IN THE GRAND COURT OF THE CAYMAN ISLANDS FINANCIAL SERVICES DIVISION .;,. 1fI4N \ ,~ ! ) , , 1 2 3 4 5 6 7 8 9 CAUSE NO: FSD 96 OF 2011 (pCJ) (Originally Cause No: 329 of 2008) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 In Chambers Before the Hon. Justice Peter Cresswell 26 April 2013 BETWEEN: AND CIGNA WORLDWIDE INSURANCE COMPANY (BY AND THROUGH ITS COURT APPOINTED RECEIVER, JOSIE SENESIE AND IN RESPECT OF THE ASSETS, UNDERTAKINGS AND AFFAIRS OF ITS LICENSED LIBERIAN BRANCH AND BUSINESS) Plaintiff ACE LIMITED Defendant Appearances: Lord Goldsmith PC, QC instructed by and with Mr. Colin McKie and Mr. Adam Huckle of Maples and Calder on behalf ofthe Defendant Mr. Ben Hubble QC instructed by and with Mr Nicholas Dunne of Walkers on behalf of Mr Martin S. Kenney and CC International Limited Mr. Richard de Lacy QC and Mr. William Jones of Ogier on behalf of Echemus Group L.P. and Echemus Investment Management Ltd. and Mr. James Little 26 RULING 27 TABLE OF CONTENTS 28 1 LEAVE GRANTED TO SERVE THE COSTS SUMMONS OUT OF 29 THE JURISDICTION 30 2 THE SUMMONSES BEFORE THE COURT 31 3 THE APPLICATION IN A NUTSHELL " 32 4 THE JUDGMENT DATED 27 JANUARY 2012 1 of 33 1 5 2 6 3 7 THE DEFAULT JUDGMENT OF 27 FEBRUARY 2012 4 8 THE SUBMISSIONS ON BEHALF OF THE DEFENDANT THE SUBMISSIONS ON BEHALF OF MR KENNEY AND CCI ANALYSIS AND CONCLUSIONS 5 6 1 LEAVE GRANTED TO SERVE THE COSTS SUMMONS OUT OF 7 THE JURISDICTION 8 On 17 April 2012 at an ex parte application, the Defendant (ACE) was granted permission to 9 serve the Costs Summons out of the jurisdiction on five costs parties: 10 11 Echemus Group L.P.; 12 Echemus Investment Management Ltd.; 13 Mr Maliin S. Kenney (Mr Kenney); 14 CC International Limited (CCl); and 15 Mr. James Little (Mr Little). 16 17 2 THE SUMMONSES BEFORE THE COURT 18 There are 2 Sununonses before the court. 19 First, a Sununons dated 24 Januruy 2013 whereby the Defendant applies for leave to amend its 20 Sununons dated 10 April 2012 to delete 2 costs pm1ies (including Mr Little) and to make clear 21 that costs are sought on the indemnity alternatively standard basis. 22 23 Second, a Summons dated 5 April 2013 by two applicants only (Mr. Kenney and CCI) for an 24 order that the order of the cOUl1 made ex parte on 18 April 2012 granting leave to serve the 25 Defendant's Sununons dated 10 April 2012 on the applicants out of the jurisdiction be set aside. 26 27 3. THE APPLICATION IN A NUTSHELL 28 Mr Kenney and CCI contend that: 2of33 1 The court had and has no jurisdiction to order service of the Costs Summons against Mr 2 Kenney and CCI because the court has no jurisdiction under GCR Order 11 to order 3 service of a Costs Summons out of the jurisdiction with the aim of securing third patty 4 costs orders; 5 6 alternatively, even if the court had or has jurisdiction, it ought in the patticulat· 7 circumstances to have declined and to decline to order service of the Costs Summons out 8 of the jurisdiction against Mr Kenney and CCl. 9 10 It should be noted that Echemus Group LP and Echemus Investment Management Ltd have 11 accepted that they have been validly joined and served and are subject to the jurisdiction of the 12 comt. In relation to the jurisdiction to order service out of the Costs Summons, Mr Kenney and 13 CCl are in exactly the sanle position as Echemus Group LP and Echemus Investment 14 Management Ltd. 15 16 4 THE JUDGMENT DATED 27 JANUARY 2012 17 I refer to my Judgment herein dated 27 January 2012 for 18 the Dramatis Personae; 19 the description of and history of the Cayman Islands proceedings and the proceedings in 20 the United States; 21 the application for security for costs; 22 the application for a stay; and 23 what I set out under the heading "An order that the Plaintiff identify the persons who are 24 funding these proceedings". 25 26 5 THE DEFAULT JUDGMENT OF 27 FEBRUARY 2012 27 On 27 February 2012 upon the court being satisfied that the Plaintiff had failed to provide 28 security for the Defendant's costs pursuant to paragraph 4 of the Order of27 Januaty 2012 29 30f33 1 the Plaintiffs Amended Writ of Summons dated 10 July 2008 was struck out and 2 judgment was entered for the Defendant. The Plaintiff was ordered to bem' the 3 Defendant's costs of the proceedings (not otherwise provided for by the Order), to be 4 taxed on the standard basis, if not agreed. 5 6 6 THE SUBMISSIONS ON BEHALF OF THE DEFENDANT 7 Lord Goldsmith PC, QC's submissions on behalf of the Defendant (ACE) were as follows:- 8 9 This is not the trial of the substantive application to make Mr Kenney and CCI (or any 10 other pmiy) liable for costs. This is a summm'y process (see Lord Templeman in Spiliada 11 Maritime Corp v Cansulex Ltd [1987] lAC 460 at 465 F). Many of the questions raised 12 by Mr Kenney and CCI are not for now. 13 14 The Defendant refers to and relies on the following: 15 16 17 18 19 20 (i) In the judgment of 27 January 2012 the whole issue of the identity and liability of those funding and directing the litigation was a key issue. At page 29 it was said "there is material before the cOUli ... which would justify the conclusion that the Plaintiff is a nominal plaintiff'. The question of liability of non or third parties to meet the costs obligation was canvassed in detail. 21 (ii) The material before the court specifically referred to the position of Mr Kenney - 22 see for example Mr Hawthorne's second affidavit. 23 (iii) The history of attempts to identify the investors behind CCI even when ordered to 24 do so in the EDPA action (see Mr Hawthorne's third affidavit paras 21 ff) 25 26 27 including abandoning the AJA claim in this court and defaulting in the EDPA (see Mr Hawthorne's sixth affidavit para 8). 28 As to the role of Mr Kenney, the Defendant refers to and relies on the evidence including in 29 pmiicular:- 4 of 33 1 (a) The whole of the sixth affidavit ofMr Hawthorne. At paragraph 21 reference is made 2 to an e-mail of 26 March 2010 which states that Mr Kenney would be investing $2 3 million in Echemus. 4 (b) The whole of the seventh affidavit of Mr Hawthorne. Mr Kenney devised the plan 5 with Mr Lohman to enforce the judgments and devised the plan to attempt to proceed 6 against ACE under its indemnity obligations. He "procured" the appointment of the 7 Liberian Receiver because ACE could not be sued directly. The plan was devised 8 long before the Receiver was appointed and before Mr Senesie recognised the 9 Liberian judgments in order to get access to the court by the device of acting through 10 a local insolvency office holder. It involved very unusual an'angements with a public 11 official. The litigation here was instigated as part of this scheme. The Receiver was 12 just a straw man "and ... a conduit for funds". Mr Kenney alTanged for the creation of 13 CCl. He mmnged funding. He "invested" himself through Blue Hawk Investments 14 Limited. 15 16 As to the role of CCI, the Defendant refers to and relies on the whole of the evidence 17 summarised at paras 49 and 50 ofMr Hawthome's seventh affidavit. 18 19 The cOUlt is not functus officio. 20 21 Mr Kenney and eel have delayed excessively in making the application to discharge and should 22 be disentitled to set aside. 23 24 Grand Cayman is plainly the most suitable forum, if not the only fomm, where the question of 25 liability in respect of a Cayman order for costs in relation to a Cayman action deliberately 26 instigated in Cayman and controlled and funded (in pmt) by Mr Kenney can be detetmined. In 27 any event the COUlt will be determining the liability of the Echemus parties. Mr Kenney and CCI 28 have in effect submitted to the jurisdiction. 29 30 Masri v Consolidated Contractors Int (UK) Ltd (No 4) [2010]1 AC 90 31 32 The decision in Masri was that ePR Pmt 71 on its hue constmction did not apply to the 33 examination of officers abroad (see Lord Mance at pm'agraphs 26,37 and 39). The discussion of 50f33 1 the Ikarian Reefer (No.2) [2000] 1 WLR 603 was merely "supportive" of that conclusion (see 2 paragraph 27), but principally the case was about the absence of an explicit power to serve out an 3 order under ePR Part 71 (see paragraph 37). The observations of Lord Mance are therefore 4 obiter dicta. 