TMSF v Wisteria Bay Ltd
Jurisdiction | Cayman Islands |
Judge | (Smellie, C.J.) |
Judgment Date | 25 August 2006 |
Court | Grand Court (Cayman Islands) |
Date | 25 August 2006 |
(Smellie, C.J.)
G. Cox, Q.C. and Miss K. Houghton for the plaintiff;
H.G. Robinson for the third defendant.
(1) Banco Economico S.A. v. Allied Leasing & Fin. Corp., 1998 CILR 102, followed.
(2) Costa Rica (Republic) v. ErlangerELR(1876), 3 Ch. D. 62, not followed.
(3) Cybervest Fund, In re, 2006 CILR 80, followed.
(4) Gordano Bldg. Contractors Ltd. v. Burgess, [1988] 1 W.L.R. 890; (1988), 132 Sol. Jo. 1091, applied.
(5) Ministère de la Culture &c. de France v. Lielb, The Times, December 24th, 1981, considered.
(6) Newbattle, TheELR(1885), 10 P.D. 33, not followed.
(7) Parkinson v. Myer Wolff & Manley, English Court of Appeal (Civil Div.), April 23rd, 1985, unreported, dicta of Kerr, L.J. applied.
(8) Parkinson (Sir Lindsay) & Co. Ltd. v. Triplan Ltd., [1973] Q.B. 609; [1973] 2 All E.R. 273, considered.
(9) Sierra Leone (Govt.) v. Davenport, [2003] EWHC 1913 (Ch.); [2003] All E.R. (D.) 183; 2003 WL 21047383, considered.
(10) Stewart v. Ask Secs. Ltd., 1994–95 CILR N–7, referred to.
(11) Taylor v. Canadian Human Rights Commn., [1990] S.C.R. 892; (1990), 75 D.L.R. (4th) 577, considered.
Grand Court Rules (1995 Revision), O.23, r.1: The relevant terms of this rule are set out at para. 7.
Civil Procedure-costs-security for costs-discharge of order requires material change in circumstances-may be material change if appeal court finds order disregarded by appellant made without jurisdiction
Civil Procedure-costs-security for costs-foreign plaintiff in contempt of court with no assets in jurisdiction may be ordered to give security-contempt given less weight if order breached made without jurisdiction and required by own state courts to commit breach-acknowledgement of reason for contempt, accompanied by apology may be reason for discharging order for security
The plaintiff (‘TMSF’) sought an injunction in the Grand Court to restrain the respondents” dealings with two ships, The Frequency and The Airwaves.
TMSF was an agency of the Turkish government, which, in the exercise of its duties, had seized two ships registered in the Cayman Islands. TMSF applied to the Grand Court for an injunction to prevent the registration of mortgages against the vessels and an order restraining all further dealings with them. Due to legal error in the application for the injunction, TMSF itself was also restrained from further dealings with the vessels until the matter came to trial. It nevertheless proceeded to arrange the auction of one of the ships and was held to be in contempt of the Cayman court for breach of the injunction. The Grand Court refused to vary the initial injunction to allow TMSF to sell the ships and, following the holding of contempt, ordered it to provide security for the respondent”s costs in the amount of $500,000.
On appeal, the Court of Appeal held that the initial injunction had been made in excess of the Grand Court”s jurisdiction as the State Immunity Act precluded it from preventing an agency of a foreign government from carrying out its governmental duties in its own state. The proceedings are reported at 2006 CILR 256.
TMSF therefore sought the discharge of the order for security because (a) the Court of Appeal”s decision that the Grand Court had no jurisdiction to make the injunction amounted to a material change in circumstances adequate to allow the discharge of the security; (b)
reassessing the situation on the basis of the new circumstances, security would not normally be granted against a plaintiff in the position of TMSF as it was an agency of a foreign government enjoying good international standing; and (c) whilst it had admittedly been in breach of the Cayman order, the breach only took place after it had first consulted the Turkish courts for guidance and been directed to proceed with the sale, and therefore it had no choice but to defy the order of one of the courts, for which it had apologized to the Grand Court.
The third respondent submitted in reply that (a) the earlier order for security for costs should not be discharged because there had been no material change of circumstances, as although the Court of Appeal had decided that the initial injunction had been granted wrongfully, TMSF had still been obliged to comply with it until it was set aside, and the finding that TMSF had been in contempt of court, on which the initial security order had been based, remained valid; (b) even if the Court of Appeal”s judgment amounted to a material change of circumstances, the order for costs should not be discharged as TMSF had already shown its willingness to disregard orders of the Cayman court by proceeding with its attempt to auction the vessels, and it was a foreign plaintiff with no funds in the Cayman Islands; and (c) as its costs were increasing, the initial order for security was no longer sufficient, and ought to be raised to $1m.
Held, discharging the order for security:
(1) The order for security would be discharged as, reassessing the situation in light of the Court of Appeal”s decision, TMSF”s contempt of court should not weigh against it. It had been put in a position in which it had no choice but to disobey the Cayman order or ignore the order of the Turkish court and neglect its governmental duties. Without the contempt of court counting against it (and its apology for that had been received and accepted), TMSF would be treated like any other state agency, and considering its good international standing, the adequacy of the funds available to the Turkish Government and its good relationship with H.M. Government, there was no reason to doubt that TMSF would meet its liabilities and therefore no reason why security should be ordered. Clearly, following this decision, the respondent”s cross-application for increased security would be refused (para. 22; paras. 24–26).
(2) This reassessment was made possible since, although there had not been a material change of circumstances relating to the initial reasons for the order for security (that TMSF was a foreign plaintiff with no funds in the jurisdiction, and had acted in contempt of the Cayman court), the Court of Appeal”s decision meant that the injunction TMSF had breached ought not to have been made in the first place. Such a finding could, in the unique circumstances of this case, be considered a material change in circumstances as it would be artificial to separate the wrongful making of the injunction from TMSF”s disobedience of it (para. 11).
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