Marada Global Corporation v Marada Corporation

• Jurisdiction: Cayman Islands
• Judge: (Harre, C.J.)
• Judgment Date: 02 November 1995
• Court: Grand Court (Cayman Islands)
• Date: 02 November 1995

Grand Court

(Harre, C.J.)

MARADA GLOBAL CORPORATION

and

MARADA CORPORATION and OTHERS

A. McN. McLaughlin, Jnr. for the plaintiff;

Mrs. S.M. Corbett for the first defendant.

Cases cited:

(1) Huntington v. Attrill, [1893] A.C. 150; (1892), 68 L.T. 326.

(2) Kilderkin Invs. v. Player, 1984–85 CILR 63.

(3) Raulin v. Fischer, [1911] 2 K.B. 93; (1911), 80 L.J.K.B. 811.

(4) Stutts v. Premier Benefit Capital Trust, 1992–93 CILR 605, considered.

(5) US v. Inkley, [1989] Q.B. 255; [1988] 3 All E.R. 144, applied.

Conflict of laws-companies-foreign-appointed receiver-claim by receiver appointed on application of foreign regulatory agency but suing through company not to be struck out by court if seeks distribution of company”s assets to investors and creditors, not penal remedy

The first defendant applied to strike out the plaintiff”s claim against it for money had and received.

A receiver, appointed by a US court and acting through the plaintiff company, brought the present proceedings against, inter alia, the first defendant for money had and received. The receiver had been appointed to manage the plaintiff”s assets on an application by the Securities and Exchange Commission, which had alleged that the plaintiff, amongst others, had violated US Federal securities legislation. The US court had ruled that the appointment was necessary to protect investors” funds and had authorized the receiver to intervene in an interpleader summons, between the SEC and the first defendant, relating to funds held in the Cayman Islands. The Grand Court ruled that the issues relating to those funds would be decided on the receiver”s claim for money had and received and consequently the SEC abandoned its claim in the interpleader proceedings. The US court subsequently authorized an action by the receiver in the name of the plaintiff, expressly stating that such an action was to be for the benefit of the plaintiff company, its investors and its creditors and that the receiver was not authorized to recover funds to distribute to the SEC. The first defendant then applied to strike out the plaintiff”s claim as an abuse of process.

It submitted that the receiver, suing in the plaintiff company”s name, had been appointed on the application of the SEC and was seeking indirectly to enforce foreign penal law in the Cayman Islands by recovering funds in order to compensate allegedly defrauded investors in the United States.

The plaintiff, in reply, submitted that its claim should not be struck out because (a) it was asserting the right of a private litigant rather than attempting to enforce foreign penal law; and (b) moreover, the receiver had been expressly authorized by the US court to recover funds for the benefit of the company, its investors and creditors, and not for distribution to the SEC.

Held, refusing to strike out the plaintiff”s claim:

The question whether a claim to be enforced in the Cayman Islands involved the assertion of foreign sovereignty was to be determined

according to Cayman law, although the attitude of the courts in the relevant foreign jurisdiction merited serious attention. Such a determination would depend on the context of the case as a whole, and the fact that the right of action was penal in nature would not in itself preclude a personal claim which depended on it. In the present case, although US securities law was penal in nature and the SEC, the government agency charged with enforcing that law, had instituted the proceedings which had led to the appointment of the receiver, the plaintiff”s claim was by a corporation in respect of rights available to any private litigant and did not seek to enforce a penal power of the state in its sovereign capacity. Moreover, the receiver was not seeking recognition from the court as he was claiming through the plaintiff company and not in his own name. The US court had expressly authorized him to sue in the name of the plaintiff to recover funds for the benefit of the company and its investors and creditors and not for distribution to the SEC. It followed that the defendant”s application would be dismissed (page 551, line 36 – page 552, line 39).

30	HARRE, C.J.: This is an application by the first defendant, Marada
Corporation, to strike out the claim of the plaintiff, Marada Global, as an
abuse of the process of the court and, subject to any counterclaim, to
dismiss the action.
On November 16th, 1994 a US District Court ordered the appointment
35	of a receiver to manage the assets of Marada Global and others on the
application of the Securities and Exchange Commission (‘SEC’). Among
the powers of the receiver was the power, on obtaining the permission of
the court, to institute any action deemed necessary and appropriate. A
further order was made by the US District Judge on December 21st, 1994.
40	It authorized the receiver to intervene in an interpleader summons relating
to funds held by a Cayman bank in which the competing parties were
Marada Corporation and the SEC and to file an independent action here to
obtain an injunction preventing dissipation of those funds. Cayman
proceedings were filed on December 21st, 1994. They claim money had
45	and received by Marada Corporation to the use of Marada Global or

alternatively money payable on demand for money lent. These pro-
ceedings are attacked on the following grounds:
1. The receiver was not authorized by the US court to commence this
action at the time when he did so.
5	2. The receiver has not made an application in Cayman for recognition
and would not have succeeded had he done so, as the proceedings are
designed to give extraterritorial effect to the penal law of a foreign
jurisdiction.
Evidence has been filed for Marada Global in the form of an affidavit by
10	its American attorney, Mr. Wiggins. He traces the involvement of the SEC
in

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