ELLIOTT v. CAYMAN ISLANDS HEALTH SERVICE AUTHORITY 20-April-2007
[2007 CILR 163]
ELLIOTT v. CAYMAN ISLANDS HEALTH SERVICE AUTHORITY
GRAND COURT (Sanderson, Ag. J.): April 20th, 2007
Civil Procedure—costs—security for costs—order against non-resident with no assets in jurisdiction restricted to costs of enforcing judgment abroad if (a) defendant’s estimate of costs of action disproportionate to value of claim; (b) significant order would restrict access to courts; _(c) plaintiff has substantial assets in foreign jurisdiction where effective legislation to enforce Cayman judgment at reasonable cost; (d) defendant’s case not clearly stronger; and (e) unreasonable delay in defendant’s application
The defendant applied for an order requiring the plaintiff to give security for the costs of an action against it for breach of a contract of employment.
The plaintiff, who was ordinarily resident in Florida, came to work for the defendant in the Cayman Islands. He alleged that the defendant repudiated his contract of employment and constructively dismissed him, whereupon he returned to the United States. He brought an action against the defendant for damages for breach of contract of $950,000, although the defendant alleged that under the contract, it could not be liable for more that 75% of that amount. The defendant sought security for costs under the Grand Court Rules, O.23, r.1(1), on the grounds that the plaintiff was ordinarily resident out of the Cayman Islands with no assets here and it would be prejudiced if it were required to go to the United States to recover any costs ordered against him.
The plaintiff submitted that he should not be required to provide security for costs since (a) although his non-residence and lack of assets in the jurisdiction were significant factors, they were not determinative and the court should consider all the circumstances; (b) the defendant was not bound to succeed at trial as it was not clear that the Health Services Authority Law (2003 Revision), s.12 provided an absolute defence to a claim for breach of an employment contract; (c) he would be able to meet any costs from his substantial assets in the United States; (d) legislation in Florida provided a simple mechanism for the recognition and enforcement of a foreign judgment, and he was prepared to sign an undertaking not to raise any of the available defences should an order for costs be made against him; (e) his alleged delay during the proceedings was not significant, whereas the defendant had delayed over two years in
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bringing this application, causing both it and the plaintiff to incur substantial costs; and (f) the defendant’s estimate of its costs was excessive as the maximum amount recoverable was $238,000.
The defendant submitted in reply that security for costs should be ordered because (a) the general rule was that it was just to make such an order against a foreign plaintiff with no assets in the Cayman Islands; (b) s.12 of the Health Services Authority Law provided it with an absolute defence against any damages claim and it was therefore bound to succeed at trial; (c) it would be put to extra expense in registering a judgment against the plaintiff’s US assets, as they were located in three different states; (d) a letter agreeing not to raise the defences in the Florida legislation might not be enforceable there, and the defendant might also raise other defences that would render the Cayman judgment unenforceable; (e) the plaintiff’s delay of four months in the course of the proceedings indicated his lack of confidence in his own case; and (f) its costs from the present time until the conclusion of the trial would be about $150,000 and its total costs were estimated at $505,931.
Held, granting the application in part:
(1) The plaintiff would be ordered to provide security for costs of $15,000. This was the court’s estimate of the maximum cost of enforcing a judgment in the United States, based on its experience in enforcing foreign judgments here and Cayman judgments abroad, and took into account that the defendant might have to register any costs order in three different US states. It would not be appropriate to order security for the defendant’s estimates of its total or even future costs (
i.e. $505,931 and $150,000 respectively) since these were unreasonably high and disproportionate to the maximum value of the claim, which was likely to be approximately $712,000 (
paras. 25–26;
paras. 29–30).