5 6 Masri is not authority for the proposition that leave to serve out of the jurisdiction on a non-party 7 for a costs order is allowed if, and only if, the non-paliy is the alter ego of the actual party. It 8 would be an unjust result if a non-party within the jurisdiction were liable for costs under the 9 wide ambit of Dymocks Franchise Systems (NSW) Pty Ltd v Todd, and others (Costs) [2004] 1 10 WLR 2807 ("Dymocks''), but a non-patiy out of the jurisdiction who has conducted himself in 11 precisely the same way would escape liability because the applicant was unable to show that he 12 was the alter ego of the named party. Notwithstanding this, if the category were limited to alter 13 ego, the Defendant satisfies this test. 14 15 As to what is meant by the telm alter ego in the context of an application for a non-patiy costs 16 order, Lord Mance explains at paragraph 33 of Masri that an alter ego is an entity who had 17 "instigated, controlled and financed" proceedings. He goes on to say that "In such 18 circumstances it may be legitimate to assimilate the party and non-party, and to treat any means 19 of service available also against the former as available against the latter. As Waller LJ put it 20 in the Ikarian Reefer (No.2) at 613E, "if what is alleged.... is that the non-party in reality 21 brought the main proceedings, the English cOllrt has jurisdiction to decide whether there has in 22 effect been a submission to the jurisdiction by the non-party". Even on this narrow view, eel 23 and Mr Kenney fall within that concept. 24 25 The Defendant proceeds on the basis of three approaches: (i) a narrow approach; (ii) an 26 intelmediate approach; and (iii) a broader approach. 27 28 The Narrow Approach 29 30 The cOUli has jurisdiction if the case can be brought within what Lord Matlce says in paragraph 31 33 of Masri, i.e. if it is "legitimate to assimilate the party and the non-party". 32 6of33 1 On any view of what this means, CCI and Mr Kenney fall within it. The Defendant relies on:- 2 3 (a) The evidence before the cOUli. 4 (b) The finding at page 29 of thc Judgment dated 27 Janumy 2012 that "there is material 5 6 before the court that would justijjl the conclusion that the Plaintiff is a nominal plaintijJ" i.e. one who is "suing for the benefit of some other person ". This indicates that 7 proceedings are in fact being brought for the benefit of the people behind the Receiver, 8 i.e. at least CCI and Mr Kenney. 9 (c) This case involves purchasing the cause of action. 10 (d) The Receiver has assigned his interest in the judgment to CCl. 11 (e) The Receiver only keeps a fee (1.25%). 12 13 In effect Mr Kenney and CCI have chosen to come to this comi tlu'ough hiding behind a receiver 14 who also has complete protection against adverse costs. It is very easy to say that they have 15 submitted to the jurisdiction - they have in fact chosen it. They can also be said to be the alter 16 ego of the Plaintiff. In interpreting these words it is legitimate to see if someone has submitted 17 to the jurisdiction. Someone who procures or assists the bringing of proceedings by A m 18 England and Wales (equally Cayman) can be said to be their alter ego in this sense. 19 20 The Intermediate Approach 21 22 Lord Mance's conclusion at pm'agraph 33 of Masri that the comi has jurisdiction to allow service 23 out on a non-pmiy where it is "legitimate to assimilate the party and the non-party" must 24 logically extend to include "the real party" to the litigation as described by Lord Brown in 25 Dymocks. Dymocks is one of the leading cases regarding the liability of third party funders. 26 There is authority supporting the proposition that, where the factors making a non-pmiy liable 27 for costs are satisfied, the court has the discretion to conclude that the non-party has submitted to 28 the cOUli's jurisdiction. In the Ikarian Reefer (No.2) counsel went as far as to submit that the 29 very nature of a non-pmiy costs order was such that, if made, it would involve deciding that the 30 relevant pmiy had in effect submitted to the jurisdiction. 70f33 1 The present case falls within Lord Brown's words in Dymocks (pages 2815 and 2816, paragraphs 2 F to A), including: 3 4 "The non party in these cases is not so milch facilitating access to justice by the party 5 fimded as himself gaining access to justice for his own purposes. He himself is "the real 6 party" to the litigation". 7 8 CCl and Mr Kenney are "the real party" to this dispute. This is itself equivalent to submitting 9 to the jurisdiction (as to which see Waller LJ in Ikarian Reefer (No.2) quoted with approval in 10 Masri}. The Defendant relies on (a) to (e) above under the heading "the Nan'ow Approach". 11 12 The Broader Approach 13 14 The House of Lords in Masri were not saying that there could not be service out of a costs 15 summons on a non-party - still less that it could only be by commencement of a new action. 16 Their concem was the proposition that it could be done without leave. (See paragraph 34 of 17 Lord Mance's speech in Masri). The ClUX is the need for leave. The Defendant accepts that the 18 leave should be by analogy with the grounds for service out under OCR 0.11 Rule 1 whether 19 you are concemed with OCR 0.11 Rule 9(1) or 9(2). Mr Kenney and CCl are necessary or 20 proper patties within OCR 0.11 Rule 1(1)(c) to the continuing dispute about the liability and 21 enforcement of costs. There is a matter in dispute, namely payment and enforcement of costs - 22 indeed, it is a question of liability for costs (Le. who is going to be liable for costs) as well as one 23 over the quantum of those costs. 24 25 7 THE SUBMISSIONS ON BEHALF OF MR KENNEY AND CCI 26 27 Mr Hubble QC's submissions on behalf ofMr Kenney and CCl were as follows. 28 29 The key issues as they emerged in the hearing are: 30 80f33 1 (I) Timing of the Summons to set aside: whether Mr Kenney andlor CCl are prevented from 2 applying to set aside the comi's Order dated 18 April 2012, by any delay in the issue of 3 their Summons to set aside, dated 5 April 2013. 4 5 (2) The Masri test: in the light of Lord Mance's Opinion in Masri, what is the correct test to 6 be applied in order for jurisdiction to be established to enable this court to grant leave to 7 serve a Costs Summons against a non-party out of the jurisdiction? 8 9 (3) Whether the Masri test is met on the evidence before the court. 10 11 As to the timing of the Summons to set aside, Mr Kenney and CCl are entitled to pursue the 12 Summons as they have complied with the GCR. The Defendant has known from the outset that 13 jurisdiction was challenged. The delay arose from the fact that the Defendant, apparently intent 14 on seeking fmiher evidence via the US proceedings, itself took no steps to list the Costs 15 Surmnons for directions. 16 17 The Masri Test 18 19 There is no jurisdiction to issue a Costs Summons against a non-paliy under GCR 0.11 Rule 20 1 (1)( c) as the Costs Summons is not a Writ of Summons. Order 11 Rule 1 only applies to the 21 service of a Writ. No Writ was served on Mr Kenney or CCl. The Writ which commenced the 22 underlying proceedings was issued by the Plaintiff (Le. the Receiver) and has been struck out. 23 ACE does not get as far as Order 11 Rule 1 (I) ( c) because it does not get past the introductory 24 wording to Order 11 Rule 1 itself. A Costs Summons is not a Writ (nor is it an Originating 25 Summons). The COUli of Appeal in VTB Capital PLC]I Malofeev and Others [2011 (2) ClLR 26 420] made it clear that Order 11 Rule 1 would only apply to a Writ which pursues a cause of 27 action. In any event, Mr Kenney and CCl are not necessary or proper parties to the Receiver's 28 cause of action against ACE (even if that cause of action remained extant, which it does not). 29 The above points are reinforced by a consideration of the requirements of Order 11 Rule 4 which 30 cannot be met in terms of a Costs Summons against a non-party. 90f33 1 There is no jurisdiction to issue a Costs Summons against a non-party under Order 11 Rule 9(1). 2 Order 11 Rule 9(1) extends the provisions of Order 11 Rule 1 to an Originating Summons, 3 Notice of Motion or Petition; but a Costs Summons is not an Originating Summons, Notice of 4 Motion or Petition, so Order 11 Rule 9(1) does not apply. 