Masri v Consolidated Contractors

JurisdictionCayman Islands
Judge(Jones, J.)
Judgment Date08 March 2011
CourtGrand Court (Cayman Islands)
Date08 March 2011
Grand Court, Financial Services Division

(Jones, J.)

MASRI
and
CONSOLIDATED CONTRACTORS INTERNATIONAL COMPANY SAL and CONSOLIDATED CONTRACTORS (OIL AND GAS) COMPANY SAL

A.S. Akiwumi and C.A. Levers for the plaintiff;

N.F.R.C. Timms, Q.C. and P.A.K. Broadhurst for the defendants;

M.A. Kish for BTC;

Ms. R. Reynolds for Mr. Manning.

Cases cited:

(1) Adams v. National Bank of Greece & Athens SA, [1961] A.C. 255; [1960] 3 W.L.R. 8; [1960] 2 All E.R. 421, applied.

(2) Jabbour (F. & K.) v. Custodian of Israeli Absentee Property, [1954] 1 W.L.R. 139; [1954] 1 All E.R. 145, applied.

(3) Kwok Chi Leung Karl v. Estate Duty Commr., [1988] 1 W.L.R. 1035; [1988] S.T.C. 728, referred to.

(4) NML Capital Ltd. v. Argentina (Republic), [2009] Q.B. 579; [2009] 2 W.L.R. 1332; [2009] 1 All E.R. (Comm.) 697; [2009] EWHC 110 (Comm), referred to.

(5) New York Life Ins. Co. v. Public Trustee, [1924] 2 Ch. 101, dicta of Atkin, L.J. applied.

(6) Société Eram Shipping Co. Ltd. v. Cie. Intl. de Navigation, [2004] 1 A.C. 260; [2003] 3 W.L.R. 21; [2003] 3 All E.R. 465; [2003] UKHL 30, dicta of Lord Bingham applied.

(7) TMSF v. Demirel, [2007] 2 All E.R. 815; [2007] 1 Lloyd”s Rep. 223; [2007] I.L. Pr. 8; [2006] EWHC 3354 (Ch); on appeal, [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, considered.

(8) Turner v. London Transp. Executive, [1977] I.C.R. 952, [1977] 1 IRLR 441, dictum of Lane, L.J. applied.

Legislation construed:

Grand Court Rules 1995, O.11, r.1(1)(m): ‘Provided that the writ does not contain any claim mentioned in Order 75, rule 1(3) service of a writ out of the jurisdiction is permissible with the leave of the Court if in the action begun by the writ the claim is brought to enforce any judgment or arbitral award.’

O.49, r.1(1): ‘Where a person (in this Order referred to as “the judgment creditor”) has obtained a judgment or order for the payment by some other person (in this Order referred to as “the judgment debtor”) of money, not being a judgment or order for the payment of money into Court, and any other person within the jurisdiction (in this Order referred to as “the garnishee”) is indebted to the judgment debtor, the Court may, subject to the provisions of this Order and of any enactment, order the garnishee to pay the judgment creditor the amount of any debt due or accruing due to the judgment debtor from the garnishee, or so much thereof as is

sufficient to satisfy that judgment or order and the costs of the garnishee proceedings.’

O.49, r.8: ‘Any payment made by a garnishee in compliance with an order absolute under this Order, and any execution levied against him in pursuance of such an order, shall be a valid discharge of his liability to the judgment debtor to the extent of the amount paid or levied notwithstanding that the garnishee proceedings are subsequently set aside or the judgment or order from which they arose reversed.’

Conflict of Laws-recognition of foreign proceedings-enforcement of judgment debt-leave to serve out of jurisdiction in action to enforce foreign judgment debt only granted if good arguable case and plaintiff can reasonably expect tangible benefit from Cayman judgment-benefit need not be direct and immediate but may be based on possibility of taking steps towards enforcement in future-leave not granted merely because debtor likely to do business or hold asset in Islands at some point

Civil Procedure-execution-garnishee order-if debt owed to defendant by third party, may order third party to pay plaintiff pursuant to Grand Court Rules, O.49 if (a) third party within jurisdiction; (b) third party indebted to defendant; (c) would operate as good discharge for third party-whether would operate as good discharge depends on proper law of contract-would not discharge if contractual debt governed by English law since English contractual obligations not discharged by foreign legislation

The plaintiff sought to enforce an English judgment debt.

Two companies, CCOG and CCIC, were jointly and severally liable to the plaintiff under English judgments. CCOG held shares in the Alfurt companies, which were incorporated in the Islands. BTC, a company incorporated in the Islands which carried on most of its business in Azerbaijan, owed CCIC US$750,001 under a contract between them, which was expressed to be governed by English law. It was alleged that CCIC subsequently assigned this debt to Citibank.