(2) The court had considered the following significant factors in determining the amount of the security ordered: (a) the plaintiff’s status as a non-resident with no assets in the jurisdiction was an important, but not a determinative factor, since the court would only make an order under the Grand Court Rules, O.23, r.1(1) against a non-resident plaintiff if it were just in all the circumstances; (b) the plaintiff was entitled to pursue his claim for breach of contract in this jurisdiction, since he had been recruited by the defendant to come to work here and a more substantial costs order might have the effect of restricting his access to the courts; (c) the plaintiff had substantial assets in the United States and there was no evidence that he would attempt to hide them or to resist the enforcement there of any costs order made by this court; (d) legislation in the United States provided a straightforward mechanism to enforce a foreign judgment, which would not result in significant expense to the defendant, and any potential defences were unlikely to present serious obstacles; (e) the additional expense in registering judgments in three different US states was likely to be small; (f) the merits of the case were not an important factor here as without the benefit of full argument, it was
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not immediately clear that one party had a much stronger case; and (g) it would be unfair to take account of those costs incurred by the defendant prior to its making the application, given that these were the result of its significant and unexplained delay of over two years (
para. 10;
para. 28).
Cases cited:
(2) De Beer v. Kanaar & Co., [2003] 1 W.L.R. 38; [2002] 3 All E.R. 1020; [2002] CLC 114; [2002] I.L. Pr. 24; [2001] C.P. Rep. 118; [2001] EWCA Civ. 1318, referred to.
(3) Naghshineh v. Chaffe, [2003] N.P.C. 146; [2003] EWHC 2107 (Ch.), referred to.
(4) Nasser v. United Bank of Kuwait, [2002] 1 W.L.R. 1868; [2002] 1 All E.R. 401; [2001] EWCA Civ. 556, referred to.
(5) Porzelack K.G. v. Porzelack (U.K.) Ltd., [1987] 1 W.L.R. 420; [1987] 1 All E.R. 1074; [1987] 2 C.M.L.R. 333; [1987] E.C.C. 407; [1987] F.S.R. 353, referred to.
(6) Somerset-Leeke v. Kay Trustees, [2004] 3 All E.R. 406; [2003] EWHC 1243 (Ch.), referred to.
(7) Thune v. London Properties Ltd., [1990] 1 W.L.R. 562; [1990] 1 All E.R. 972; [1990] B.C.C. 293; [1991] I.L. Pr. 66, referred to.
(8) Weissfisch v. Julius, [2005] EWHC 2746 (Ch.), referred to.
Legislation construed:
Grand Court Rules, O.23, r.1(1): The relevant terms of this paragraph are set out at
para. 3.
Health Services Authority Law (2003 Revision), s.12: The relevant terms of this section are set out at
para. 11.
Uniform Out-of-country Foreign Money-Judgment Recognition Act, s.55.604: The relevant terms of this section are set out at
para. 15.
s.55.606: The relevant terms of this section are set out at
para. 17.
K.J. Farrow for the plaintiff;
S.T. McCann and D. Schofield for the defendant.
1 SANDERSON, Ag. J.: The defendant applies for an order that the plaintiff provide security for the costs of this action. The plaintiff was employed by the defendant as its Chief Executive Officer. The plaintiff sues the defendant for damages for breach of contract, alleging that the defendant repudiated the employment contract and constructively dismissed him. He claims he accepted the repudiation on March 31st, 2004. Thereafter, the plaintiff returned to the United States and is currently living in the State of Florida.
2 The defendant seeks security for costs on the basis that the plaintiff
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does not reside nor have any assets in the Cayman Islands and that it would be prejudicial if the defendant were ultimately required to go to the United States to recover any costs that might be ordered against the plaintiff.
3 The Grand Court Rules, O.23, r.1 provides as follows:
“(1) Where, on the application of a defendant to an action or other proceeding it appears to the Court—
(a) that the plaintiff is ordinarily resident out of the jurisdiction; or
. . .
then if, having regard to all of the circumstances of the case, the Court thinks it just to do so, it may order the plaintiff to give such security for the defendant’s costs of the action or other proceedings as it thinks just.”
4 The most significant language of O.23, r.1 is “having regard to all of the circumstances of the case, the Court thinks it just to do so, it may order …” Both parties agree that the order is discretionary. They disagree primarily on the weight to be attached to the fact that the plaintiff is no longer resident here.
