Condoco Grand Cayman Resort Ltd v Broadhurst DaCosta

• Jurisdiction: Cayman Islands
• Judge: (Henderson, J.)
• Judgment Date: 17 January 2005
• Court: Grand Court (Cayman Islands)
• Date: 17 January 2005

Grand Court

(Henderson, J.)

CONDOCO GRAND CAYMAN RESORT LIMITED and VILLASCO GRAND CAYMAN LIMITED

and

BROADHURST DACOSTA, REDWOOD HOTEL INVESTMENT CORPORATION, CAYMAN NET LIMITED and KYC NEWS INCORPORATED

J.P. Walton for the plaintiffs;

S. Hall-Jones for the fourth defendant.

Cases cited:

(1) Att. Gen. v. Guardian Newspapers Ltd. (No. 2), [1990] 1 A.C. 109; [1988] 3 All E.R. 545, dictum of Lord Goff applied.

(2) Castree v. E.R. Squibb & Sons Ltd., [1980] 1 W.L.R. 1248; [1980] 2 All E.R. 589, referred to.

(3) Chaplin v. Boys, [1971] A.C. 356; [1969] 2 All E.R. 1085, referred to.

(4) Coco v. A.N. Clark (Engrs.) Ltd., [1969] R.P.C. 41; [1968] F.S.R. 415, applied.

(5) Contadora Enterprises S.A. v. Chile Holdings (Cayman) Ltd, 1999 CILR 194, applied.

(6) Cordoba Shipping Co. Ltd. v. National State Bank, The Albaforth, [1984] 2 Lloyd”s Rep. 91, referred to.

(7) Diamond v. Bank of London & Montreal Ltd., [1979] 1 Q.B. 333; [1979] 1 All E.R. 561, referred to.

(8) Dow Jones & Co. Inc. v. Gutnick, [2002] HCA 56; 194 A.L.R. 433, applied.

(9) Electric Furnace Co. v. Selas Corp. of America, [1987] R.P.C. 23, applied.

(10) Francome v. Mirror Group Newspapers Ltd., [1984] 1 W.L.R. 892; [1984] 2 All E.R. 408, referred to.

(11) Malone v. Metropolitan Police Commr., [1979] 1 Ch. 344; [1979] 2 All E.R. 620, referred to.

(12) Massey v. Heynes & Co.ELR(1888), 21 Q.B.D. 330; [1886–90] All E.R. Rep. 996, referred to.

(13) Metall & Rohstoff A.G. v. Donaldson, [1990] 1 Q.B. 391; [1989] 3 All E.R. 14, referred to.

(14) Qatar Petroleum Producing Auth. v. Shell Internationale Petroleum Maatschappij B.V., [1983] 2 Lloyd”s Rep. 35, referred to.

(15) Rosler v. Hilbery, [1925] 1 Ch. 250; [1924] All E.R. Rep. 821, referred to.

(16) Spiliada Maritime Corp. v. Cansulex Ltd., [1987] 1 A.C. 460; [1986] 3 All E.R. 843, referred to.

(17) Times Newspapers Ltd. v. MGN Ltd., [1993] E.M.L.R. 443, referred to.

(18) Watson & Sons v. Daily Record (Glasgow) Ltd., [1907] 1 K.B. 853, referred to.

(19) Wilson, Sons & Co. Ltd. v. Balcarres Brook S.S. Co. Ltd., [1893] 1 Q.B. 422, referred to.

(20) Woodward v. Hutchins, [1977] 1 W.L.R. 760; [1977] 2 All E.R. 751, referred to.

Legislation construed:

Grand Court Rules, O.11, r.1(1): The relevant terms of this sub-rule are set out at para. 19.

Land Law-contract of sale-confidentiality-details of unit prices and down-payments on sales in new development objectively confidential-confidentiality remains until registration with Registrar of Lands

Civil Procedure-service of process-service out of jurisdiction-no service out under Grand Court Rules, O.11, r.1(1)(b) if injunction sought only effective if enforced abroad and enforcement not permitted by law of foreign jurisdiction

Civil Procedure-joinder of parties-necessary and proper parties-under Grand Court Rules, O.11, r.1(1)(c), ‘proper party’ one where common questions of law and fact arise against it and other parties-party not ‘necessary party’ if only purpose of joining to obtain discovery-service out of jurisdiction not permitted if no real or practical advantage for party seeking service, e.g. if would not be granted injunction and no significant damage

Civil Procedure-service out of process-service out of jurisdiction-for purposes of Grand Court Rules, O.11, r.1(1)(f), act committed within jurisdiction if confidential information passed to entity in US and trans-mitted to paying subscriber viewing it on computer in Cayman Islands

The plaintiffs made an application to the Grand Court for damages, a permanent injunction and disclosure of sources in an action for breach of confidence, conspiracy to breach confidence and conspiracy to interfere with the economic interests of the plaintiffs by unlawful means.