5 6 The above conclusions are reinforced by the fact that both in England & Wales and in Hong 7 Kong specific provision has been added to the equivalent of Order 11 Rule 1 to deal with the 8 position of applications for costs against non-parties. 9 10 There is a very limited jurisdiction to grant leave to serve a Costs Summons against a non-party 11 under Order 11 Rule 9(2) where the non-party is the alter ego of the Plaintiff and the cOUli is 12 satisfied that it is legitimate to assimilate the Plaintiff and the non-party so as to treat any means 13 of service available against the Plaintiff as also available against the non-party: see Lord Mance 14 in Masri at paragraph 33. Lord Mance said that (i) generally, Rule 9(2) only applies to service of 15 documents on pmiies to the action, but (ii) there is a very limited exception where the non-patiy 16 is the alter ego to, and so can be treated as assimilated with, the party itself. 17 18 As to the ambit of the Masri test in paragraph 33, Lord Mance identifies the Ikarian Reefer (No 19 2) as a special case because Mr Comninos was the alter ego of the claimant company (ie the one- 20 ship company scenario). "In sllch circumstances" (i.e. where the non-patiy is the alter ego of the 21 claimant) it "may" be legitimate to assimilate the patiy and non-party; thus to be the alter ego is 22 the threshold criterion. Where that is the case, the means of service available against the pmiy 23 are also available against the alter ego. 24 25 This limited jurisdiction arises only where (i) the non-party can be said to be the claimant's alter 26 ego and (ii) it is appropriate to assimilate the pmiies and to treat the non-party as if he was the 27 party for service purposes. This must be the limit of the jurisdiction, othelwise Lord Mance 28 would not have gone on, in paragraph 36, to approve Tomlinson J's conclusion that CPR 6.30(2) 29 (the successor to Rule 9(2» is "concerned with documents requiring to be served on parties to 30 the proceedings". It would not be right to widen Lord Mance's exception to either (i) a general 31 discretion to decide that a non-party should be "assimilated" with a party and/or (ii) the "real 10 of 33 1 party" ground identified by Lord Brown in Dymocks at paragraph 25( c). To do so would be to 2 blur the distinction between the very limited jurisdiction which Lord Mance identifies in 3 paragraph 33 of Masri as to service and the wider discretion that the court has to order costs 4 against a non-party. 5 6 Whether the Masri test is met on the evidence 7 8 The Masri test is not met on the evidence because it cannot be said that Mr Kenney and/or CCI 9 are the alter egos of the Plaintiff, nor can it be said that there is a good arguable case to such 10 effect. ACE's application to serve out in April 2012 was not put on the basis that Mr Kenney 11 and/or CCl were the Plaintiffs alter ego. 12 13 Alter ego means "a person's secondGlY or alternative personality" (the Oxford English 14 Dictionary) or "a corporation used by an individual in conducting personal business" (Black's 15 Law Dictionaty). Both these definitions strongly echo Lord Mance's example, namely the one- 16 ship company with a sole director/shareholder. 17 18 Neither Mr Kenney nor CCl can be said to be the Receiver's "alter ego". The Liberian Creditors 19 took 55% of the ordinary shares in CCl and in addition the Liberian Creditors have held a seat on 20 the board of directors of CCl, together with one representative director of the funders and an 21 independent director. 22 23 Similarly if (contrary to the above) the court was minded to apply a wider Masri test where 24 patiies can be treated as "assimilated" or where the non-party can be regarded as "the real patiy", 25 then the above factors also mean that Mr Kenney and/or CCl should not be assimilated with the 26 Plaintiff or treated as "the real patiy". Even if it was to be proved that Mr Kenney was the 27 architect of and driving force behind the litigation plan that does not make him "the real party". 28 It just means that he was the lawyer doing his best for his client. Nor does the fact that he had a 29 small (less than 1 %) indirect interest in the fmits of the underlying claim make him "the real 30 party". Similarly, to be the funding vehicle for a variety of interests (the Liberian Creditors and 31 investors) does not make CCI "the real patiy" either. 11 of 33 1 In light of Masri, in the absence of specific provision within the rules such as now exists in 2 England & Wales and Hong Kong, the only limited jurisdiction that exists to grant leave to serve 3 a Costs Summons against a non-party out of the jurisdiction is where that non-party can properly 4 be said to be the Plaintiffs alter ego. 5 6 Neither Mr Kenney nor CCI can be said to be the Plaintiffs alter ego (or, for that matter, "the 7 real party"). That being so, the court's ex patte Order dated 18 April 2012 should be set aside. 8 9 8 ANALYSIS AND CONCLUSIONS 10 Applications for permission to serve a foreign defendant out of the jurisdiction 11 12 On an application for permission to serve a foreign defendant out of the jurisdiction, the 13 applicant has to satisfy three requirements: Seaconsar Far East Ltd v Bank Markazi Jomhouri 14 Islalld Iran [1994] 1 AC 438, 453-457. First, the applicant must satisfy the court that in relation 15 to the foreign defendant there is a serious issue to be tried on the merits, i.e. a substantial 16 question offact or law, or both. The current practice in England is that this is the same test as for 17 resisting summary judgment, namely whether there is a real (as opposed to a fanciful) prospect 18 of success: e.g. Carvill America Inc v Camperdoll'n UK Ltd [2005] EWCA Civ 645. Second, the 19 applicant must satisfy the COUlt that there is a good arguable case that the claim falls within one 20 or more classes of case in which permission to serve out may be given. In this context "good 21 at'guable case" connotes that one side has a much better argument than the other: see Canada 22 Trust Co v Stolzenberg (No 2) [1998] 1 WLR 547,555-7 per Waller LJ, affd [2002] 1 AC 1; 23 Bois Distilleries BV v Superior Yacht Services [2006] UKPC 45. Third, the applicant must 24 satisfy the court that in all the circumstances the Cayman Islands is clearly or distinctly the 25 appropriate forum for the trial of the dispute, and that in all the circumstances the Grand COUlt 26 ought to exercise its discretion to permit service of the proceedings out of the jurisdiction. (See 27 Lord Collins in AK Investment CJSC v Kyrgyz Mobil Tel Limited and Others [2011] UKPC 7). 12 of 33 1 Application for, and grant of, leave to serve writ out of jurisdiction 2 3 Order 11 Rule 4 provides:- 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 (1) An application for the grant of leave under lUle 1 (I) must be supported by an affidavit stating - (a) the grounds on which the application is made; (b) that in the deponent's belief the plaintiff has a good cause of action; (c) in what place or country the defendant is, or probably may be found; (d) where the application is made under lUle 1 (1 )( c), the grounds for the deponent's belief that there is between the plaintiff and the person on whom a writ has been served a real issue which the plaintiff may reasonably ask the COUli to tty; and (e) if service is not to be effected personally the method or methods of service which are in accordance with the law of the country in which service is to be effected. (2) No such leave shall be granted unless it shall be made sufficiently to appear to the COUli that the case is a propel' one for service out of the jurisdiction under this Order. (3) An order granting leave to serve a writ out of the jurisdiction under lUle 1 must limit a fj)" time within which the defendant to be served must acknowledge service. '.' 