Midtown Acquisitions L.P v Essar Global Fund Ltd
| Jurisdiction | Cayman Islands |
| Judge | Ingrid Mangatal |
| Judgment Date | 02 May 2017 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO FSD 159 of 2016 (IMJ) |
| Date | 02 May 2017 |
The Hon. Justice Ingrid Mangatal
CAUSE NO FSD 159 of 2016 (IMJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Summary judgment application — foreign judgment — Whether Final and Conclusive — Whether Defendant has real prospect of successfully arguing that the foreign judgment was obtained by fraud or in breach of natural justice .
Mr. M Crawford and Mr. P Smith of Maples and Calder for the Plaintiffs
Mr. U Payne, Mr. P Murphy and Mr. J Zimmer of Ogier for the Defendant
Barclays Bank Plc (“Barclays”) is a public company incorporated in the United Kingdom.
Credit Suisse Loan Funding LLC (“Credit Suisse”) is a limited liability corporation incorporated under the laws of the State of Delaware, USA.
Midtown Acquisitions L.P. (“Midtown”) is a limited partnership organised under the laws of the State of New York, USA and an affiliate of Davidson Kempner Capital Management.
Special Situations Investing Group, Inc. (“Special Situations”) is a company incorporated under the laws of the State of Delaware, USA and a subsidiary of The Goldman Sachs Group, Inc.
Barclays, Credit Suisse, Midtown and Special Situations are each Lenders as defined in paragraph 7 below, and are together referred to as “the New York Judgment Creditors”.
The Defendant Essar Global Fund Limited (“EGFL”) is a Cayman Islands exempted nonresident company which has its registered office at PO Box 1350, Clifton House, 75 Fort Street, Grand Cayman, Cayman Islands and carries on business as the holding company of the Essar Group. EGFL was incorporated on 20 September 2005.
Under a Credit and Security Agreement dated 30 September 2014 (the “Credit Agreement”) between Essar Steel Minnesota LLC (the “Borrower”), each guarantor party thereto, US Bank as agent (“Agent”) and the lenders party thereto from time to time (the “Lenders”), the Lenders provided a first priority senior secured term loan facility to the Borrower (the “Term Loan”). The Credit Agreement is governed by New York law.
Under a Guaranty also dated 30 September 2014 entered into by EGFL in favour of the Agent for the benefit of the Lenders (the “Guaranty”), EGFL guaranteed to each Lender payment of the principal of, premium and interest on, the Term Loan and any other Obligations due under the Credit Agreement, up to the Maximum Guaranteed Obligations, plus interest and fees, costs and expenses. The Maximum Guaranteed Obligations is USD$200,000,000.00 plus interest at the rate of 13.5% per annum accruing through payment, plus fees, reasonable costs, and expenses incurred in collecting, enforcing and preserving rights under the Guaranty. The Guaranty is governed by New York law.
Section 8.2 of the Credit Agreement provides in material part, that in the case of any Event of Default, the Term Loan may be accelerated.
Section 2.1(c) of the Guaranty provides that, in the event of any declaration of acceleration of the Term Loan, the Term Loan (up to the Maximum Guaranteed Obligations) will forthwith become due and payable by the Defendant.
The Statement of Claim alleges that on 23 February 2016, as a result of numerous prior admitted Events of Default under the Credit Agreement, the Agent, as directed by the Lenders, by notice to the Borrower, declared the unpaid amount of the Term Loan, and all other amounts owed under the Credit Agreement, totalling US$412,132,810, to be immediately due and payable.
Pursuant to Section 2.1 of the Guaranty, EGFL became obligated immediately to pay the Agent on behalf of the Lenders the Maximum Guaranteed Obligations amount of US$200,000,000, plus interest at the rate of 13.5% per annum accruing through payment, plus fees, reasonable costs and expenses incurred in collecting, enforcing and preserving rights under the Guaranty.
On 18 th March 2016 EGFL stipulated by way of affidavit, and confessed to judgment with respect the Guaranty (“Confession of Judgment”).
The Confession of Judgment contained an admission of liability by the Defendant under the Guaranty in the amount of US$201,575,000; and that interest was to accrue at the rate of 13.5% per annum, and that the entry of judgment was authorized in favour of the lenders in any federal state court located in the Borough of Manhattan, City and State of New York or any other court of competent jurisdiction in the amount of US $201,575,000 together with certain other amounts.
