Jorek Shipping Company v Palmerston Chartering Company Ltd

• Jurisdiction: Cayman Islands
• Judge: (Hull, J.)
• Judgment Date: 03 April 1987
• Date: 03 April 1987
• Court: Grand Court (Cayman Islands)

Grand Court

(Hull, J.)

JOREK SHIPPING COMPANY A/S, THUNE and ROLL

and

PALMERSTON CHARTERING COMPANY LIMITED and NINE OTHERS

M. Crystal, Q.C., R. D. Alberga, Q.C., A. J. Foster and J. Higham for the plaintiffs;

N. Phillips, Q.C., M. Cran and T. Shea for the defendants.

Cases cited:

(1) CBS UK Ltd. v. Perry, [1985] F.S.R. 421.

(2) Comet Prods. UK Ltd. v. Hawkex Plastics Ltd., [1971] 2 Q.B. 67; [1971] 1 All E.R. 1141.

Evidence-affidavits-cross-examination on affidavit-court has discretion to allow cross-examination on deponent”s affidavit-crossexamination normally allowed unless very exceptional circumstances demonstrated by deponent

In the course of an application for discovery, the plaintiffs sought cross-examination of directors of two of the defendant companies upon affidavits made by them.

When the majority shareholder in and director of the first plaintiff was declared bankrupt, his world-wide assets vested in the second and third plaintiffs, his trustees in bankruptcy, who consequently acquired all the shares in Jorek. In the light of the defendants” previous dealings with the bankrupt, the plaintiffs brought proceedings against the defendants seeking inter alia discovery, injunctions, accounts and enquiries as necessary.

In response to a summons for discovery subsequently filed by the plaintiffs, directors of two of the defendant companies delivered unsworn affidavits to the plaintiffs” solicitors in London accompanied by

a dossier which they both swore was correct to the best of their knowledge and which was made with reference to the facts known to them at that time.

Later in the proceedings, the plaintiffs sought permission to crossexamine the two directors upon their affidavits since it appeared from further developments that the affidavits were unsatisfactory.

The plaintiffs submitted, inter alia, that (a) since cross-examination should be ordered except in very exceptional circumstances, the defendants had to show and had not shown that the circumstances here were exceptional even though the cross-examination went to the issues in dispute; and (b) they were seeking to cross-examine only in relation to particular matters. Discovery was limited to the purposes of the action and was not for the purpose of disclosure to the world at large and involved a mandatory order which by definition would be irreversible.

The defendants submitted, inter alia, that (a) the real issue was whether the plaintiffs had made out a strong prima facie case of wrongdoing against the defendants in their dealings with the bankrupt, specifically breach of trust and breach of fiduciary duty. The matters on which the plaintiffs sought to cross-examine would not ultimately help to decide this issue; and (b) the matters sought for cross-examination went to the degree of confidentiality which the defendants were entitled to claim in respect of the matters to which the plaintiffs” application related. To allow cross-examination would pre-empt the issues to be determined, the plaintiffs were seeking disclosure and consequently these were very exceptional circumstances.

Held, allowing the application:

The court would proceed on the basis that it had a discretion to order cross-examination and that the principle to be applied was that it ought to make the order unless very exceptional circumstances were demonstrated by the defendants. From the documents tendered, the court had come to the general conclusion that there existed a number of aspects of the affidavits on which it was appropriate that the two directors should submit to cross-examination to test their evidence. The plaintiffs had made out a strong prima facie case of breach of trust and breach of fiduciary duty and, since the defendants had not shown the existence of very exceptional circumstances which would make the cross-examination of the two directors inappropriate, they would be ordered to attend for cross-examination on their affidavits (page 358, lines 4–24).

HULL, J.: On November 3rd I made an order in the following
terms:
‘Cross-examination of Messrs. Crespel and Perrin is
ordered for the purposes indicated by Mr. Crystal. Counsel
5	are to submit a draft order for approval. I will state my
reasons subsequently.’
I now do so. So far as it is relevant to the present matter, the
background as contended by the plaintiffs (which is complex)
can, I think, be summarised as follows.
10	This is an action by the trustees in bankruptcy of a man called
Johan Reksten who is a Norwegian shipowner. He was declared
bankrupt by a Norwegian court on November 8th, 1982. It is not
disputed that his world-wide assets thereby vested in the trustees
in the bankruptcy (the plaintiffs, Messrs. Thune and Roll) who
15	have a duty to trace them for the benefit of the creditors. One of
those assets was a majority shareholding in a Norwegian company
which is the other plaintiff (‘Jorek’). On July 29th, 1983 the
trustees also acquired all of the other shares in Jorek.
Johan was the stepson of Hilmar Reksten who was also a Nor-
20	wegian shipowner. From about the time of the Second World
War, Hilmar had a special relationship with the fourth defendant
(‘Hambros Bank’) and its associated companies.
Mr. Perrin has been a director of Hambros Bank since May
1973. He is now a Deputy Chairman. Mr. Crespel, who is the third
25	defendant, has been the Managing Director of Hambros Channel
Island Trust Corporation Ltd. (‘HCITCO’), the fifth defendant,
since February 1972. Mr. Crespel has also been a director of the
first defendant (‘Palmerston Chartering’) since July 1973 and
HCITCO has provided secretarial and administrative services for
30	Palmerston Chartering since the latter”s formation.
In the late 1960s and early 1970s Hilmar built up a very large
tanker operation by utilising companies registered in various jur-
isdictions, including Liberia, Panama, the Cayman Islands and
Bermuda. During the mid-1970s this was adversely affected by
35	the recession in world shipping. By his death on July 1st, 1980, his
estate was insolvent to a

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