Dawson-Damer v Lyndhurst Ltd

• Jurisdiction: Bermuda
• Judgment Date: 06 February 2019
• Date: 06 February 2019
• Docket Number: Civil Jurisdiction 2018 No 334
• Court: Supreme Court (Bermuda)

[2019] Bda LR 10

In The Supreme Court of Bermuda

Civil Jurisdiction 2018 No 334

Between:

Ashley Dawson-Damer

Applicant

and

Lyndhurst Limited

Respondent

Mr R Wilson QC and Mr S Pearman for the Applicant

Mr D Brownbill QC and Mr K Robinson for the Respondent

The following cases were referred to in the judgment:

The Siskina [1979] AC 210

Channel Tunnel Group and Anor v Balfour Beatty Ltd and Ors [1993] AC 334

Black Swan Investments ISA v Harvest View and Ors BIHCV 2009/339

Yukos CIS Investments Ltd and Anor v Yukos Hydrocarbons Investments Limited and Ors HCVAP 2010/028

Meespierson (Bahamas) Ltd v Grupo Torres SA [2001] 1 LRC 627

Polly Peck International plc v Nadir and Ors (No 2) [1992] 4 All ER 769

Allan v Rea Brothers Trustees Ltd [2002] EWCA Civ 85

Gany & Rangoonwala v Khan and Ors [2018] UKPC 21

King Fung Vacuum Limited v Toto Toys Limited [2006] HKCA 145

Madoff Securities International Limited v Raven [2011] EWHC 3102

Cherney v Neuman [2009] EWHC 1743

Application for interlocutory preservation order in aid of a proprietary claim — Requirement of underlying substantive proceedings — Proceedings in foreign jurisdiction must be enforceable in Bermuda — Trust assets

JUDGMENT of Hargun CJ

Introduction

1. These proceedings are commenced by Ashley Dawson-Damer (“the Applicant”) by Originating Summons filed on 24 September 2018 seeking an interim injunction preserving the assets received by Lyndhurst Limited (“the Respondent”) in 2006 and 2009 from Grampian Trust Company Limited (“Grampian”) in its capacity as a trustee of the Glenfinnan Settlement (“the Settlement”) and held by the Respondent as a trustee of the Came, Hewish and Emo Settlements (“The Bermuda Trusts”).

2. The Applicant also seeks information from the Respondent in terms of (1) a list of the assets held by it which were received from Grampian (“the Assets”); (2) the whereabouts of the Assets including all relevant account details; (3) the total value of the Assets with separate values ascribed to each Asset class; (4) the extent to which the Assets are encumbered; and (5) a complete list of all distributions made from the Assets from 1 December 2006 to date including all and any capital and/or interest distributions.

Background

3. The Applicant is a discretionary beneficiary of the Settlement which is governed by the laws of The Bahamas.

4. In 2006 and 2009, the trustee of the Settlement, Grampian, a Bahamian private trust company, made two appointments in the aggregate sum of US $402 million (“the Appointments”) (representing approximately 98% of the assets of the Settlement) onto inter alia The Bermuda Trusts of which the Respondent is the trustee.

5. In March 2015, the Applicant commenced proceedings in the Supreme Court of The Bahamas against Grampian seeking to set aside the Appointments. The Respondent was added as a defendant to the Bahamian proceedings in July 2018. In the Bahamian proceedings the Applicant seeks inter alia (1) declarations that the 2006 Appointments and/or the 2009 Appointment are void, or alternatively voidable; (2) an order setting aside the 2006 Appointments and/or the 2009 Appointment; and (3) an order requiring the re-vesting of assets subject to the 2006 Appointments and/or 2009 Appointment (or the traceable proceeds thereof) to the Settlement. The Respondent has elected not to submit to the jurisdiction of the Bahamian courts and has refused to participate in the Bahamian proceedings.

