Braga v Equity Trust Company

JurisdictionCayman Islands
CourtGrand Court
Judge(Smellie, C.J.)
Judgment Date10 June 2011
Date10 June 2011
Grand Court, Financial Services Division

(Smellie, C.J.)

BRAGA
and
EQUITY TRUST COMPANY (CAYMAN) LIMITED and FOUR OTHERS

A.S. Akiwumi, R.T.W. Annette and C. Levers for the applicants;

J. Fenwick, Q.C. and N. Dunne for the plaintiff;

The defendants did not appear and were not represented.

Cases cited:

(1) Ansbacher (Cayman) Ltd., In re, 2001 CILR 214, referred to.

(2) Aoot Kalmneft v. Denton Wilde Sapte, [2002] 1 Lloyd”s Rep. 417, considered.

(3) Arab Monetary Fund v. Hashim (No. 5), [1992] 2 All E.R. 911, considered.

(4) Ashworth Hospital Auth. v. MGN Ltd., [2002] 1 W.L.R. 2033; [2002] 4 All E.R. 193; [2002] H.R.L.R. 41; [2002] U.K.H.R.R. 1263; [2002] UKHL 29, applied.

(5) Bankers Trust Co. v. Shapira, [1980] 1 W.L.R. 1274; [1980] 3 All E.R. 353, dicta of Lord Denning, M.R. applied.

(6) Bernard L. Madoff Inv. Secs. LLC, In re, 2010 (1) CILR 231, referred to.

(7) Biba Ltd. v. Stratford Invs. Ltd., [1973] Ch. 281; [1972] 3 W.L.R. 902; [1972] 3 All E.R. 1041, dictum of Brightman J. applied.

(8) Brink”s Mat Ltd. v. Elcombe, [1988] 1 W.L.R. 1350; [1988] 3 All E.R. 188; [1989] 1 FSR 211, referred to.

(9) C Corp. v. P, 1994–95 CILR 189, referred to.

(10) Crest Homes PLC v. Marks, [1987] A.C. 829; [1987] 2 All E.R. 1074, dictum of Lord Oliver distinguished.

(11) Deutsch-Südamerikanische Bank A.G. v. Codelco, 1996 CILR 1, referred to.

(12) Dubai Bank Ltd. v. Galadari, [1990] 1 Lloyd”s Rep. 120, referred to.

(13) Equatorial Guinea (President) v. Royal Bank of Scotland Intl., 2005–06 GLR 373; [2006] 3 LRC 676; [2006] UKPC 7, referred to.

(14) Gianne v. Miller, 2006 CILR N [26]; on appeal, 2007 CILR N[10], considered.

(15) Hussain v. Hussain, [1986] Fam. 134; [1986] 2 W.L.R. 801; [1986] 1 All E.R. 961, dictum of Lord Donaldson, M.R. applied.

(16) JCS Bank Fidelity Corp. Servs. Ltd., In re, BVI C.A., February 21st, 2011, unreported, considered

(17) Lewis v. Eliades (No. 1), [2002] C.P. Rep. 28, [2002] EWHC 335 (QB), referred to.

(18) Lonrho plc v. Fayed (No. 2), [1992] 1 W.L.R. 1; [1991] 4 All E.R. 961, considered.

(19) Mileage Conference Group, In re, [1966] 1 W.L.R. 1137; [1966] 2 All E.R. 849, referred to.

(20) Mitsui & Co. Ltd. v. Nexen Petroleum UK Ltd., [2005] 3 All E.R. 511; [2005] EWHC 625 (Ch), considered.

(21) Norwich Pharmacal Co. v. Customs & Excise Commrs., [1974] A.C. 133; [1973] 3 W.L.R. 164; [1973] 2 All E.R. 943; [1973] FSR 365; [1974] R.P.C. 101, applied.

(22) Phoenix Meridian Equity Ltd. v. Lyxor Asset Management S.A., 2009 CILR 153; on appeal, 2009 CILR 553, applied.

(23) R. v. City of London Magistrate”s Ct., ex p. Green, [1997] 3 All E.R. 551; [1998] Crim. L.R. 54, referred to.

(24) Seaward v. Paterson, [1897] 1 Ch. 545; (1897), 66 L.J. Ch. 267, referred to.

(25) SmithKline Beecham Biologicals SA v. Connaught Labs. Inc., [1999] 4 All E.R. 498; [2000] F.S.R. 1, referred to.

(26) Spectravest Inc. v. Aperknit Ltd., [1988] F.S.R. 161, referred to.

(27) Stancomb v. Trowbridge Urban District Council, [1910] 2 Ch. 190, referred to.

(28) Straumur-Burduras Inv. Bank HF, In re, 2010 (2) CILR 146, referred to.

(29) Telesystem Intl. Wireless Inc. v. CVC/Opportunity Equity Partners L.P., 2002 CILR 96; on appeal, 2002 CILR 591, referred to.

(30) Wea Records Ltd. v. Vision Channel 4 Ltd., [1983] 1 W.L.R. 721; [1983] 2 All E.R. 589, dicta of Purchas, L.J. applied.

(31) Westinghouse Elec. Corp. Uranium Contract, In re, [1978] A.C. 547; [1977] 3 All E.R. 703, referred to.

