CCC V Conway 2013 2 Lloyd's Rep
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[2013] Vol 2 LLOYD’S LAW REPORTS 179 Guernsey CA] Carlyle Capital Corporation Ltd v Conway PART 4 COURT OF APPEAL OF THE ISLAND T he claim alleged that the defendants owed OF GUERNSEY CCC fi duciary duties and duties to act with skill and care in managing CCC’s business affairs, and 30 March; 27 April 2012 were in breach of the various duties. There was also a claim against CIM for breach of the IMA. ———— The liquidators claimed damages for misfeasance, breach of fi duciary duty, gross negligence and/ CARLYLE CAPITAL CORPORATION LTD or negligence as against the defendants in their (IN LIQUIDATION) AND OTHERS capacities as directors and/or in the case of the v Carlyle defendants as shadow directors. There CONWAY AND OTHERS was also a claim against CIM for damages for breach of contract. In addition, there was a claim B efore The Hon Michael Jacob BELOFF QC, against the directors, pursuant to section 106 of James Walker MCNEILL QC and the Companies (Guernsey) Law 1994 or section Sir Hugh Peter Derwyn BENNETT, Judges of Appeal 422 of the Companies (Guernsey) Law 2008 for compensation, claims under section 106 against Practice — Anti-anti-suit injunction — the Carlyle defendants alleging that they were Liquidators of Guernsey company bringing “offi cers” of CCC, a claim against the Carlyle common law and statutory claims against defendants for the return of CCC’s books and former directors and managers — One records and other property, and a claim against defendant having benefi t of exclusive Delaware the Carlyle defendants for unjust enrichment. jurisdiction clause — Whether non-statutory On 7 July 2010 the liquidators applied for claims should be litigated in Delaware — leave to serve proceedings out of the jurisdiction Whether liquidators entitled to anti-anti-suit on all the defendants (save for the seventh injunction restraining Delaware proceedings. defendant, who was resident in Guernsey). The T he fi rst plaintiff (CCC) was incorporated application was heard and granted by Lieutenant in Guernsey on 29 August 2006 to invest in Bailiff Talbot on an ex parte basis. residential mortgage-backed securities. After On 16 December 2010 the liquidators withdrew eight months of increasing volatility in the global their proceedings in the Delaware court. credit markets, on 17 March 2008 CCC was On 29 December 2010 the Carlyle defendants placed into compulsory liquidation in Guernsey instituted proceedings in the Delaware court on the application of its directors. When CCC for an injunction ordering the liquidators not to collapsed not only was the capital lost but there pursue any litigation with respect to the IMA was a substantial defi cit. in any jurisdiction other than Delaware, for On 7 July 2010 CCC’s liquidators issued damages, and for a declaration that the exclusive proceedings in four separate jurisdictions, jurisdiction clause in the IMA was a valid, Guernsey, Delaware, Washington DC, and the binding and enforceable contractual agreement. State of New York, all claiming in similar form On 28 February 2011 all the defendants fi led damages “in a sum to be determined at trial in Guernsey exceptions déclinatoire to set aside exceeding US$1 billion” together with other the leave to serve out of the jurisdiction granted relief. by LB Talbot or, alternatively, for an order that T here were 10 defendants. The fi rst seven the proceedings be stayed pending the outcome were directors of CCC. The eighth defendant, of proceedings in Delaware. Carlyle Investment Management LLC (CIM), On 22 July 2011 Deputy Bailiff Collas declined was a Delaware-registered company and was to set aside service out of the jurisdiction but, appointed as the investment manager and advisor relying on the exclusive Delaware jurisdiction to CCC pursuant to an investment management clause in the IMA, he imposed a temporary stay agreement (IMA) dated 20 September 2006. The on all the liquidators’ claims, requiring them fi rst ninth defendant, TC Group LLC (TCG), owned to litigate their non-statutory claims in Delaware, 75 per cent of CIM, and the 10th defendant, TCG followed by their statutory, insolvency type, claims Holdings LLC, was the sole managing member in Guernsey once the Delaware proceedings had of TCG. The eighth, ninth and 10th defendants been concluded (the forum issue). were referred as “the Carlyle defendants”. It was On 8 August 2011 the liquidators sought the alleged that, by virtue of their control over CCC Deputy Bailiff’s leave to appeal on the forum and by their conduct, the Carlyle defendants issue which, on 18 August 2011, he refused. became de facto or shadow directors of CCC and On 17 August 2011 the Carlyle defendants fi led thereby owed the same duties to CCC as its de a motion in the Delaware court for preliminary jure directors. injunctive relief. 