23 Service of originating summons, petition, notice of motion, etc. 0 11 r 9 24 25 Order 11 Rule 9 provides:- 26 (1) Subject to Order 73, lUle 5, and Order 102, lUle 16, lUle 1 of this Order shall apply to 27 the service out of the jurisdiction of an originating summons, notice of motion 01' 28 petition as it applies to the service of a writ. 29 (2) Service out of the jurisdiction of any summons, notice or order issued, given or made 30 in any proceedings is permissible with the leave of the COUli, but leave shall not be 13 of 33 1 2 3 4 5 6 7 8 9 10 11 12 required for such service in any proceedings in which the writ, originating summons, motion or petition may by these Rules or under any Law be served without leave. (3) Rule 4(1) and (2) shall, so far as applicable, apply in relation to an application for the grant of leave under this rule as they apply in relation to an application for the grant of leave under lUle 1. (4) An order under this rule granting leave to serve an originating summons out of the jurisdiction must limit a time within which the defendant to be served with the summons must acknowledge service. (5) Rules 5, 6 and 8 shall apply in relation to any document in respect of which leave to serve out of the jurisdiction has been granted under this rule as they apply in relation to a writ. 13 Principal cases in which service of writ out of jurisdiction is permissible 14 15 Order 11 Rule I provides:- 16 17 18 19 20 21 22 23 24 (1) Provided that the writ does not contain any claim mentioned in Order 75, rule 1(3) service of a writ out of the jurisdiction is pelmissible with the leave of the COUli if in the action begun by the writ.. .... (c) the claim is brought against a person who has been or will be duly served within or out of the jurisdiction and a person out of the jurisdiction is a necessary or proper patiy thereto; ... 25 Costs orders against non-parties 26 27 Section 24 of the Judicature Law (2007 Revision) permits a costs order to be made against a non- 28 patiy. It provides:- 29 30
(1) Subject to the provisions of this or any other Law and to rules of court, the 31 costs of and incidental to all civil proceedings in- 14 of 33 1 2 3 4 5 6 7 8 (a) (b) the COUl1 of Appeal; and the Grand COUl1, shall be in the discretion of the relevant cOUl1. (2) Without prejudice to any general power to make rules of court, such rules may make provisions for regulating matters relating to the costs of those proceedings including, in pm1icular, the entitlement to costs, the taxation of costs, the powers of taxing officers and the powers of judges to review decisions oftaxing officers. (3) The cOUl1 shall have full power to determine by whom and to what extent 9 the costs are to be paid. 10 11 Section 24(3) is in identical terms to Section 51 (3) of the Supreme COUl1 Act 1981 which was 12 considered by the Corn1 of Appeal in Ikarian Reefer (No.2). 13 14 Costs orders against non-parties - the principles to be derived from the English and 15 Commonwealth authorities. 16 17 The Privy Council in Dymocks (Lord Brown of Eaton-under-Heywood) has set out the principles 18 to be derived from the English and Commonwealth authorities: 19 20 21 22 23 24 25 26 27 28 29 30 31 32 "(1) Although costs orders against non-parties are to be regarded as "exceptional", exceptional in this context means no more than outside the ordinmy run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question in any such "exceptional" case is whether in all the circumstances it is just to make the order. It must be recognised that this is inevitably to some extent a fact- specific jurisdiction and that there will often be a number of different considerations in play, some militating infavour of an ordel~ some against. (2) Generally speaking the discretion will not be exercised against "pure jimders ", described in paragraph 40 of Hamilton v Al Fayed (No 2) [2003J QB 1175, 1194 as "those with no personal interest in the litigation, who do not stand to benefit from it, are not jimding it as a matter of business, and in no w course fl. 15 of 33 1 2 3 4 5 In their case the court's usual approach is to give priority to the public interest in the fimded party getting access to justice over that of the successfid unfimded party recovering his costs and so not having to bear the expense of vindicating his rights. (3) Where, however, the non-party not merely funds the proceedings but substantially 6 also controls or at any rate is to benefit ji'o/II them, justice will ordinarily require that, if 7 the proceedings fail, he will pay the successful party's costs. The non-party in these cases 8 is not so much facilitating access to justice by the party fimded as himself gaining access 9 to justice for his own purposes. He himself is "the real party" to the litigation, a concept 10 repeatedly invoked throughout the jurisprudence - see, for example... Millett L.J. 's 11 judgment in Metalloy Supplies Ltd v MA (UK) Ltd [1997J 1 w'L.R. 1613. Consistently 12 with this approach, Phillips L.J described the non-party underwriters in TGA Chapman 13 Ltd v Christopher [1998J 1 w'L.R. 12, 22 as "the defendants in all but name ". Nor, 14 indeed, is it necessmy that the non-party be "the only real party" to the litigation in the 15 sense explained in the Knight case, provided that he is "a real party in ... velY important 16 and critical respects"; see Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner 17 of Taxation (2001) 179 A.L.R. 406... Some reflection of this concept of "the real party" is 18 to be found in CPR r. 25.13 (2) (f) which allows a security for costs order to be made 19 where "the claimant is acting as a nominal claimant". 20 21 22 23 24 (4) Perhaps the most difficult cases are those in which non-parties fimd receivers or liquidators (or, indeed, financially insecure companies generally) in litigation designed to advance the fimder's own financial interests. " 25 I refer to Civil Procedure volume 1 2013 for the cases referred to in the note to CPR 48.2 (pages 26 1522 to 1532) including in particular (but without limitation) Globe Equities Ltd v Globe Legal 27 Services Ltd [1999] B.L.R. 232, CA in which the decision in Symphony Group v Hodgson [1993] 28 4 All ER 143, CA and other cases are analysed and the cases referred to at page 1527 and 29 following under the heading "Litigation Funding" where Dymocks has been considered and 30 applied. 16 of 33 1 Costs orders against non-parties where the non-party is outside the jurisdiction 2 3 The lkariall Reefer (No.2) 4 5 In the lkarian Reefer (No.2) [2000] 1 WLR 603 the COUli of Appeal held that where it was 6 alleged that a non-patiy domiciled outside the jurisdiction was the alter ego of a party to civil 7 proceedings pending in the English cOUli, the English court had jurisdiction under section 51 of 8 the Supreme COUli Act 1981 to decide whether that non-patiy had such a connection with the 9 proceedings that he should pay the costs. The appropriate procedure, under the Rules of the 10 Supreme COUli in force at the material time, would have been for the defendant to issue a 11 summons in the action, supported by an affidavit stating the grounds of the application in 12 accordance with R.S.C. Ord. 11, r. 9(5), and obtain leave to serve the summons outside the 13 jurisdiction under R.S.c. Ord. 11, r. 9(4). There were no grounds for attacking the judge's 14 exercise of his discretion to grant retrospective leave for service out of the jurisdiction. 15 16 Lord Justice Waller said at page 611B:- 17 18 "What, however, it is necessmy to stress in this context is that where the court is exercising its 19 power under section 51 of the Act of 1981 it is doing so in the context of substantive proceedings 20 in which the cOllrt does have jurisdiction. The exercise of the power to order costs to be paid by 21 a party not named is an order made in those proceedings and it will only be exercised on the 22 basis of a substantial connection with those proceedings by a non-party ... " 23 24 Lord Justice Waller continued at page 613E:- 25 26 " ... if an order were made by the English court, and once the question of enforcement was an 27 issue, the question might arise as to whether a court other than the English court would 28 recognise that jurisdiction. That is not in issue at this stage. But, if the English court were to 29 find on the issue arising under section 51 that Mr Comninos was effectively the alter ego of the 30 plaintiff and that proper notice had been given to Mr COlllninos that that issue was to be decided 17 of 33 1 by the English cOllrt, then the judgment may well be one that would be recognised in other 2 Convention countries by virtue of article 26 of the Brussels Convention. ... 