On 24 August 2016 pursuant to the New York Civil Practice Law and Rules, the New York Judgment Creditors filed a request with the New York Court seeking the entry of judgment pursuant to the Confession of Judgment. The New York Judgment Creditors gave credit for US$40 million in payments that had been received from the Defendant.
On 25 August 2016 the New York Court entered judgment for the New York Judgment Creditors in the principal sum plus interest, costs and disbursements in the total sum of US$171,769,169.00 (the “New York Judgment”).
EGFL was served with the New York Judgment on 31 August 2016.
It is pleaded that the New York Judgment became enforceable immediately in the State of New York. Further, that there was no appeal pending in the courts of the State of New York, the appeal period in respect of the New York Judgment having expired, and no stay of execution has been granted in favour of EGFL.
The Statement of Claim avers that the New York Judgment is final and conclusive for a liquidated sum and gives rise to a res judicata under New York Law in respect of the matters to which it relates.
By reason of the New York Judgment, the pleading continues, EGFL is indebted to the New York Judgment creditors in the amount of US$171,769,169 and accordingly the New York Judgment Creditors sought judgment in that amount.
Further, the New York Judgment Creditors also claimed interest pursuant to the Guaranty at the rate of 13.5% per annum from 25 August 2016 until the date of actual payment (whether before or after any judgment of the Grand Court). Alternatively, the New York Judgment Creditors claimed interest pursuant to section 34 of the Judicature Law (2013 Revision) at such rate and for such period as the Court thinks fit.
An Acknowledgement of Service was filed in the instant proceedings on behalf of EGFL on 17 October 2016.
On 15 November 2016, after the proceedings were filed in the name of Barclays, Credit Suisse, Midtown and Special Situations, Barclays, Credit Suisse and Special Situations assigned the benefit of the New York judgment to Midtown. Midtown's application to be sole plaintiff in order to reflect that position was granted by me without opposition on 10 January 2017, with costs to EGFL on the standard basis to be taxed if not agreed.
This is the Plaintiffs' application for summary judgment, dated 26 October 2016, to enforce the Judgment of the New York Supreme Court in the amount of US$171,769,169.00 dated 25 August 2016.
The Plaintiffs' summons dated 26 October 2016 seeks the following orders:
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“1. Pursuant to GCR O. 14, r.1, that summary judgment be entered in favour of the Plaintiffs in the amount of US $171,769,169.00 (the “ Principal Sum”).
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2. Directions for the determination of the Plaintiffs' claim for contractual or alternatively statutory interest on the Principal Sum.
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3. Such further or alternative relief as the Court thinks fit.
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4. That the Plaintiffs' costs of and incidental to this Summons be paid by the Defendant to be taxed if not agreed.”
The application is supported by the affidavits of Benjamin Finestone, who is a partner in the firm of Quinn, Emanuel Urquhart & Sullivan LLP (“Quinn Emanuel”), and is based in that firm's New York office. Quinn Emanuel have acted for, and continue to act for, the Lenders and their Agent in relation to EGFL's indebtedness.
In addition to other evidence, Mr. Finestone at paragraph 20 of his First affidavit opines that, as a matter of New York law, the Confession of Judgment is a document that entitles the person in whose favour it is made to obtain the entry of judgment in the Supreme Court of the State of New York, pursuant to the New York Civil Practice Law and Rules, §3218.
At paragraph 29, he also opined that:
“29. As a matter of New York law, where, as is the case in respect of the New York Judgment, a judgment has been obtained pursuant to New York Civil Practice Law and Rules …3218 and the appeal deadline has expired, that judgment is final and conclusive for a liquidated amount and gives rise to a res judicata under New York law in respect of the matters to which it relates.”
The application is contested by Mr. Payne, Counsel for EGFL, on the basis that EGFL has bona fide defences to the claim which, because of complex issues of New York law and fact, should not be disposed of summarily as part of the summary judgment procedure in the Cayman Islands. The Defendant states their position is as follows:-
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“(a) the Confession Judgment [i.e. the New York Judgment] was obtained by “fraud, misrepresentation or other misconduct” as construed under New York law:
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(b) enforcement of the Confession Judgment is contrary to public policy;
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(c) the Confession Judgment was obtained in breach of the principles of natural justice;
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(d) the Confession Judgment is not final and conclusive; and/or
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(e) there is a triable issue involving foreign law.”
EGFL relies upon the affidavit of Sushil Baid, Vice President of an affiliate of EGFL, the affidavit of Stephen Meister, a lawyer, and partner in the law firm Meister Seelig & Fein LLP, New York Counsel for EGFL and...
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