180 LLOYD’S LAW REPORTS [2013] Vol 2 Carlyle Capital Corporation Ltd v Conway [Guernsey CA On 18 August 2011 in the Delaware court the the IMA gave them a contractual right to have all liquidators fi led a motion to dismiss or stay the the issues decided by the Delaware court; it was anti-suit proceedings. therefore for the Delaware court and not for the On 19 August 2011 the liquidators in Guernsey Guernsey court to determine what effect should submitted an application for leave to appeal to be given to the exclusive jurisdiction clause. the Court of Appeal on the forum issue. On 15 T he liquidators contended that the Carlyle September 2011 the Guernsey Court of Appeal defendants were seeking to subvert the effect of ordered that the application, with the appeal to the Court of Appeal’s earlier judgment on the follow, if granted, should be heard as soon as forum issue by seeking in Delaware that which possible. they had already failed to obtain in Guernsey, ie On 21 September 2011 the fi rst to fourth and an order compelling the liquidators’ proceedings eighth to 10th defendants served a cross-notice to be heard in Delaware. seeking to overturn the Deputy Bailiff’s refusal to ——— Held by Guernsey CA (BELOFF, MCNEILL set aside the leave to serve out or alternatively to and BENNETT JJA) that the appeal would be uphold the order as to the stay. On 23 September dismissed. 2011 the fi fth to seventh defendants served a (1) The principles governing the grant of similar cross-notice. an anti-anti-suit injunction were essentially On 4 October 2011 the liquidators made an ex the same as those which governed an anti-suit parte application in Guernsey for an anti-anti- injunction. In considering whether to grant an suit injunction against the Carlyle defendants. anti-suit injunction the paramount objective was The application was granted by Judge Finch on the ends of justice. Insofar as discrete categories 7 October 2011. of cases in the granting of such an injunction had been identifi ed, they were not exhaustive. On 17 November 2011 Judge Finch dismissed As long as the ends of justice were served by an application by the Carlyle defendants to set the grant of such injunction the absence of aside the ex parte order. previous precedent should not inhibit the court On 2 December 2011 Judge Finch in the to which an application was made ( see paras 68, course of a supplementary judgment recorded 71 and 72). the Carlyle defendants’ apparent intention to (2) Guernsey was the only jurisdiction in “advance the Delaware proceedings” and “to set which all causes of action, common law and up a trial in Delaware” and that would “cause statutory, could be pursued and the statutory serious issues before the Guernsey Court of insolvency remedies were freighted with public Appeal to be pronounced upon in Delaware and interest considerations. To permit the Carlyle is contrary to the sense of the judgment I handed defendants to pursue their quest for anti-suit down”. He granted leave to appeal to the Carlyle relief from the Delaware court might lead to defendants. multiplicity of proceedings and the possibility On 23 December 2011 the proceedings issued of inconsistent results. In the circumstances, the in the State of New York and in Washington DC overall interests of justice favoured the grant of by the liquidators were discontinued by consent. the anti-anti-suit injunction ( see paras 78 to 85). B etween 30 January and 3 February 2012 the (3) Case law did not compel a contrary Guernsey Court of Appeal heard the liquidators’ conclusion. An exclusive jurisdiction clause could appeal on the forum issue. In a judgment handed be overridden in appropriate cases, not limited down on 5 March 2012 the Court of Appeal to the existence of vexation and oppression; allowed the liquidators to amend the Cause so for example, where it was necessary to avoid as to bring in additional statutory claims for multiplicity of proceedings and the possibility of wrongful trading and for disqualifi cation orders. inconsistent judgments; where it was necessary to It allowed the liquidators’ appeal on the forum give effect to a statutory right in one forum even issue and dismissed the defendants’ cross- if the dispute was otherwise subject to a forum notice, on the basis that the Guernsey court had selection clause in favour of the foreign forum; jurisdiction to consider all the claims whereas where it was necessary for the protection of a the Delaware court did not. The consequence of court’s legitimately conferred jurisdiction and the Court of Appeal’s decision was that all the the prevention of litigants’ evasion of important liquidators’ claims would proceed in a single public policies of the forum; and where it was jurisdiction, ie Guernsey.