Sanderson J
IN CHAMBERS
IN THE GRAND COURT OF THE CAYMAN ISLANDS
HOLDEN AT GEORGE TOWN, GRAND CAYMAN
Before: The Hon Mr. Justice Sanderson
BETWEEN: Richard Friend
AND: Condoco Grand Cayman Resorts Ltd.
Cause No: 173/02
Plaintiff
Defendant
BETWEEN: Richard Friend
AND: (1) Michael Ryan (trading as MRG International)
(2) I.R.R. Ltd.
(3) Hotelco Ltd.
(4) Condoco Grand Cayman Resorts Ltd.
(5) Villasco Grand Cayman Resorts Ltd.
Cause No: 184/02
Plaintiff
Defendants
BETWEEN: Trafalgar Investment & Trading Co.
AND: Condoco Grand Cayman Resort Ltd.
Cause No: 185/02
Plaintiff
Defendant
BETWEEN: Trafalgar Investment & Trading Co.
AND: Michael Ryan
Cause No: 222/02
Plaintiff
Defendant
Appearances:
Mr. Peter Broadhurst & Mr. Kyle Broadhurst for the Plaintiff
Mr. Ramon Alberga, QC & Mr. Nick Joseph for the Defendant
Heard on 2nd, 3rd & 4th October 2002
JUDGMENT
CHAMBERS COMMENCED ON FRIDAY,
OCTOBER 4TH, 2002 AT 2:34 P.M.
THE COURT: The defendants apply for a stay of proceeding in four actions on the basis of forum non-conveniens and/or alibi lis pendens.
The plaintiff, Richard Friend, signed two engagement agreements for 1998 and 1999. Pursuant to those agreements he was to work for Michael Ryan in 1998, and for Michael Ryan and IRR Limited in 1999. The agreements do not say what he was to do; that is, what duties he would perform.
Clause 1 of the 1998 agreement says:
"Richard E. Friend ('REF') agrees to work full time for (or for the benefit of) MRG International ('MRG'), based out of Miami, Florida, from May 1, 1998 through April 30, 1999, for $1.00 per year (subject to extension upon mutually agreeable terms). All out of pocket expenses are to be
reimbursed to REF not less frequently than monthly. REF's position is to report directly to Michael Ryan."
Clause 1 of the 1999 agreement says:
"Richard E. Friend ('REF') agrees to work full time for (or for the benefit of) MRG International and IRR Limited (respectively, and jointly and severally, 'MRG'), based out of Miami, Florida, in connection with its Grand Cayman and Costa Rican projects (and any other projects undertaken by MRG, from May 1, 1999 through April 30, 2000, for $1.00 per year, plus bonuses plus 1% of condo and villa sales) as mutually agreed and warranted under the circumstances (which term shall be subject to extension from year to year upon mutually agreeable terms). All out of pocket expenses incurred by REF
are to be reimbursed to REF not less frequently than monthly. REF's position is Senior Vice President of all relevant companies, and REF shall report directly to Michael Ryan."
The balance of those two agreements then go on to deal with how Mr. Friend is to be compensated. Namely, he is to receive properties at certain prices, with the agreement that Mr. Ryan will cause them to be re-purchased later at a profit. Other provisions of the agreement provide for the right to purchase certain shares. These agreements were structured by Mr. Friend, in order to be advantageous to him from a tax perspective; that is, it appears -- at least to me -- that he was intending to pay capital gains tax on what in reality was income.
Mr. Ryan and the other defendants are Caymanian companies or Caymanian residents. They were involved with, and are responsible for, the development of the Ritz Carlton project. The work that Mr. Friend was doing was in connection with that project. The
agreements for the purchase and sale of property have been signed by other companies controlled by Mr. Ryan, and as well, they have been signed by Mr. Friend. As I understand it, those agreements have not been completed. Mr. Friend apparently worked for Mr. Ryan for approximately three years. During that period of time he was paid approximately $38,000 in cash directly and reimbursed approximately $70,000 for out-of-pocket expenses. He also invested approximately $265,000 of his money in the Ritz Carlton project, because Mr. Ryan was running out of funds.
Mr. Friend began to complain about not being paid and attempted to negotiate a settlement with Mr. Ryan. In late February 2002, Mr. Friend's lawyers wrote a demand letter requesting resolution of this matter and a response by March 1st, or else proceedings would be initiated in the Cayman Islands against Mr. Ryan and his companies. There was no immediate response from Mr. Ryan. Instead, he instructed Florida attorneys to commence proceedings in Miami against Mr. Friend. This was done on March 1st.
