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

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 17 January 2001
• Date: 17 January 2001
• Court: Grand Court (Cayman Islands)

Grand Court

(Smellie, C.J.)

GRUPO TORRAS and TORRAS HOSTENCH LONDON LIMITED

and

BANK OF BUTTERFIELD INTERNATIONAL (CAYMAN) LIMITED and FIVE OTHERS

G.F. Ritchie and Mrs. R.C. Whittaker-Myles for the plaintiffs;

H. St. J. Moses and N. Joseph for the first, second, third and fourth defendants;

D. MacF. Murray for the fifth and sixth defendants.

Cases cited:

(1) Bank of Nova Scotia v. Becker, 1988–89 CILR 12.

(2) Beck, In re, Attia v. Seed(1918), 87 L.J. Ch. 335; 118 L.T. 629.

(3) Budding v. MurdochELR(1875), 1 Ch. D. 42; 45 L.J. Ch. 213.

(4) Cayman Hotel & Golf Inc. v. Resort Gems Ltd., 1992–93 CILR 372, applied.

(5) Hubbock v. Helms(1887), 56 L.J. Ch. 536; 56 L.T. 232.

(6) Lloyds Bowmaker Ltd. v. Britannia Arrow Holdings PLC, [1988] 1 W.L.R. 1337; [1988] 3 All E.R. 178, considered.

(7) Raleigh v. Goschen, [1898] 1 Ch. 73; (1897), 67 L.J. Ch. 59.

(8) Sneade v. Wotherton Barytes & Lead Mining Co. Ltd., [1904] 1 K.B. 295; (1904), 73 L.J.K.B. 170.

(9) Swiss Bank & Trust Co. Ltd. v. Iorgulescu, 1994–95 CILR 149, followed.

(10) Warner v. Sampson, [1959] 1 Q.B. 297; [1959] 1 All E.R. 120.

Legislation construed:

Grand Court Rules, O.15, r.4(1): The relevant terms of this paragraph are set out at para. 43.

O.15, r.6(2)(b)(i): The relevant terms of this sub-paragraph are set out at para. 44.

O.20, r.5(1): ‘Subject to Order 15, rules 6, 7 and 8 and the following provisions of this rule, the Court may at any stage of the proceedings allow the plaintiff to amend his writ, or any party to amend his pleading, on such terms as to costs or otherwise as may be just and in any manner (if any) as it may direct.’

r.8(1): ‘For the purpose of determining the real question in controversy between the parties to any proceedings, or of correcting any defect or error in any proceedings, the Court may at any stage of the proceedings and either of its own motion or on the application of any party to the proceedings order any document in the proceedings to be amended on such terms as to costs or otherwise as may be just and in such manner (if any) as it may direct.’

Civil Procedure-pleading-amendment-amendment to be allowed to determine real matters in issue or correct defect unless applicant acting mala fide or amendment will cause injustice not remediable by costs-may add new cause of action to avoid multiple proceedings if not bound to fail and no substantial alteration of character of proceedings

Civil Procedure-pleading-amendment-may add cause of action pre-viously unknown to Cayman law if prima facie arguable-trial judge to determine whether admissible

Civil Procedure-joinder of parties-party whose presence necessary-Grand Court Rules, O.15, rr. 4 and 6(2)(b)(i) to be construed liberally to allow joinder of defendant whose presence necessary to determine matters raised by amended pleadings, e.g. where new cause of action arises from same facts as existing claims and new defendant central to both

The plaintiffs brought proceedings against a trust to recover moneys stolen by the trust settlor.

The plaintiffs were companies owned by the Kuwaiti Government”s overseas investment office, which was run from England by the settlor, a member of the Kuwaiti Royal Family. They alleged that the settlor had engaged in fraud on an international scale and had placed large sums of money stolen from them in nine separate trust funds around the world, including in the Cayman Islands.

