Not a “banana republic” – Cayman Court delivers conclusive judgment on matters of forum conveniens and abuse of process

Background

The substantive dispute arose from allegations by a Cayman incorporated company (the Plaintiff) against one of its former directors and founders, Mr Oussama Ammar, a French citizen. Mr Ammar was the co-founder of the group colloquially known as “The Family”, one of France’s most famous start-up incubators. The Family’s co-founders, Alice Zagury and Nicolas Colin, having already fired their opening salvos in what would become a very public dispute by filing criminal complaints against Mr Ammar in France, continued their pursuit by issuing proceedings in Cayman.

The Plaintiff is part of The Family, which offers investments in new start up ventures to investors. The Plaintiff’s case was that Mr Ammar dishonestly misappropriated funds paid into the Plaintiff by those investors. The Second and Third Defendants are both companies incorporated in Honk Kong, owned by Mr Ammar and with Mr Ammar as the sole director.

Proceedings were issued on 22 February 2022. On 15 March 2022 the Plaintiff secured an order (the Order) granting service out of the jurisdiction, substituted service by email and a worldwide freezing order (the WFO). In May 2022 the Plaintiff entered default judgment for a sum to be assessed (the Judgment). On 6-7 November 2023 a hearing took place to determine quantum and on 5 December 2023 the Court rendered a final award in favour of the Plaintiff and ordered that the Defendants pay all of the Plaintiff’s costs on the indemnity basis.

Curiously (or perhaps not) the Defendants initially took no part in the proceedings in Cayman at all. It was not until the Plaintiff took steps to enforce the Judgment in Delaware that the Defendants engaged in the Cayman litigation for the first time, in early March 2024, a fact that the Plaintiff asserted was no coincidence. Mr Ammar claimed that his previous non-participation was due to the fact that he was prevented from doing so by a legal spending cap in the WFO (USD 10,000).

The Defendants applied to discharge the Order, and the Plaintiff in turn applied to strike out the Defendants’ application as an abuse of process.

In determining the applications, Parker J delivered a judgment that provides helpful guidance on: (i) full and frank disclosure; (ii) service out of the jurisdiction and forum conveniens; (iii) substituted service; and (iv) abuse of process.

Full and Frank Disclosure

The duty to provide full and frank disclosure is an issue that can, if not paid proper regard, cause significant setbacks for applicants, including any order made being set aside.

The Court provided a useful reminder of some of the more important points, namely:

(i) the duty applies even when the application is made on notice and the Defendant has had copies of all materials beforehand;[1]

(ii) the fact that a Defendant may choose not to appear or object does not water down the duty on the part of the applicant;[2]

(iii) the duty extends to drawing the Court’s attention to significant factual legal and procedural aspects of the case;[3]

(iv) the ultimate touchstone is whether the presentation of the application is fair in all material respects;[4]

(v) the evidence and the argument must be presented and summarised in a way which, when taken as a whole, is not misleading or unfairly one-side;[5]

(vi) the duty extends to drawing the Judge’s attention to any parts of a draft order which depart from standard form, ensuring that the Judge is aware of all the terms and their implications;[6] and

(vii) The duty is important and if it is breached the Court will be astute to ensure that the applicant is deprived of any advantage obtained.[7]

The Court however then tempered this reminder, with reference to Wang v Credit Suise AG & Ors [8] in which Appleby’s David Lee and David Lewis-Hall appeared successfully,[9] setting out the following additional principles:

(viii) materiality is to be assessed by the Court, not by an applicant or his legal advisors, and not all facts which might or should have been disclosed are sufficiently material to justify or require the immediate discharge of the order without examination of the merits. In complex cases and bearing in mind time pressure there is scope for a limited margin of error; [10]

(ix) the court retains a discretion which could justify an immediate discharge of the order, no discharge, a continuation on terms, or indeed a new order depending on the circumstances. The discretion is to be applied on a principled and fair basis so that material breaches of the duty are properly dealt with;[11] and

(x) applications are not to become an instrument of injustice where there is a minute examination of all points which might have been made, with little prospect of discharge on the merits of the case.[12]

For an informative recent example of these latter principles being applied, see MYF Maximus Limited v DNB Bank ASA [13], also citing Wang .

The Defendants adopted somewhat of a scattergun approach to the application, advancing broad and varied allegations of failures to meet the requirements of full and frank disclosure.

For the most part, the Court paid this approach fairly short thrift, disposing of the allegations with the statement that the ”Court has considered each of these arguments fully and the totality of them to assess whether there was a fair presentation. It has come to the clear view that the presentation was fair and not misleading and did not omit any material facts. The Court is satisfied that any omissions were inadvertent and not material”.[14] Parker J did however analyse allegations that the Court’s attention was not drawn to the fact that the Order departed from the standard form of order in two material respects:

1. the Order imposed a spending cap of USD 10,000; and

2. the Order placed a limit on the cross-undertaking in damages of USD 25,000.

