George Allen Cowan v Equis Special LP

• Jurisdiction: Cayman Islands
• Judge: Ingrid Mangatal
• Judgment Date: 03 October 2019
• Court: Grand Court (Cayman Islands)
• Docket Number: Cause No: FSD 22 of 2018 (IMJ)

Between

(1) George Allen Cowan

(2) George Allen Cowan

(On Behalf of Equis Special L.P. (Previously known as Equis Asia Fund Special L.P.))

Plaintiffs

and

(1) Equis Special LP

(Previously known as Equis Asia Fund Special LP) Acting by its General Partner Equis Special G.P.)

(2) Equis Special G.P.

(Previously known as Equis Asia Fund Special GP) in its Capacity as General Partner of Equis Special L.P.

(3) David Charles Russell

(4) Adam Bernhard Ballin

(5) Lance Michael Comes

(6) Joseph Thomas Carmody

(7) Rajpal Singh Chaudhary

(8) Tony Gibson

(9) Equis Development Limited

Defendants

Before:

The Hon. Justice Ingrid Mangatal

Cause No: FSD 22 of 2018 (IMJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

HEADNOTE

Applications to Set Aside Order for Service Out of the Jurisdiction — GCR Order 11, Rules (1) and (4), Order 32, Rule 6. GCR Order 41, Rule 5(3) Affidavits by Attorneys

Duty of full and frank Disclosure at ex parte hearing — Whether Amended Claim disclosed serious issue to be tried in relation to a certain claim — GCR Order 12, Rule 8(1)(b) and (c) — Whether service defective — Whether there are good reasons for Validating Defective Service.

Appearances:

Mr. Stephen Atherton QC instructed by Mr. Nicholas Dunne and Mr. Brett Basdeo of Walkers for the Plaintiffs

Mr. Richard Millett QC instructed by Mr. James Eldridge and Mr. Adrian Davey of Maples and Calder for the Third, Fourth, Fifth, Seventh, Eighth and Ninth Defendants

Mr. Nigel Meeson QC instructed by Mr. Erik Bodden and Mr. Spencer Vickers of Conyers Dill & Pearman for the Sixth Defendant

IN CHAMBERS

RULING

Introduction

1 The two day hearing concerned the Amended Summons of the Ninth Defendant, Equis Development Limited ( “EDL”) dated 30 November 2018 and the Summons of the Third, Fourth, Fifth, Seventh and Eighth Defendants — respectively David Charles Russell (“Mr. Russell”), Adam Bernhard Ballin (“Mr. Ballin”), Lance Michael Comes (“Mr. Comes”), Rajpal Singh Chaudhary (“Mr. Chaudhary”) and Tony Gibson (“Mr. Gibson”), of 7 December 2018. The Third to Fifth and Seventh to Ninth Defendants (collectively the “Foreign Maples Defendants”) seek to set aside the Court's Order of 24 September 2018 made ex parte by which the Plaintiffs were granted leave to serve the proceedings out of the jurisdiction (the “Service Out Order”).

2 The Sixth Defendant Joseph Thomas Carmody ( “Mr. Carmody”) who is separately represented by Conyers, Dill & Pearman (“ Conyers”), has filed his own Re-Amended Summons dated 11 December 2018 in some terms similar to those of the Foreign Maples Defendants, but also relying upon different and additional grounds.

3 The Defendants' respective summonses are referred to hereafter as the “EDL Summons”, the “Partners' Summons” and the “Carmody Summons”.

4 The EDL Summons is supported by the First and Second Affirmations of Sung Woo Yang (“Mr. Yang”), dated 30 November 2018 and March 2019. The Partners' Summons is supported by evidence from Mr. Russell, Mr. Ballin, Mr. Comes, Mr. Chaudhary and Mr. Gibson, as described in the Core Bundle. The Carmody Summons is supported by three affidavits of Jordan McErlean, sworn respectively on 21 November 2018, 12 March 2019, and 20 March 2019 and that of Mr. Carmody sworn on 11 December 2018. Reliance is also Placed on the evidence of Mr. Yang.

5 Mr. Cowan filed an affidavit in opposition to all 3 Summonses, sworn to on 28 February 2019 (“Mr. Cowan's First Affidavit”). There have been a number of affidavits in response from Mr. Gibson, Mr. Ballin, Mr. Russell, and Mr. Yang, filed in March 2019.

6 In the EDL and Partners' Summonses, the Foreign Maples Defendants have focused on a brand new claim, being a US$350 million claim brought derivatively by Mr. Cowan on behalf of Special LP in respect of Japan Solar LP (the “Japan Solar Claim”), pleaded at paragraphs 37A-T of the Re-Amended Writ of Summons and Statement of Claim (the “Re-Amended Writ”). In summary, the Foreign Maples Defendants each seek to set aside the Plaintiffs' permission to serve out of the jurisdiction the Japan Solar Claim on the basis that:

• (1) Mr. Cowan failed to make full and frank disclosure of material facts upon his ex parte application of 24 September 2018, which resulted in the Court being seriously misled into granting the Service Out Order in respect of that claim; and in any event,

• (2) The Japan Solar Claim is inadequately pleaded, legally incompetent, factually hopeless, and discloses no good arguable case for the purposes of some of the jurisdictional gateways and in any event raises no serious issue to be tried in respect of any of them.

