JP Morgan Multi-Strategy Fund LP v Macro Fund Ltd

• Jurisdiction: Cayman Islands
• Judge: (Henderson, Ag. J.)
• Judgment Date: 12 November 2002
• Court: Grand Court (Cayman Islands)
• Date: 12 November 2002

Grand Court

(Henderson, Ag. J.)

J.P. MORGAN MULTI-STRATEGY FUND L.P. and NINE OTHERS

and

MACRO FUND LIMITED, MACRO FUND (US) LIMITED and I.I.U. CAPITAL LIMITED

S.R. Andrew for the applicants;

A.J. Jones, Q.C. and M.W. Imrie for the first and second respondents;

The third respondent did not appear and was not represented.

Cases cited:

(1) Chitel v. RothbartUNK(1982), 141 D.L.R. (3d) 268; 39 O.R. (2d) 513, applied.

(2) Customs & Excise Commrs. v. Anchor Foods Ltd., [1999] 1 W.L.R. 1139; [1999] 3 All E.R. 268, dicta of Neuberger J. applied.

(3) Galaxia Maritima S.A. v. Mineralimportexport, The Eleftherios, [1982] 1 W.L.R. 539; [1982] 1 All E.R. 796, followed.

(4) Hampshire Cosmetic Labs. Ltd. v. Mutschmann, 1999 CILR 21, applied.

(5) Iraqi Ministry of Defence v. Arcepey Shipping Co. S.A., [1981] Q.B. 65; [1979] Lloyd”s Rep. 632, referred to.

(6) Ninemia Maritime Corp. v. Trave Schiffahrts G.m.b.H. & Co. K.G., The Niedersachsen, [1983] 1 W.L.R. 1412; [1984] 1 All E.R. 398, applied.

(7) Polly Peck Intl. PLC v. Nadir (No. 2), [1992] 4 All E.R. 769; [1993] BCLC 187, applied.

Injunctions-Mareva injunction-dissipation of assets-applicant to show real, objective risk of dissipation, preventing satisfaction of future judgment-conduct of respondent”s ordinary business activities, e.g. issue and redemption of shares in mutual fund, not dissipation of assets

The applicants applied for a worldwide Mareva injunction against the respondents.

The applicants were investment funds which redeemed their investments in two mutual funds and, under the mutual funds” articles, were each charged an early redemption penalty for doing so. They brought proceedings to recover the sums deducted from their entitlements calculated by the funds, alleging that the respondents had agreed, separately, to waive the early redemption penalty. The funds adjusted their calculations for the ongoing redemption of other investors” investments, to take account of a possible judgment against them for repayment of the applicants” redemption penalties.

The applicants sought an injunction to preserve until judgment a fund sufficient to repay the redemption penalties and to meet their alternative claim for rescission and damages. The effect would be to reduce the redemption value of other investments redeemed during the currency of the injunction.

The applicants submitted that the continued redemption of investments at the present value constituted a real risk of dissipation of the respondents” assets, such that a judgment in their favour for damages would go unsatisfied.

The respondents submitted in reply that the court should not grant an injunction that would impede the funds in the conduct of their ordinary business activities and was unnecessary to prevent the deliberate dissipation of assets.

Held, dismissing the application:

(1) The discretion to impose a worldwide Mareva injunction was to be exercised rarely and only if the applicant could demonstrate a good arguable case that the court had jurisdiction in relation to its cause of action against the respondent and that it was entitled to a certain or

approximate sum. The respondent had to have assets, and it was usual for the applicant to give an undertaking as to damages. The applicant also had to show that if an injunction were not granted there was, objectively, a real risk that the respondent would dissipate its assets-whether deliberately or not did not have to be decided in this case-so that a judgment in the applicant”s favour would go unsatisfied (paras. 7–9; para. 14).

(2) The court would not grant an injunction in this case, in the interests of the funds and their investors, since the redemption of investments in the ordinary course of business did not constitute dissipation of assets. Whilst the court would act to prevent a concerted attempt by the respondents to reduce their assets in a manner distinct from their ordinary business...