The English court made a receivership order in respect of CCIC, appointing a receiver with the power, inter alia, to collect the sum owing by BTC. The plaintiff sought a declaration in the Cayman Islands that the English receivership order be recognized by the Cayman court. The Grand Court (Foster, Ag. J.) made a recognition order, which incorrectly gave the impression that the receiver was being appointed as a receiver by the Cayman court. The receiver misrepresented the effect of the recognition order to BTC, claiming that it was required to pay into court any amount owing to CCIC pursuant to their contract. It was not clear to BTC whether

the debt was owed to CCIC or had been assigned to Citibank, and BTC paid US$750,001 into court with the expectation that it would clarify to whom the debt was owed. CCIC subsequently commenced an application in Azerbaijan seeking an order that BTC pay it, and not Citibank, the US$750,001. The Azerbaijani courts gave judgments on CCIC”s application, but the judgments in their translated form were unclear as to whether the debt had been assigned to Citibank.

The plaintiff commenced an enforcement action in the Cayman Islands against CCOG and CCIC. The Grand Court (Smellie, C.J.) made an ex parte order granting leave for the writ to be served on the companies out of the jurisdiction. On an application by CCIC, the Grand Court (Jones, J.) set aside the recognition order and ordered the money paid in by BTC to be treated as if it had been paid in respect of the enforcement action (in proceedings reported at 2010 (1) CILR 265).

The jurisdictional challenge to the enforcement action

The plaintiff sought to continue the enforcement action against the companies, submitting that (a) in an action seeking to enforce a foreign judgment debt pursuant to the Grand Court Rules (‘GCR’), O.11, r.1(1)(m), it need only be demonstrated that there was the prospect of a tangible benefit to the plaintiff in being able to enforce, or to take steps towards enforcing, the foreign judgment in the Islands; (b) there was the prospect of a tangible benefit from being able to enforce the English judgment against the shares in the Alfurt companies owned by CCOG; (c) there was the prospect of a tangible benefit from being able to enforce the English judgment debt by way of obtaining a garnishee order over the debt owed by BTC to CCIC; and (d) the court should therefore allow the enforcement proceedings to continue as against both companies.

CCOG sought to set aside the ex parte order by which the plaintiff was given leave to serve it out of the jurisdiction, submitting that (a) its only assets in the Islands-and therefore the only assets against which the plaintiff could enforce a Cayman order-were shares in the Alfurt companies; (b) these shares were now worthless, and were in fact a liability since there were fees associated with owning them; and (c) there would therefore be no benefit to the plaintiff in pursuing an enforcement action against it.

CCIC also sought to set aside the ex parte order by which the plaintiff had been given leave to serve process out of the jurisdiction, submitting that (a) the only way a Cayman enforcement order could be of tangible benefit to the plaintiff would be if there were some prospect of his being able to garnish the debt owing by BTC; (b) since BTC was resident in Azerbaijan (as well as elsewhere), and the debt was primarily payable there, the debt was situate in Azerbaijan; (c) the Cayman court could not make a garnishee order in respect of a debt situate in a foreign jurisdiction; and (d) there was therefore no prospect of a tangible benefit to the plaintiff from enforcement proceedings against CCIC.

The court considered (a) the requirements for allowing, or allowing to continue, an action brought to enforce a foreign judgment debt under

GCR, O.11, r.1(1)(m); and (b) the law that applied when determining whether a Cayman garnishee order would operate as a good discharge of BTC”s debt.

BTC”s application for repayment of money in court

BTC applied to have the money it had paid into court returned, submitting that (a) if the companies” jurisdictional challenge resulted in the discontinuance of the enforcement action, it was automatically entitled to be repaid; (b) since it had paid the money into court in response to the recognition order, which had since been set aside with no appeal forthcoming, it should be repaid; (c) there was no justification for requiring it to pay money into court-or to leave money in court-in order to secure its liability in the event of a garnishee order being made; (d) the money belonged to it, and had not been transferred to any other party, since it had been paid into court only in an attempt to take a neutral stance when faced with a dispute; and (e) the Azerbaijani judgments would provide a defence to a Cayman garnishee proceeding, in that they provided that its debt had been assigned to Citibank and was no longer owed to CCIC, and it would therefore be exposed to the risk of double payment if its money was not repaid.

CCIC submitted in reply that the money should remain in court, since (a) the money was no longer BTC”s but CCIC”s, having been paid into court with the intention of discharging BTC”s obligation to CCIC; (b) the Azerbaijani judgments would not provide a defence to a Cayman garnishee proceeding, since it was not clear that they had effectively assigned BTC”s debt to Citibank...

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