Merrill Lynch v Demirel

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 06 August 2010
• Court: Grand Court (Cayman Islands)
• Date: 06 August 2010

Grand Court, Financial Services Division

(Smellie, C.J.)

MERRILL LYNCH BANK AND TRUST COMPANY (CAYMAN) LIMITED

and

DEMIREL, DEMIREL, TASARRUF MEVDUATI SIGORTA FONU and ATTORNEY GENERAL

C.D. McKie and S.J. Alexander for the plaintiff;

The defendants did not appear and were not represented.

Cases cited:

(1) Beddoe, In re, Downes v. Cottam, [1893] 1 Ch. 547; (1892), 62 L.J. Ch. 233; 37 Sol. Jo. 99, referred to.

(2) Helmsman Ltd. v. Bank of New York Trust Co. (Cayman) Ltd., 2009 CILR 490, referred to.

Legislation construed:

Grand Court Rules 1995, O.11, r.1(1)(j): The relevant terms of this sub-rule are set out at para. 21.

r.1(2): The relevant terms of this sub-rule are set out at para. 14.

r.4(2): The relevant terms of this sub-rule are set out at para. 21.

Trusts Law (2009 Revision), s.90: The relevant terms of this section are set out at para. 15.

Civil Procedure-service of process-service out of jurisdiction-leave not required to serve application for Beddoe relief out of jurisdiction under Grand Court Rules, O.11, r.1(2) as within Cayman court”s jurisdiction pursuant to Trusts Law (2009 Revision), s.90-procedure for obtaining Beddoe relief not consistent with needing leave for service out

The third defendant sought to enforce a Turkish judgment against the first defendant.

The plaintiff, a Cayman company, was the trustee of two Cayman trusts of which the first defendant was the settlor and principal beneficiary, his wife (the second defendant) and potential future children also being beneficiaries. The trusts specified the Cayman Islands as their forum of administration. The third defendant was a Turkish Government agency which existed for the purpose of restructuring and administering failed banks, which had acquired the assets and rights of two failed banks having rights of action against the first defendant for the misappropriation of the proceeds of apparently fraudulent loans made to him. It obtained judgment in Turkey in the amount of US$30m. against the first defendant in respect of this fraud. It subsequently commenced proceedings in the Grand Court against, inter alia, the first defendant and the plaintiff to enforce the Turkish judgment.

The Grand Court (Smellie, C.J.) granted summary judgment against the first defendant (in proceedings reported at 2008 CILR 267), and the Court of Appeal subsequently refused the first defendant leave to appeal. The third defendant then applied to enforce that judgment by appointing receivers by way of equitable execution over certain property purportedly belonging to the first defendant. However, the Grand Court (Smellie, C.J., in proceedings reported at 2009 CILR 324) and the Court of Appeal (Chadwick, P., Mottley and Vos, JJ.A., in proceedings reported at 2009 CILR 474) dismissed the application. The Court of Appeal (Chadwick, P., Forte and Mottley, JJ.A.) subsequently granted conditional leave to appeal to the Privy Council (in proceedings reported at 2010 (1) CILR 1).

The plaintiff applied for Beddoe relief in the form of directions as to what role, if any, to take in the Privy Council appeal and whether to apply

for security for its costs of doing so. It sought to serve the application for Beddoe relief out of the jurisdiction on the first, second and third defendants, submitting that (a) the application was a matter within s.90 of the Trusts Law (2009 Revision) and therefore for the Cayman court to determine without reference to the laws of other jurisdictions; (b) leave to serve out of the jurisdiction was therefore not required under GCR, O.11, r.1(2); (c) a requirement of leave to serve out of the jurisdiction would be inconsistent with the procedure for obtaining Beddoe relief; and (d) in the alternative, if leave were required, then it should be granted, since the claim was in respect of a trust governed by Cayman law (as required by GCR, O.11, r.1(1)(j)) and the Cayman Islands were, on balance, the appropriate forum for the trial (as required by O.11, r.4(2)), given that (i) the trustee and the trusts were governed by Cayman law; (ii) the trust deeds specified the Islands as their forum of administration; (iii) the trust assets were most closely connected with the Islands; (iv) it was unlikely that any Turkish witnesses or lawyers would need to attend the hearing; (v) language concerns were unlikely to pose a difficulty at the hearing; (vi) although it was unclear whether the first defendant was subject to a travel ban, this had not previously impeded proceedings; (vii) the fourth defendant was based in the Islands; and (viii) the proceedings to which the application related were Cayman proceedings.

The court considered (a) whether the plaintiff required leave to serve an application for Beddoe relief out of the jurisdiction; (b) if so, whether it was appropriate to grant leave; and (c) the period for acknowledgement of service by the first, second and third defendants.

Held, permitting service out of the jurisdiction:

(1) The plaintiff did not need to obtain the leave of the court to serve an application for Beddoe relief out of the jurisdiction. The Grand Court Rules, O.11, r.1(2) provided that leave to serve out of the jurisdiction was not required where, by virtue of another law, the court had the power to determine the application notwithstanding that the party against whom the claim was made was outside the jurisdiction. Leave was not therefore required since the claim fell within s.90 of the Trusts Law (2009 Revision), pursuant to which questions arising in respect of the administration of a trust governed by Cayman law fell to be determined according to Cayman law, without reference to the laws of other relevant jurisdictions. Moreover, the procedure for obtaining Beddoe relief would not be consistent with a requirement to apply for leave to serve the originating...