Re Swiss Oil Corporation

• Jurisdiction: Cayman Islands
• Judge: (Harre, J.)
• Judgment Date: 06 December 1988
• Court: Grand Court (Cayman Islands)
• Date: 06 December 1988

Grand Court

(Harre, J.)

IN THE MATTER OF THE ARBITRATION BETWEEN SWISS OIL CORPORATION, REPUBLIC OF GABON and SOCIÉTÉ NATIONALE PETROLIÈRE GABONAISE PETROGAB S.A.

IMBAR MARITIMA S.A. and FIVE OTHERS

and

REPUBLIC OF GABON

R. Potts, Q.C., and C. Quin for the plaintiffs;

A. Jones for the defendant.

Cases cited:

(1) Kilderkin Invs. v. Player, 1984–85 CILR 63, distinguished.

(2) Meyer v. DresserENR(1864), 16 C.B.N.S. 646.

Legislation construed:

Rules of the Supreme Court, O.28, r.4:

‘(1) The Court by whom an originating summons is heard may, if the liability of the defendant to the plaintiff in respect of any claim made by the plaintiff is established, make such order in favour of the plaintiff as the nature of the case may require . . . .

(2) In any case where the court does not dispose of any originating summons altogether at a hearing or order . . . the Court shall give such directions as to the further conduct of the proceedings as it thinks best adapted to secure the just, expeditious and economical disposal thereof.’

Civil Procedure-judgments and orders-summary judgment-application for summary judgment-English Rules of Supreme Court, O.28, r.4 applicable-if defendant has arguable case court to dismiss plaintiff”s application but to give directions for further conduct of proceedings

Conflict of Laws-procedure-set-off and counterclaim-if application made at beginning of trial and concerns convenience of setting off claims, lex fori applicable-if application is step in enforcement of arbitral award and questions continued existence of award, lex causae more likely applicable

Companies-receivers-powers and duties-duties of receiver put in charge of liability of company not incompatible with duty of liquidator in collecting assets of company in course of winding up

The plaintiffs sought leave to enforce an award against the defendant which had been made in their favour by the International Chamber of Commerce Court of Arbitration and assigned to a Cayman company in accordance with certain binding fiduciary obligations.

The plaintiffs were ship-owners and inter-related foreign companies. The Swiss Oil Corporation (‘SOC’) was a Cayman company and a business associate of the plaintiffs. It alleged that the defendant had been in breach of contract for the sale of crude oil and acting on its own behalf and as assignee for the plaintiffs effected an arbitration clause to bring the matter before the Court of Arbitration of the International Chamber of Commerce. The court found the Republic liable on the claims and made a compensatory award to SOC. It also awarded the Republic greater compensation in respect of its counterclaim against SOC. SOC then executed an assignment in favour of the present plaintiffs in this suit of the part of the award it had obtained on a fiduciary basis on their behalf.

By an originating summons (Clause No. 328 of 1987), the Republic, pursuant to the Foreign Arbitral Awards Enforcement Law, sought leave of the Grand Court to enforce the award made in its favour against SOC. It also sought to liquidate the sum awarded against it in respect of the plaintiffs” claims by setting it off against the greater amount awarded to it in respect of its claims against SOC, the fiduciary assignee of the claims.

On June 17th, 1988 the court (Collett, C.J.) made an order granting the Republic leave to enforce the award by entering judgment in its favour. It also ordered that the Republic be restrained from removing or otherwise dealing with any sum limited to the principal and interest due from the Republic to the plaintiffs at the time of the order. The Republic then demanded payment of the amount due under the judgment and on receiving no satisfactory response from SOC filed a petition to wind up SOC.

Before the Republic”s originating summons had been heard, the plaintiffs instituted proceedings (Cause No. 137 of 1988) in which they sought leave to enforce the award against the Republic with respect to the compensation claimed by them and assigned to SOC. The Grand Court appointed a receiver with the specific purpose of safeguarding fa) the liabilities of SOC to the Republic under the arbitral award; and (b) the judgment debt and interest due from SOC to the Republic under the judgment of the Grand Court of June 17th, 1988. With reference to this order, the Grand Court (Collett, C.J.) then ruled that the order was not intended to and did not inhibit the petition for winding up SOC nor were the winding-up proceedings incompatible with the role of the receiver.

The plaintiffs then made the present application seeking (i) final judgment or further directions with respect to enforcement of their share of the award against the defendant; and (b) amendment of the order appointing the receiver to include a paragraph expressly restraining the defendant from proceeding with the winding-up petition against SOC whilst these proceedings were pending. The defendant filed summonses seeking to discharge both orders altogether.

The plaintiffs submitted that (a) there had been no agreement to a set-off between the Republic and SOC; (b) to set off an award due to them from the defendant against an award due to the defendant from SOC would be a breach of the fundamental common law principle that one man”s property could not be applied in satisfaction of another”s debts, a fortiori when the property concerned was affected by a trust; (c) whether or not a set-off could be inferred from the circumstances was a matter to be determined by the lex fori, in this case Cayman law and not, as was contended, by Swiss or Gabonese law; and (d) with respect to the defendant”s petition for winding up SOC, the amendment to the order appointing the receiver was necessary to avoid the ambiguity of the receiver and the defendant both claiming to be in charge of those proceedings.

The defendant submitted in reply that (a) Gabonese law as the lex causae applied and consequently the amount awarded by the arbitral court in respect of the plaintiffs” claims had been set off against amounts awarded to it against SOC; (b) the balance of convenience lay in discharging the orders; and (c) in any event the receivership served no useful purpose.

Held, dismissing the application:

(1) The plaintiffs” application by originating summons for final judgment to enforce the award in their favour would be treated as an

application for summary judgment to which the English Rules of the Supreme Court, O.28, r.4 applied in the absence of local rules. Accordingly, the court could only rule in their favour if the liability of the defendant-that is, its obligation to pay to the plaintiffs the award claimed-had been definitely established. If, as was the case, it was apparent that the defendant might have an arguable defence to the plaintiffs” claim, the court would have to dismiss the plaintiffs” summons for final judgment but had no jurisdiction under O.28, r.4 to dismiss altogether the proceedings to enforce the award; it had to give directions, according to its discretion, as to their further conduct. By dismissing the plaintiffs” summons, it would not be refusing to enforce a Convention award under the Foreign Arbitral Awards Enforcement Law, s.5 but rather refusing to dispose of the suit at a first hearing in the interests of allowing the parties fully to identify and argue all the pertinent issues (page 230, line 37 – page 231, line 30).

(2) One of the primary issues to be determined was the nature and validity of the defence to the plaintiffs” application. This concerned the defendant”s claim that the arbitral award to SOC in respect of the plaintiffs” claims and on their behalf, had been set off against amounts awarded to the defendant against SOC. In the light of this claim, first, the issue of whether in fact there was an award...