3 4 In summmy, in any event, it is in my view convenient to approach this case first as if no 5 Convention point arose, that is, on the basis that Mr Comninos was resident and domiciled 6 outside all Convention countries ... " 7 8 Position in a non-Brussels Convention case 9 10 As will by noll' be apparent, it seems to me that the English court does have jurisdiction to decide 11 in relation to a non-party resident outside the jurisdiction whether they should be liable for costs 12 under section 51 of the Act of 1981. It seems to me that it must be open to a party to serve a 13 notice on someone outside the jurisdiction which in effect says: ... "We have issued a summons in 14 the action and we are going to contend you have had such a connection with proceedings within 15 the jurisdiction and, more clearly still, that it is actually you that brought the action and that you 16 have submitted to the jurisdiction, and we are going to seek an order for costs against you on 17 that basis. " 18 19 It filrthermore seems to me that procedurally the appropriate course under the old rules was to 20 issue a summons in the action. That summons would be served on the plaintiff in the action and 21 would also be served on Mr Comninos outside the jurisdiction. It would not on any view be 22 material to look at Ord. 11, r 1. Order 11, r 9(4) would apply and as it seems to me leave to 23 serve that summons out of the jurisdiction should have been obtained. In this assumed situation 24 under the old rules, I do not myseif see that an originating summons effectively commencing 25 ji·esh proceedings would have been the appropriate course and thus Ord. 11, r 9(1) would not be 26 material. Despite the dictum of Phillips L.J. in Murphy v Young & Co's BrewelY pIc [l997} 1 27 W.L.R. 1591, I prefer the approach of Sir Robert Gatehouse in Seismik Securitik AG v Sphere 28 Drake Insurance pIc (unreported), 3 Februmy 1998 ... 18 of 33 1 In relation to obtaining leave, Ord 11, r. 9(5) is relevant. It provides: 2 3 4 5 6 "Rule 4(1), (2) and (3) shall, safar as applicable, apply in relation to an applicationfor the grant of leave under this rule as they apply in relation to an application for the grant of leave under rule 1." 7 In my view the words "so far as applicable" do not render it unnecessmy to swear an ajJidavit ... 8 Those words allow good sense to dictate the contents of the ajJidavit. As it seems to me they 9 provide a requirement to make it clear in the ajJidavit what the grounds are for the application, 10 that in the deponent's belief the applicant for the order has a good claim to have costs paid by 11 the non-party, and the place where the person to be served with the summons can be found. In 12 other words the ajJidmlit, in much the same way as one relating to rule 1(1), makes out the basis 13 on which the non-party is being sued for costs and the basis on which it is contended that it is 14 right that the English court should take jurisdiction. 15 16 Civil Procedure Rules 1998, rule 48.2(1) 17 18 It is convenient to mention the procedure under the new Civil Procedure Rules 1998 at this 19 juncture. I share the judge's anxiety as to whether there may not be a lacuna in the rules where 20 rule 48.2(1) is to apply in relation to a non-party outside the jurisdiction. It is not infact clear to 21 me whether the appropriate course under the Rules is to issue an application for the joinder of a 22 non-party and serve that application only on the other named parties, and then serve the 23 amended proceedings in some wayan the non-party, or whether the application to join should be 24 served on the non-party. I incline to the latter view, in which event, so far as that application is 25 concerned, Ord 11, I' 9(4) and (5) would apply as I have indicated they should apply to a 26 summons under the procedure applicable before the Rules came into effect. I also incline to the 27 view that at present there must be an inherent power to give leave to join a party and to give 28 leave to serve that party out of the jurisdiction once the hearing of the application to join has 29 resulted in an order for joinder. But the matter was not fidly argued before us and it would 30 certainly be of assistance, as the judge indicated, to clarifY the matter by a specific provision in 31 Order 11. " 19 of 33 1 Lord Justice Waller summarised his conclusion at page 617B as follows:- 2 3 (i) "The English court has jurisdiction over a party not domiciled within the jurisdiction to 4 decide whether that party has had such a connection with proceedings pending in the 5 6 7 8 English court that he should pay the costs although he was not named as a party. A fortiori, if the connection alleged is that a non-party was the alter ego of a party, the English court has jurisdiction to decide that question and decide whether the non-party has in effect submitted to the English jurisdiction. 9 (ii) If the non-party is domiciled in a Convention counfly, the Brussels Convention does not 10 prevent the English court exercising the section 51 jurisdiction either because to make 11 a section 51 application in subsisting proceedings does not involve "suing" the non- 12 party as that term is used in the Convention or because, if it does, the non-party is 13 being sued as a third-party to those proceedings under article 6(2). Again, if the 14 allegation is that the non-party is the alter ego of a party who has sued and brought 15 proceedings, the position is clearer still in that the non-party is not only not being sued 16 but (if the allegation is made out) has submitted to the jurisdiction. . 17 (iii) Mr Comninos is not being sued in relation to an insurance matter and thus has no right 18 to the benefit under article 11. 19 (iv) Leave to serve out of the jurisdiction the summons relating to section 51 was required 20 but the judge's refl'ospective granting of leave should be upheld. " 21 22 Masri 23 24 In Masri v Consolidated Contractors International (UK) Ltd and others (No 4) [2009] UKHL 43 25 the judgment creditor obtained judgment in English proceedings against among others a foreign 26 company which had submitted to the jurisdiction by defending the proceedings. The company, 27 which was incorporated in Lebanon and domiciled in Greece, failed to meet the judgment debt. 28 The judgment creditor obtained without notice an order under CPR r 71.2 for K, an officer of the 29 company domiciled in Greece, to be examined in England in respect of the company's foreign 30 assets. K applied for the order to be set aside on the principal grounds that CPR r 71.2 did not 31 apply to an officer of a foreign judgment debtor in respect of its assets abroad and that any order 20 of 33 1 for the taking of evidence was regulated by European Community law. The master granted the 2 application and set aside the order for want of jurisdiction. The Court of Appeal allowed the 3 judgment creditor's appeal, holding that Community law did not displace CPR r 71.2, that its 4 wording was sufficient to include the order against K and that it was no breach of international 5 law or comity for the order to be made. 6 7 On K's appeal the House of Lords held that whether and to what extent the presumption against 8 extraterritoriality applied in relation to foreigners outside the jurisdiction depended on who was 9 within the legislative grasp or intendment of the patiicular provision: that Parliament, when 10 enacting section 1 of the Civil Procedure Act 1997 under which the Civil Procedure Rules were 11 made, was to be taken as understanding and endorsing the manner in which the rule-making 12 power in respect of extraterritorial jurisdiction has been exercised over the years and as 13 permitting the extension of the English comis' jurisdiction over persons abroad so as to cover 14 new causes of action and situations; and that the rule-making power conferred by section 1 of the 15 1997 Act was wide enough, in principle, to permit the rule-making authority to enact rules 16 relating to the examination of