As to the spending cap, the Court referred to the authority of HMRC v Begum[15] and the general principle that a Court will not impose a cap on a defendant’s legal costs, so as not to set itself up as a costs accessor.[16] The standard position is that a defendant may use frozen assets for the payment of his reasonable legal costs, provided that the plaintiff is informed as to the source of the payments.[17]

As to the cross-undertaking in damages, the Court reiterated that the usual position is that an unlimited cross-undertaking is required and noted that this was not explored with reference to relevant authorities at the ex parte hearing.

Notwithstanding the above, the Court declined to exercise its discretion to set aside the Order; reliance was placed on the fact that the Defendants had not taken part in the proceedings for 2 years and had had ample opportunity to take these points on prior occasions. Parker J concluded “The fact remains that although Mr Ammar’s English solicitors did contact [the Plaintiff’s] Cayman attorneys about the spending limit, no points were taken by [the Defendants] about these terms for 2 years and it is, in the Court’s view, too late to take them now.” The Court’s reasoning suggests that had the Defendants taken a more pro-active approach and pursued these points sooner, they may have prevailed.

Service out of the Jurisdiction and Forum Conveniens

The law pertaining to service out of the jurisdiction in Cayman is fairly well settled. The Court provided a brief synopsis of the relevant principles as follows. The applicant must show, in relation to each defendant:

(i) there is a serious issue to be tried (a substantial question of fact or law, with a real as opposed to fanciful prospect of success;

(ii) that service out is permissible by reference to the gateways provided for in GCR Order 11 rule 1 (by showing at least a plausible evidential basis); and

(iii) that in all the circumstances of the case, it is appropriate for the Court to exercise its discretion to permit service out.[18]

Finally, should the jurisdictional threshold be crossed, the court is then faced with determining the forum in which the case can most suitably be tried – forum conveniens.

The Plaintiff applied for jurisdiction over Mr Ammar based on GCR O.11 r.1 gateways:

(i) d(iii) – a contract giving the Court jurisdiction in respect of that contract;

(ii) (e) – a breach of Contract within the Cayman Islands; and

(iii) (ff) – a claim against a director of a Cayman Islands company which relates to the company of the status, rights or duties of the director.

The only gateway relied upon vis the Second and Third Defendants was (c) – a necessary and proper party; that jurisdiction being dependent upon establishing jurisdiction over Mr Ammar.

It was common ground between the parties that (e) was not applicable,[19] however the Court found little difficulty in concluding that (ff) was; the claim related to Mr Ammar’s conduct as a director of the Plaintiff, a Cayman incorporated company.[20]

The Court’s analysis of (d)(iii) was more complex. The Defendant argued that the misappropriated payments were made pursuant to a Strategic Services Agreement dated 18 may 2018 (the SSA) between The Family (Holdings) Limited (another member of The Family) and the Second Defendant for providing services to the Plaintiff’s group, wherein Mr Ammar received the payments for acting as the agent of the Second Defendant. The SSA was governed by English law and contained an exclusive jurisdiction clause in favour of the English courts.

In a ruling that truly highlights the importance of properly managing disputes across multiple jurisdictions, Parker J noted that in concurrent proceedings in England the Defendants had sought to argue that their arrangements with the Plaintiff were not subject to the SSA and were instead governed by a different suite of contracts.[21] The Court inferred that this was a reference to a separate contract that was relied upon by the Plaintiff and that was governed by Cayman law,[22] rendering d(iii) applicable.

Having established jurisdiction, the court then considered forum conveniens and again, the duty of full and frank disclosure reared its head.

The Defendant once more pulled out the proverbial scattergun and argued that the Plaintiff had failed to draw the Court’s attention to a plethora of factors, including allegations that: none of the parties had a real connection to Cayman; the SSA was subject to English law; there was no relevant documentation in the Cayman Islands and case management would be simple in England or France.[23]

The Court, again noting that the Defendants had taken conflicting positions in concurrent proceedings in England and France which had not been explained, did not accept any of the arguments advanced.[24]

Applying the principles in Spiliada Maritime Corp v Cansulex Ltd[25] the Court concluded that the Cayman Islands was clearly the most appropriate forum for the dispute and that the Court had been correct in exercising its discretion to permit service out.[26]

Substituted Service

In turning to substituted service, the Defendants’ submissions, although ultimately not successful, found some force.

The starting point is that GCR O.10, r1(1) requires that a Writ be served personally on each defendant. Should an application be made for substituted service be required, it must be made by affidavit and state the facts upon which the application is founded (GCR O.65, r.4). That evidence ought to set out why personal service is impractical and the legality of the method of service in the relevant country.