6. In the Bahamian proceedings the Applicant asserts that when exercising its power to make the 2006 Appointments and/or the 2009 Appointment, Grampian failed to exercise its discretion fairly, properly, reasonably or even-handedly. In particular, it is alleged inter alia that (1) Grampian unfairly discriminated against the Applicant by adopting a policy that she will not benefit under the Settlement and took that policy into account when considering how to exercise its fiduciary discretionary powers under the Settlement; (2) Grampian failed to give any or any proper consideration whether provision ought to be made for the Applicant from the Settlement whether at that time or in the future; (3) Grampian failed to take into account the Applicant's financial circumstances and weigh them against the needs of the beneficiaries in whose favour the Appointments were made; (4) Grampian purportedly decided by 2004 that the Applicant would not benefit from the Settlement (despite her remaining a beneficiary) and thereby wrongfully closed its mind to the interests of the Applicant and the question of whether she should benefit from any exercise of discretion under the Settlement thereby effectively (and improperly) limiting the scope of the powers conferred on Grampian; and (5) alternatively, Grampian exercised its powers for the ulterior and improper purpose of excluding the Applicant from benefiting from the vast bulk of the trust fund, having determined not to exercise its power to exclude the Applicant from the class of beneficiaries on the grounds that it would be provocative to do so.

7. The Applicant contends that if she succeeds in a claim in the Bahamian proceedings, the assets representing the traceable proceeds of those Appointments will be held by the Respondent on bare trust for Grampian as trustee of the Settlement. In these circumstances the Applicant has sought an undertaking from the Respondent that the Respondent will not dissipate the Assets pending the resolution of the Bahamian proceedings. The parties have engaged in lengthy correspondence in relation to the issue of the undertaking by the Respondent. The Respondent has confirmed that it has made no distributions to the beneficiaries of the Bermuda Trusts and whilst it has no present intention of making any distributions to the beneficiaries, it does not consider it appropriate to give the undertaking sought. In the circumstances the Applicant has commenced these proceedings seeking a preservation order from the Court.

Outline of the issues between the parties

8. The Applicant contends that the test for granting injunctive relief in the form of a preservation order where a proprietary claim is advanced is the American Cyanamid test (American Cyanamid v Ethicon[1975] AC 396). Under this test the Court has to be satisfied of three matters: first, has the Applicant shown a serious issue to be tried on the merits; second, is the balance of convenience in favour of granting injunctive relief; and third, is it just and convenient in all the circumstances to grant the order.

9. The Respondent accepts that in the case of a proprietary claim, where proceedings are pending in this jurisdiction, the relevant test is as set out in the American Cyanamid case. However, the underlying proceedings, in aid of which this injunction is sought, are not pending in this jurisdiction but are pending in a foreign jurisdiction. In these circumstances, the Respondent contends that this Court will not exercise its statutory jurisdiction to grant an injunction in aid of the foreign proceedings unless it can be shown that any judgment resulting from the foreign proceedings will be enforceable in Bermuda. The Respondent argues that there is an established body of case law holding that if the foreign judgment will not be enforceable in Bermuda, having regard to Bermudian conflict of law rules relating to the enforcement of foreign judgments, a Bermuda court will not grant an injunction in aid of the foreign proceedings.

Discussion on the jurisdiction issue

10. This Court's jurisdiction to grant interlocutory relief is to be found in section 19(c) of the Supreme Court Act 1905 which provides that, “an injunction may be granted, or a receiver appointed, by an interlocutory order of the court in all cases in which it appears to the Court to be just or convenient that such order should be made”.

11. RSC O 29 r 2(1) deals specifically with injunctions aimed at detention and preservation of subject matter of cause or action and provides that, “On the application of any party to a cause or matter the Court may make an order for the detention, custody or preservation of any property which is the subject-matter of the cause or matter, or as to which any question may arise therein, or for the inspection of any such property in the possession of a party to the cause or matter.”

12. The wording of section 19(c) of the 1905 Act, like its corresponding English provision, is wide and open ended. However, the exercise of this jurisdiction, as the cases show, has always been subject to constraints. One such constraint is that the court will not ordinarily make an interlocutory preservation order unless the court has jurisdiction over the underlying cause of action to which the interlocutory injunction relates.

13. The root case dealing with this constraint is The Siskina[1979] AC 210 where Lord Diplock stated the general proposition that an interlocutory injunction cannot exist in isolation and must be linked to an underlying cause of action:

“That subsection, speaking as it does of interlocutory orders, presupposes the existence of an action, actual or potential, claiming substantive relief which the High Court has jurisdiction to...