complained of” (see paragraph 76);

  “the represented defendants' evidence … is questionable at the very least” (paragraph 79);

  “In all the circumstances it is to be inferred that the Dividend was part of the unlawful scheme to assist D2 to avoid its contractual obligations to RBI” (paragraph 100);

  “The represented defendants' evidence in relation to these representations is contradictory and weak. It consists of denying that there were any representations and asserting that RBI had misunderstood or misconstrued what was being represented. It is also suggested by the represented defendants' evidence that it was obvious that D2 would not remain in the MFC group and therefore the MFC group did not think to explain these matters to RBI. The represented defendants' evidence is to the effect that these were well known and readily discoverable reorganisations. That in my view is not credible in view of the conduct of the represented defendants and the lengths undertaken to move companies and assets in this case” (paragraph 106(e));

  “The evidence shows evasive conduct and a lack of candour on the part of the MFC group…” (paragraph 106(g));

  “Mr Lawler's evidence assists the court to form the view that MFC group's accounts were opaque and there were breaches of accounting standards within them” (paragraph...