an officer abroad of a company against which judgment had been 17 given within the jurisdiction. But it was held, allowing the appeal, that, since a corporate 18 judgment debtor had a separate legal personality from its officers and was not to be equated with 19 them and since the officers might have information about its affairs but had not submitted to the 20 jurisdiction, a corporate judgment debtor was in a different position from an individual judgment 21 debtor outside the jurisdiction against whom an order for examination might be made under CPR 22 r 71.2 and served abroad under CPR Pt 6. Although there was a close connection between the 23 subject matter of an action against a corporate judgment debtor and its officer, CPR Pt 71 was 24 connected with obtaining information in aid of the enforcement of a private judgment in private 25 civil litigation. In such proceedings, in contrast to proceedings where the public interest required 26 an officer's public examination, parties were not entitled to ask the court to summon witnesses 27 £i·om abroad to provide full information. Since the historical origin of CPR Pt 71 concerning the 28 examination of officers of a corporate judgment debtor and the extreme informality of its 29 operation indicated a purely domestic focus, and since CPR IT 6.20(9) and 6.30(2) did not, 30 properly construed, enable service out of the jurisdiction of an order under CPR Pt 71 which had 31 been made against a non-patiy, CPR r 71.2 did not pelmit an order for examinatiol1 to be made 21 of 33 1 against an officer who was outside the jmisdiction. Accordingly, the order made against K 2 would be set aside. 3 4 In his opinion Lord Mance identified the issues before the House as follows:- 5 6 (1) "whether the language of CPR I' 71.2 purports to confer power to order examination of a 7 foreign director of a foreign company, (2) whether it purports to confer power to order such 8 examination in respect offoreign assets, (3) whethel~ ifit does, it is ultra vires the rule-making 9 powel~ (4) whether, ifit does, there is any basis under CPR Pt 6for service upon Mr KholllY out 10 of the jurisdiction in Greece, and (5) whether, if there is, the English courts should none the less 11 give "primacy" or priority to lise of the Evidence Regulation, before contemplating such 12 domestic means. " 13 14 (Paragraph 9) 15 16 At paragraph 26 he concluded that CPR Pt 71 does not contemplate an application and order in 17 relation to an officer outside the jmisdiction. 18 19 Lord Mance then turned to consider service out of the jmisdiction. He said (paragraph 27) that 20 his conclusion as to CPR Pt 71 was "reinforced" by a consideration of the position relating to 21 service. He then turned to consider CPR l' 6.30 (2). CPR l' 6.30(2) provides: 22 23 "UnJess paragraph (3) applies, where the permission of the court is required for a claim form to 24 be served out of the jurisdiction the permission of the comt must also be obtained for service out 25 of the jmisdiction of any other document to be served in the proceedings". 26 27 At para 28 and following Lord Mance said: 28 29 "28. The primmy purpose of CPR r 6.30(2) is, on any view, to require leave for service out of 30 the jurisdiction on a defendant to proceedings of documents requiring to be served during such 31 proceedings on such defendant, where the original claim form required such leave. It is an 22 of 33 1 understandable provision. By inference, it indicates that if the claim form did not require leave 2 for service out of the jurisdiction, then ancil/my documents requiring to be served on the 3 defendant during the proceedings do not require such leave. The Court of Appeal intelpreted 4 CPR I' 6.30(2) as having a second and much wider effect, that of enabling any non-party on 5 whom it might be appropriate to serve any document during the course of proceedings to be 6 served, with leave if the proceedings against the original defendant required leave for service 7 out, without leave if they did not. 8 9
The wider intelpretation put by the Court of Appeal on CPR I' 6.30(2) leads to a surprising 10 result. In a case where service of the original proceedings took place abroad with leave using 11 one of the gateways in CPR I' 6.20, there would be an open discretion to grant leave for service 12 out of the jurisdiction of any ancillmy document on a non-party. Still more slilprisingly, if the 13 original proceedings did not require leave to serve out (eg because the defendant was domiciled 14 in a Brussels Regulating state), a non-party could be served abroad (on the face of it in any 15 cozmtly in the world) without leave. 16 17
The Court of Appeal relied upon two cases under Ord. 11, r 9 of the previous Rules, which 18 read, as amended: 19 20 "(1) Rule 1 of this Order shall apply to the sen'ice out of the jurisdiction of an originating 21 summons, notice of motion or petition as it applies to service of a writ ... " 22 "(4) Service out of the jurisdiction of any summons, notice or order issued, given or made in 23 any proceedings is permissible with the leave of the court, but leave shall not be required for 24 such service in any proceedings in which the writ, originating summons, motion or petition may 25 by these rules or under any Act be served out of the jurisdiction without leave." (Emphasis 26 added) 27 28 Union Bank of Finland Ltd v Lelakis [1997] 1 WLR 590 ... does not help on the present issue. 29 30 "31 The second case is The 1karian Refter (No 2), ... where the COllrt of Appeal was concerned 31 that there might be a lacuna in the rules in relation to a non-party whom the success jill 23 of 33 1 defendant sought to hold liable for costs ordered against the lInsliccessfiil claimant company. 2 However, the cOllrt considered, first, that Ord 11, I' 9(4) enable leave to be given for service of 3 an application for such costs on Mr Comninos, and opined, second, that there must anyway be 4 an inherent power to give leave to join a non-party and serve him out of the jurisdiction. 5 6 32 The laller proposition is at odds with the generally understood position accepted by the 7 court in the Lelakis case... It has long been established that service out of the jurisdiction 8 requires express authorisation either by statue or in the Rules. Thus, in In re Aktiebolaget 9 Robertsfors and La Societe Anonyme des Papeteries de l'Aa [l9JO} 2 KB 727, where the Court 10 of Appeal had to construe Ord XI, I' 8A made in 1909 to extend the power to serve out to 11 summonses, orders or notices, the court held that this power was only exercisable in situations 12 where service out of a writ was permissible under Ord XI, I' 8 and so did not cover a summons to 13 set aside an arbitration mvard There was no suggestion that the heads of Ord XI, I' 8 were 14 anything other than exclusive. Ord 11, I' 9(1) which replaced Ord XI, r 8A confirmed the 15 exclusive nature of the heads of jurisdiction to serve out provided by Ord 11, r 1. 16 17 33 As to the former proposition, The Ikarian Reefer (No 2) [2000} 1 WLR 603 may be vi~wed 18 as a special case, since Mr Comninos was the alter ego of the claimant company whose 19 proceedings he had instigated, controlled and financed In such circumstances it lIlay be 20 legitimate to assimilate the party and non-party, and to treat any means of service available 21 against the former as available also against the laller. As Waller U put it [2000} 1 WLR 603, 22 613E, 23 "if what is alleged .. is that the non-party in reality brought the main proceedings, the 24 English court has jurisdiction to decide whether there has in effict been a submission to 25 the jurisdiction by the non-party n. 26 27 Nothing equivalent can be or is alleged in respect of Mr Khalil)! in the present case, and Waller 28 U's statement was by way of coda to the primary basis on which the Court of Appeal held that 29 there was jurisdiction to serve out on a non-party. That involved reliance upon the Court of 30 Appeal's previous decision in Mansour v Mansour [1989}1 FLR 418. 