Grupo Torras SA v Bank of Butterfield Intl (Cayman) Ltd

• Jurisdiction: Cayman Islands
• Judge: (Smellie, J.)
• Judgment Date: 23 November 1995
• Court: Grand Court (Cayman Islands)
• Date: 23 November 1995

Grand Court

(Smellie, J.)

GRUPO TORRAS S.A. and TORRAS HOSTENCH LONDON LIMITED

and

BANK OF BUTTERFIELD INTERNATIONAL (CAYMAN) LIMITED and FIVE OTHERS

A.J. Popplewell and G.F. Ritchie for the plaintiffs;

E.A. McQuater and H. St.J. Moses for the first to fourth defendants;

A.J. Beltrami and D. MacF. Murray for the fifth and sixth defendants.

Cases cited:

(1) Arab Monetary Fund v. Hashim (No. 2), [1990] 1 All E.R. 673, dicta of Hoffmann J. applied.

(2) Bankers Trust Co. v. Shapira, [1980] 1 W.L.R. 1274; [1980] 3 All E.R. 353, considered.

(3) Borden (U.K.) Ltd. v. Scottish Timber Prods. Ltd., [1981] Ch. 25; [1979] 3 All E.R. 961.

(4) CH Ltd. v. F, 1988–89 CILR 516, applied.

(5) Lipkin Gorman v. Karpnale Ltd., [1991] 2 A.C. 548; [1992] 4 All E.R. 512.

(6) McKay v. Essex Area Health Auth., [1982] Q.B. 1166; [1982] 2 All E.R. 771, dicta of Stephenson, L.J. applied.

(7) Norwich Pharmacal v. Customs & Excise Commrs., [1974] A.C. 133; [1973] 2 All E.R. 943, considered.

(8) Smith Kline & French Labs. Ltd. v. Global Pharmaceutics Ltd., [1986] R.P.C. 394.[1986] R.P.C. 394.

Legislation construed:

Grand Court Rules, O.18, r.19(1): The relevant terms of this paragraph are set out at page 445, lines 4–13.

r.19(2): The relevant terms of this paragraph are set out at page 446, lines 7–8.

Trusts-tracing actions-pleading-not to be struck out for failure to specify assets representing plaintiff”s property or how acquired-reasonable cause of action shown if pleaded facts support inference that defendant holds assets identifiable as plaintiff”s with benefit of discovery

The plaintiffs brought proceedings against a trust to recover, by way of proprietary tracing claims, moneys stolen from them by the trust settlor.

The plaintiffs were companies owned by the Kuwaiti Government”s overseas investment office, which was based in England and run by the settlor, a member of the Kuwaiti Royal Family. The settlor was the former President of the first plaintiff. They alleged that the settlor had fraudulently misappropriated funds and placed large sums of money stolen from them in trust funds around the world. Some of these moneys had already been traced and were the subject of proceedings in the English High Court.

The settlor was the sole primary beneficiary of a Cayman trust, the assets of which were held by the second, third and fourth defendants. His wife and child (the fifth and sixth defendants) were the contingent beneficiaries.

The plaintiffs issued proceedings against the first defendant trustee and obtained leave to serve the other defendants outside the jurisdiction, as well as limited orders for disclosure and an injunction restraining the grantor from dealing with the trust assets here. The statement of claim contained claims in respect of moneys traced to an account in The Bahamas, a large proportion of which had been spent on assets held by the Cayman trust. Further unparticularized claims were included, in respect of ‘further receipts of the plaintiffs” moneys,’ as bare tracing and unjust enrichment claims.

The defendants applied to strike out the latter claims under the Grand Court Rules, O.18, r.19 or the court”s inherent jurisdiction. They submitted that (a) the claims disclosed no reasonable cause of action, since (i) they purported to be proprietary claims and yet failed to identify any specific property into which the plaintiffs” moneys could be traced, and (ii) they were based on inference and supposition rather than evi-dence and were therefore plainly unsustainable; (b) for the same reasons, the claims were also frivolous, vexatious and an abuse of the process of

the court; and (c) the plaintiffs should not be permitted to proceed and use the discovery process to obtain evidence to support these claims and also those against the settlor in England.

