Chile Holdings v Santiago de Chile Hotel Corporation

• Jurisdiction: Cayman Islands
• Judge: (Smellie, J.)
• Judgment Date: 26 June 1997
• Court: Grand Court (Cayman Islands)
• Date: 26 June 1997

Grand Court

(Smellie, J.)

CHILE HOLDINGS (CAYMAN) LIMITED

and

SANTIAGO DE CHILE HOTEL CORPORATION S.A. and SIX OTHERS

C.G. Quin and D.A. Harris for the plaintiff.

Cases cited:

(1) Argentine Holdings (Cayman) Ltd. v. Buenos Aires Hotel Corp. S.A., 1997 CILR 90.

(2) Conan Doyle”s Will Trusts, In re, Harwood v. Fides Union Fiduciaire, [1971] Ch. 982; [1971] 2 All E.R. 1377.

(3) De Cespedes, Re, Debtor v. Petitioning Creditor & Official ReceiverUNK, [1937] 2 All E.R. 572; sub nom. De Cespides, Re, Debtor v. Petitioning Creditor & Official ReceiverUNK(1937), 156 L.T. 471.

(4) El Sombrero Ltd., In re, [1958] Ch. 900; [1958] 3 All E.R. 1, followed.

(5) Judgment Debtor (No. 1539 of 1936) In re a, [1937] Ch. 137; [1936] 3 All E.R. 767.

(6) Paragon Group Ltd. v. Burnell, [1991] Ch. 498; [1990] 3 All E.R. 923; on appeal, [1991] Ch. 498; [1991] 2 All E.R. 388, followed.

(7) Porter v. Freudenberg, Kreglinger v. Samuel, In re Merten”s Patents, [1915] 1 K.B. 857; [1914-15] All E.R. Rep. 918, observations of Lord Reading, C.J. applied.

(8) Urquhart, In re, ex p. UrquhartELR(1890), 24 Q.B.D. 723, dicta of Lord Esher, M.R. and Lopes, L.J. applied.

(9) Watt v. BarnettELR(1878), 3 Q.B.D. 183, dicta of Mellor J. applied.

(10) Western Suburban & Notting Hill Perm. Benefit Bldg. Socy. v. Rucklidge, [1905] 2 Ch 472.

Legislation construed:

Grand Court Rules 1995, O.10, r.1(1):

‘A writ must be served personally on each defendant by the plaintiff or his agent.’

O.65, r.4: The relevant terms of this rule are set out at page 322, line 40 – page 323, line 3.

Civil Procedure-service of process-substituted service-under Grand Court Rules, O.65, r.4(1), may order substituted service if personal service impracticable due to defendant”s evasion-‘impracticable’ means ‘practically impossible’ to effect service at time of application-test for impracticability outside jurisdiction same as for service within it

Civil Procedure-service of process-substituted service-in deciding whether to order substituted service under Grand Court Rules, O.65, r.4(1), court may consider consequences of refusal-purpose of rule to prevent defendant avoiding judgment by evading service without any fault on part of plaintiff

Civil Procedure-service of process-substituted service-under Grand Court Rules, O.65, r.4(3), plaintiff to show proposed substituted service will bring proceedings to defendant”s attention-service on defendant”s overseas attorneys acting in related litigation may suffice

Civil Procedure-service of process-substituted service-effect of substituted service same as that of personal service-service and consequent judgment binding on parties

The plaintiff applied for an order for substituted service of a writ and other documents on the seventh defendant.

The plaintiff, a Cayman company now in liquidation, brought proceedings to recover shares in the first defendant company (‘SCHC’), which it alleged had been fraudulently transferred to the second defendant and eventually to the seventh defendant (‘LTCC’), a Saudi Arabian company controlled by the third defendant, with the intention of defeating the plaintiff”s creditors.

The plaintiff obtained judgment against the first six defendants at an earlier hearing, which ordered the setting aside of the transfers, but it was unable to effect personal service of the writ and statement of claim on LTCC, despite obtaining leave to serve out of the jurisdiction. The plaintiff”s attorneys were unable to locate any company officer of LTCC at either of the addresses in Saudi Arabia to which their enquiries had led them and further efforts by the British Consulate to serve the documents were similarly thwarted when staff refused to accept service in the absence of the company owners, who were said to be overseas.

The plaintiff sought leave to serve the writ and accompanying documents on LTCC”s Panama attorneys and London solicitors who represented the company in related proceedings in Panama and England respectively, so that LTCC would be given the opportunity to defend the present proceedings and be bound by the outcome.

