On 14 September 2023, The Honorable Mr Justice Kawaley handed down judgment in the latest instalment in the matter of Fortunate Drift Limited v Canterbury Securities, Ltd (FSD 227 of 2018). Katie Pearson of Claritas, acting for the Plaintiff, Fortunate Drift Limited (“FDL”), assisted by Rupert Coe and Mark Baldock, both of Three Stone Chambers, secured an order requiring the Defendant, Canterbury Securities, Ltd (“CSL”) to make a payment into a first-class Cayman bank of US$ 15,801,626.72 in support of a freezing order previously obtained by FDL (the “Frozen Sum”). The judgment is available here.
Following the hand-down of judgment on liability in this matter (a commentary on which, along with access to the judgment on liability, is available here), FDL applied for an order requiring CSL to pay the Frozen Sum into a first-class Cayman bank in the following circumstances:
- On 22 May 2023, FDL had obtained an injunction freezing the proceeds of sale of certain shares beneficially owned by FDL (the “Proceeds of Sale”). FDL’s case at trial, on which it was ultimately successful, was that those shares had been sold without FDL’s authorisation.
- CSL had represented to FDL that the Proceeds of Sale were held by a company called “Canadian Escrow Company Limited” (“Canadian Escrow”).
- On 16 June 2023, at the conclusion of the substantive trial on liability, FDL applied for and obtained an Order requiring CSL to disclose how the Proceeds of Sale were currently and had been held (the “Information Order”). Importantly, paragraph 1.2 of the Information Order simply required CSL to provide to FDL “[a] screen shot showing the current location, precise value and registered custodian of the Proceeds insofar as those Proceeds remain in the Defendant’s control” (Judgment, paragraph [2]).
- In the face of repeated applications for extensions of time to comply with the Information Order (with which CSL never did comply), CSL gave disclosure of a treasury bill purchased on 24 July 2023 (the “Treasury Bill”) to give the Court “reassur[ance] there are sufficient assets that could satisfy a judgment” (Judgment, paragraph [5]). CSL expressly claimed that the Treasury Bill had not been bought with the Proceeds of Sale.
- On 9 August 2023:
- FDL applied to freeze the Treasury Bill; and
- The Court circulated a draft judgment in the substantive claim for editorial comments.
- On 17 August 2023:
- The Court made an order freezing the Treasury Bill, in the face of opposition from CSL in the form of an affidavit, her eighth, from Ms Winczura that the Treasury Bill should not be frozen “because it would be disproportionate to do so” (Judgment, paragraph 8(e)).
- Thereafter, CSL’s attorneys emailed the Court to inform it that the Treasury Bill had in fact been sold and CSL had acquired alternative assets in its place, being Class B Preference Shares in a Canadian company called Thinkbox Atlas Investments Limited.
FDL issued a summons seeking an order that CSL pay a sum equivalent to the Treasury Bill into a first-class Cayman bank. In acceding to FDL’s summons, the Judge found that:
- CSL had not complied with paragraph 1.2 of Information Order and provided the required (or any) screenshot (Judgment, paragraph [31](b)). (The Judge stayed any further compliance with the Information Order until the quantum hearing in the substantive claim (Judgment, paragraph [26])).
- CSL’s conduct “established the clearest imaginable case of a risk of dissipation” because:
- It had failed to provide the screenshot which had been ordered and provided an “entirely unsatisfactory” explanation for its failure to do so; and
- CSL had sold the Treasury Bill, which it had proposed be substitute security. The Court held this “was both a blatant act of dissipation and a gross abuse of the processes of this Court” (Judgment, paragraph [31](c)).
- At paragraph [40], the Judge said CSL’s conduct amounted to a “sorry picture of dishonourable litigation conduct”, which made FDL’s application for the relief sought “factually unanswerable”.
- At paragraphs [41]-[45], the Judge considered the jurisdiction to require CSL to pay the Frozen Sum to a first-class Cayman bank. At paragraph [43], the Judge held that the existence of such a jurisdiction was “obvious”, deriving from the Court’s “jurisdiction to make such ancillary orders as may be required to ensure that its substantive freezing orders are rendered effective” (citing, at paragraph [44], his own remarks in Arcelormittal USA LLC v Essar Global Fund Limited [2019 (1) CILR 294]).
The Judgment provides a timely reminder of the extent of the Grand Court’s jurisdiction to grant ancillary orders and the perils of failing to comply with the Grand Court’s Orders.
