Lhasa Invs Ltd v ICIC

• Jurisdiction: Cayman Islands
• Court: Court of Appeal (Cayman Islands)
• Judge: (Zacca, P., Georges and Kerr, JJ.A.)
• Judgment Date: 12 December 1994
• Date: 12 December 1994

LHASA INVESTMENTS LIMITED and CONCORDE INTERNATIONAL TRADING S.A.

and

INTERNATIONAL CREDIT AND INVESTMENTS COMPANY (OVERSEAS) LIMITED (in liquidation)

(Zacca, P., Georges and Kerr, JJ.A.)

Court of Appeal

Civil Procedure-appeals-powers of court-appellate court only to alter trial judge”s decision if wrong, or made on basis of misdirection on principle or appropriateness of factors for consideration

Civil Procedure-pleading-amendment-amendment of statement of claim allowed if Cayman Islands forum conveniens and leave granted under Grand Court (Civil Procedure) Rules, r.13(3) to serve defendant outside jurisdiction with amended claim-forum and leave for service may be considered in any order

Civil Procedure-pleading-conspiracy to defraud-sufficient to make simple averment of conspiracy to defraud in writ if statement of claim elaborates purposes and means of conspiracy-amendment proper if transfers details from writ to statement of claim

Civil Procedure-pleading-striking out-no application to strike out statement of claim unless real likelihood of success thus obviating need for trial or simplifying proceedings-no cause to be struck out on basis of defective statement of claim unless irremediable

Held, dismissing the appeals:

(1) The Court of Appeal would not be entitled to interfere with the Grand Court”s decision unless (a) the Grand Court misdirected itself on the principles to be applied in the exercise of its discretion; (b) the decision was made taking into account factors which should not have been considered or in disregard of appropriate matters for attention; or (c) the decision was plainly wrong (page 307, lines 20–29).

(2) The Grand Court had in fact correctly allowed the addition of the new claim seeking a declaration as to the extent of FIIL”s share ownership since it was satisfied that the claim was one in respect of which leave would be granted under the Grand Court (Civil Procedure) Rules, r.13(3) to serve Concorde out of the jurisdiction. In exercising this discretion, the court had properly been guided by the Rules of the Supreme Court, O.11, r.1. Since Lhasa had held the AOC shares before they were transferred to Concorde, Lhasa was a proper party to any investigation into their ownership and leave would be granted in accordance with O.11, r.1(c) to serve Concorde out of the jurisdiction as a necessary party to a claim against it. Consequently, it was unnecessary to consider whether the court would grant leave in circumstances outside the scope of O.11, r.1, although there would need to be compelling reasons to do so (page 305, line 43 – page 307, line 12).

(3) Apart from the issue of leave for service out of the jurisdiction, the court also had to decide whether the Cayman Islands was the proper forum

for the resolution of the proposed claim, although it was irrelevant in which order these questions were considered. The respondent had satisfied the burden on him to prove that in the interests of justice and all the parties, the Cayman Islands were a more appropriate forum than Pakistan. Since the parallel proceedings in Pakistan concerned the enforcement of the ruling of the English court, the only real connection with Pakistan was that AOC carried out its main business activities there and they were irrelevant to the issue of the beneficial ownership of the shares. Accordingly, the Grand Court had been correct to allow the addition of the new claim for a declaration (page 307, lines 13–19;page 307, line 30 – page 309, line 32).

(4) The preceding holdings were relevant to the consideration of the other amendments to the statement of claim, which included references to the alleged methods of defrauding the respondent that had been deleted from the original writ. This deletion did not bar the amendment since it was adequate for the writ to contain a simple averment of conspiracy and a claim for consequential damages, with the purposes and means being set out in the statement of claim. Accordingly, the trial judge had not erred in ordering these amendments (page 310, lines 12–29).

(5) An application to strike out all or part of a statement of claim should only be heard where there was a real likelihood of the order sought being granted, and obviating the necessity for a trial or at least substantially simplifying the proceedings. The pleadings in the present case had shown that there was a serious issue to be tried and since the cause could only be struck out on the basis of irremediable defects in the statement of claim (which was not the case here), the appellants” preliminary application was bound to fail, although their arguments could still be advanced at the trial. Consequently, the trial judge had correctly struck out this application in limine (page 310, line 34 – page 312, line 5).

Cases cited:

(1) Harrods (Buenos Aires) Ltd., In re, [1992] Ch. 72; [1991] 4 All E.R. 334, distinguished.

(2) Morris v. Mahfouz (No. 3), English Chancery Division, May 25th, 1994, dictum of Rattee J. applied.

