Laager v Kruger

• Jurisdiction: Cayman Islands
• Judge: (Harre, C.J.)
• Judgment Date: 12 November 1996
• Date: 12 November 1996
• Court: Grand Court (Cayman Islands)

Grand Court

(Harre, C.J.)

LAAGER

and

P. KRUGER and B. KRUGER

C.G. Quin and S. Hellman for the applicant;

A.J. Jones and Mrs. A.L. Peccarino for the respondent;

J.R. McDonough for the interested party.

Cases cited:

(1) -A. v. C., [1981] Q.B. 956, dictum of Goff J. applied.

(2) -Campbell Mussels v. Thompson (1984), 81 L.S. Gaz. 2140; The Times, May 30th, 1984.

(3) -Kea Corp. v. Parrot Corp. Ltd., English Court of Appeal, September 24th, 1986, unreported, applied.

(4) -Law Socy. v. Shanks, [1988] 1 FLR 504; (1987), 131 Sol. Jo. 1626.

(5) -Morgan (J.P.) & Co. v. Collins, 1996 CILR N–5.

(6) -P.C.W. (Underwriting Agencies) Ltd. v. Dixon, [1983] 2 All E.R. 158; (1983), 133 New L.J. 204, dicta of Lloyd J. applied.

(7) -S.C.F. Finance Ltd. v. Masri, [1985] 1 W.L.R. 876; [1985] 2 All E.R. 747, distinguished.

Injunctions-Mareva injunction-defendant”s legitimate expenses-legal and living expenses-court may authorize payments from enjoined assets-affidavit evidence sufficient proof of debts if no challenge by creditors to scope of injunction

Injunctions-Mareva injunction-defendant”s legitimate expenses-cor-porate liabilities-court may authorize payment of dividends etc. by defendant”s companies from enjoined assets if funds legally available for payment

Injunctions-Mareva injunction-defendant”s legitimate expenses-pay-ment from enjoined assets-court may not require defendant to use foreign assets before Cayman assets or to apply certain domestic assets rather than others to meet expenses

The applicant sought the variation of a world-wide Mareva injunction.

The respondent had obtained judgment against the applicant”s husband in separate proceedings and had been granted a Mareva injunction over the assets of both husband and wife for the purpose of enforcing that judgment. The applicant allegedly held the enjoined assets as nominee for her husband following transfers to her at an undervalue or without consideration.

Since the injunction made no provision for the payment of legal and living expenses out of the enjoined assets, the applicant now sought leave to discharge liabilities incurred by her in good faith which were now owing, including dividend payments by companies in which she was beneficially interested.

She submitted that (a) since she was not a party to the proceedings in which the respondent had obtained judgment against her husband and since the beneficial ownership of the enjoined assets would be determined only when that judgment was enforced, her evidence should be accepted that she was their beneficial owner and therefore entitled to use them to meet her own legitimate legal and living expenses and the payment of dividends to company shareholders; and (b) for the same reasons, she was free to use any assets within the Islands for those purposes and could not be required to favour the respondent by using assets abroad which would not be covered by the enforcement proceedings or those which were least likely to go to her husband”s creditors, to meet her debts.

The respondent submitted in reply that (a) the applicant should not be permitted to dissipate enjoined assets by payments to creditors whose entitlement was not established except by the applicant”s own affidavit evidence, as this would defeat his interests as a judgment creditor; (b) nor could the liabilities of companies be met out of assets allegedly owned by the applicant unless the court looked behind the corporate facade, which in law it could not do; and (c) if such liabilities were to be discharged, the applicant should first apply those funds outside the jurisdiction and assets within it which were more clearly hers rather than her husband”s, in conformity with the objective of the injunction to preserve assets likely to be used to satisfy the judgment debt.

Held, varying the terms of the injunction to allow for the payments requested:

(1) Since the purpose of the injunction was to preserve assets to avoid their dissipation but not to prevent the applicant and her husband from living in their accustomed manner or to deprive them of the means to defend themselves in proceedings against them, the court was obliged to make provision for the payment of legal and living expenses, which was absent from the original injunction (page 364, line 30 – page 365, line 6; page 367, lines 40–45).

(2) In the absence of any third party claim to the enjoined assets by way of a challenge to the injunction itself, the applicant”s evidence as to what sums were owed and to whom would be accepted and payments authorized accordingly, as the injunction did not give the respondent priority over other creditors (page 364, lines 16–23; page 365, line 19 – page 366, line 5).

(3) Similarly, the corporate liabilities of companies controlled by the applicant and her husband could properly be met out of enjoined assets, so long as the funds used were legally available for that purpose, without the need to lift the corporate veil and examine the companies” ownership (page 366, lines 9–21).

(4) Since ownership of the enjoined assets was by definition still in issue, the applicant could not be required to select certain assets before others from which to meet her liabilities, according to the perceived relative strength of her claim to ownership of them, in order to preserve her husband”s assets. It would also be unreasonable for her to use overseas assets in preference to those in the Cayman Islands to meet legal costs incurred here, especially in view of the jurisdictional conflicts this would cause in the context of extensive foreign litigation (page 366, lines 22–35; page 368, lines 1–10).

15	HARRE, C.J.: By a summons dated June 5th, 1996 the applicant (‘the
second defendant’), Mrs. Barbara Kruger, sought leave to use moneys
which are the subject of a world-wide injunction to meet legal and living
expenses. She has, between that time and today, filed four affidavits in
which she gives details of properties in which she claims to have a
20	beneficial interest, and of what she says are her liabilities.
Orders dated August 12th and 21st and September 16th have been
made concerning specific payments and related obligations of the second
defendant. Leave was also given, by consent, for her to open a bank
account for the payment of

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