5 Counsel referred to several authorities to assist in determining what factors should be considered and what weight should be attached to those factors in determining what “is just.” Justice cannot always be clearly defined by examples from various other cases. If it could, then it would simply become another set of rules for the court to follow. Justice depends on the application of the law to the particular facts of the case, while balancing the interests of and prejudice to the parties. There are several factors the courts have considered in the past and which are useful to consider in determining a just result in this application.
The importance of a non-resident plaintiff with no assets within the jurisdiction
“The case law suggests that although it is a matter of discretion, it is the usual, ordinary or general rule of practice of the court to require a foreign plaintiff to give security for costs, because it is ordinarily just to do so.”
7 Smellie, C.J. ordered security for costs. His conclusion was not, however, based exclusively on the fact that the court would require
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security for costs from a foreign plaintiff. It was also based upon other factors considered by the Chief Justice in his reasons, including the court’s preliminary view on the outcome of the case and the unwarranted allegations made by the party.
8 The plaintiff argues that the “modern approach” has been stated in several recent English decisions, including Porzelack K.G. v. Porzelack (U.K.) Ltd. (5); Thune v. London Properties Ltd. (7); Nasser v. United Bank of Kuwait (4); De Beer v. Kanaar & Co. (2); Somerset-Leeke v. Kay Trustees (6); Naghshineh v. Chaffe (3) and Weissfisch v. Julius (8).
9 This “modern approach” was, in part, influenced by the European Convention on Human Rights and considers such factors as—
(a) the increasing ease of enforcing the judgments of one jurisdiction in most other jurisdictions, whether pursuant to reciprocal arrangements or otherwise;
(b) the recognition that there is no correlation between the cost of enforcing a costs order abroad and the defendant’s costs of defending the action;
(c) the recognition that an order for security for costs could be discriminatory in the sense that it may restrict, to a disproportionate extent, freedom of access to the courts, contrary to the provision of the European Convention on Human Rights; and
(d) the realization that a plaintiff ordinarily resident within the jurisdiction, against whom security cannot be ordered, may have no significant assets within the jurisdiction against which a costs order could be enforced.
10 In my view, the fact that a plaintiff is a non-resident and without assets in the Cayman Islands still remains an important factor for the court to consider. However, I also conclude that the factors considered by the recent English cases are worthy of consideration in determining the importance to be attached to the plaintiff’s non-residence and lack of assets in the jurisdiction.
The merits of the case
11 The defendant argued that it had a very strong case and was bound to succeed at trial. It said that it had an absolute defence to the claim by virtue of s.12 of the Health Services Authority Law (2003 Revision), which provides:
“Neither the Authority, nor any director or employee of the Authority shall be liable in damages for anything done or omitted in the discharge or purported discharge of their respective functions
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under this Law unless it is shown that the act or omission resulted from their dishonesty, fraud or wilful neglect.”
This defence was recently added to the amended statement of defence. It may be a good defence. However, the trial judge may easily conclude that it was not intended to apply to an alleged breach of contract and restrict its application to a limitation of liability in respect of the Authority discharging its duties under the legislation and may further conclude that performance of an employment contract does not fall within that remit. Accordingly, s.12 does not create a clear defence to the claim.
12 However, I have not had the benefit of full argument on this point and I therefore cannot say with confidence whether the plaintiff or defendant is more likely to succeed. The ultimate conclusion will of course depend upon the evidence at trial, the findings of fact that arise from that evidence and the full submissions from counsel on the interpretation of that section.
13 Therefore, the merits of the case are not an important factor on this application. The merits of this case should only be considered if the court can see clearly, without undertaking an extensive examination of the pleadings or affidavit evidence or a detailed review of the law, that the merits are clearly in favour of one party: see Porzelack K.G. v. Porzelack (U.K.) Ltd. (5).
