Renova Resources v Gilbertson

• Jurisdiction: Cayman Islands
• Judge: (Foster, J.)
• Judgment Date: 28 April 2010
• Court: Grand Court (Cayman Islands)
• Date: 28 April 2010

Grand Court, Financial Services Division

(Foster, J.)

RENOVA RESOURCES PRIVATE EQUITY LIMITED

and

GILBERTSON and FOUR OTHERS

GILBERTSON and AUTUMN HOLDINGS ASSET INCORPORATED

and

VEKSELBERG, KUZNETSOV, RENOVA HOLDING LIMITED and RENOVA RESOURCES PRIVATE EQUITY LIMITED

J.S. Eldridge for the plaintiff and the counterclaim defendants;

G. Halkerston for the first and fifth defendants and the counterclaim plaintiffs;

The second, third and fourth defendants did not appear and were not represented.

Cases cited:

(1) Cayman Islands News Bureau Ltd. v. Cohen, 1988–89 CILR 56, followed.

(2) HSH Cayman I GP Ltd. v. ABN AMRO Bank N.V., 2010 (1) CILR 114, referred to.

(3) Heath (C.E.) plc v. Ceram Holding Co., [1988] 1 W.L.R. 1219; [1989] 1 All E.R. 203; (1988), 132 Sol. Jo. 1299, referred to.

(4) Lemos v. Coutts & Co. (Cayman) Ltd., 1992–93 CILR 5, distinguished.

(5) Powell v. Att. Gen., 2009 CILR 298, distinguished.

(6) Raja v. Van Hoogstraten (No. 9), sub nom. Tombstone Ltd. v. Raja, [2009] 1 W.L.R. 1143; [2009] C.P. Rep. 18; [2008] N.P.C. 142; [2008] EWCA Civ 1444, distinguished.

Legislation construed:

Grand Court Law (2008 Revision), s.18: The relevant terms of this section are set out at para. 28.

Grand Court Rules 1995, Preamble: The relevant terms of the Preamble are set out at para. 10.

O.14: The relevant terms of this order are set out at para. 1.

O.15, r.5(2): ‘If it appears on the application of any party against who a counterclaim is made that the subject matter of the counterclaim ought for any reason be disposed of by a separate action, the Court may order the counterclaim to struck out or may order it to be tried separately or may make such other order as may be expedient.’

O.15, r.6(2): ‘Subject to the provisions of this rule, at any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application-

(a) order any person who has been improperly or unnecessarily made a party or who has for any reason ceased to be a proper or necessary party, to cease to be a party . . .’

Civil Procedure-judgments and orders-summary judgment-no jurisdiction to order summary judgment in favour of counterclaim defendant under normal construction of Grand Court Rules, O.14-summary judgment available to defendant under O.14, r.12 but not to extend to counterclaim defendant given separate provisions for plaintiff (r.1) and counterclaim plaintiff (r.5)-‘overriding objective’ of Grand Court Rules requires no more than ‘normal construction’

Civil Procedure-judgments and orders-summary judgment-no inherent jurisdiction to order summary judgment for counterclaim defendant-jurisdiction to order summary judgment conferred only by express statutory rules therefore only extendable by express statutory rules-lack of jurisdiction in Grand Court Rules not necessarily inadvertent since original English rules had similar omission

The plaintiff brought a derivative action in respect of alleged breaches of fiduciary duty and knowing receipt of property.

The plaintiff”s holding company entered into an investment structure with the first to fourth defendants. A dispute arose between the plaintiff and the defendants concerning an acquisition by the first defendant, the funds for which had been raised by inter alia the fifth defendant. The plaintiff issued a writ and statement of claim against the five defendants, and was given leave to serve the first and fifth defendants out of the jurisdiction. The defendants subsequently acknowledged service, and the plaintiff applied to continue its derivative action.

After a contested hearing, the Grand Court (Foster, Ag. J.) gave leave to the plaintiff to continue the action pursuant to the Grand Court Rules, O.15, r.12A (in proceedings reported at 2009 CILR 268). The first and fifth defendants subsequently filed and served a defence, as well as a

counterclaim against the plaintiff and three other parties involved in the underlying dispute. The counterclaim defendants replied with a defence to the counterclaim, and the counterclaim plaintiffs served a reply to the defence.

