Apex Fund Services Ltd and Hughes v Clingerman and Silk Road Funds Ltd (leave to appeal)

• Jurisdiction: Bermuda
• Judgment Date: 18 February 2020
• Docket Number: Commercial Jurisdiction 2019 No 292
• Date: 18 February 2020
• Court: Supreme Court (Bermuda)

[2020] Bda LR 12

In The Supreme Court of Bermuda

Commercial Jurisdiction 2019 No 292

Between:

Apex Fund Services Ltd

Peter Hughes

Plaintiffs

and

Matthew Clingerman (in his capacity as Receiver of the Silk Road M3 Fund, a segregated account of Silk Road Funds Limited

Silk Road Funds Limited

Defendants

Mr M Chudleigh and Ms L Williamson for the Plaintiffs

Mr J Elkinson for the Defendants

The following cases were referred to in the judgment:

Dobie v Interinvest (Bermuda) Ltd and Black [2010] Bda LR 25

Avicola Villalobos SA v Lisa SA and Leamington Reinsurance Co Ltd [2007] Bda LR 81

Bank of Credit: & Commerce International SA v Ali, Husain and Zafar [2001] EWCA Civ 636

Hadmor Productions Ltd v Hamilton [1983] 1 AC 191

Island Construction Ltd and DeSilva v Phillips and Phillips [2019] Bda LR 92

Application for leave to appeal decision to set aside interim anti-suit injunction — Legal test for granting leave to appeal against exercise of judicial discretion — Stay pending appeal — Whether costs should follow the event for interim order

RULING of Subair Williams J

Introduction

1. This Court is concerned with a Notice of Motion for leave to appeal my 12 November 2019 Ruling in this matter (“my November Ruling”) where I set aside my earlier ex parte order of 22 July 2019 granting interim anti-suit injunctive relief.

2. The Notice of Motion contains various grounds of appeal which criticize my findings that the Plaintiffs failed to prove their legal entitlement (whether statutory, contractual or non-contractual) to an anti-suit injunction.

3. Mr Chudleigh also foreshadowed the Plaintiffs' intention to supplement the grounds of appeal to include an application to adduce fresh evidence which is said not to have been reasonably available for placement before me in the lead-up to my November Ruling.

4. Additionally, the Plaintiffs seek the restoration and extension of the interim injunctive relief granted ex parte on 22 July 2019 so to effectively stay the New York proceedings pending the outcome of the appeal proceedings in this matter.

5. During the course of oral arguments from both sides, it became readily apparent that a written ruling from this Court would be desirable as a means of clarification on the correct test and approach to the Court's consideration of leave applications where the subject of criticism under appeal is the exercise of judicial discretion.

The Application for Leave to Appeal

Grounds against my November Ruling

6. In the Grounds pleaded in the Notice of Motion, it is said that I erred in refusing both the claims to a contractual and non-contractual entitlement to an anti-suit injunction.

7. Where the Plaintiffs complain about my decision that there was no contractual right to the pursued relief, they submit that I wrongly interpreted the jurisdiction clause in the Administration Agreement. The Plaintiffs also advance a ground of complaint against my interpretation of the scope of the Receiver's Court ordered powers.

8. On the subject of the non-contractual entitlement to the anti-suit injunction where it was argued that the New York proceedings are vexatious and/or oppressive and/or unconscionable, the Plaintiffs say that I erred in finding that the New York Court had a real potential of being found to be a natural and appropriate forum.

9. As a bottom-line position, the Plaintiffs aver that my refusal to grant the interim injunction and to set aside the 22 July ex parte order was wrong in law and/or manifestly wrong in the exercise of my discretion.

Prospective Grounds relying on Fresh Evidence

10. Relying on the supporting affidavit evidence, Mr Chudleigh explained the current status of the New York proceedings where it is recorded that on 21 November 2019 the Hon O Peter Sherwood, JSC conditionally granted the Plaintiffs' motion to dismiss on jurisdictional grounds in the following terms:

“Upon the foregoing documents, it is ordered that this motion to dismiss (Motion Sequence Number 001) is GRANTED, as plaintiff has not carried its burden of showing the court has jurisdiction over defendants Apex Fund Services Ltd, a Bermuda company, and Peter Hughes, a Bermuda resident (together “Apex”). Apex provides fund administration services from offices in Bermuda. It does not have custody of funds. Plaintiff's allegations that defendant Alisher Ali (“Ali”) effected fraudulent transfers and that Apex aided and abetted the fraud using New York based banks is irrelevant because said defendants had custody of any funds or utilized any New York bank in this matter.

Plaintiff alleges Ali had a New York residence and defendants communicated with him regularly in New York. Plaintiff also maintain that Apex, acting through an agent in New York had knowledge of Ali's improper acts and worked to terminate Apex's connection with M3 Fund which is sufficient to satisfy New York's purposeful availment requirement. The evidence presently before the court is insufficient for assertion of jurisdiction. However, the court will permit limited discovery in aid of the claim of jurisdiction.

The scope of that discovery is described in the transcript of oral argument on the motion dated November 20, 2019. Discovery shall be completed by January 31, 2020. Counsel shall appear for a status conference on Tuesday, January 21, 2020…”

11. Mr Chudleigh argued that the recent dismissal of the New York action is a significant factor for an appellate Court to consider against my analysis on the Plaintiffs' claim to a non-contractual entitlement to an anti-suit injunction. In my November Ruling I remarked that the New York Court might find on the evidence that it too is a natural and appropriate forum for the resolution of the underlying action. At paragraph 139 of my November Ruling I stated:

“The lion's share of the claims factually center on the actions of the Plaintiffs and Mr Ali. The case against Mr Ali and the Transferee Defendants is tied to the New York banking transactions which moved the proceeds of the Fund from one New York bank account to the next. In my judgment, the Plaintiffs have shown it highly likely that they will meet the satisfaction of the second limb of the test requiring Bermuda to be a natural and appropriate forum for the determination of matters in issue. I cannot, however, at this point say that the same is not so in respect of the New York Court which also has a realpotential of being found to be a natural and appropriate forum. For example, if it is later found on the facts that Mr Ali was resident in New York between around 16 February 2013 and 3 October 2014 from where he operated the...