CVC/Opportunity Equity Partners LP v Telesystem Intl Wireless Inc.

• Jurisdiction: Cayman Islands
• Judge: (Zacca, P., Rowe and Taylor, JJ.A.)
• Judgment Date: 29 November 2002
• Court: Court of Appeal (Cayman Islands)
• Date: 29 November 2002

Court of Appeal

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

CVC/OPPORTUNITY EQUITY PARTNERS, L.P. and FOUR OTHERS

and

TELESYSTEM INTERNATIONAL WIRELESS INCORPORATED, T.I.W. DO BRASIL LIMITADA and DEMARCO ALMEIDA

Cases cited:

(1) Aberdonia Cars Ltd. v. Brown, Hughes & Strachan Ltd.(1915), 59 Sol. Jo. 598, explained.

(2) Anon.ENR(1747), 3 Atk. 567; 26 E.R. 1127, considered.

(3) Carrow v. Ferrior(1868), 37 L.J. Ch. 569; 17 L.T. 536, considered.

(4) Kane v. Kane(1867), 16 W.R. 99, considered.

(5) McKinney v. Missick, [1965–1970] 2 L.R.B. 234, considered.

Legislation construed:

Grand Court Rules, O.45, r.5(1): The relevant terms of this paragraph are set out at para. 17.

O.45, r.7(1): The relevant terms of this paragraph are set out at para. 17.

(2): The relevant terms of this paragraph are set out at para. 17.

(3): The relevant terms of this paragraph are set out at para. 17.

(4): The relevant terms of this paragraph are set out at para. 17.

(6): The relevant terms of this paragraph are set out at para. 17.

(7): The relevant terms of this paragraph are set out at para. 17.

Courts-contempt of court-civil contempt-personal service of order on company officer pre-requisite to enforcement against company under Grand Court Rules, O.45, r.5(1), unless (a) officer present in court when order made or (b) company expressly notified (r.7(6))-company not notified of order”s terms by service on attorneys or by attorneys” presence in court

The respondents applied to the Grand Court for an order for the sequestration of the first four appellants” assets for contempt of court, and for the committal of their Chief Executive Officer.

The appellant companies sought to use a letter from the first respondent to the third to obtain an order restraining their attorneys from acting in two related proceedings on the ground of conflict of interest. Having granted an interim order, the court refused a final order restraining the appellants from using the document because it was relevant to the issues in an action against the third respondent and was not protected by privilege. When giving its decision orally, the court did not expressly state that it intended to permit the use of the document for the purposes only of the specified litigation. The court”s written decision, delivered the next day following approval of its terms by the parties” attorneys, contained an express prohibition on the use of the letter outside those proceedings (see 2001 CILR 444).

The appellant companies displayed the letter on their web site two days later, with a note stating that the Grand Court had permitted its use in any proceedings as evidence of collusion between the first and third respondents. The following day, two other Brazilian newspapers published the text of the appellants” note. The appellants” principal then filed a criminal complaint, citing the letter as evidence of a conspiracy between the third respondent and the first respondent”s principal.

The appellants conceded that their Cayman attorneys had informed their Brazilian in-house counsel of the terms of the order a week after it was made, and the offending material remained on the web site for a further five days. The Grand Court then made orders (i) prohibiting further publication of the letter on the Internet or any further use of it

other than in the specified proceedings without its leave, (ii) prohibiting publication of the facts and details of the Cayman proceedings, and (iii) ordering the publication of the text of these orders.

The respondents were refused leave to issue a writ of sequestration against the appellant companies and an order of committal against their principal officer. The Grand Court (Smellie, C.J.) held that the appellants” principal was not guilty of contempt of court, since it had not been proved that he had personal notice of the precise terms of the written order. However, he had (perhaps unwittingly) breached the court”s order when he filed the letter in support of his criminal complaint, and was ordered, inter alia, to pay 20% of the costs of the contempt proceedings on an indemnity basis.

The court held that appellant companies had knowingly breached the order when they posted the document on their web site and referred to it in a newspaper article, within two days of its issue, since they had had actual notice of the terms of the written order, before their Brazilian legal adviser informed them of the modification. They were deemed to have been in court when the order was made by virtue of the presence of their attorney, and deemed to have been served with a copy of it when their attorneys were served. Accordingly, under the Grand Court Rules, O.45, r.7(6)(a), the prohibitory order could be enforced by committal or sequestration without first being served on them.

However, as the appellants had ceased publication of the offending material and their principal had apologized to the court, and because their innocent investors would suffer if their assets were sequestrated, they were merely fined $100,000 and ordered to pay the respondents” costs of the application on an indemnity basis. The proceedings in the Grand Court are reported at 2002 CILR 96.

On appeal, the appellants submitted that (a) for the purposes of enforcing the court”s order before service of it on them, under the Grand Court Rules, O.45, r.7(6)(a), they should not be deemed to have been present in court at the making of the order or to have been notified of its terms, by virtue only of their attorneys” presence; and (b) their principal officer should not have had costs awarded against him, since he was a successful party, the court having found that he had not had actual notice of the order”s terms.

The respondents submitted in reply that (a) since the appellant companies could conduct litigation only if represented by attorneys, and their attorneys were obliged to notify them of the terms of a court order, they were properly deemed to have had actual notice of the order from the outset by virtue of their attorneys” presence in court; and (b) the costs order against the appellants” principal was justified, since he controlled the companies, the court had found him to be a dishonest witness, and in view of the importance of the non-publication order, the appellants” attorneys must have informed him of its contents.

Held, dismissing the appeal:

(1) The Chief Justice had erred in attributing notice of the court”s prohibitory order to the appellants from the date of the court”s written judgment. Although corporate bodies could only appear in court through their legal advisers, under O.45, r.7(6) the appellants were not deemed to have been present in court when the order was made, for the purposes of enforcing it before service on them, merely because their attorneys were then present. The Rules created an exception to the general principle that service of an order on an attorney constituted service on his client, by requiring that where another party to proceedings sought to enforce that order against a company or one of its officers, the order should be served on the officer, unless r.7(6)(a) or (b) were satisfied. An officer”s presence in court would suffice as notice of the terms of the order for the purposes of r.7(6)(a), but since no company officer had been present, the appellants had not knowingly breached the order unless they had been notified of its terms ‘by telephone, telegram or otherwise’ (r.7(6)(b)) (para. 18; paras. 21–22; paras. 25–29; para. 31).

(2) Although it had not been proved that the appellants were notified by their attorney of the terms of the order before they posted the document on their website, they had conceded that they were made aware of its terms a week later when told by their in-house attorney in Brazil, and the offending material had remained on display for a further five days. Accordingly, the Chief Justice had properly found that the companies had breached the order (albeit not from its outset) and that the breach had been intentional. On this basis, the court would not set aside the fines imposed on the appellants (paras. 32–33).

(3) The Chief Justice had also properly exercised his discretion to award costs against the appellants” principal notwithstanding that he did not find him to have been personally in breach of the order. His finding merely that the principal officer ‘lacked crediblity’ when he denied having had personal knowledge of the order-despite the fact that the appellant companies, which he controlled, were fixed with that knowledge as of the time when their Cayman attorneys communicated the terms of the final order to their Brazilian in-house lawyer-was a generous one. In the circumstances, the costs award against him had been justified. The appeal would be dismissed (paras. 34–38).

1 ZACCA, P., delivering the judgment of the...