TMSF v Wisteria Bay

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 01 January 2008
• Court: Grand Court (Cayman Islands)
• Date: 01 January 2008

Grand Court

(Smellie, C.J.)

TASARRUF MEVDUATI SIGORTA FONU, MAVI TURIZM YATIRIM TICARET A.S. and RUMELI CIMENTO SANAYI TICARET A.S.

and

WISTERIA BAY LIMITED, UTTERTON LIMITED, ABDALLAH IBRAHIM ABDALLAH AL-AYED and REGISTRAR OF SHIPPING

G. Cox, Q.C., R. Davison, A. Walters and Ms. K. Houghton for the plaintiffs;

H. Robinson and G. Keightley for the defendants.

Cases cited:

(1) Air Foyle Ltd. v. Center Capital Ltd., [2003] 2 Lloyd”s Rep. 753; [2004] I.L. Pr. 15; [2002] EWHC 2535 (Comm), referred to.

(2) Angel v. Aubrecht, 2007 CILR 251, referred to.

(3) Arrow Nominees Inc. v. Blackledge, [2000] 2 BCLC 167; [2001] BCC 591; [2000] C.P. Rep. 59, followed.

(4) 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.

(5) Att. Gen. (U.K.) v. Heinemann Publishers Australia Pty. Ltd., [1989] 2 F.S.R. 631; (1988), 78 ALR 449; 62 ALJR 344, referred to.

(6) Becker v. Bank of Nova Scotia, 1986–87 CILR 389, referred to.

(7) Beeforth v. Beeforth, English C.A., The Times, September 17th, 1998, unreported, referred to.

(8) Bineta, The, [1967] 1 W.L.R. 121; [1966] 3 All E.R. 1007; [1966] 2 Lloyd”s Rep. 419; (1966), 110 Sol. Jo. 788, referred to.

(9) Brown v. Horvat Properties (Cayman Islands) Ltd., 1992–93 CILR N–5, referred to.

(10) Ebanks v. Brooks, 2004–05 CILR N[28], referred to.

(11) Glatzer v. Bradston Ltd., The Ocean Enterprise, [1997] 1 Lloyd”s Rep. 449, applied.

(12) Hartley, In re, [1891] 2 Ch. 121, applied.

(13) Huntington v. Attrill, [1893] A.C. 150; (1893), 62 L.J.P.C. 44; 68 L.T. 326, referred to.

(14) Hytec Information Systems Ltd. v. Coventry C.C., [1997] 1 W.L.R. 1666, referred to.

(15) Iran v. Barakat Galleries Ltd., [2008] 3 W.L.R. 486; [2008] 1 All E.R. 1177; [2008] 2 All E.R. (Comm) 225; [2007] 2 C.L.C. 994; [2007] EWCA Civ. 1374, applied.

(16) Jokai Tea Holdings Ltd., In re, [1992] 1 W.L.R. 1196; [1993] 1 All E.R. 630, referred to.

(17) Keypak Homecare Ltd., Re, [1987] BCLC 409; (1987), 3 BCC 558; 1988 PCC 115, referred to.

(18) Kok Hoong v. Leong Cheong Kweng Mines Ltd., [1964] A.C. 993; [1964] 2 W.L.R. 150; [1964] 1 All E.R. 300; (1963), 107 Sol. Jo. 1037, dictum of Lord Radcliffe considered.

(19) Landauer Ltd. v. Comins & Co., [1991] T.L.R. 382, referred to.

(20) Logicrose Ltd. v. Southend Utd. F.C. Ltd.(1988), 132 Sol. Jo. 1591, referred to.

(21) Long v. Farrer & Co., [2004] EWHC 1774 (Ch); [2004] B.P.I.R. 1218, referred to.

(22) Matthews v. Kuwait Bechtel Corp., [1959] 2 Q.B. 57; [1959] 2 W.L.R. 702; [1959] 2 All E.R. 345; (1959), 103 Sol. Jo. 393, referred to.

(23) Metall & Rohstoff A.G. v. Donaldson Lufkin & Jenrette Inc., [1990] 1 Q.B. 391; [1989] 3 W.L.R. 563; [1989] 3 All E.R. 14; (1989), 133 Sol. Jo. 1200, referred to.

(24) National Westminster Bank PLC v. Daniel, [1993] 1 W.L.R. 1453; [1994] 1 All E.R. 156, referred to.

(25) Patten v. Burke Publishing Co. Ltd., [1991] 1 W.L.R. 541; [1991] 2 All E.R. 821; [1991] F.S.R. 483, referred to.

(26) Pople v. Evans, [1969] 2 Ch. 255; [1968] 3 W.L.R. 97; [1968] 2 All E.R. 743; (1968), 112 Sol. Jo. 441, dictum of Ungoed-Thomas J., considered.

(27) Siskina v. Distos Cia. Naviera S.A., The Siskina, [1979] A.C. 210; [1977] 3 W.L.R. 818; [1977] 3 All E.R. 803; [1978] 1 Lloyd”s Rep. 1, considered.

(28) Smith v. Buchan(1888), 36 W.R. 631; 58 L.T. 710, referred to.

(29) Swain v. Hillman, [2001] 1 All E.R. 91; [2001] C.P. Rep. 16; [1999] C.P.L.R. 779; [1999] T.L.R. 745, referred to.

(30) Telesystem Intl. Wireless Inc. v. CVC/Opportunity Equity Partners L.P., 2001 CILR N[21], referred to.

(31) Tisand (Pty) Ltd. v. MV Cape Moreton (Owners), [2005] FCAFC 68, considered.

