Masri v Consolidated Contractors

• Jurisdiction: Cayman Islands
• Judge: (Jones, J.)
• Judgment Date: 19 February 2010
• Court: Grand Court (Cayman Islands)
• Date: 19 February 2010

Grand Court, Financial Services Division

(Jones, J.)

MASRI and MANNING

and

CONSOLIDATED CONTRACTORS INTERNATIONAL COMPANY SAL

A. Akiwumi for the first plaintiff;

A. Layton, Q.C. and P.A.K. Broadhurst for the defendant.

The second plaintiff did not appear and was not represented.

Cases cited:

(1) Kilderkin Invs. Grand Cayman v. Player, 1980–83 CILR 403; on appeal, 1984–85 CILR 63, referred to.

(2) Kleinwort Benson Ltd. v. Barbrak Ltd., The Myrto (No. 3), [1987] A.C. 597; [1987] 2 W.L.R. 1053; [1987] 2 All E.R. 289; [1987] 2 Lloyd”s Rep. 1, applied.

(3) Liff v. Peasley, [1980] 1 W.L.R. 781; [1980] 1 All E.R. 623, referred to.

(4) Masri v. Consolidated Contractors Intl. Co. SAL (No. 2), [2009] Q.B. 450; [2009] 2 W.L.R. 621; [2008] 2 Lloyd”s Rep. 128; [2008] 1 CLC 657; [2008] EWCA Civ 303, dicta of Lawrence Collins, L.J. applied.

(5) Miller v. Gianne, 2007 CILR 18, referred to.

(6) Schibsby v. WestenholzELR(1870), L.R. 6 Q.B. 155; [1861–73] All E.R. Rep. 988, dicta of Blackburn J. applied.

(7) Sneade v. Wotherton Barytes & Lead Mining Co. Ltd., [1904] 1 K.B. 295; (1904), 73 L.J.K.B. 170, referred to.

(8) TMSF v. Demirel, [2007] 1 W.L.R. 2508; [2007] 4 All E.R. 1014; [2007] 2 All E.R. (Comm) 925; [2007] 2 Lloyd”s Rep. 440; [2007] EWCA Civ 799, referred to.

Legislation construed:

Grand Court Rules, O.6, r.8: The relevant terms of this rule are set out at para. 37.

O.7, r.3: The relevant terms of this rule are set out at para. 26.

O.11, r.1(1)(m): The relevant terms of this paragraph are set out at para. 17.

O.15, r.6(2)(b): The relevant terms of this paragraph are set out at para. 28.

Conflict of Laws-recognition of foreign proceedings-appointment of receiver-foreign appointment of receiver recognized but not enforceable in Cayman Islands-no specific positive obligation imposed, only injunction against judgment debtor receiving funds covered by receivership and generalized duties of co-operation-not ‘final and conclusive’ as supervisory jurisdiction remains with foreign court

Conflict of Laws-recognition of foreign proceedings-enforcement of judgment debt-correct way for claimant to enforce foreign judgment debt in Cayman Islands is by enforcement action commenced by writ on basis of foreign judgment-Cayman court may not enforce foreign order appointing receiver to enable claimant to enforce foreign judgment debt since creates no enforceable conclusive and final obligation

The first plaintiff issued an originating summons seeking the recognition in the Cayman Islands of the appointment of a receiver by an English court.

The first plaintiff had successfully brought proceedings in England against the defendant Lebanese company-which had its principal office in Greece-for breach of a contract, relating to the exploration of an oil field and entitling him to a percentage of the revenues. The English court awarded substantial damages to the first plaintiff (in the ‘quantum judgments’), and, in a subsequent order (the ‘receivership order’), appointed the second plaintiff as receiver by way of equitable execution over debts due to be paid to the defendant, including one payable by a Cayman company. The quantum judgments remained unsatisfied and, on October 31st, 2008, the first plaintiff issued two substantially identical summonses (one drafted as an inter partes originating summons, the other an ex parte interlocutory summons) seeking an order that the receivership

order be recognized in the Cayman Islands for the purpose of collecting the specified debts from the Cayman company. The originating summons was served on the defendant in Greece on May 28th, 2009, through the Hague Service Convention process.

The Grand Court (Foster, Ag. J.), in an ex parte hearing on November 18th, 2008, made an order recognizing the appointment of the receiver and giving him orders, directions and the right to apply for further directions. The receiver was also joined to the proceedings, and the originating summons was amended to reflect this on December 8th, 2008.