In the present case, none of the above was done. The Court found that the correct procedure was not followed,[27] however, whilst expressing that it was an exception, found that the circumstances of the case warranted a good reason for validating service retrospectively.[28] The Court justified this conclusion on the foundation that there had been no prejudice caused to the Defendants by service via email, the Defendants’ solicitors had taken no steps to oppose or appear at the hearing producing the Order and it had taken the Defendants 2 years to argue that service was defective.

Abuse of Process

Following the Order and Judgment, Mr Ammar was not subtle about his thoughts towards those findings, or the Cayman Courts, stating publicly: that the decisions were rendered without due process; that the Cayman Islands is a “banana republic” with a legal system that is “worth nothing”; that he had “no intention” of taking part in the Cayman proceedings; and that “we will see what the real judges think”, “before the right jurisdictions”.[29]

Parker J delivered the level and reasoned Caymanian riposte.

The Court first noted, pursuant to GCR O.12, r.8(1), that any defendant wishing to dispute jurisdiction is required to enter a notice of intention to defend the proceedings and, within the time limited for service of the defence, apply to the Court for the discharge of any order giving leave to serve the Writ on the defendant outside of the jurisdiction.[30] Referring to several authorities on delay to applications of this nature, the Court concluded that not only had no such notice been entered but that even if this were now remedied it would be thoroughly out of time.[31] Mr Ammar’s explanation of the fee spending limit within the WFO was not accepted; there was evidence that Mr Ammar’s legal costs were being met by third parties, attorneys could have been instructed in Cayman prior to the Order (or after) and once enforcement was commenced in Delaware “it did not take long for [the Defendants] to find and pay for appropriate representation”.[32]

The Court then considered the various inconsistencies advanced by the Defendants in the multiple jurisdictions and concluded that “what is obvious from the evidence is the manifest efforts [the Defendants] have made to avoid justice in any of these courts by saying whatever it suits them to say at the relevant time and place.”[33] Further, the “Court finds that [the Defendants’] true motivation in bringing the applications is not a genuinely held belief that this Court does not have jurisdiction, or that service was defective, but rather arises from their desire to frustrate enforcement of the Judgment.”[34]

Extraordinarily, Parker J closed with a finding that “Even if the Court had found there had been a breach of the duty of full and frank disclosure and that a fair presentation had not been made, there are such strong reasons for departing from the usual sanction for non-disclosure that it would not be in the interests of justice to set aside the Order made.”

In a final display of Caymanian magnanimity, Parker J afforded the Defendants the opportunity to file a written argument as to why they should not pay the Plaintiff’s costs on the indemnity basis, if they wished to do so; of not more than 5 pages and within 14 days.[35]

Important Takeaways

1. Pay proper attention to full and frank disclosure, it is not an afterthought, but rather a vital part of any ex parte application and it is important to get it right;

2. To delay is to court your own misfortune, potentially rendering previously valid points moot;

3. Ensure pleadings in separate, but factually linked, proceedings are consistent; and

4. Avoid the use of the term “banana republic” when litigating in Cayman.

[1] [15]
[2] [16]
[3] [15], citing Memory Corporation plc v Sidhu [2000] 1 WLR 1443, at 1459H to 1460B
[4] [17], citing Fundo Soberano de Angola v Dos Santos [2018] EHC 2199 (Comm) at [50] – [53], citied with approval in Cowan v Equis Special LP (Unreported, 3 October 2019, Mangatal J) at [77] – [78]
[5] [17]
[6] [18]
[7] [19], citing Ritchie 2021 (1) CILR at paras 271-286 Parker J
[8] (Unreported Decision, FSD 262, 268, 269, 270 of 2021, 8 April 2022)
[9] For a wider factual background to this matter and analysis of an important related decision of the Court of Appeal of the Eastern Caribbean Supreme Court, reinforcing protection to shareholders of BVI companies, see Appleby’s earlier article here.
[10] [20]
[11] [21]
[12] [22]
[13] (Unreported) FSD 289 of 2023 (DDJ)
[14] [25]
[15] [2010] EWHC 2186
[16] Begum at [43]
[17] [34]
[18] [46]
[19] [51]
[20] [56] – [57]
[21][21] [55]
[22] [65]
[23] [71]
[24] [72] – [75]
[25] [1987] AC 460 at 476B
[26] For a more in-depth analysis and application of these principles in Cayman, see Brasil Telecom S.A. v Opportunity Fund [2008 CILR 211]
[27] [92]
[28] [95]
[29] [108]
[30] [111]
[31] [112] – [120]
[32] [121] – [129]
[33] [134]
[34] [135]
[35] [140]