7 The Partners' Summons did originally also seek to say that, contrary to the allegations in paragraph 32G of the Re-Amended Writ and several statements in affidavit of Stuart D'Addona dated 12 September 2018 (“D'Addona 1”), Mr. Russell, Mr. Ballin, Mr. Comes and Mr. Chaudhary, as directors of Special GP, do not owe any of the fiduciary duties to Special LP that are pleaded in paragraph 32G of the Re-Amended Writ or at all. Thus, they said, no cause of action lay against those Defendants on that basis. However, that point is not being pursued as it does not relate to the Japan Solar Claim.

The Submissions of the Foreign Maples Defendants

8 The Foreign Maples Defendants say that the background events leading up to the Service Out Order are themselves a cause for serious concern:

• (1) The First Plaintiff (“Mr. Cowan”) is a former employee of Equis (Hong Kong) Limited (“Equis HK”) whose employment was terminated on 29 October 2017. On 23 February 2018 Mr. Cowan served a claim on the First and Second Defendants ( “Special LP” and “Special GP”), claiming that he was entitled to certain additional investment proceeds and raising relatively narrow points of contractual construction.

• (2) The parties exchanged a Defence, a Reply and various requests for further and better particulars. Following those exchanges, Mr. Cowan wrote to Special LP and Special GP on 25 June 2018 enclosing a draft re-amended claim. There was, at that stage, no suggestion of a claim against other Defendants, or any allegation of conspiracy; the claim was squarely a contractual one, albeit the pleading had been heavily criticized by Maples and Calder (“Maples”) (acting for Special LP and Special GP).

• (3) It was therefore, Maples say, with some surprise and grave concern they received a letter from Walkers on 12 September 2018 (acting for Mr. Cowan), proposing a yet further iteration of the claim. That claim now included the Foreign Maples Defendants and made allegations of fraud against them. The Foreign Maples Defendants say that Mr. Cowan's allegations are wholly baseless, unsupported by any proper evidential foundation and can only have been brought for the cynical tactical purpose of placing pressure on individuals associated with Special LP and Special GP in order to force a settlement.

• (4) Mr. Cowan's Summons for leave to re-amend his claim and serve proceedings out of the jurisdiction (the “Cowan Summons”) was heard ex parte by this Court on 24 September 2018. However, it was submitted that none of the extraordinary and highly material features of the proposed re-amended claim were brought to the Court's attention. Specifically:

  • (a) Mr. Cowan failed to indicate the true scale of his proposed amendments. It was incumbent on him, in seeking leave, to state that what had commenced as a relatively self-contained contractual dispute was to become a US$440 million conspiracy claim with multiple related causes of action. He failed to do so.

  • (b) Further, he failed to disclose that the Japan Solar Claim was entirely novel; at no previous point in the litigation had that claim been so much as suggested. Mr. Cowan also failed to identify any new information that would explain its belated appearance.

  • (c) The sudden emergence of the Japan Solar Claim raised many important questions, not least as to whether Mr. Cowan honestly believed in its truth. Mr. Millett Q.C., on behalf of the Foreign Maples Defendants contends that it was remarkable that this vast alleged conspiracy had only occurred to Mr Cowan shortly before 12 September 2018, almost a year since he had first threatened proceedings, and only after Maples had highlighted the multiple flaws in his original, contractual claim. Despite Mr. Cowan's legal representatives (Walkers) telling the court at the ex parte hearing that “additional materials subsequently came to Mr. Cowan's attention which necessitated filing an Amended Writ and now a Re-Amended Writ,” no such “additional materials” were identified either in the evidence in support of the ex parte application or the skeleton argument, and Mr. Cowan's reply evidence does not explain it either. A fair presentation to the Judge, the submission continues, required Walkers to show the Court the “additional material” that justified the application at that time and supported the re-amendment.

• (5) More culpably still, declares Mr. Millett QC, is that the description of the Japan Solar Claim that Mr. Cowan allowed to be presented to the Court was itself seriously inadequate.

  • (a) Mr. Cowan's legal representatives argued that the fact the original claim had been defended by Special LP and Special GP was tantamount to an acceptance that the amended claim disclosed a serious issue to be tried. However, given the dramatic reformulation of Mr. Cowan's case, that submission was incorrect, misleading, and should never have been made.

  • (b) Further, the Court's attention was not drawn to a considerable number of further obvious legal and factual defences that the Defendants would be likely to assert. For example:

    • i. The fact that the key premise of the Japan Solar Claim of an alleged trust over a 20% Deemed Interest in Japan Solar LP (the “Deemed Interest”) in favour of Special LP, is directly contradicted by the express...