Brasil Telecom v Opportunity Fund

• Jurisdiction: Cayman Islands
• Judge: (Zacca, P., Taylor and Mottley, JJ.A.)
• Judgment Date: 09 April 2008
• Court: Court of Appeal (Cayman Islands)
• Date: 09 April 2008

Court of Appeal

(Zacca, P., Taylor and Mottley, JJ.A.)

BRASIL TELECOM S.A.

and

OPPORTUNITY FUND

M. Black, Q.C., S. Andrew and J. Kennedy for the appellant;

R. Ellis, Q.C. and J. Chapman for the respondent.

Cases cited:

(1) Contadora Enterprises S.A. v. Chile Holdings (Cayman) Ltd., 1999 CILR 194, dicta of Collett J.A. not followed.

(2) Lhasa Invs. Ltd. v. International Credit & Inv. Co. (Overseas) Ltd., 1994–95 CILR 293, dicta of Georges J.A. followed.

(3) Lubbe v. Cape Plc (No. 2), [2000] 1 W.L.R. 1545; [2000] 4 All E.R. 268; [2000] 2 Lloyd”s Rep. 383, dicta of Lord Hope of Craighead applied.

(4) Oceanic Sun Line Special Shipping Co. Inc. v. Fay, [1988] LRC (Comm) 228; (1988), 165 C.L.R. 197; 62 A.L.J.R. 389; 79 A.L.R. 9, dicta of Deane J. considered.

(5) Sim v. Robinow(1892), 19 R. (Ct. of Sess.) 665, dicta of Lord Kinnear considered.

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

Conflict of laws-jurisdiction-forum conveniens-defendant sued in Cayman as of right has burden of showing other available forum more natural and appropriate, having more real and substantial connection to case-court to consider factors effecting convenience and expense, e.g. physical location of evidence and witnesses, language barriers-burden then shifts to plaintiff to show justice unobtainable in other available forum

Conflict of laws-jurisdiction-forum conveniens-court not to consider public policy in determination of forum, unless in context of interests of parties

Conflict of laws-jurisdiction-forum conveniens-threat of duplication of proceedings (i.e. by need to enforce foreign judgment in Cayman) not relevant to determination of forum, as true whenever seek to enforce foreign judgment here

The appellant brought an action against the respondent in the Grand Court, seeking certain commercial benefits, wrongfully transferred to the respondent, to be returned to it.

The appellant was a Brazilian telephone company, based in Brazil, established by a consortium made up of several investment funds, including the respondent, to acquire telecommunications assets in Brazil. The respondent was a Cayman company which operated mutual funds in Brazil for investment in Brazilian businesses, and was the controlling shareholder of the appellant. When the appellant was established, a key investment fund, of which the respondent was itself part, installed a management team and appointed directors to the appellant”s board. The appellant alleged that the respondent was the constructive trustee of commercial benefits of the appellant, wrongfully transferred to it by those employees in breach of their fiduciary duty, knowingly and improperly received and then disposed of by it, and that it had caused the appellant to enter into improvident contracts, refrain from potentially profitable dealings, and favour certain suppliers in return for investment in the respondent”s funds.

The respondent sought a stay of proceedings, on the ground that Brazil,

rather than the Cayman Islands, was the appropriate forum for the trial. It demonstrated that the action had the most real and substantial connection with Brazil, all documentary evidence and witnesses being present there (the majority of which was in, or spoke, Portuguese), and agreed to submit to its jurisdiction. The Grand Court (Levers, J.) therefore granted a stay and the burden then shifted to the appellant to show that it would not obtain justice in Brazil, which it failed to do.

On appeal, the appellant submitted that (a) it had brought the action against the respondent in the Cayman Islands as of right, the respondent being a Cayman company and the Cayman Islands being the most natural and appropriate forum; (b) the respondent had failed to demonstrate that there was a more appropriate forum for the trial with regard to factors such as expense and convenience, and simply to submit to another jurisdiction did not necessarily make it available; (c) in any case, if the court were satisfied that Brazil was a more appropriate and available forum, the burden then shifted to itself to show that it would not obtain justice there-which it would not be able to do because the Brazilian court would not recognize its cause of action, or have jurisdiction to award the remedies sought, as Brazilian law was not the proper law of the dispute, and any remedies available there would be so inadequate as to result in injustice; (d) to stay the present action would compel a duplication of proceedings as, were the Brazilian court to accept jurisdiction and grant relief to the appellant in Brazil, it would still have to try to enforce that judgment in the Cayman Islands; and (e) the judge had failed to take into account public policy considerations when choosing the appropriate forum, such as the damage to the reputation of the Cayman Islands within the international financial community if it were seen as powerless to intervene to prevent an abuse of its own laws by a company incorporated here simply in order to take the advantage of those laws.