(32) Universal & Surety Co. Ltd., In re, 1992–93 CILR 157, referred to.

(33) Wahr-Hansen v. Compass Trust Co. Ltd., 2007 CILR 55, referred to.

(34) Wallersteiner v. Moir, [1974] 1 W.L.R. 991; [1974] 3 All E.R. 217; (1974), 118 Sol. Jo. 464, referred to.

(35) Woodrow v. Chalk Catering Ltd., [1999] C.L.Y. 569, referred to.

(36) Young v. Thomas, [1892] 2 Ch. 134, referred to.

Legislation construed:

Grand Court Rules 1995, O.11, r.1(1)(i): The relevant terms of this rule are set out at para. 96.

Civil Procedure-judgments and orders-default judgments-if default judgment gives rise to res judicata, estoppel raised only in respect of precise facts and claims in pleadings-plaintiff not estopped from seeking further separate relief necessary in interests of justice, e.g. default judgment limited to striking out defendants” fraudulent mortgages on vessels raises no estoppel to preclude plaintiff”s further claim to de-register vessels and re-register in names of correct owners

Civil Procedure-judgments and orders-‘unless order’-defendant”s inadequate explanation of repeated failure to comply with court”s order and inability to demonstrate that proceedings should continue, together with history of non-compliant conduct, may amount to abuse of process-defence struck out if fair trial and safe verdict no longer possible

Conflict of Laws-application of foreign law-foreign public law-although no jurisdiction to enforce foreign public law, characterization dependent on Cayman law as lex fori and not on that ascribed by foreign system-for Cayman court to determine substance of right sought to be enforced-may enforce possessory or compensatory action on behalf of foreign governmental agency but if central interest of foreign government confiscatory or penal, will not enforce

The first plaintiff sought an injunction to restrain the defendants” dealings with two ships.

The first plaintiff (‘TMSF’) was a Turkish Government agency which insured Turkish bank deposits. In July 2003, TMSF took control of a Turkish bank for failing to comply with banking regulations and, upon discovering an error, invited the bank”s depositors to prove their deposits. This resulted in the discovery of a shortfall in the bank”s assets of approximately US$5.1bn., which had to be reimbursed to the bank”s customers by TMSF. Under Turkish law, TMSF had a right to recover the

assets of the bank”s shareholders, and those acting on their behalf, which included the Uzan family, the owners of the first and second defendants (‘Wisteria’ and ‘Utterton’ respectively), who were themselves the registered owners of two valuable yachts, The Frequency and The Airwaves, registered in the Cayman Islands. TMSF therefore initiated proceedings to recover the yachts, which were together valued at approximately US$50m. The yachts were restrained by the Turkish court and in March 2004 ‘attached’ to TMSF under statutory powers.

At the time of the attachment, the yachts were the subject of a sub-charter agreement with two other Uzan companies (the second plaintiff, ‘Mavi’ and ‘Medya’) and were under their direct ownership and control, moored in Turkish waters. TMSF claimed the right to sell the yachts, and apply the proceeds of the sale in part satisfaction of the debt owed to it by the bank, pursuant to Turkish law. Wisteria and Utterton, however, remained the registered owners of the yachts, and they disputed their connection with the Uzan family, claiming that the yachts were not assets recoverable under the Turkish Collection Law.

In November 2004, TMSF had the yachts valued and placed on the market. The Cayman Registrar of Shipping then received applications for the registration of mortgages in respect of the yachts from the third defendant, Mr. Al-Ayed. He produced documentation which indicated that Wisteria and Utterton had mortgaged the vessels-in November 2000 in the case of Wisteria and March 2001 in that of Utterton-repayable on October 1st, 2004 (Wisteria), and March 30th, 2004 (Utterton). He claimed that, those dates having passed and payment being outstanding, the titles to the yachts had passed to him, and they were not therefore recoverable by TMSF.

TMSF claimed that the mortgages were a sham, designed to fraudulently subvert the sale of the vessels and to defeat the obligations owed to it, and that Mr. Al-Ayed was an agent of Wisteria, Utterton and the Uzan family. In January 2006, the Grand Court issued an ‘unless’ order to the effect that the originals of Mr. Al-Ayed”s documentation be delivered up for forensic examination to ascertain the date that the mortgage agreements were signed and whether, therefore, they genuinely pre-dated the attachment of the vessels by TMSF. By February 2007, after several hearings, the ‘unless’ order had still not been fulfilled and the court therefore re-issued it. The defendants then applied for the variation of the order, on the basis that they no longer had the originals of some of the documents, which was granted, and a new ‘unless’ order for the discovery of the originals remaining in their possession, by April 3rd, 2007, was issued. Unknown to the court, however, the defendants had already had destructive testing carried out on those documents, which had then been presented to the Clerk of Courts on March 30th, 2007, and were then sent to two further experts at the expense of TMSF. Visual inconsistencies between those so-called originals and photocopies of them were then investigated and confirmed; although the copies should have matched,

they were not the same. In the meantime, in July 2007, the yachts were sold; Frequency to Mavi and Airwaves to the third plaintiff (‘Rumeli’).

Expunging the mortgages

The plaintiffs submitted that (a) the mortgages on the vessels should be expunged; (b) this would naturally follow from the striking out of the defendants” defence and counterclaims for failure to comply with the ‘unless’ orders, or explain why the failures had taken place; (c) the alleged mortgage documentation had been deliberately withheld, or destroyed, by the defendants and because of its importance to their case a fair trial was no longer possible in its absence; (d) the defendants could not be expected to comply with...