Meridian Trust Company Ltd and American Associated Group Ltd v Batista Da Silva and Five Others

• Jurisdiction: Cayman Islands
• Judge: (Mangatal, J.)
• Judgment Date: 15 March 2017
• Court: Grand Court (Cayman Islands)
• Date: 15 March 2017

Grand Court, Financial Services Division

(Mangatal, J.)

MERIDIAN TRUST COMPANY LIMITED and AMERICAN ASSOCIATED GROUP LIMITED

and

BATISTA DA SILVA and FIVE OTHERS

G. Halkerston, L. Hatfield and J. McGee for the applicants.

E. McQuater, Q.C., A. Dixon and T. Baildam for the first to fourth respondents.

Cases cited:

(1) A.J. Bekhor & Co. Ltd. v. Bilton, [1981] Q.B. 923; [1981] 2 W.L.R. 601; [1981] 2 All E.R. 565; [1981] 1 Lloyd’s Rep. 491; [1981] Com. L.R. 50, dicta of Griffiths, L.J. considered.

(2) Ahmad Hamad Algosaibi & Bros. Co. v. Saad Invs. Co. Ltd., 2011 (1) CILR 178, considered.

(3) Arab Monetary Fund v. Hashim (No. 5), [1992] 2 All E.R. 911, referred to.

(4) Classroom Invs. Inc. v. China Hospitals Inc., 2015 (1) CILR 451, referred to.

(5) Dadourian Group Intl. Inc. v. Simms, [2006] EWCA Civ 399; [2006] 1 W.L.R. 2499; [2006] 3 All E.R. 48; [2006] 1 All E.R. (Comm) 709; [2006] 2 Lloyd’s Rep. 354; [2006] C.P. Rep. 31; [2006] 1 C.L.C. 744, applied.

(6) Greenwich Inc. Ltd. v. Dowling, [2014] EWHC 2451 (Ch), referred to.

(7) JSC BTA Bank v. Ablyazov, [2010] EWHC 2219 (QB); [2011] 1 All E.R. (Comm) 1093; [2010] 2 C.L.C. 329; further proceedings, [2011] EWHC 2506 (Comm); further proceedings, [2013] EWCACiv 928; [2014] 1 W.L.R. 1414; [2014] 1 All E.R. (Comm) 700; [2014] 1 Lloyd’s Rep. 195; [2013] 2 C.L.C. 286, considered.

(8) JSC BTA Bank v. Shalabayev, [2011] EWHC 2903 (Ch), referred to.

(9) JSC Mezhdunarodniy Promyshlenniy Bank v. Pugachev, [2015] EWCA Civ 139; [2016] 1 W.L.R. 160; [2015] 2 All E.R. (Comm) 816; [2015] 1 C.L.C. 238; [2015] WTLR 991; [2015] 2 P. & C.R. DG4, considered.

(10) JSC VTB Bank v. Skurikhin, [2012] EWHC 3116 (Comm), referred to.

(11) Linsen Intl. Ltd. v Humpuss Sea Transp. Pte. Ltd., [2011] EWHC 2339 (Comm); [2012] Bus. L.R. 1649; [2011] 2 Lloyd’s Rep. 663; [2012] 1 BCLC 651; [2011] 2 C.L.C. 773, referred to.

(12) M.V. Yorke Motors (A Firm) v. Edwards, [1982] 1 W.L.R. 444; [1982] 1 All E.R. 1024, referred to.

(13) Mahan Air v. Blue Sky One Ltd., [2011] EWCA Civ 544, referred to.

(14) Marcan Shipping (London) Ltd. v. Kefalas, [2007] EWCA Civ 463; [2007] 1 W.L.R. 1864; [2007] 3 All E.R. 365; [2007] C.P. Rep. 41; [2007] 1 C.L.C. 785, referred to.

(15) Memory Corp. plc v. Sidhu (No. 1), [2000] 1 W.L.R. 1443; [2000] CPLR 171; [2000] F.S.R. 921, referred to.

(16) Orb a.r.l. v. Ruhan, [2016] EWHC 850 (Comm), dicta of Popplewell, J. considered.

(17) Petromar Energy Resources Pte. Ltd. v. Glencore Intl. AG, [1999] 2 SLR 609; [1999] SGCA 28, distinguished.

(18) Pride of Derby & Derbyshire Angling Assoc. Ltd. v. British Celanese Ltd., [1953] Ch. 149; [1953] 2 W.L.R. 58; [1953] 1 All E.R. 179, referred to.

(19) Raja v. van Hoogstraten, [2004] EWCA Civ 968; [2004] 4 All E.R. 793; [2005] C.P. Rep. 6, referred to.

(20) Wallace v. Merrill Lynch Intl. Bank Ltd., [1998] 1 SLR 785; [1998] SGCA 2, distinguished.

Civil Procedure—judgments and orders—“unless order”—court carefully to consider if order appropriate—order that unless respondent complies with disclosure order would be debarred from contesting Mareva order inappropriate if respondent in foreign prison and compliance difficult

Injunctions—Mareva injunction—discovery of assets—order for disclosure of historic banking documentation justified if necessary to ensure compliance with Mareva order as evidence of prior worldwide asset dissipation by respondent—burdensome and unusual nature of order to be brought to court’s attention on ex parte application

The applicants had obtained an ex parte Mareva order.

