Hutchinson Ltd v Cititrust

• Jurisdiction: Cayman Islands
• Judge: (Douglas, Ag. J.)
• Judgment Date: 30 January 1998
• Court: Grand Court (Cayman Islands)
• Date: 30 January 1998

Grand Court

(Douglas, Ag. J.)

HUTCHINSON LIMITED, CRAIN CREEK LIMITED, MOUNTAIN DEW LIMITED and FORUM LIMITED

and

CITITRUST (CAYMAN) LIMITED and TEN OTHERS

A. Turner for the plaintiffs;

N.R.F.C. Timms for the defendants.

Cases cited:

(1) -Barings PLC v. Coopers & Lybrand, [1996] T.L.R. 498; (1996), 140 Sol. Jo. (L.B.) 210; on appeal, [1997] 1 BCLC 427; [1997] BCC 498.

(2) -Broken Hill Pty. Co. Ltd. v. Xenakis, [1982] Lloyd”s Rep. 304; [1982] Com. L.R. 152.

(3) -Carmel Exporters (Sales) Ltd. v. Sea-Land Services Inc., [1981] 1 W.L.R. 1068; [1981] 1 All E.R. 984, considered.

(4) -Chaplin v. Boys, [1971] A.C. 356; [1969] 2 All E.R. 855, applied.

(5) -El Ajou v. Dollar Land Holdings PLC, [1993] 3 All E.R. 717; [1993] BCLC 735; on appeal, [1994] 2 All E.R. 685; [1994] 1 BCLC 464, dicta of Millett J. applied.

(6) -Fidelity & Guar. Intl. Ltd. v. Hakemian, 1992–93 CILR N–6, distinguished.

(7) -Gulf East Intl. v. Parvoz Carder, English Queen”s Bench Division, March 23rd, 1994, unreported.

(8) -Hydrodam (Corby) Ltd., ReUNK, [1994] 2 BCLC 180; sub nom. Re Hydrodan (Corby) Ltd.UNK[1994] BCC 161, considered.

(9) -Kuwait Oil Tanker Co. S.A.K. v. Al Bader, [1997] 1 W.L.R. 1410; [1997] 2 All E.R. 855, dicta of Staughton, L.J. applied.

(10) -Lawson v. Midland Travellers Ltd., [1993] 1 W.L.R. 735; [1993] 1 All E.R. 989, followed.

(11) -Lonrho PLC v. Fayed, [1992] 1 A.C. 448; [1991] 3 All E.R. 303, applied.

(12) -Prospect Properties Ltd. v. McNeill, 1990–91 CILR 171, followed.

(13) -R. v. Kensington Income Tax Commrs, ex p. Princess Edmond de Polignac, [1917] 1 K.B. 486, dicta of Viscount Reading applied.

(14) -Royal Brunei Airlines Sdn. Bhd. v. Tan, [1995] 2 A.C. 378; [1995] 3 All E.R. 97, applied.

(15) -Spiliada Maritime Corp. v. Cansulex Ltd., The Spiliada, [1987] A.C. 460; [1986] 3 All E.R. 843, applied.

Legislation construed:

Grand Court Rules, O.11, r.1(1): The relevant terms of this paragraph are set out at page 55, lines 39–41; page 57, lines 30–32; page 62, lines 30–34; and page 65, line 41 – page 66, line 2.

O.12, r.8:

‘(1) A defendant who wishes to dispute the jurisdiction of the Court in the proceedings by reason of any irregularity [in any order giving leave to serve the writ out of the jurisdiction] . . . shall give notice of intention to defend the proceedings and shall within the time limited for service of a defence, apply to the Court for-

(a) -an order setting aside the writ or service of the writ on him;

. . .

(c) -the discharge of any order giving leave to serve the writ on him out of the jurisdiction. . . .

(3) An application under paragraph (1) must be supported by an affidavit verifying the facts on which the application is based and a copy of the affidavit must be served with the notice of motion or summons by which the application is made.’

(6): The relevant terms of this paragraph are set out at page 51, lines 27–31.

O.32, r.3(2):

‘. . . [U]nless the Court otherwise orders or any of these Rules otherwise provides-

(a) -a summons must be served on every other party not less than four days before the day specified in the summons for the hearing of the application;

(b) -any evidence relied on in support of the application must be served with the summons.’