(3) Rawson Trust Co. Ltd. v. G.C.T.C. Ltd., 1980–83 CILR 214, dictum of Summerfield, C.J. considered.

(4) Russian Comm. & Indus. Bank v. British Bank for Foreign Trade, [1921] 2 A.C. 438; [1921] All E.R. Rep. 329.

(5) Spiliada Maritime Corp. v. Cansulex Ltd., The Spiliada, [1987] A.C. 460; [1986] 3 All E.R. 843; [1987] 1 Lloyd”s Rep. 1.

(6) Waterhouse v. Reid, [1938] 1 K.B. 743; [1938] 1 All E.R. 235.

(7) Williams & Humbert Ltd. v. W. & H. Trade Marks (Jersey) Ltd., [1986] A.C. 368; [1985] 2 All E.R. 208, dictum of Lord Mackay of Clashfern applied.

Legislation construed:

Grand Court (Civil Procedure) Rules, r.13(3):

‘No such process shall be served outside the jurisdiction without leave of the Court. . . .’

Rules of the Supreme Court (England), O.11, r.1(1)(c):

‘. . . [S]ervice of a writ out of the jurisdiction is permissible with the leave of the Court if in the action begun by the writ-

. . .

(c) the claim is brought against a person duly served within or out of the jurisdiction and a person out of the jurisdiction is a necessary or proper party thereto.’

The respondent sought a declaration as to the extent of its ownership of FIIL and damages for conspiracy to defraud it of FIIL”s assets.

The respondent was a Cayman-registered company, in liquidation, which claimed that it had financed the purchase of FIIL shares, to be held in the names of Pharaon and two others on trust for it. The payments were recorded as loans in the accounts in order to disguise the respondent”s ownership. Following allegations that certain assets of FIIL, the AOC shares, had been misappropriated and unlawfully transferred to Lhasa and then to Concorde, a Panamanian company, the respondent commenced proceedings in the Grand Court against FIIL, Lhasa, Concorde, Pharaon and the two others, seeking a declaration of its beneficial ownership of FIIL and damages for conspiracy to defraud it of FIIL”s assets. Leave was granted to serve Concorde out of the jurisdiction, in accordance with the

Rules of the Supreme Court, O.11, r.1(1)(c), on the basis that it was necessary to a claim against Lhasa, a party duly served within the jurisdiction.

Only Lhasa and Concorde entered an appearance and filed defences. They accepted that the respondent owned 75% of FIIL but claimed that AOC was 85% beneficially owned by Pharaon. The English Chancery Division (Harman, J.) had already ordered the rectification of the AOC share register so that all the shares were held in the name of FIIL but had left open the question of beneficial ownership.

The Cayman proceedings had reached the discovery stage when the respondent sought and obtained leave to amend his writ and statement of claim (a) to have FIIL removed as a defendant and added as a plaintiff; (b) to introduce a claim for a declaration as to FIIL”s beneficial ownership of AOC; and (c) to elaborate the methods of fraud employed by the conspirators, including falsifying accounts. The appellants unsuccessfully sought to have the whole or part of the statement of claim struck out.

The Grand Court (Harre, C.J.) held, inter alia, that (a) the amendments would be allowed because (i) the Cayman Islands was a more appropriate forum than Pakistan, where the AOC subsidiaries (which were the subject of proceedings in Pakistan) were based, since this was the only connection with Pakistan and it would be exceptional to decide the forum for an action concerning share ownership on the basis of where the company”s main operations took place; and (ii) the new claim was one in respect of which leave would be granted, under the Grand Court (Civil Procedure) Rules, r.13(3) (following the Rules of the Supreme Court, O.11, r.1 guidelines), to serve Concorde out of the jurisdiction since it was necessary to a claim against Lhasa who had a real reason to oppose the granting of a declaration which was central to the conspiracy allegations against it and accordingly would be a party duly served with the claim within the jurisdiction; and (b) the appellants” application to strike out all or part of the statement of claim would fail since it had not been made promptly and would necessitate prolonged and serious argument without the likelihood of any part of the pleadings being struck out. The Grand Court proceedings are reported at 1994–95 CILR 180.

On appeal, the appellants submitted that (a) leave should not have been granted to introduce a claim for a declaration as to the extent of FIIL”s ownership in AOC because (i) leave would not be granted to serve Concorde with the claim outside the jurisdiction as a necessary party to a claim against Lhasa in accordance with the guidance offered by the Rules of the Supreme Court, O.11, r.1 since Lhasa had disclaimed ownership of the AOC shares and was merely a nominal defendant; (ii) Pakistan was a more appropriate forum for the resolution of this claim since parallel proceedings were in progress, AOC”s business...