TMSF v Wisteria Bay Ltd

JurisdictionCayman Islands
Judge(Smellie, C.J.)
Judgment Date19 July 2007
CourtGrand Court (Cayman Islands)
Date19 July 2007
Grand Court

(Smellie, C.J.)

TASARRUF MEVDUATI SIGORTA FONU
and
WISTERIA BAY LIMITED, UTTERTON LIMITED, ABDALLAH IBRAHIM ABDALLAH AL-AYED and REGISTRAR OF SHIPPING

Ms. K. Houghton for the plaintiff;

H.G. Robinson for the defendants.

Cases cited:

(1) Att.-Gen. (New Zealand) v. Ortiz, [1984] A.C. 1; [1983] 2 All E.R. 93; [1983] 2 Lloyd”s Rep. 265; (1983), 127 Sol. Jo. 307, referred to.

(2) BHB Enterprises PLC v. Victor Chandler (Intl.) Ltd., [2005] E.C.C. 40; [2005] EuLR 924; [2005] UKCLR 787; [2005] EWHC 1074 (Ch), dicta of Laddie J. followed.

(3) Brokaw v. Seatrain UK Ltd., [1971] 2 Q.B. 476; [1971] 2 All E.R. 98; [1971] 1 Lloyd”s Rep. 337; (1971), 115 Sol. Jo. 172, referred to.

(4) Brunswick (Duke) v. King of HanoverENR(1844), 6 Beav. 1; 49 E.R. 724, followed.

(5) Evans v. European Bank Ltd., [2004] NSWCA 82; (2004), 61 NSWLR 75; 1 BFRA 143; [2005] ALMD 6369; [2005] ALMD 6370; [2005] ALMD 6554, referred to.

(6) India (Govt.) v. Taylor, [1955] A.C. 491; [1955] 1 All E.R. 292, referred to.

(7) Marada Global Corp. v. Marada Corp., 1994–95 CILR 546, referred to.

(8) Miller v. Gianne, 2007 CILR 18, referred to.

(9) Swiss Bank & Trust Corp. Ltd. v. Iorgulescu, 1994–95 CILR 149, applied.

(10) T Trust, In re, 2002 CILR N[1], followed.

(11) Tilling v. Whiteman, [1980] A.C. 1; [1979] 1 All E.R. 737; [1979] J.P.L. 834, followed.

(12) US v. Ivey(1995), 130 D.L.R. (4th) 674; 27 B.L.R. (2d) 221; 18 C.E.L.R. (N.S.) 157; 26 O.R. (3d) 533, referred to.

Civil Procedure-pleading-striking out-court may strike out claim based on foreign law unless fully particularized, clearly and specifically, including all relevant facts and precise legal provisions

The plaintiff sought a declaration that mortgages registered against two vessels on the Shipping Register were fraudulent and invalid.

The plaintiff, an agency of the Turkish Government, had taken control of a bank in Turkey that had collapsed amid allegations of widespread fraud. It alleged that two vessels registered in the Cayman Islands in the names of the first and second defendants were assets of the bank, to which it had acquired proprietary title by operation of Turkish law, and that the third defendant, assisted by the first two, had fraudulently recorded mortgages against the vessels on the Cayman Shipping Register for the sole purpose of defeating its title. An injunction restraining the plaintiff from dealing with the ships had been set aside by the Court of Appeal (Zacca, P., Taylor and Mottley, JJ.A.) on the ground that the plaintiff, as an agency of the Turkish state, was not subject to the jurisdiction of the Cayman courts. The proceedings are reported at 2006 CILR 256.

As a result of criminal proceedings in Turkey, the Turkish court authorized the plaintiff to sell the vessels, but it was unable to do so while the mortgages remained on the Register and applied for an order that they be removed. The defendants brought the present action to have the claim struck out or alternatively, to try the issue of the ships” title as a preliminary issue and the plaintiff applied to make further amendments to its statement of claim.

The plaintiff submitted that (a) it was not asking the court to enforce the public or penal laws of another state, but merely to enforce a private proprietary right acquired by valid and effective Turkish law, and it had provided clear and adequate particulars of the relevant legal provisions; (b) even if its claim involved enforcement of a foreign law, not all such laws would be denied effect, and furthermore, public policy favoured recognition of its right since the Shipping Register should not be used as an instrument of fraud; (c) its proposed re-amendments merely clarified its allegation that the mortgages were illegal; and (d) the issue of title was

one of contested factual allegations and thus not suitable for trial as a preliminary issue.

The defendants submitted in reply that (a) the plaintiff had failed to set out clearly and specifically the relevant provisions of Turkish law on which it was relying; (b) since it had already successfully argued in the Court of Appeal that, as a Turkish governmental agency, it was not subject to the court”s jurisdiction, it was now estopped from arguing that its title derived from a source other than the exercise of Turkish sovereignty; (c) its proposed re-amendments should not be allowed as it had no standing to invoke Cayman public policy without a proven proprietary interest, which itself depended upon the court”s recognition of Turkish law; and (d) alternatively, the question of title to the vessels should be tried as a preliminary issue.

Held, making the following ruling:

(1) The application to strike out the plaintiff”s claim would be refused. Questions of foreign law that became issues of fact for the court to resolve had to be fully particularized in the pleadings, including all the relevant facts and the precise rules relied on, and insufficiency of pleading might result in the action being struck out. The stringent requirements were especially important in cases such as the present, in which transnational fraud was alleged. The plaintiff in its various pleadings and responses had met the requirements since it had set out, clearly and specifically, the precise provisions of Turkish law on which it sought to rely in asserting a proprietary title to the vessels, and furthermore, had voluntarily provided the defendants with English translations of those provisions though it was not in law obliged to do so (paras. 17–20; paras. 22–23; para. 36).

(2) The plaintiff”s alternative pleadings based on public policy considerations were also not liable to be struck out, nor were they an abuse of the process of the court, since they met directly the defendants” estoppel argument and their objection that the plaintiff was effectively operating as an extension of a foreign sovereign power. These were quintessentially matters to be decided at trial and showed that the plaintiff had a plainly arguable case (paras. 26–29).

(3) The application to try as a preliminary issue the question of whether the plaintiff had a valid title to the ships by operation of Turkish law would be refused. The allegations of fraud and the validity of the mortgages were highly contentious issues of fact that could only be decided after an adversarial hearing and were therefore unsuited to a preliminary trial, which would only prolong the case with the attendant risk of increased costs (paras. 31–32).

(4) However, the plaintiff”s application to re-amend its statement of claim would be allowed. The defendants” objections simply anticipated the very issues to be decided in the forthcoming trial and if the application were refused, the court would be wrongly prevented from considering

those issues. Furthermore, it was unlikely that the amendments would result in prejudice to the defendants (paras. 35–36).

1 SMELLIE, C.J.: This case has been before this court since the latter part of 2004 and is already the subject of a number of interlocutory rulings, including at least one which has found its way to the Court of Appeal. It is therefore fair to say that the case...

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