The Appleby 2012 Offshore Round-Up: Civil Procedure

Welcome to Appleby's review of the key decisions on matters of civil procedure and remedies handed down in the leading offshore jurisdictions during 2012, compiled by members of our Litigation & Insolvency Practice Group in Bermuda, the British Virgin Islands, the Cayman Islands, Jersey, Guernsey and the Isle of Man. Equivalent updates are available in the areas of insolvency & restructuring, company law, fund disputes and trust litigation. Copies may be obtained from our website or from your usual Appleby contact.

Across the offshore jurisdictions, 2012 has produced a steady flow of judgments in the sphere of civil procedure. The BVI has delivered an important decision relating to time limits for limitation and service, while the Bermuda Court has been busy on issues of costs as well as delivering its first reported decision on 'Springboard relief'. Cross-border issues feature strongly, which is not surprising given the international business presence of each jurisdiction. For example, asset-freezing and anti-suit (and anti-anti-suit) injunctions have been particularly topical in the BVI, Bermuda, Cayman and Jersey Courts and the Isle of Man Court has heard a variety of interlocutory applications concerning proceedings in relation to the litigation surrounding Bitel LLC (a Kyrgyz telecommunications company). In respect of the early determination of litigation, there have been some interesting developments in Cayman regarding strike-out and default judgment. We have also seen cases, especially in Guernsey, involving the questions of service out of the jurisdiction and when a stay on the forum non conveniens ground should be granted.

Asset-Freezing Injunctions

The ability of the courts to grant so-called 'free-standing' injunctive relief (i.e. relief in aid of foreign proceedings in the absence of a local cause of action) has continued to be topical in the offshore jurisdictions. In the BVI, the Black Swan jurisdiction, derived from the decision of Bannister J in Black Swan v. Harvest View BVIHCV 2009/399, affirmed by the Court of Appeal in Yukos CIS Investments v. Yukos Hydrocarbons BVICVAP 2010/028, is authority for the proposition that the Court may in appropriate cases grant free-standing injunctive relief, in aid of foreign proceedings. It thus marks a departure from the rule in The Siskina [1979] AC 210, long since abrogated in England but until then good law in BVI.

The Court has previously sought to keep a keen eye on the development of the jurisdiction, to ensure that the principle is kept within its proper bounds. Thus at first instance in Yukos, Bannister J explained that "Black Swan rests upon the willingness of the Court, in a case when the defendant to foreign proceedings has assets within its jurisdiction, to act in aid of a claimant's prospective entitlement to a money judgment if successful in the foreign proceedings. It depends upon the assumption that the foreign money judgment will be enforceable, by registration or otherwise, in the Court within whose jurisdiction the assets are situated. It is this last feature which founds the jurisdiction". The trend continued throughout 2012. For example, in Gudavadze v. Carlina BVIHCM 2012/0011 the Court left open the question whether summary judgment could ever be appropriate in Black Swan proceedings, but then granted summary judgment (significantly, against the claimant), in part on the grounds that there was no basis for continuing the injunctive relief originally obtained. It is less obvious that summary judgment would be available against the defendant.

In the case of Magot v. Gazin BVIHCM 2012/100, in an oral ex tempore judgment, the Court noted that the Black Swan jurisdiction is quite different from ordinary civil proceedings, and will not be accompanied by pleadings or orders for disclosure. It doubted whether Black Swan clothes the Court with the power to make ancillary orders, such as asset disclosure orders, preferring to take the view that these are best made by the foreign court. A similar approach, differently expressed, might be thought to lie behind the decision of the Commercial Court Judge in VTB v. Nutritek [2011] 11 JBVIC 2301: there the Judge noted the potential for jurisdictional disharmony where orders were made in the satellite proceedings which went beyond the relief granted in the primary, foreign proceedings. In Magot, the Court reserved for further argument the question whether adverse costs orders can be made in Black Swan proceedings.

Meanwhile, in the Cayman Islands, on 13 and 14 February 2012, the Court of Appeal heard an appeal against the decision of the Grand Court (Cresswell J) in January 2012 in VTB Capital plc v Malofeev & Others that there is no jurisdiction to grant a free standing Chabra injunction where the "cause of action defendant" was not a party to the proceedings.

In that case, the Grand Court was asked to grant a free-standing asset-freezing order against three defendants in support of an English worldwide freezing order. The first defendant was not resident within the Cayman Islands and there was no other basis on which he could be sued in Cayman, while the second and third defendants were Cayman companies which, the plaintiff alleged, held and managed an investment portfolio which was truly that of the first defendant.

Cresswell J declined to follow Quin J's decision of only a few months earlier in Gillies-Smith, (Unreported, Quin J, 12 May 2011) and refused to grant the freezing order against the first defendant and leave to serve out of the jurisdiction. He held that the Court was bound by the decision of the majority of the Privy Council in Mercedes- Benz AG v Leiduck [1996] 1 AC 284. The Judge went on to urge the Legislature to give urgent consideration to whether legislation equivalent to section 25 of the English Civil Jurisdiction and Judgments Act 1982 (whereby the English Court may grant a freezing order in support of foreign proceedings) should be introduced in Cayman.

With regard to the second and third defendants (which were Cayman companies) the question was whether the Court was able to grant a free standing Chabra order freezing the Cayman assets of the defendants where no substantive cause of action had been asserted against them. The order was hesitatingly granted by Cresswell J at the ex parte stage on the basis that the issue should be fully argued at an inter partes hearing. The Judge conditionally discharged the order following the inter partes hearing: he concluded that where there is no "cause of action defendant" in proceedings in the Cayman Islands, the Grand Court did not have jurisdiction to grant Chabra relief. The injunction remained in force for a limited time, which gave the plaintiff an opportunity to apply for leave to appeal. Leave to appeal was obtained from the Court of Appeal, which continued the injunction until the hearing of the appeal. Judgment following the appeal is still awaited, but at the end of the hearing of the appeal the Court of Appeal accepted undertakings offered by the second and third defendants and discharged the injunction.

In Bermuda, in the case of E.R.G. Resources v Nabors Global [2012] SC (Bda) 23 Com, the Court similarly considered the scope of the Court's power to grant free-standing injunctive relief in aid of foreign proceedings. Citing the Black Swan authority from the BVI, Kawaley CJ confirmed that the current Bermuda common law...