24 of 33 1 34 Waller U noted that Donaldson MR in Mansour had been addressing a version ofOrd 11, 2 r 9(4), which omitted the words "out of the jurisdiction" which I have italicised in quoting its 3 language above. In fact Donaldson MR was in error in omitting those words. Waller U, 4 believing that they had been added subsequent to Mansour, said [2000} 1 WLR 603, 613 that 5 6 "With the insertion of those words it is not possible to argue that, simply because the 7 action was started by a writ where service of the same could be made without leave, any 8 summons in the action which is to be served on a person outside the jurisdiction can be 9 served without leave. " 10 11 But he continued by jinding in Donaldson MR's reasoning support for "the view that, where 12 there is an action pending before the English court, then a summons in that action can be served 13 on a person domiciled and resident outside the jurisdiction ", whether or not he or she was 14 already a party. Bearing in mind that the proceedings in The Ikarian Reefer (No 2) [2000} 1 15 WLR 603 were brought by writ served on insurers within the jurisdiction by lwr Comninos's 16 shipowning company, ljind it difficult to discern the distinction between the proposition rejected 17 and the proposition accepted in these two sentences. Leaving aside situations where the non- 18 party is the alter ego of a party to existing litigation, any suggestion that any non-party can be 19 served without leave under CPR I' 6.30(2) with any ancillmy summons issued by either party in 20 any proceedings properly brought and served within the jurisdiction clearly cannot be right. It 21 is not without interest that the Rule Committee, following The Ikarian Reefer (No 2) concluded 22 that the rules should be supplemented by adding CPR I' 6.20(17) in order expressly to permit 23 service out of a claim for an order for costs against a non-party ... 24 25 36 The scope of CPR r 6.30(2) has been comprehensively reviewed by Tomlinson J in Vitol 26 SA v Capri Marine Ltd [2009} Bus LR 271, in a context paralleling the present - service on an 27 officer resident in Greece of an order for his examination under CPR Pt 71. Tomlinson J held 28 that CPR r 6.30(2) was concerned with documents requiring to be served on parties to the 29 proceedings. The Court of Appeal in the present case disagreed and thought that CPR Pt 71 was 30 not "naturaily limited" in this way. In my opinion, Tomlinson J was right, and I agree with his 25 of 33 1 clear reasons (including those he gave for distinguishing The Ikarian Reefer (No 2) [2000J 1 2 WLR 603) and his conclusion. 3 4 37 Although there may have beenlacllnae in the Victorian rules regarding service out of the 5 jurisdiction, the continuing absence in the modern rules of any provision enabling service Ollt of 6 an order under CPR Pt 71 is both consistent with and in my opinion supportive of the view that 7 CPR Pt 71 was not contemplated, any more than its differently worded predecessors were, as 8 applying to officers outside the jurisdiction. " 9 10 Analysis 11 12 I analyse the position as follows. 13 14
The jurisdiction to make costs orders against non-parties under section 24 of the 15 Judicature Law (2007 Revision) and the principles to be derived from the English and 16 Commonwealth authorities are set out above. 17 18 The note to CPR 48.2 in Civil Procedure volume 1 2013 (pages 1522 to 1532) and the cases 19 there cited show how impOliant the jurisdiction to make costs orders against non-pilliies is today 20 and the many different circumstances in which the jurisdiction is exercised. 21 22
The correct procedure where a plaintiff or defendant seeks a costs order against a non- 23 party is to issue a summons in the action for an order pursuant to section 24 of the Judicature 24 Law (2007 Revision) that the non-party pay the costs and to apply to add the non-pilliy as a pilliy 25 to the proceedings for the purposes of costs only. (See Lord Justice Waller in The Ikarian Reefer 26 (No 2) at pages 614 and 615). 27 28 29 30
On an application for permission to serve a foreign person out of the jurisdiction the applicant has to satisfy the three requirements set out above. It is elementary that the applicant has to satisfy the court in relation to the first requirement that there is a serious issue to be tried 26 of 33 1 and in relation to the second requirement that there is a good arguable case (in both cases as set 2 out above). It is impoliant to emphasise that the court is not engaged in a trial. 3 4
Has the Defendant satisfied the first requirement in relation to Mr Kenney and CCI? 5 6 In my opinion there is a serious issue to be tried as to whether a costs order should be made 7 against both Mr Kenney and CCl under section 24, with a real prospect of success, for the 8 following reasons:- 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 (i) (ii) I refer to and have taken into account the totality of the evidence before the cOUli (including the first affidavit of Mr Kenney). The history of the litigation in the United States and Liberia is by any standards extraordinary. There are many respects in which there is a serious issue as to whether what has happened is beyond conventional Litigation Funding. I refer to my judgment dated 27 January 2012 including (without limitation) the finding at page 29: "If, contrary to the above, there was not jurisdiction under OCR 0.23, r.l(l)(a) to order security, there is material before the cOUli (referred to above) which would justifY the conclusion that the Plaintiff is a nominal plaintiff." A nominal plaintiff is a plaintiff (not being a plaintiff who is suing in a representative capacity) who is suing for the benefit of some other person or persons and there is reason to believe that he will be unable to pay the costs of the defendant if ordered to do so. (OCR O. 231Ule 1(l)(b)). Further I draw attention to the formulation used to describe the Plaintiff and refer to my observations at page 17 of my earlier judgment under Leave to Amend (i). 27 of 33 1 (iii) 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 There are serious issues to be tried as to whether Mr Kenney's funding and control of the litigation in this court was as summarised by Mr Hawthorne (at paragraphs 47 and 48 of his seventh affidavit):- "47 ... Mr Kenney has controlled jar a decade the efforts to enjorce the Liberian Judgments, which culminated in the suit in the Cayman Islands. Among other things: a) Mr Kenney devised a strategy jar his clients, AJA and the G-22 (and later, CCl) to cause the Commissioner to issue proceedings on their behalf in the Cayman Islands. b) Mr Kenney was the central figure in executing this strategy. In so doing, Mr. Kenney and his clients controlled the Receiver's actions, placed limits on his ability to act, and required him to account to CCI jar his decisions and expenditures. Mr. Kenney ensured that the Receiver was no more than a straw man, executing the plans oj Mr Kenney and his clients. c) Mr Kenney's strategy also attempted to ensure that the actual litigant in the Grand Court, the Receivel~ would be judgment-prooj and unable to pay costs. d) Mr Kenney created CCI and brought in "Garrett" as an investor, fimding the pursuit oj the Liberian Judgments in the Cayman Islands. By structuring CCI to conceal "Garrett'''s identity, Mr Kenney again attempted to ensure that ACE would be unable to recover its costs in the event that Mr Kenney's clients did not prevail in the Grand Court. e) Mr Kenney created the Echemus entities and brought in more investors to allow the action to continue in the Cayman Islands when "Garret!'''s investment was exhausted. Mr Kenney's complete control over the litigation is demonstrated by the jact that Mr Little lefi it to Mr Kenney to negotiate the CCI investment on behalf oj the Echemus Fund, even though Mr Kenney had jormed and previously represented CCI, and even though Mr Kenney was purportedly representing the Receiver at the same time. 28 of 33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 (iv) j) Mr Kenney was the managing director and the largest shareholder of the Echemus Manager, which had management control over the Echemus Fund (both entities having been created by Mr Kenney), at the time that the Echemus Fund decided to respond to this court's order to post security for costs by ceasing to jimd the Receivel~ and redirecting its "ACE budget" elsewhere, thereby compelling the Receiver to default ... 