In the Florida proceedings, Mr. Ryan alleged for the first time that the 1998 and 1999 agreements were void because Mr. Friend had been hired as a lawyer or in-house counsel and that he was not entitled to practice law in the state of Florida because he had been suspended by the Florida State Bar for theft. In the Florida proceedings, Mr. Ryan sought an accounting and a declaration that he was not obliged to pay any money under the contracts because they were void. He also alleged breach of contract and legal malpractice.
Mr. Friend commenced these proceedings on March 8th 2002 before he was served with the proceedings in Florida. The Cayman proceedings were served first. According to the decision in Dresser UK Ltd v Falcongate Freight Ltd. [1992] 2 All ER 450. The Cayman Islands proceedings having been served first, will be considered to be the first in time.
Mr. Friend then applied to the Florida court for a stay or dismissal of those proceedings on the basis of forum non-conveniens. He argued that the Cayman Islands was the most convenient forum, and
therefore these proceedings should go ahead and the US proceedings dismissed. I am not sure gentlemen if it was dismissed or stayed.
MR. ALBERGA: I know he wanted a dismissal because of forum non-conveniens --
THE COURT: It doesn't really matter. It was either for a dismissal or a stay.
This matter came before His Honour Judge Paul Siegel on July 15th, and he ordered that the claim for declaratory relief (ie., the contractual obligation question) be stayed in Florida. He further ruled however, that the most convenient forum for the remaining three matters (the accounting of the $108,000 paid for wages and disbursements, the claim for breach of contract, and the claim for malpractice) should be dealt with by the court in Florida. Judge Siegel suggested that the Florida court should first make a determination on whether the contract had been breached or was void, and then this court should determine what amounts, if any, or obligations, if any, were owing, pursuant to the subsidiary agreements that were made pursuant to the main agreement.
Before determining the question of whether or not a stay should be granted, I should state some, but not necessarily all, of the obvious principles that should apply when there are concurrent proceedings in separate jurisdictions.
1) To the extent possible, proceedings should not continue in two jurisdictions simultaneously.
2) Courts should not be competing with each other over jurisdiction, or preferring their own jurisdiction over that of another competent foreign court, unless there is good reason.
3) Courts should, whenever possible, respect and attempt to apply the decisions and judgments of foreign courts, unless there is a good reason not to do so.
4) Courts should avoid, whenever possible, giving conflicting decisions.
5) The court, bearing in mind the cautions in paragraphs 1 to 4, should always attempt to do justice between the parties.
This Court and our Court of Appeal have considered the question of forum non-conveniens
most recently in the case of Telesystem Int. Wireless Inc. et al v CVC Opportunity Partners et al. August 2002 C.I.C.A. unreported. I have read the judgment in that case and I am mindful and accept the guidelines that it imposed in determining forum questions.
In this particular case, I am satisfied that the US courts will make a fair and impartial determination of the issues that are presently before it. Judge Siegel carefully reviewed and considered the evidence that was before him. Even though I might have come to a different conclusion on the question of whether the US or the Cayman Islands was the most convenient forum, on issues 2, 3 and 4, (which decided on the basis of the location of documents, witnesses, et cetera), I do not think it right to do that, unless there are compelling reasons for doing so.
The reasons argued by Mr. Broadhurst why these matters should be before the Cayman Islands courts, rather than the US courts are in summary as follows: (I recognise that I am not going to refer to all of the arguments but what I consider to be the major ones.).
1) In the US proceedings, the successful party will not normally be entitled to claim any portion of attorneys' fees as recoverable costs. Therefore, if Mr. Friend is successful in Florida, he will not be able to recover his legal fees there. In the Cayman Islands, he will, if successful, be entitled to claim all, or at least a portion, of legal fees. I do not accept Mr. Alberga's submission that they could be claimed as damages here. I do not think they fall properly under the head of damages first enunciated by the English court in (Windsor) Ltd. v Newman Industries Ltd. [1949] 1 All ER 997, where the damages claimed must reasonably be in the contemplation of the parties at the time the contract was made.
2) The matter can be litigated here far more quickly than in the United States. It can probably be completed here within 12 months. In the US it will likely take twice as long and perhaps longer.
3) The claim here is in excess of a million dollars. Mr. Friend worked for several years and claimed he was not paid. Mr. Ryan is asking that these proceedings be stayed,
pending his lawsuit for what at present appears to me to be an accounting for about $110,000.
4) It is not clear that the proper law to be applied to the engagement letter is Florida law. It appears that the claim in Florida is that the Caymanian companies or Caymanian residents, developing a project in these islands, hired Mr. Friend to give them legal advice on this project. The legal advice alleged is that he negotiated contracts between them (that is either the Cayman residents and Caymanian companies) with others, including persons or companies in Arizona, Washington DC, and Delaware. It is not clear what, if any, advice was given to Ryan and his companies regarding Florida law. The contracts were apparently executed in the Cayman Islands for services to be given to Caymanian companies or residents regarding business dealings on a Caymanian property development with persons outside the state of Florida.