The defendant applied for the order of the Grand Court to be set aside. He submitted that, while the receivership order could be recognized by the Cayman court, it could not be enforced as it neither imposed a positive obligation on the defendant nor was it ‘final and conclusive’; the order of the Grand Court went beyond mere recognition of the receivership order and attempted to enforce it by purporting to give the receiver orders, directions and the right to apply for further directions. The defendant also applied to strike out the originating summons on the grounds that (i) the first plaintiff was not entitled to an order for leave to serve the originating summons out of the jurisdiction under the Grand Court Rules, O.11, r.1(1)(m) as it did not seek ‘enforcement’; (ii) it was procedurally irregular in that it did not state the relief sought and should not have been heard ex parte without notice to the defendant; (iii) it had expired, as six months had elapsed between issue and service on the defendant in Greece; (iv) there was no good reason to grant a retrospective extension of validity, the first plaintiff having neither made a timely application nor monitored progress; and (v) the service in Greece was invalid as it had not complied with the procedures in Regulation (EC) No. 1393/2007.

The first plaintiff submitted in reply that the Grand Court should recognize the receivership order, and also that the originating summons should not be struck out, as (i) he was entitled to an order for leave to serve the originating summons out of the jurisdiction under the Grand Court Rules, O.11, r.1(1)(m); (ii) he was justified in seeking relief on an ex parte basis; (iii) the joinder of the receiver meant that the six-month period of validity ran from the date of the amendment of the originating summons and the service in Greece was therefore within this period; (iv) alternatively, a retrospective extension of the validity of the originating summons should be granted, since service in Greece through the Hague Service Convention process had been slow; and (v) it did not matter that the service had not complied with the EC regulation, since the regulation did not apply in the Cayman Islands-compliance with the Hague Service Convention was all that was required.

Held, granting the defendant”s applications:

(1) The order of the Grand Court, which went beyond mere recognition of the receivership order and attempted to enforce it by purporting to give the receiver orders, directions and the right to apply for further directions, would be set aside. There was a distinction between the recognition of

foreign judgments and their enforcement, and not every judgment that was recognized would be enforced. The Cayman court could only enforce a foreign judgment if it imposed a specific positive obligation (to pay a definite sum of money or of specific performance) that was ‘final and conclusive.’ An order appointing a receiver by way of equitable execution did not meet these criteria, as (a) it operated as an injunction against the judgment debtor”s receiving funds covered by the receivership, which was not a positive obligation; (b) the positive obligations it imposed-e.g. duties of co-operation with the receiver-were too generalized; and (c) the supervisory jurisdiction of the foreign court over the receiver meant that the order could not be regarded as final and conclusive. Since the receivership order could not be enforced in the Cayman Islands, and since the order of the Grand Court had attempted to enforce it, the order would be set aside (paras. 9–15).

(2) Any obligation the defendant had to pay damages arose under the quantum judgments and not the receivership order. The quantum judgments would prima facie be enforceable in the Cayman Islands at common law, since they created a final and conclusive obligation on the defendant to pay damages enforceable by a Grand Court judgment and order for payment. In order to recover these damages, therefore, the first plaintiff should not have applied for the recognition of the receivership order but brought an action in the Grand Court (an action which should always be commenced by writ) to enforce the quantum judgments (para. 6; para. 16; paras. 19–22).

(3) The first plaintiff was not entitled to an order for leave to serve the originating summons out of the jurisdiction under the Grand Court Rules, O.11, r.1(1)(m). To be entitled to obtain leave under that paragraph, the claim must (a) have been brought by a judgment creditor; (b) have been brought against the judgment debtor; (c) have as its subject matter a judgment enforceable by the Cayman court; and (d) be for ‘enforcement.’ Since the claim was for recognition and not for enforcement, the originating summons did not meet those criteria and the plaintiff would not be granted leave for service out of the jurisdiction (paras. 17–18).

(4) Moreover, the originating summons would be struck out for procedural irregularity. It was irregular in that it did not sufficiently state the relief sought (as required by the Grand Court Rules, O.7, r.3). Furthermore, the plaintiff”s issuing of the two substantially identical summonses-one an inter partes originating summons, the other an ex parte interlocutory summons-had the consequence that the originating summons was heard ex parte. This was a fundamental irregularity since it amounted to a trial of the action without any notice to the defendant. Given that the English receivership order had been made as a result of an inter partes hearing in which the defendant was represented, and that the originating summons was drafted as inter partes, there was no justification for granting relief on an ex parte basis (paras. 24–27).

(5) Further, there was no indication why the joinder of the receiver as a party was necessary in order for the court to determine whether to recognize his appointment...