Hutchinson Ltd et Al v Cititrust (Cayman) Ltd et Al
| Jurisdiction | Cayman Islands |
| Judge | Douglas, J. |
| Judgment Date | 30 January 1988 |
| Court | Grand Court (Cayman Islands) |
| Date | 30 January 1988 |
Douglas, J. (Ag.)
Grand Court
Civil procedure - Service out of jurisdiction — Application to set aside service — Circumstances in which court may retrospectively validate leave to serve process outside jurisdiction granted contrary to Grand Court Rules, O. 11, r. 1(1)© if writ still valid and all conditions of leave later met.
Trusts - Constructive trust — Court may impose constructive trust over foreign assets of Cayman company even if acts giving rise to trust occurred outside jurisdiction — Knowing assistance claims to be governed by Cayman law.
W.S. Walker & Co. for plaintiffs
Malples & Calder for the defendants
Douglas, J. Ag.: Before me are summonses involving 4 plaintiffs and 11 defendants. The statement of claim is not only lengthy but complex, comprising 31 pages involving numerous issues. In addition, the plaintiffs seek 34 declarations. The attorneys representing the parties have vigorously argued each and every issue and have requested the court to look into each claim by each defendant against each plaintiff.
Although it is the duty of the court to examine each and every issue, all that is required at this stage of the proceedings is for the court to determine whether or not to validate or discharge the order of Smellie, J. giving leave to serve the writ on the second, third, fourth, seventh, eighth, ninth, tenth and eleventh defendants. Much of the debate about the applicability of the rules will prove to be academic because of the outcome. However, I take time to examine them because of the considerable discussion of the case law and principles, which took place before me, in the event that this considered ruling may be useful on another occasion.
The four plaintiffs, Hutchinson Ltd., Crain Creek Ltd., Mountain Dew Ltd. and Forum Ltd. are all limited companies registered in the Cayman Islands and are in liquidation. Mr. Cleaver of Ernst & Young, Grand Cayman, and Mr. Alain Winkelmann of ATAG Ernst & Young, Switzerland, are the joint official liquidators.
At all material times these plaintiffs were underlying companies owned by the first defendant, Cititrnst (Cayman) Ltd., as trustee of the trusts for the benefit of the N. family. Hutchinson and Forum were underlying assets of the N. family settlements. Crain Creek and Mountain Dew were underlying assets of the “Hi-tech” settlement. Hutchinson, Crain Creek and Forum were beneficially owned by Mrs. N. prior to settlement of their shares upon the relevant trusts. Mountain Dew was established as an underlying company to receive assets settled by Mrs. N. who was a major creditor of Hutchinson, Mountain Dew and Forum, having lent substantial demand loans.
Cititrnst is a company registered in the Cayman Islands. The shares of each of the plaintiffs were held by the fifth and sixth defendants, Brennan Ltd. and Tyler Ltd., as nominees for and on behalf of Cititrust. Brennan and Tyler, both companies registered in the Cayman Islands, were respectively appointed as Secretary and President of each of the plaintiffs. Confidas Finance et Placement S.A., the seventh defendant, is a company which carries on business from its offices in Zurich and Geneva, administering the trust in Switzerland on behalf of Cititrust. Its officers acted in turn as officers and authorized signatories for Brennan and Tyler in carrying out instructions on behalf of Cititrust.
Mr. Y., Ms. G. and Mr. S., the eighth, ninth and tenth defendants respectively, were at all material times employees of Confidas; Mr. S. being a Vice-President of that company. Ms. G. has apparently not been served and has as yet played no part in the proceedings. Donat Investments, Madeleine Investments and Hitchcock Investments S.A., the second, third and fourth defendants respectively (“the Panamanian companies”) are registered in Panama and owned by Cititrust (Bahamas) Ltd. They acted as directors for each of the plaintiffs. Their officers and directors included residents of the Cayman Islands. Citibank (Switzerland) (“CIBS”), the eleventh defendant, is incorporated in Switzerland and provides banking and related services there.
In 1988, Mountain Dew purchased a substantial number of shares of the Harland Simon Group (“HSG”) for which it borrowed money from Bank S.G. Warburg Solitic A.G. (“BSG”), but subsequently financing was provided by General Bank & Trust (Bahamas) Ltd. (“GBT”). Pursuant to the loan, Mountain Dew pledged certain of its shares in HSG to GBT as security. These shares were held by Credit Suisse.
On September 11th, 1990, Mountain Dew gave instructions for the sale of its shares in HSG. The instructions were first, to pay the necessary amount to Credit Suisse in London to obtain good title to the HSG shares held by Credit Suisse and, secondly, to transfer the net proceeds of the sale to the account of CIBS for the benefit of Mountain Dew.