The plaintiffs submitted in reply that (a) the defendants had failed to show that the claims were obviously unsustainable as they were required to do under O.18, r.19, since the pleaded facts were to be presumed to be true for the purposes of the application, and evidence capable of sustaining the claims would almost certainly be obtained through discovery; (b) to sustain a tracing claim, they had to show only that the defendants had received and retained property which was identifiable as their property; and (c) the process of discovery could be employed in their favour against any person believed to have received the proceeds of the fraud, without first establishing the exact means by which the assets were acquired.

Held, dismissing the application:

(1) The plaintiffs” unjust enrichment claims were not obviously unsustainable or bound to fail and would not be struck out under the Grand Court Rules, O.18, r.19(1), either as disclosing no reasonable cause of action or as being frivolous, vexatious or otherwise an abuse of process. These wider claims were based on sustainable inferences from the pleaded facts (which must, for the purposes of this application, be regarded as true); namely that (i) the settlor was in a fiduciary position in relation to the plaintiffs, (ii) prima facie he had been at the centre of an elaborate and large scale fraud, (iii) large sums of money had been traced to him and larger sums still remained unaccounted for, (iv) he had been shown to use trusts around the world as repositories for the proceeds of the fraud, and (v) he had repeatedly refused to comply with court orders requiring disclosure of his assets. Since the pleadings were sustainable, the plaintiff”s motives for proceeding here were irrelevant (page 446, line 43 – page 448, line 2; page 450, lines 7–13; page 451, lines 9–15).

(2) Although, in order to succeed at trial, the plaintiffs would have to prove the precise path by which their moneys were acquired by the defendants, it was unnecessary at this stage for them to be able to do so. Rather, they needed only to show that the defendants held property identifiable (with the benefit of discovery) as representing their moneys. In the interests of justice they were entitled to expect the co-operation of the court and would be permitted to proceed so as to obtain the means of particularizing and proving their claims, if necessary by working backwards, tracing from the defendants” assets to themselves. The defendants, who had become ‘mixed-up’ in the grantor”s fraud, had a duty to assist them by giving full information, and would not be permitted to use the rules of pleading to defeat arguable claims. Counsel for the parties would ensure that confidential information about the Cayman trust”s assets prior to the fraud or originating from other sources would be excluded from discovery (page 448, lines 3–14; page 448, line 28 – page 449, line 29; page 449, lines 40–45; page 450, lines 28–35).

SMELLIE, J.: The plaintiff companies (‘GT’ and ‘THL’) com-
menced this action by writ on June 28th, 1995. It is one of the several
off-shoots of ongoing proceedings in London against some 56
30	defendants, including one Sheikh Fahad Mohammed Al-Sabah.
GT and THL are incorporated in Spain and England respectively and
are beneficially owned by the Kuwaiti Investment Office (‘the KIO’).
The KIO is the overseas investment vehicle established by the Kuwaiti
Government. Sheikh Fahad is the former chairman of the KIO and former
35	president of GT. He is alleged to be the central figure in a conspiracy by
which the plaintiffs have been defrauded of more than US$450m., of
which some US$337m. remain untraced and unaccounted for. Of the
sums accounted for, US$22.5m. have been traced into accounts or trusts
connected to Sheikh Fahad. The amount of US$3m. has been traced into
40	an account held on his behalf by Bahamian lawyers and of that, the lesser
sum of US$2.4m. has been shown to have been spent in the maintenance
and upgrading of assets held by a trust called the Comfort Trust.
The Comfort Trust is an instrument of Sheikh Fahad-he is its grantor
and its only primary beneficiary, although the fifth and sixth defendants
45	are named as contingent beneficiaries. The Comfort Trust is domiciled in

the Cayman Islands and the first defendant is trustee. The first defendant
is joined as a party for that reason. The second, third and fourth
defendants are companies by which assets of the Comfort Trust are held.
Following on the filing of the writ in this action, there were
5	interlocutory applications in response to which orders for ex parte
Mareva injunctive relief, early disclosure and leave to serve outside the
jurisdiction on the second to sixth defendants were granted to the
plaintiffs. Then followed inter partes hearings in which, among other
things, the early disclosure orders in favour of the plaintiffs were varied
10	and the ambit narrowed, for reasons given in a written ruling dated
August 7th, 1995. Up until then no statement of claim had been filed by
the plaintiff. Filed on August 31st, 1995, the statement of claim

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