Civil Procedure-service of process-service out of jurisdiction-application to set aside service-Grand Court Rules, O.12, r.8(1) satisfied by filing application within time-limit for service of defence-re-service with supporting affidavit within general time-limit for service under O.32, r.3(2) satisfies r.8(3)

Civil Procedure-service of process-service out of jurisdiction-court may retrospectively validate leave to serve process outside jurisdiction granted contrary to Grand Court Rules, O.11, r.1(1)(c) if writ still valid and all conditions of leave later met

Civil Procedure-service of process-service out of jurisdiction-under Grand Court Rules, O.11, r.1(1)(f) plaintiff seeking leave to serve tortfeasor outside jurisdiction to show significant damage sustained within Islands if no tortious act committed here-liquidation of non-trading holding companies insufficient

Conflict of Laws-trusts-constructive trusts-knowing assistance-court may impose constructive trust over foreign assets of Cayman company even if acts giving rise to trust occurred outside jurisdiction-unlike knowing receipt based claims, knowing assistance claims governed by Cayman law

Companies-directors-de facto/shadow director-under Grand Court Rules, O.11, r.1(1)(ff), plaintiff seeking leave to serve corporate director of Cayman company outside jurisdiction to specify whether acted as de facto or shadow director-need not plead distinction if defendant is individual

The plaintiff companies, in liquidation, brought proceedings against the defendants to recover moneys paid to creditors by way of fraudulent preferences.

The plaintiffs were Cayman companies owned by Cititrust (Cayman) Ltd. as trustee for the two N. family trusts, and were debtors of Mrs. N. Mountain Dew Ltd., the third plaintiff, paid the proceeds of the sale of shares in three English companies into a Swiss account with Citibank. At Mrs. N.”s request, the officers and nominee shareholders of Mountain

Dew instructed Citibank to pay sums from this account into Mrs. N.”s account as full repayment of its debt to her. These payments were later ratified by Mountain Dew”s corporate directors in a Board meeting in The Bahamas.

When the payments had been made, Mountain Dew was unable to pay its debts to the first and second plaintiffs but advanced moneys to the fourth plaintiff which were in turn paid to Mrs. N. in satisfaction of debts to her. Ultimately, all the plaintiff companies were wound up.

The plaintiffs obtained leave to serve proceedings on Citibank and four other foreign-registered companies which had acted as officers of the plaintiffs or their owners, as well as three Swiss nationals employed by them. They alleged, inter alia, conspiracy to defraud and breach of fiduciary duty. They meanwhile served proceedings on Cititrust and the nominee shareholders in the Cayman Islands. The defendants acknow-ledged service and applied for orders under the Grand Court Rules, O.12, r.8 for the discharge of the court”s leave, the setting aside of the writ in respect of the foreign defendants and a declaration that the court had no jurisdiction over them, all on the ground of forum non conveniens. Their application for an extension of time to serve affidavit evidence was withdrawn and they later re-served their summons with a supporting affidavit.

The plaintiffs applied for the dismissal of the summons and for the validation of the court”s leave to serve their writ outside the jurisdiction.

They submitted that (a) since O.12, r.8(3) required that affidavit evidence supporting a challenge to the court”s jurisdiction should be served with the summons, the defendants had, by filing a summons alone on the last day permitted for the service of their defences, failed to comply with r.8(1) that an application be made by that date; (b) accordingly, by r.8(6), the defendants” acknowledgements of service were irrevocable submissions to the jurisdiction of the court; (c) the defendants” withdrawal of their application for an extension of time also had this effect; (d) the court should not exercise its discretion to allow the defendants to proceed with their application despite late service of the affidavit, nor should it allow an extension of time retrospectively for service; and (e) the court had properly given leave to the plaintiffs to serve the foreign defendant outside the jurisdiction under any or all of sub-paras. (c), (e), (f), (ff) and (j) of O.11, r.1(1), and the order should therefore be validated.

The defendants submitted in reply that (a) since the meaning of ‘application’ in O.12, r.8(1) was ‘filing with the court’ and not ‘service,’ their challenge to the court”s jurisdiction had been made within the time permitted for service of their defences, and the absence of affidavit evidence at that time did not nullify the application; (b) they had complied with the general time-limit for service of a summons and accompanying evidence under O.32, r.3, namely, service four days before the present hearing; (c) accordingly, their acknowledgements of service would not be treated as submissions to the jurisdiction under r.8(6); (d) nor did the withdrawal of their application for an extension of time

constitute such a submission; (e) the Cayman Islands were not the proper forum for the hearing of the plaintiffs” claims and the plaintiffs had satisfied none of the conditions for leave to serve the foreign defendants outside the jurisdiction; (f) the plaintiffs had in fact failed to show any fiduciary, contractual or other relationship between themselves and the defendants that could give rise to a cause of action; (g) even if one or more of the grounds in O.11, r.1(1) were made out, the plaintiffs” claims would be largely unenforceable under Swiss law due to the operation of the Swiss Federal Act on International Private Law; and (h) the plaintiff had withheld relevant information about existing parallel English and Swiss litigation against two of the defendants in respect of the same assets and it would therefore be inequitable for the court to assume jurisdiction.

Held, discharging the leave to serve the defendants outside the jurisdiction:

(1) The defendants had not, by acknowledging service, submitted to the jurisdiction of the court for the purposes of O.12, r.8(6), since they had applied for the discharge of the court”s leave to serve them outside the jurisdiction by filing their summons within the time specified by r.8(1). Rule 8(3) required only that affidavit evidence in support of the application be served with the summons, and since their summons had been re-served, together with supporting evidence, within the general time-limit for...