The plaintiff submitted that (a) since it was impracticable for its agents to serve the writ and statement of claim on LTCC personally due to that company”s efforts to evade all attempts to do so, it should be granted leave to effect substituted service under the Grand Court Rules, O.65, r.4(1); (b) in the interests of justice, the court, in deciding whether to make such an order, should consider not only whether personal service was ‘impracticable’ within the meaning of O.65, r.4(1) but also the consequences to the plaintiff of refusing; (c) it bore no greater burden of proof in this matter merely because the writ had been issued for service outside the jurisdiction than otherwise; and (d) it had also shown by evidence of the relationship between LTCC and its legal advisers in England and in Panama that service upon them would have the effect of bringing the proceedings to the defendant”s attention, as required by O.65, r.4(3).

Held, making an order for substituted service:

(1) Since the plaintiff had shown that it was ‘impracticable’ for it to effect personal service of the writ and statement of claim on LTCC as was required by the Grand Court Rules, O.10, r.1(1)-apparently as a result of evasion by that defendant”s officers-the court would under O.65, r.4(1) order substituted service upon LTCC”s Panama attorneys and English solicitors who, the evidence showed, represented it in litigation in those jurisdictions (page 325, line 39 – page 326, line 5; page 328, lines 5–13).

(2) The plaintiff was not required to satisfy any greater standard of proof in respect of the difficulty of effecting personal service on LTCC in Saudi Arabia than would have been required of it had it attempted service within the jurisdiction. In either case, the plaintiff had only to show that personal service was ‘impracticable’ or practically impossible at the time of its application, whether or not it might become possible at some future date (page 326, lines 16–25; page 327, lines 23–27,; page 328, line 22 – page 329, line 5).

(3) Whilst the impracticability of personal service was sufficient in itself to justify an order, the court could in the exercise of its discretion take into account the probable consequences of refusing to allow substituted service. Accordingly, since the purpose of O.65, r.4(1) was to prevent a defendant”s avoiding judgment against it, and since the plaintiff did not rely on that rule simply to alleviate an omission or delay on its own part in attempting to serve the documents, it was proper for the court to consider this rationale (page 326, lines 6–15; page 326, line 42 – page 327, line 23).

(4) Since the plaintiff had shown to the court”s satisfaction that the documents served on LTCC”s legal advisers would effectively bring the proceedings to its attention, there would be no prejudice to the company by the making of an order for substituted service (page 322, lines 2–8; page 330, lines 5–11).

(5) Once substituted service had been effected by the method ordered by the court, its effect would be the same as that of personal service, and any judgment given upon it would be binding upon LTCC unless it could show good cause why it should be set aside (page 329, lines 8–35).

SMELLIE, J.: This is an ex parte application on behalf of the plaintiff
company for an order for substituted service of the amended writ and
other process upon the seventh defendant (‘LTCC’), which is a company
45	domiciled in Saudi Arabia and organized under the laws of that country.

Efforts to serve LTCC directly in Saudi Arabia have proved unsuccessful.
Those efforts are described in some detail below. The order sought would
allow substituted service upon a firm of attorneys in Panama City,
Panama and upon a firm of solicitors in London, England. Those
5	attorneys and solicitors are respectively shown to represent LTCC and
other interests in Panama and England. These interests are hereafter
referred to as ‘the Pharaon interests’ because of common links with a Mr.
Gaith Rashad Pharaon, about whom more is explained below.
The Panamanian firm is the attorney of record for LTCC in its role as
10	plaintiff in Panamanian proceedings which it has brought against certain
parties, including some who are parties to these present proceedings. I
have before me certified copies of process described as ‘Assertive
common proceedings’-or ‘Processo ordinario declarativo’ in
Spanish-emanating from the proceedings filed in the Panamanian court.
15	That process bears the name of ‘Sucre, Arias, Castro and Reyes’ as
attorneys for LTCC, which is identified by name and by reference to its
details of incorporation in Saudi Arabia, by reference to its legal
representative in that country, one Mujarreh Said Al Ghamdi of Djeddah,
Saudi Arabia (‘Mr. Al Ghamdi’).
20	The English firm of solicitors representing the Pharaon interests in
London-where ICIC, the sixth defendant, has sued them-is Berwin
Leighton, of Adelaide House, London Bridge, London. This
solicitor/client relationship is established as a matter of record in these
proceedings by the first affidavit of Daniel Harris and the seventh
25	affidavit in Cause No. 36 of 1996 of Charles Quin which exhibit
correspondence between their firm and the firm of Berwin Leighton to
that effect. Further evidence in these proceedings reveals that LTCC is
owned or controlled by Gaith Pharaon and his son Laith

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