The respondents submitted in reply that (a) it would submit to the jurisdiction of Brazil, which, rather than the Cayman Islands, was the natural and appropriate forum for the trial, having the most real and substantial connection to the action, because both parties conducted their business entirely in Brazil, and the alleged wrongful actions would have taken place there and would, therefore, have been governed by Brazilian law; (b) any witnesses to (and documentary evidence of) the alleged wrongful actions would be in Brazil and could not be compelled to come to the Cayman Islands and, in any case, would require interpretation/translation from Portuguese, adding to the inconvenience and expense of a trial here; (c) although, if the court were satisfied that Brazil was the most appropriate forum, the burden would shift to the appellant to show that, in the interest of justice, the trial should nevertheless take place in the Cayman Islands it could not do so, as there was no evidence that a Brazilian court would not recognize the appellant”s cause of action, or have jurisdiction to award the remedies claimed; (d) the threat of a duplication of proceedings in order to obtain equitable relief in the Cayman Islands, should the appellant be successful in Brazil, did not

discharge the appellant”s burden, as that threat was the same for any plaintiff, successful abroad, seeking to enforce a foreign judgment in the Cayman Islands; and (e) the Grand Court should not have taken into account public policy considerations when reaching its decision as to the choice of forum, which should only be determined by an examination of the interests of the parties and the ends of justice, and if the issue of public policy could not be dealt with in the context of those interests, it must not be taken into account.

Held, dismissing the appeal:

(1) The appeal would be dismissed and the stay of proceedings granted. The respondent had discharged its burden to show that not only were the Cayman Islands not the most natural and appropriate forum, but that Brazil was, having the most real and substantial connection to the action and a trial there being more convenient and less expensive. As well as the fact that both parties carried out business solely in Brazil, and any alleged wrongful action would have therefore been governed by Brazilian law, all witnesses (and documentary evidence) were in Brazil and would require interpretation (and translation) from Portuguese, if indeed the witnesses came to the Cayman Islands voluntarily as they could not be compelled. The respondent also undertook to submit to the Brazilian jurisdiction, which satisfied the burden of showing that, as well as being appropriate, Brazil was an available forum (para. 23; paras. 26–27; para. 44).

(2) The appellant had failed to satisfy its burden of showing that there were special circumstances, which required that, in the interests of justice, the trial should take place in the Cayman Islands. There was no evidence that the appellant would not obtain justice in Brazil; Brazilian law would recognize the facts alleged as establishing an actionable wrong and the proper remedies were available and adequate. In any case, the appellant was able to seek interim protective relief here, in aid of foreign proceedings, and was entitled to apply to the Grand Court to have the stay lifted, should the respondent fail to submit to the jurisdiction of the Brazilian court, or should that court decline to hear the cause of action and award the relief sought (para. 28; para. 48; paras. 50–52).

(3) Although the appellant, in order to obtain equitable relief in the Cayman Islands, following any success in Brazil, would have to bring further proceedings here, that was true of any plaintiff seeking to enforce a foreign judgment in the Cayman Islands and, in any case, any such proceedings would most probably be capable of summary disposition (para. 54, per Taylor, J.A.).

(4) The question of choice of forum should be determined only with regard to the interest of the parties and the ends of justice, without regard to public policy, unless it could be considered in the context of those interests; to do so would make the burden on the defendant, to show that the Cayman Islands were not the appropriate forum, more onerous. The

appeal would be dismissed and the respondent”s costs of the appeal taxed, if not agreed (paras. 39–41; para. 55).

1 ZACCA, P.: I have read in draft the reasons and decision of Mottley, J.A. I agree with these reasons and I would also dismiss the appeal.

2 MOTTLEY, J.A.: On March 16th, 2006, the appellant, Brasil Telecom S.A., filed a writ and statement of claim against the respondent, Opportunity Fund, in which it alleged that the respondent was the constructive trustee of...