Kosmos Capital Pty Ltd v Turiya Ventures Ltd

• Jurisdiction: Cayman Islands
• Judge: (McMillan, J.)
• Judgment Date: 27 June 2019
• Court: Grand Court (Cayman Islands)
• Date: 27 June 2019

KOSMOS CAPITAL PTY LIMITED

and

TURIYA VENTURES LIMITED

(McMillan, J.)

Grand Court, Financial Services Division (Cayman Islands)

Injunctions — proprietary injunctions — aid of foreign proceedings — under Grand Court Law (2015 Revision), s.11A(5) court to refuse interim relief if unjust or inconvenient to grant application — if no application to foreign court or evidence that relief will assist foreign court then no basis for Cayman court to act

Held, dismissing the ex parte order and the plaintiff’s amended originating summons:

(1) Section 11A of the Grand Court Law (2015 Revision) enabled the court to grant interim relief in aid of foreign proceedings. The statutory constraint in s.11A(5) provided that the court could refuse to grant interim relief if, in its opinion, it would be unjust or inconvenient to grant the application. The interests of comity should fully be borne in mind, though comity was not in itself exhaustive of the scope of what should be weighed and considered. In the present case, prior to the plaintiff’s application for injunctive relief from the court, no injunction had been sought or obtained from any other jurisdiction. Moreover, no indication had been given as to how granting the relief requested in the Cayman Islands would facilitate the process of the court having primary jurisdiction. Where a foreign court had not exercised a jurisdiction to grant relief, the domestic court was not necessarily precluded from granting relief but the court should require a satisfactory explanation as to how that situationhad come about before granting a remedy which was so intrusive in character and also as to how granting the remedy would facilitate the process of the primary court. If no such explanation was forthcoming, despite repeated requests from the court, the court might well form an opinion that to proceed further would be both unjust and inconvenient. The court had a discretion to be exercised in all the circumstances of the case and it should grant an injunction only for good reason. The likely effect of the injunction should be to promote the interests of justice overall and not to work unfairly, oppressively or speculatively. In the present case there was no indication that the Australian court required any assistance and, despite frequent enquiries, no explanation as to why no injunction application had been brought in Australia. Section 11A(5) recognized the doctrine of comity and s.11A(6) required the court to have regard to the purpose of facilitation. In the present case, it was impossible for the court to identify how granting an injunction would facilitate the Australian proceedings in any way. No fundamental basis had been put forward for the court to act. It would be unjust and inconvenient to grant the relief sought. The court would also have refused to grant the relief sought because it would be unjustified to do so. The defendant’s application to set aside the ex parte order and to dismiss the plaintiff’s amended originating summons would be granted (para. 16; paras. 28–30; paras. 37–46; paras. 51–65).

(2) The disclosure order granted on the plaintiff’s ex parte application was, in effect, a stand-alone disclosure order. The plaintiff’s failure to draw to the court’s attention previous case law in which disclosure obligations were imposed as an adjunct to injunctive relief, together with the attendant absence of any relevant legal jurisdiction satisfied the court that the disclosure order must be discharged (para. 24).

Cases cited:

(1)Classroom Invs. Inc. v. China Hospital Inc., 2015 (1) CILR 451, applied.

(2)Ennismore Fund Management Ltd. v. Fenris Consulting Ltd., 2016 (1) CILR 282; further proceedings, 2019 (1) CILR 405, referred to.

(3)Harvey River Estate Pty. Ltd. v. Foster, Cause No. FSD 175 of 2015, Grand Ct., June 9th, 2016, unreported, distinguished.

(4)Refco Inc. v. Eastern Trading Co., [1999] 1 Lloyd’s Rep. 159, dicta of Millett, L.J. considered.

Legislation construed:

Grand Court Law (2015 Revision), s.11A: The relevant terms of this section are set out at para. 15.

The plaintiff sought relief against the defendant including an order requiring disclosure of its assets.

The plaintiff was an Australian company and the bare assignee of a cause of action from another Australian company, Jetmax Trading Pty. Ltd. (“Jetmax”). Jetmax had transferred cryptocurrency to Turiya Ventures LLC (a Delaware company), for the purchase of certain tokens. With agreement from Jetmax, Turiya Ventures LLC sold the currency in exchange for a sum of US dollars. Jetmax claimed that it did not receive the tokens and sought a full refund. Turiya Ventures LLC partially refunded Jetmax.