In October 2016, the applicants obtained a Mareva order from the Grand Court (Mangatal, J.) on an ex parte application pursuant to the Grand Court Law (2015 Revision), s.11A in relation to proceedings that were to be commenced in Florida (and which were commenced in January 2017). The court also ordered the respondents to disclose information regarding the first respondent’s assets to the applicants, including banking documentation since 2010. The undertakings given by the applicants included an undertaking that—

“save for any application for interim relief against the respondents in the Bahamas, the applicants will not without leave of the Court seek to enforce this order in any country outside the Cayman Islands or seek an order of a similar nature including orders conferring a charge or other security against the respondents or the respondents’ assets.”

The respondents made various disclosures.

In January 2017, the first respondent was arrested in Brazil and was detained in a high security prison. He sought an order that he should not be required to disclose historic banking documentation.

In February 2017, the applicants obtained an ex parte interim injunction in Florida pursuant to the Florida Uniform Fraudulent Transfers Act (“the FUFTA injunction”) preventing the respondents from fraudulently transferring assets out of Florida.The applicants applied for an unless order providing that unless the respondents complied with the disclosure obligations within 48 hours they would be debarred from opposing the continuation of the Mareva order until 14 days after the grant of any final judgment in the Florida proceedings. They sought an order varying the terms of the Mareva order to retrospectively authorize the FUFTA injunction, if their application for that injunction had not been permitted by the terms of the Mareva order.

The applicants submitted, inter alia, that the FUFTA injunction was not contrary to the Cayman Mareva order as it was not a Mareva or freezing order but had a narrow scope, merely preventing the respondents from fraudulently transferring assets out of Florida, but, if necessary, they sought an amendment to the undertakings that permission had been granted. In respect of the respondents’ disclosure obligations, disclosure of documents prior to October 2016 was necessary in order to identify the first respondent’s current assets as there was evidence of worldwide dissipation. As a matter of practicality, they were content to seek disclosure of bank statements from September 2012 onwards in respect of bank accounts outside Brazil. In respect of the application for an unless order, the respondents were in deliberate and continuing breach of their disclosure obligations. There was no evidence that it was impossible for the first respondent to comply with his disclosure obligations by reason of his imprisonment, and an unless order was appropriate in the circumstances.

The respondents submitted, inter alia, that the applicants should have applied to the Grand Court for permission to apply for the FUFTA injunction, which had been obtained in breach of the Cayman Mareva order. In respect of the historic disclosure, disclosure of bank documentation prior to October 2016 was unjustified as, where a freezing injunction was sought in support of a personal claim, ancillary disclosure orders were concerned solely with the respondent’s current assets and even in proprietary cases the court was generally reluctant to order wide-ranging disclosure of historic transactions. The applicants should have drawn the court’s attention to the onerous and peculiar nature of the order for historic disclosure. An unless order would not be appropriate in the circumstances of the case as it was impossible for the first respondent to comply with the order while imprisoned.

Held, ruling as follows:

(1) The FUFTA injunction had not been obtained in breach of the applicants’ undertaking given pursuant to the Cayman Mareva order. The claim for such an injunction and interim and permanent relief had been part of the applicants’ proposed course of action at the time the Mareva order was granted. The wording of the FUFTA injunction did not on the face of it state what the applicants claimed as to the nature of the injunction, i.e. that it was not a Mareva or freezing order but related only to fraudulent transfers, but the respondents provided no evidence to challenge the applicants’ evidence as to the nature of the FUFTA injunction. Whilst it could have been more squarely put before the court that anapplication would be made for interim relief in Florida, the applicants’ undertaking was not intended to affect the bringing of interim relief in the jurisdiction in which the substantive claim was brought. If the court were wrong on the question whether the FUFTA injunction amounted to similar relief and was caught by the undertaking, it was satisfied that any breach by the applicants had been unintentional. The applicable principles outlined by the case law were, in any event, satisfied as (i) the FUFTA application was just and convenient in ensuring that the worldwide freezing order was effective as it protected assets in Florida from fraudulent dissipation—those assets being in the jurisdiction of the substantive claim would be more readily susceptible to efficient enforcement processes following a Florida judgment if they were to remain in Florida at that time; (ii) the regulation of costs associated with interim applications in Florida was properly a matter for the Florida court being the jurisdiction in which the substantive proceedings were taking place; (iii) the respondents were parties to the FUFTA injunction application, as were other defendants to the Florida proceedings. The regulation of those proceedings was properly a matter for the Florida court; (iv) the Grand Court had been given all the necessary information relating to the FUFTA injunction; and (v) there was a real prospect that there were relevant assets within Florida and a risk that such assets would be dissipated (paras. 60–70).

(2) The order requiring disclosure of the respondents’ historic assets would not be discharged. At the ex parte hearing of this difficult case, the applicants should have spelled out clearly that the historic disclosure being sought was unusual and particularly burdensome. The applicants had, however, made it clear that they were seeking...