The difficulty with enforcing any judgment for costs in the United States
14 The plaintiff has disclosed that he has significant assets located in the United States. He owns a single-family home at 581 Farmloop Road, Banner Elk, North Carolina, with an estimated net value of US$1,350,000 plus furnishings valued at approximately US$250,000. He also owns a single-family home at 35 Grandview Drive, Mount Cisco, New York, with a net value of approximately US$400,000. He also has an independent retirement account (IRA) with Amerprise Financial Services with a value of US$205,000 and a second IRA in the amount of US$650,000, which pays him a monthly annuity of US$6,500 for the next 10 years. He is the owner of two motor vehicles with a new value of approximately US$90,000. His monthly income is US$8,250. He is ordinarily resident in Florida.
15 The plaintiff produced a copy of the US Uniform Out-of-country Foreign Money-Judgment Recognition Act which has been adopted in Florida (his jurisdiction of residence), North Carolina and New York. That legislation provides a simple mechanism for the registration and enforcement of a foreign judgment. The recognition and enforcement of a foreign judgment is set out in s.55.604, which provides as follows:
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“Recognition and enforcement
Except as provided in s.55.605, an out-of-country foreign judgment meeting the requirements of s.55.603 is conclusive between the parties to the extent that it grants or denies recovery of a sum of money. Procedures for recognition and enforceability of an out-of-country foreign judgment shall be as follows:
(1) The out-of-country foreign judgment shall be filed with the clerk of the court and recorded in the public records in the county or counties where enforcement is sought.
. . .
(2) The judgment debtor shall have 30 days after service of the notice to file a notice of objection with the clerk of the court specifying the grounds for nonrecognition or nonenforceability under this act.
(3) Upon the application of any party, and after proper notice, the circuit court shall have jurisdiction to conduct a hearing, determine the issues, and enter an appropriate order granting or denying recognition in accordance with the terms of this act.
(4) If the judgment debtor fails to file a notice of objection within the required time, the clerk of the court shall record a certificate stating that no objection has been filed.
(5) Upon entry of an order recognizing the out-of-country foreign judgment, or upon recording of the clerk’s certificate set forth above, the out-of-country foreign judgment shall be enforced in the same manner as the judgment of a court of this state.”
16 The Notes of Decisions, referring to this section, provide:
“Under Florida common law, a foreign decree is entitled to comity where (1) the parties have been given notice and opportunity to be heard; (2) the foreign court had original jurisdiction; and (3) the foreign decree does not offend the public policy of the State of Florida: Nicor Intl. Corp. v. El Paso Corp., 318 F. Supp. 2d 1160 (S.D. Fla. 2004), Judgment 830.1.”
17 Section 55.606 of the Uniform Out-of-country Foreign Money-Judgment Recognition Act provides for the grounds for non-recognition as follows:
“Grounds for nonrecognition
(1) An out-of-country foreign judgment is not conclusive if:
(a) The judgment was rendered under a system which does not
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provide impartial tribunals or procedures compatible with the requirements of due process of law.
(b) The foreign court did not have personal jurisdiction over the defendant.
(c) The foreign court did not have jurisdiction over the subject matter.
(2) An out-of-country foreign judgment need not be recognized if:
(a) The defendant in the proceedings in the foreign court did not receive notice of the proceedings in sufficient time to enable him or her to defend.
(b) The judgment was obtained by fraud.
(c) The cause of action or claim for relief on which the judgment is based is repugnant to the public policy of this state.
(d) The judgment conflicts with another final and conclusive order.
(e) The proceeding in the foreign court was contrary to an agreement between the parties under which the dispute in question was to be settled otherwise than by proceedings in that court.
(f) In the case of jurisdiction based only on personal service, the foreign court was a seriously inconvenient forum for the trial of the action.
(g) The foreign jurisdiction where judgment was rendered would not give recognition to a similar judgment rendered in this state.”
18 During the hearing, the plaintiff’s counsel advised that his client was prepared to sign an undertaking or a letter agreement indicating that he would not raise any of the grounds for non-recognition should there be an award of costs against him in this court. That is, he was prepared to sign a document now agreeing that he would not raise any of the potential defences in the United States should a costs order be made against him. This was not, however, acceptable to the defendant, who argued that even if such a letter were signed, it may not be enforceable and may not prevent the plaintiff from raising such a defence in Florida. I did not find the defendant’s argument on this point to be persuasive. Should a plaintiff in this jurisdiction sign an agreement that he will not raise any of the potential defences in his home jurisdiction should an award of costs be
2007 CILR 171
made against him, it would, I think, be very persuasive evidence to any court in the United States.