The fourth defendant, KYC, a company registered under the laws of Florida without offices or employees outside Florida and without any legal or physical presence in the Cayman Islands, published newsletters on the Internet concerning international finance and financial crime. Among them were a number of unflattering articles about the plaintiff companies, which were involved in the construction, marketing and sale of various condominiums and villas forming part of the Ritz Carlton

Residences Project, and their principal. In particular, the articles con-tained detailed information concerning unit prices and down-payments relating to sales of condominiums and villas, which was confidential at the time of publication and was allegedly obtained by KYC in breach of confidence.

The Grand Court (Panton, Ag. J.) gave leave ex parte to the plaintiffs to serve the writ and statement of claim on KYC in Florida. On the inter partes review of the order, the plaintiffs submitted that leave had been properly granted, according to the Grand Court Rules, O.11, r.1(1), sub-rules (b), (c) and/or (f), as the information was confidential when KYC obtained it, it knew this was so, and its decision to publish amounted to a breach of a duty or assisting a breach of a duty of confidentiality owed by KYC or a third party to the plaintiffs.

KYC submitted in reply that (a) the information was accurate and came from reliable sources, which it was unwilling to disclose; and (b) it was only bound by the law of the United States where it carried out its journalistic activities and US law would not recognize the claims advanced in the present proceedings.

Held, discharging the order for leave to serve out of the jurisdiction:

(1) There was a good arguable case that the fourth defendant had acted in breach of the duty of confidence it owed to the plaintiffs by its unauthorized use of confidential information. The information, being details of unit prices and down-payments relating to sales of condo-miniums and villas, was of an objectively confidential nature and was highly likely to have been communicated to the fourth defendant in circumstances importing an obligation of confidence, i.e. the fourth defendant was to be taken as having notice that the information was confidential, regardless of whether it ‘closed its eyes’ to its confidentiality. That some of the information might have to be disclosed on registration of the sale of the real property with the Registrar of Lands was irrelevant-the parties had a right and duty to treat the information as confidential until the moment of registration (para. 20; para. 24; paras. 26–27; para. 35).

(2) Service out of the jurisdiction under the Grand Court Rules, O.11, r.1(1)(b), however, would not be permitted as an injunction was unlikely to be granted. The activity of the fourth defendant causing disclosure took place in Florida and an injunction would only be effective if enforced there, which it would not be, as constitutional provisions in the United States governing freedom of expression were fundamentally different from the law of England and the Cayman Islands. Nor would a Florida court enforce an order directing the fourth defendant to deliver up confidential information in its possession, destroy copies and reveal its sources (paras. 40–44).

(3) Neither would leave be granted for service out of the jurisdiction under Grand Court Rules, O.11, r.1(1)(c), as it would achieve no real or

practical advantage for the plaintiffs given that they would not be granted an injunction and had not sustained significant damage. The fourth defen-dant was, however, a ‘proper’ party as there were common questions of law and fact arising in respect of the claims against the four defendants but was not a ‘necessary’ party as leave to serve out of the jurisdiction was not permitted if the only purpose of joining the foreign defendant to the proceedings was to obtain discovery (paras. 47–49; paras. 51–52).

(4) Nor would leave be granted for service out of the jurisdiction under Grand Court Rules, O.11, r.1(1)(f). The breach of confidentiality resulted from an act committed within the jurisdiction, i.e. a chain of events began with the imparting of information by someone unknown to the fourth defendant based in the United States and ended with a paying subscriber in the Cayman Islands viewing the information on a computer screen. Nonetheless, there was no good arguable case that any damage had been sustained (paras. 55–58; para. 60; para. 64).

1 HENDERSON, J.: This application raises, although in a preliminary way, the question of the extent to which the public interest exception will protect a journalist from liability for misuse of confidential information.

2 The plaintiffs have commenced an action against the fourth defen-dant, KYC News Inc. (‘KYC’), for damages, a permanent injunction, and an order for disclosure of their sources. The plaintiffs advance claims for breach of confidence, conspiracy to breach confidence and conspiracy to interfere with the economic interests of the plaintiffs by unlawful means.

3 On May 24th, 2004 Panton, Ag. J. of this court gave leave to the plaintiffs to serve the writ of summons and statement of claim on KYC in Florida. That order was obtained ex parte. I have now conducted an inter partes review of the order.

Facts

4 KYC distributes news about international finance and financial crime over the internet to paid subscribers. It publishes two monthly newsletters, Offshore Alert and Inside Bermuda, and one weekly newsletter, KYC Alert. Subscribers to these publications may gain access to them over the internet by accessing one of several web sites maintained by KYC for the purpose. In addition, KYC Alert (the weekly newsletter) was distributed to paid subscribers by email until after the commence-ment of the present action. KYC says that it ‘promotes its products and services largely via email.’

5 KYC is a company registered under the laws of Florida; it is not registered in any other jurisdiction and has no offices or employees in any

jurisdiction but Florida. In particular, KYC has no assets or employees in the Cayman...