The plaintiff made an ex parte application for injunctive relief under s.11A of the Grand Court Law (2015 Revision) and ancillary disclosure. It subsequently renewed its application ex parte for disclosure but not injunctive relief and the Grand Court (McMillan, J.) granted a disclosure order. The plaintiff did not inform the court, as it should have done, that legal issues could arise in relation to whether the disclosure sought should only be granted as an adjunct to injunctive relief. The plaintiff reserved the application for freezing and proprietary injunctions. The defendant, which was a Cayman company, and Turiya Ventures LLC were distinct entities.

The plaintiff filed a claim against the defendant and others in the Federal Court of Australia. As against the defendant, it was alleged that the defendant held the rights in respect of assets acquired with trust funds, that it received those rights with knowledge that they were the proceeds of trust property held for the benefit of Jetmax and that it was a knowing recipient of the proceeds of misapplied trust property and held the rights as constructive trustee for Jetmax. It was acknowledged that pending disclosure there was a lack of direct admissible evidence that the defendant received any of Jetmax’s money or that it held property into which Jetmax’s assets could be traced.

Under s.11A(1) of the Grand Court Law (2015 Revision), the court could grant interim relief in relation to proceedings which had been or were to be commenced in a court outside the Islands and were capable of giving rise to a judgment which might be enforced in the Islands. Section 11A(5) provided: “The Court may refuse an application for . . . the grant of interim relief if, in its opinion, it would be unjust or inconvenient to grant the application.” Under s.11A(6), the court in exercising the power under s.11A(1) had to have regard to the fact that the power was ancillary to proceedings outside the Islands and “for the purpose of facilitating the process of a court outside the Islands that has primary jurisdiction over such proceedings.”

Before the court there were two parallel applications: First, the plaintiff’s amended originating summons seeking an order preventing the defendant disposing of or dealing with its assets, and an order that the defendant inform the plaintiff of all its worldwide assets exceeding US$1,000, and in particular that the defendant be ordered to provide the plaintiff a copy of the Grams Purchase Agreement. Secondly, the defendant’s application seeking the setting aside of the ex parte disclosure order and the dismissal of the amended originating summons.

In the course of the hearing, the plaintiff abandoned its application for a freezing order and appeared to accept that if an order for disclosure were to be continued it would only be in conjunction with the granting of a proprietary injunction. Prior to the plaintiff’s application for injunctive relief from the Grand Court, no injunction had been sought or obtained from any other jurisdiction. Moreover, no indication had been given as to how granting the relief sought in the Cayman Islands would facilitate the process of the court with primary jurisdiction. The plaintiff submitted that the Cayman injunctive relief would preserve the assets and that the plaintiff intended to bring proceedings in Australia for an injunction, though no steps had yet been taken.

A. Woodcock and P. Keeble for the plaintiff/applicant;

H. Khanbhai for the defendant/respondent.

1 McMILLAN, J.:

Introduction

In this matter there are two parallel applications before the court.

2 There is an amended originating summons by Kosmos Capital Pty. Ltd. (“the plaintiff”) seeking the following relief against Turiya Ventures Ltd. (“the defendant”):

“Disposal of Assets

(1) An Order that until the return date or further Order of the Court, the Defendant must not in any way dispose of or deal with or diminish the value of any of the assets referred to below, whether they are inside or outside the Cayman Islands, namely:—

aAny cryptocurrency tokens and/or the rights to and/or interest in the same, including but not limited to the cryptocurrency tokens known as Grams (in the amount of 5,927,518.84 Grams) issued by TON Issuer Inc and/or Telegram Group Inc or any rights to receive Grams, which were purchased with or are otherwise attributable to the payments made by Jetmax to the Defendant pursuant to the contract between them dated 15 February 2018;

bAny and all other assets of the Defendant wherever located up to a value of US$3,000,000;

 (together, the ‘Relevant Assets’).

(2) The Order shall apply to assets (whether or not specifically listed) whether or not they are in the Defendant’s own name and whether they are solely or jointly owned. For the purpose of the Order the Defendant’s assets include any asset which it has the power, directly or indirectly, to dispose of or deal with as if it were its own. The Defendant is to be regarded as having such power if a third party holds or controls the asset in accordance with his direct or indirect instructions.

(3) This prohibition to cover dealings with Relevant Assets of any kind including the following in particular:

aAny sale, transfer, mortgage or assignment of any of the...