I do not see in the material before me that Judge Siegel was asked to determine if the proper law of the contract was Florida law or Cayman Islands law. I can see that there is a
substantial argument that it should be Cayman Islands' law, and that this issue should be determined sooner rather than later. If it is determined that the proper law of the contract is the Cayman Islands, then that trial should probably proceed here, rather than have all of the opinion evidence on Cayman Islands law being heard in a trial in the state of Florida. Judge Siegel felt that it was in the public interest to have the matter heard in Florida, because it involved allegations of a Florida attorney practising law there while under suspension, and doing so negligently. Clearly that is a matter of public interest in Florida, but I think it is important that the question of what is the proper law of the contract be determined first.
5) There was an argument in the hearing before me that, as a matter of Florida law, it is not prohibited or wrong for a lawyer who is not a member of the Florida bar to act as in-house counsel to a foreign person or a company doing business in Florida. Again, I think that should be the determined sooner rather than later, and should be done by the
Florida courts.
6) That some of the claims here (specifically cause 184/02) was a stand alone claim in that at least $250,000 of the deposit that was advanced for the purchase of property here had nothing to do with the validity of the engagement agreements.
7) That Judge Siegel ruled that the actions here should be tried here, (but suggested that this be done after the trial in Florida).
8) That the parties here are different than in the Florida proceedings. Mr. Ryan is not a plaintiff or a party in Florida and he has no assets there. Although Mr. Alberga did indicate that he felt he could probably obtain an undertaking from Mr. Ryan personally to accept the jurisdiction of the Florida court, should Mr. Friend wish to file any judgment here, against Mr. Ryan. He did offer such an undertaking for the corporate parties that were named.
I think the narrow question that I have to decide is, therefore, should this court await the determination by the Florida court on
whether or not the engagement agreements are void under Florida law. Mr. Alberga submitted that was the most efficient way of dealing with the problem and it would avoid unnecessary expense. He also urged me not to go behind the decision of Judge Siegel. I have considered all of the reasons he advanced for favouring the Florida courts determination of this issue first, and I will not repeat them here.
On balance, I am not persuaded that there has been a sufficient determination of some of the important preliminary issues, such that a stay should be entered in these proceedings at this time. Rather, I think the stay should be refused to allow for the following:
1) That the parties apply to this court for its determination on what the proper law of the contract should be. That would, I expect, necessarily involve leading some additional Affidavit evidence outlining the description of what work was being done, where it was being performed, and the nature of the work.
2) That the parties should apply to the Florida courts for preliminary determination on whether a lawyer can be in-house counsel to a
foreign company without being a member of the Florida bar.
3) That the discovery of documents continue in both jurisdictions because there will be significant duplication of document production, and that documents produced in one action should be produced in the other.
4) That the pleadings be completed here; with 21 days for the filing of the statement of defence, and seven days thereafter for the reply.
5) That the parties will be subject to the courts further directions as to whether or not a stay shall be granted in these proceedings or any part of these proceedings after the issues referred to in paragraphs 1 and 2 have been dealt with. I think costs should be in the cause, gentlemen, unless you have submissions to the contrary.
MR. ALBERGA: Well, My Lord, at the moment I think until these two issues are determined, perhaps Your Lordship should make no order as to costs, but depending on how those issues are determined both parties may wish to make a further application to Your Lordship.
THE COURT: Mr. Broadhurst.
MR. BROADHURST: I think they should be in the cause, My Lord. Regardless of what happens in the first two circumstances, I think these costs should be in the cause.
THE COURT: Yes, I think that's right. I think they will be costs in the cause.
MR. ALBERGA: As I submitted, I think the relevant order is costs reserved or --
THE COURT: Well, my intention is that costs will go to the successful party in this litigation ultimately.
MR. ALBERGA: Ultimately, yes.
THE COURT: So if Mr. Friend is successful, he will get his costs of this application. If Mr. Ryan is successful he will get the costs of this application.
MR. ALBERGA: That's a matter for Your Lordship's discretion. There is only one clarification I seek, sir. In which of these two matters, one to be determined in Cayman and one to be determined in Florida, is it your intention should go first?
THE COURT: I think it's going to be entirely a matter of the court's availability
to hear them. I would suggest that material be prepared as quickly as possible and submitted to the court and heard as quickly as possible. Whichever is determined first, I don't have any view as to which is desirable. I think from my perspective I need to know the answers to those questions before I can make a proper determination.
MR. ALBERGA: On what should happen after that?
THE COURT: Yes, and I think I would like answers to both questions.
MR. ALBERGA: Before that. That's what I was wondering, My Lord.
THE COURT: I think for my own perspective the important question is the proper law of the contract. Thank you gentlemen.
(PROCEEDINGS ADJOURNED)