48. Mr Kenney has jimded this litigation at many points and in many ways. The evidence obtained to date shows that: a) In addition to earning fees throughout his representation of AJA, the G-22, CCI and the Receivel~ Mr Kenney has a contingency interest in this litigation (see ... E-mail Ji"om James Little to Martin Kenney and John Bagalini, dated June 7, 2011 ... which states that the hila lead law firms Kenney & Co. and Mr Lohman's Iml' firm, were planning to reduce their success fee to 9% to accommodate additional jill1ding). b) Mr Kenney invested in the Liberian Claims in or about June 2010 through his interest in Bluehawk, which was a limited partner of the Echemus Fund ... c) Mr Kenney was until recently the majority shareholder of Echemus Managel~ and hence stood additionally to gain on any recovelY on the Liberian Claims through distributions ji'om the Echemus Fund to Echemus Manager. " There are serious issues to be tried as to whether CCl's funding and control of the litigation in this court was as summarised by Mr Hawthorne (at paragraph 49 of his seventh affidavit):- "49 ... CCI has been a principal jill1der of the effort to enforce the Liberian Judgments since its creation in 2005. It was the channel through which "Garrett" 's US$2.85 million investment was used to pay attorneys and finance the development and pursuit of the case in the Cayman Islands, long before the case was filed in the Grand Court in June 2008. Were it not for CCl's payments 29 of 33 1 2 to Mr Kenney and others, the action in the Grand Court would never have been brought. " 3 (v) The issues referred to in (iii) and (iv) above should be seen in the context of and against 4 the background of the conduct of and extraordinary history of the proceedings in the 5 6 United States (EDPA and Delaware) and Liberia as described in the evidence. 7 (vi) There are serious issues as to the circumstances of what Lord Goldsmith described as a 8 "very unusual agreement" between a public official and private pmiies as to how the 9 official would execute his duties once appointed as receiver (see paragraphs 9 and 10 following of Mr Hawthorne's seventh affidavit). Lord Goldsmith submitted that this 11 case involves the purchase of a cause of action and asselied that the Receiver assigned 12 his interest in the judgment to CCI, only keeping a fee (1.25%). 13 14 In his first affidavit Mr. Kenney disputes many of the Defendant's allegations but it is 15 not appropriate to seek to resolve these issues in the course of this application. 16 17 18 19 20 21
In my opinion there is a serious issue to be tried as to whether a costs order should be made against both Mr Kenney and CCI under section 24, with a real prospect of success. Has the Defendant satisfied the second requirement in relation to Mr Kenney and CCI? 22 The second requirement is that the applicant must satisfY the couti that there is a good arguable 23 case that the claim falls within one or more classes of case in which permission to serve out may 24 be given. In this context "good arguable case" connotes that one side has a much better 25 argument than the other. 26 27 For present purposes the question is has the Defendant satisfied the couti that there is a good 28 arguable case that the court has jurisdiction to grant permission to serve the Costs Summons out 29 of the jurisdiction under GCR 0 11 r 9(2) or alternatively under GCR 0 11 r 1(1)(c)? 30 30 of 33 1 It is necessary first to consider what is the extent of the jurisdiction under OCR 0 11 r 9(2). The 2 competing submissions as to the extent of the jurisdiction under OCR 0 11 r 9(2) are set out 3 above. 4 5 The principle underlying the jurisdiction (so far as relevant) under OCR 0 11 r 9(2) to be derived 6 from Masri is that where a person (B) instigates, controls and finances proceedings brought in 7 the name of A, there may be circumstances in which it is legitimate to assimilate the party A and 8 the non-party B, and to treat any means of service available against A, as available also against 9 B. This is so where B in reality brought the main proceedings and there has in effect been a 10 submission to the jurisdiction by B. I derive this principle from paragraph 33 of Lord Mance's 11 opinion. Although the expression alter ego may be used to describe B' s relationship with A, I do 12 not read Lord Mance in Masri as confining the use of OCR 0 11 r 9(2) to the alter ego of a one 13 ship Panamanian company. Lord Mance plainly regarded the type of case that would fall within 14 the principle as narrow, but he was not concerned in Masri to examine the extent of the 15 circumstances in which it might be legitimate to assimilate the Paliy A and the non-party B, 16 because an application for an order under CPR r 71.2 plainly did not fall within the principle or 17 CPR r 6.30(2). 18 19 I do not accept Mr Hubble's submissions to the extent that he seeks to narrow the limited 20 jurisdiction fuliher by confining it to the case of an alter ego or the alter ego of a one ship 21 Panamanian Company. 22 23 As to the relevant facts I repeat the matters set out under (i) to (vi) in paragraph 4 above. 24 25 In my opinion there is a good arguable case (a much better argument) that this case falls within 26 the jurisdiction described above because there is a good arguable case that:- 27 28 (l) Mr Kenney and CCl instigated, controlled and financed these proceedings and that the 29 circumstances are such that it is legitimate to assimilate Mr Kenney and CCI with the 30 Plaintiff and to treat any means of service available against the Plaintiff as also available 31 against Mr Kenney and CCl. 31 of 33 1 (2) Mr Kenney and CCI in reality brought these proceedings and there has in effect been a 2 submission to the jurisdiction by Mr Kenney and CCl. 3 (3) If (contrary to my opinion) it is necessary to establish that Mr Kenney and CCI were the 4 alter ego of the Plaintiff, the concept of alter ego is met in the present case because the 5 Plaintiff was a nominal plaintiff. 6 7 In the light of my conclusions set out above it is unnecessary to consider Lord Goldsmith's 8 altemative arguments as to the ambit ofthe cOUli's power under GCR 0 II l' 9(2) or altematively 9 under GCR 011 rl(l)(c). 10 11
As to the third requirement (the applicant must satisfy the cOUli that in all the 12 circwnstances the Cayman Islands is clearly or distinctly the appropriate fomm for the trial of 13 the dispute, and that in all the circumstances the court ought to exercise its discretion to pennit 14 service of the proceedings out of the jurisdiction), it is in my opinion beyond argument that the 15 Cayman Islands is clearly and distinctly the appropriate forum. In my opinion in all the 16 circumstances described above the court ought to exercise its discretion to pennit service of the 17 proceedings out of the jurisdiction. 18 19
For the reasons set out above I will make an order as sought in the Defendant's Summons 20 dated 24 January 2013 and I dismiss the Summons dated 5 April 2013 to set aside the order of 18 21 April 2012. 22 23 I add two footnotes to this Judgment. 24 25 The overriding objective 26 27 I refer to the overriding objective quoted in my earlier judgment including in patiicular 4.2( d). 28 At issue is who should pay costs which amount to no more than about 870,000 US dollars on the 29 standard basis. This dispute is probably already generating costs which are likely to exceed that 30 figure. It is high time that this remaining dispute is resolved. If the remaining dispute Catffiot be 32 of 33 1 resolved through attomeys in the usual way, consideration should be given to using the services 2 of a mediator. 3 4 The Rules Committee 5 6 In my opinion the Rules Committee should give urgent consideration to making an appropriate 7 revision to the Grand Court Rules in order expressly to permit service out of a claim for costs 8 against a non-party. It is highly desirable that this court should keep up with the relevant 9 developments in England and Wales (CPR r. 6.20(17)) and other jurisdictions (such as Hong 10 Kong). 11 12 13 14 15 DATED this 13th day of May 2013 33 of 33