Civil Procedure-disclosure-Norwich Pharmacal order-defendant must be sufficiently ‘involved,’ innocently or otherwise, in wrongdoing of others-may be ordered to provide information to prove wrongdoing, since orders not limited to cases where wrongdoer”s identity unknown-not essential for plaintiff to show order necessary to enable action to be brought-jurisdiction to make orders broad, flexible and developing

Civil Procedure-disclosure-Bankers Trust relief-may be set aside, and plaintiff required to take steps to recover disclosed material, if no real prospect relief would assist with locating and preserving assets fraudulently misappropriated-ordering disclosure by fiduciary services provider of all information relating to client”s finances only justified if urgent need to trace misappropriated assets

Civil Procedure-disclosure-use of disclosed documents in other proceedings-no breach of undertaking unless contravention of clear and unambiguous term, proved to criminal standard-failure to oppose foreign application for disclosure of or unsealing of court file containing disclosed material not breach if not expressly prohibited-court to require more comprehensive undertakings when ordering disclosure-may require further undertakings to take steps to recover disclosed material

Dr. Braga sought orders for disclosure in aid of ongoing proceedings regarding an alleged fraud in Brazil.

Petroforte, a Brazilian company, was the subject of bankruptcy proceedings in the Brazilian courts. Dr. Braga was appointed as the judicial administrator of Petroforte and other companies in the Petroforte group. He alleged that assets had been fraudulently taken from the Petroforte Group, the fraud involving five companies, centered on Securinvest, a Brazilian company which was an applicant in these proceedings and the two shareholders of which (also applicants) were Cayman companies. He also brought additional proceedings in Brazil challenging the legitimacy of certain transactions and seeking to recover assets.

Dr. Braga made ex parte applications in the Cayman Islands for the disclosure of information by the defendants, who were fiduciary services

providers to Securinvest”s shareholders, about the identity of its ultimate beneficial owner. He also sought relief with the intention of preventing the dissipation of assets-either through the bankruptcy proceedings or the additional proceedings-of which the Petroforte Group had been defrauded, some of which were under his control.

The Grand Court (at different times, Cooke, Ag. J. and Henderson, J.) made Norwich Pharmacal orders requiring disclosure by the defendants of confidential information held by them in respect of the affairs of the applicants. The orders included Bankers Trust relief requiring comprehensive disclosure by the defendants of the applicants” financial affairs. The Grand Court also granted ancillary orders pursuant to the Confidential Relationships (Preservation) Law (2009 Revision), s.4. These orders required Dr. Braga to undertake not to use and file copies of the documents disclosed to him under the Norwich Pharmacal orders without further leave of the court for any purpose other than (a) complying with a Brazilian court order; (b) the institution and prosecution of any proceedings relating to the Petroforte estate before the Cayman, Brazilian, US or any other courts; or (c) investigating the ultimate beneficial ownership of Securinvest.

Dr. Braga filed the disclosed documents under seal in the Brazilian courts, and also filed them-not under seal-in proceedings he instituted in the US, the BVI and Belize. He successfully applied to the Brazilian court to bring Ms. Katia Rabello into the Petroforte bankruptcy, its written decision containing information gleaned from the disclosed documents. Pursuant to a further application by Dr. Braga, the court ordered that official letters containing a copy of its decision be sent to the Brazilian Central Bank, which regulated an entity in which Ms. Rabello held shares. The Central Bank subsequently applied to the Brazilian court for access to the disclosed documents. Having sought advice from BVI lawyers, Dr. Braga did not oppose the application, to which the Brazilian court acceded. On an appeal, the court ordered that Ms. Rabello should have access to the disclosed documents. The Brazilian court subsequently unsealed the court file, without opposition from Dr. Braga, which resulted in negative press coverage in Brazil of the applicants.

The Norwich Pharmacal orders

The applicants applied to set aside the Norwich Pharmacal orders, submitting that (a) Dr. Braga had misrepresented to the court his status as judicial administrator over Securinvest; (b) under Brazilian law, he did not have standing to bring those applications; (c) he was guilty of material non-disclosure in relation to the Brazilian proceedings; (d) he had failed to establish that a wrong had arguably been committed, which was a pre-requisite to the Norwich Pharmacal proceedings; (e) the orders were not sought for the purpose of enabling an action to be brought against a wrongdoer; (f) the applicants were not involved or mixed up in the alleged wrongdoing but merely innocent witnesses; (g) Dr. Braga had failed to show a real prospect that the information to be disclosed might lead to the

location or preservation of claimed assets; (h) there was a risk that the ultimate determination of ownership of the claimed assets would be frustrated by the wrongdoer”s dissipating them; (i) ongoing proceedings in Brazil were a bar to the orders; (j) the orders were not sought for the purpose of ascertaining the identity of the wrongdoer; and (k) the orders should not have been granted in aid of foreign proceedings when it was open to Dr. Braga to apply by way of letters rogatory or under s.241 of the Companies Law.

Dr. Braga submitted in reply that (a) the applicants had failed to establish any abuse of the process of the court through bad faith or material non-disclosure which justified the setting aside of orders already made and executed; (b) the defendants were involved and mixed up in the allegedly fraudulent activity by Securinvest as fiduciary services providers to its shareholders; (c) the ongoing proceedings in Brazil were no bar to Norwich Pharmacal orders; (d) it was appropriate to make Norwich Pharmacal orders to provide information as to the true relationship between Securinvest and the...

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