Judgment was entered against the settlor in England and US2.4m. (a small percentage of the funds stolen) was traced to a Cayman trust of which he was the sole primary beneficiary. The plaintiffs obtained an injunction restraining the settlor from dealing with the Cayman trust assets. They brought a wider proprietary tracing claim in respect of the remaining funds in the trust, which the Grand Court refused to strike out (in proceedings reported at 2000 CILR 452). The settlor”s wife and son, as contingent beneficiaries, voluntarily joined the proceedings as the fifth and sixth defendants.

The plaintiffs now applied for leave to amend their writ and pleadings to add non-proprietary claims seeking declaratory relief and to join as defendants the settlor and three underlying trust companies controlled by the trustee, as a means of enforcing the judgment obtained against the settlor in England. The claims relied on (i) the misuse of the trust as an infringement of Cayman public policy; (ii) lifting the veil on the trust to reveal the plaintiffs” beneficial interests; (iii) a remedial constructive trust in the plaintiffs” favour; and (iv) the trustee”s obligation to pay the judgment debt on behalf of the settlor. Although such claims had never been brought before in the Cayman Islands, the Grand Court had earlier found that they were prima facie arguable here and leave had been given in Jersey to make similar claims in respect of the trusts there (see In re Esteem Settlement, 2000 JLR 119). They would require extensive discovery and an examination of the other trusts controlled by the settlor worldwide, into which he had placed stolen funds. The first defendant trustee did not oppose the addition of the new claims or the joinder of the settlor and the underlying trust companies.

The fifth and sixth defendants submitted that (a) the proposed amendments were an attempt to circumvent the Limitation Law 1996, which precluded any fraudulent disposition claim against the trust at this stage; (b) the non-proprietary claims were bound to fail and were therefore inadmissible; (c) the amendments were unduly prejudicial to them as innocent parties, since they would result in a much longer, more complex and costly trial; (d) the plaintiffs” failure to proceed promptly with their action despite having had the benefit of a Mareva injunction for over five years was an abuse of process, and the amendments would mean further delay; and (e) the joinder of the settlor was unnecessary for the proper disposal of the issues before the court.

The plaintiffs submitted in reply that (a) the new causes of action had accrued at the same time as the existing claims, were not statute-barred and had a reasonable chance of success; (b) their interests in the trust as judgment creditors had to take precedence over those of the fifth and sixth defendants as contingent beneficiaries; (c) the prejudice to the trustee if a separate action were required to try the non-proprietary claims would outweigh that to the fifth and sixth defendants, who would still have to defend them later; (d) the Mareva injunction would continue even if the applications were refused, and the court would grant an injunction in aid of a new separate action; and (e) the settlor should be joined as a defendant under O.15, rr. 4(1) and 6(2) of the Grand Court Rules.

Held, allowing the application:

(1) Under the Grand Court Rules, an amendment to pleadings would be permitted to assist in determining the real question in controversy between the parties or to correct an error or defect, unless the party proposing the amendment was not acting bona fide or the defect was such that the amendment could not be made without causing injustice to another party which could not be compensated for by costs. Whilst the

court had a duty to assist the plaintiffs, it would not do so if that would unduly prejudice the defendants. Although a new cause of action could be added if it would clarify the issues and avoid multiple proceedings, the court would not permit an amendment which would alter the character of the proceedings altogether and which should be brought in fresh proceedings. Nor would an amendment be allowed to add a claim which was bound to fail. Since the amended pleadings would be substituted for the claims endorsed on the original writ, no cause of action could be added which had accrued since the issue of the writ (paras. 9–10; paras. 28–32; para. 34).

(2) The court was satisfied that if the amendments were refused, the plaintiffs would be substantially prejudiced in recovering the proceeds of the massive fraud perpetrated by the settlor, and that any prejudice to the trust or the defendants from the addition of the new claims could be compensated for by costs. The amendments would undoubtedly prolong the proceedings and extend the duration of the trial. However, the substantial costs of defending the new claims would have to be met by the fifth and sixth defendants in separate proceedings if not in this case. The continuation of the Mareva injunction would not prejudice their interests as contingent beneficiaries, and the court would, in any event, almost certainly grant a further injunction in support of a later action bringing the four new claims. The proceedings had...