From the sum of £23,240,521, which was the gross proceeds of the sale, Mountain Dew paid £12,190,068 to Credit Suisse as repayment of a loan. It also paid the sum of £115,000 to Singer & Friedlander as commission for selling its HSG shares, and a further £228,763.12 as an early payment discount. This is one of the amounts claimed by the plaintiffs from the defendants. Of the shares sold, 703,800 with a value of £3,358,316.37 were beneficially owned by Crain Creek, the second plaintiff. After the sale Mountain Dew held that amount on trust for Crain Creek.
In October 1990, Mountain Dew also owned 310,000 shares in Kewill Systems Ltd. At the request of Mrs. N., these were sold, the net proceeds being £406,753.42. The sum of £240,272.09 from that sale was paid to Vermar Ltd. to pay interest on a debt due to Vermar. This loan was treated as a reduction of Mountain Dew's indebtedness to Mrs. N. The balance of the proceeds was placed in a fixed deposit in Mountain Dew's account at CIBS with other available funds.
In September 1990, Mountain Dew owned shares in the News Cutting Bureau Ltd. On or about January 8th, 1990 Mountain Dew sold its shares in the company, the net income being £729,000 and £724,000. These amounts were combined with Mountain Dew's fixed deposit in CIBS.
On September 6th, 1990 Brennan and Tyler gave instructions to CIBS to debit Mountain Dew's account and transfer the sum of £8,692,000 to Mrs. N.'s account. Then on September 14th a further sum of £1,967,000 was debited from Mountain Dew's account in Switzerland and transferred to Mrs. N.'s account with CIBS. This instruction, is alleged to have been given by Mrs. N. to Confidas. There were no written instructions.
On February 18th, 1991 the directors of Mountain Dew, namely, Donat, Madeleine and Hitchcock, met in the Bahamas where they passed certain resolutions concerning the payments to Mrs. N. It is as a result of these resolutions that certain of the claims by the plaintiffs against these defendants have arisen. I will deal with these resolutions at the appropriate time.
On June 25th, 1996 the plaintiffs filed an ex parte summons applying for leave to serve proceedings out of the jurisdiction upon the defendants. On August 27th, Smellie, J. granted leave for service out of the jurisdiction on the second to fourth and seventh to eleventh defendants. On December 11th, 1996 an acknowledgment of service on behalf of the first, fifth and sixth defendants was received, and on February 17th the acknowledgments of service on behalf of the second to fourth, seventh, eighth, tenth and eleventh defendants were received. On that date also the plaintiffs obtained an order extending the validity of the writ of summons for a further 12 months from its date of expiry until February 28th, 1998.
On April 24th, 1997, the final date of the time allowed for the filing of a defence by the defendants, a total of three summonses were filed by the various defendants. These were first, applications on behalf of Cititrust, Brennan and Tyler for a stay of the order of Smellie, J., on the ground of forum non conveniens; secondly, an application on behalf of the non-Caymanian defendants seeking various orders under the Grand Court Rules, 0. 12, r.8; and thirdly, another summons by the non-Caymanian defendants seeking an extension of time for the service of the affidavit in support of the 0. 12, r.8 application. On May 9th, 1997, these defendants were granted leave to withdraw this last summons.
On May 15th, 1997, the plaintiffs filed a summons for the dismissal of the 0. 12, r.8 application. On May 12th they were granted leave to amend the said summons. On May 20th the defendants re-served the 0. 12, r.8 summons along with supporting affidavits. On June 17th the plaintiffs filed their amended summons, which will now be the first issue with which I will deal. However, before I proceed I must record that on July 8th the plaintiffs filed another summons, this time seeking, inter alia, the retrospective validation of the leave granted by Smellie, J. on August 27th, 1996. This application of June 17th sought the following orders:
‘1. That the second to fourth and seventh to eleventh defendants’ 0. 12, r.8 summons filed herein on April 24th, 1997 be dismissed on the grounds that —
(a) the affidavits in support thereof were not filed by April 24th, 1997;
(b) the affidavits in support thereof were not served with the 0. 12, r.8 summons on April 24th, 1997; and
(c) the second to fourth and seventh to eleventh defendants voluntarily submitted to the jurisdiction of this honourable court by withdrawing their summons to extend time for service of their affidavit evidence in support of their 0. 12, r.8 summons, on May 9th, 1997.
2. That the second to fourth and seventh to eleventh defendants do file their defences forthwith.”
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