The counterclaim defendants applied for summary judgment against the counterclaim plaintiffs on the ground that they had no prospect of success. They submitted that the court had the jurisdiction to order it, since (a) the GCR, O.14, r.12, which enabled summary judgment to be ordered in favour of a defendant, should be construed in accordance with the ‘overriding objective’ of the GCR to include a defendant to a counterclaim; (b) alternatively, since there would be an extraordinary lacuna in the GCR if a counterclaim with no prospect of success had to proceed to trial, the court should order that summary judgment should be available in these circumstances, in the exercise of its inherent jurisdiction; (c) failing that, the court should order separate trials under the GCR, O.15, r.5, at which point it would be able to order summary judgment; (d) alternatively, the court could order that the counterclaim defendants cease to be joined to the counterclaim under the GCR, O.15, r.6(2); and (e) if the court found that there was no procedure for the order of summary judgment in favour of a counterclaim defendant, s.18(2) of the Grand Court Law (2008 Revision) applied and the court should follow the English practice (which, under the Civil Procedure Rules, r.24.3, was to allow the ordering of summary judgment in favour of all types of defendant).

The counterclaim plaintiffs submitted in reply that the court did not have jurisdiction to order summary judgment in favour of a counterclaim defendant, since (a) it was only entitled to construe the GCR, O.14 in accordance with its normal meaning, which did not allow for the ordering of summary judgment in favour of a defendant to a counterclaim; (b) since the court”s jurisdiction to order summary judgment had been conferred by express statutory rules, any apparent lacuna should only be filled by express statutory rules, and not by the exercise of an inherent jurisdiction; (c) the court should not order separate trials pursuant to the GCR, O.15, r.5 as it had not heard argument on the matter, nor was that order an appropriate vehicle for obtaining summary judgment; (d) nor should the court order that the counterclaim defendants cease to be parties to the claim as it had not heard argument and in any event the relevant rules were different; and (e) s.18(2) of the Grand Court Law did not apply since the Cayman rules already provided a means of obtaining summary judgment, albeit more narrowly than in England, and, moreover, applying the CPR, r.24.3 only in respect of counterclaim defendants would lead to an unsatisfactory difference in treatment between main action defendants and counterclaim defendants.

Held, dismissing the application:

(1) The court did not have jurisdiction to order summary judgment in favour of a counterclaim defendant. In arguing that, since the counterclaim had no prospect of success, the court should hold that it had jurisdiction,

the counterclaim defendants had put matters the wrong way round: jurisdiction should be determined prior to the merits of the application. Under the GCR, O.14, the court could order summary judgment in favour of a plaintiff (r.1), a defendant (r.12), or a counterclaim plaintiff (r.5), but there was no equivalent provision for a counterclaim defendant. Further, the interpretation of O.14 in accordance with the ‘overriding objective’ did not require the word ‘defendant’ in r.12 to be construed to include a counterclaim defendant. Given that the word ‘plaintiff’ in r.1 apparently did not include a counterclaim plaintiff (otherwise r.5 would have been otiose), it was clear that O.14 distinguished between an original action and a counterclaim. The overriding objective did not require anything other than a normal construction of the GCR, whenever possible-and a normal construction of O.14 disclosed no jurisdiction to order summary judgment in favour of a counterclaim defendant. In any event, it was not clear that ordering summary judgment would have achieved the overriding objective, there being a strong dispute between the parties as to whether the counterclaim would add significantly to the length and cost of the trial (para. 7; paras. 12–15; para. 19).

(2) Further, the court would not order summary judgment in favour of a counterclaim defendant in the exercise of its inherent jurisdiction. Its (exceptional) jurisdiction to order summary judgment had been conferred only by express statutory rules, and any apparent lacuna could therefore only be filled by express statutory rules, and not by the exercise of its inherent jurisdiction. Moreover, it was not necessarily the case that the absence of express jurisdiction to order summary judgment in favour of a counterclaim defendant was an inadvertent lacuna-given that the English Rules of the Supreme Court, on which the GCR were based, made no provision for summary judgment in favour of any defendant, it was entirely possible that the lack of such jurisdiction was an intentional omission (paras. 23–24).

(3) Two of the other strategies devised by the counterclaim defendants to allow the court to order summary judgment in their favour-ordering separate trials pursuant to the GCR, O.15, r.5(2) and then ordering summary judgment; and ordering that the counterclaim defendants cease to be parties to the counterclaim-would also be dismissed, as the case had not been heard on the basis of either rule, and, moreover, the only appropriate way to obtain summary judgment was through O.14 (paras. 26–27).

(4) Nor would the court apply s.18(2) of the Grand Court Law (2008 Revision), which required it to apply the English practice (which, under the CPR, r.24.3, was to allow ‘summary judgment against a claimant in any type of proceedings’) if the relevant matter of practice or procedure...