19 The defendant filed an affidavit from Lazaro Fernandez Jr., an attorney practising in Miami. Mr. Fernandez deposed that an application could be brought in the United States under this legislation to enforce the Cayman judgment. However, he said that a potential defence might be raised on the basis that it could be argued that the judgment was for “taxes, a fine, or other penalty.” The award of ordinary costs in the Cayman Islands, as in other Commonwealth countries, is not a tax, a fine or any other form of penalty. It is intended to compensate a successful party for a portion of the costs they had to incur in the course of litigation. That is clearly understood in these Islands and could not be much disputed in the United States. I find little merit in the defendant’s assertion that the plaintiff would be able to successfully raise that defence in the United States.
20 Mr. Fernandez further deposed that the plaintiff could argue that the award of cost was “a judgment obtained by fraud.” This defence is typically available at common law whenever there is an action to sue on a foreign judgment. It is a difficult defence to succeed on and the defendant must show that there was a fraud upon the court. I am not persuaded that this would likely be a successful defence if it were raised in the United States. My sense was that Mr. Fernandez was reaching for reasons that could possibly or might substantiate a defence. I was not at all persuaded on his material that any of those defences would likely have any merit. Although it is possible that a defence could be raised in the State of Florida or the other states in America, I do not think that any such defences would be likely to present much of a barrier.
21 Ultimately I am satisfied that Mr. Elliott is a man of some means in the United States and that there is no evidence to suggest that he would do anything to impair or prevent the defendant from recovering any costs that might be ordered. On the contrary, the material suggests to me that the defendant is advancing an argument which is speculative and is not doing so for the primary purpose of protecting its interest but rather seeking an order which could potentially prevent Mr. Elliott from pursuing his remedies in the Cayman Islands.
22 I am satisfied that if an order for costs is ultimately made against Mr. Elliott here, then the defendant will most probably have a reasonably speedy and efficient remedy available to it to pursue that award of costs in the United States. I recognize, however, that it may be necessary to file the judgment in three of the states within the United States and to take some efforts to have the judgment registered and recognized within the United States. There may be some costs associated with that and I think that the defendant is entitled to an order for some security for costs to protect against that eventuality.
2007 CILR 172
23 In its application, the defendant disclosed that the total amount of costs estimated for this action was $505,931. These costs are to be expended in a lawsuit where the maximum amount of the claim appears to be approximately $950,000.
24 However, para. 3 of the amended statement of claim provides:
“Section VIII, sub-s. 3 provides that, after six months of the start of the agreement, each party might give the other six months’ notice to terminate the same without cause and, in the event of such termination on the part of the Authority, it would pay the plaintiff 75% of the total salary which would have been paid to him had he served the entire term of three years.”
25 It is unclear from this pleading what the maximum amount of the claim is, but it may be 75% of the $950,000 or approximately $712,000. The amount of costs that are being incurred seems disproportionate to the amount involved. It is of course always open to a party to spend whatever they choose on conducting litigation. That does not mean that the court will order security for costs for whatever amount is spent or estimated to be spent. During the course of submissions, Mr. McCann seemed to accept Mr. Farrow’s suggestion that the maximum amount that could actually be recoverable as costs would be approximately $238,000.
26 Even this amount seems to be high and would not ordinarily be viewed by the court as reasonable costs or an appropriate amount to order as security for costs for a wrongful dismissal trial. In these circumstances, it does not seem reasonable or just to require a non-resident plaintiff to post security in the amount suggested by the defendant.
Delay by the parties
27 The defendant argued that there had been a delay by the plaintiff in the course of these proceedings and that this delay was an indication that the plaintiff lacked confidence in his case. I do not accept that the rather short delay encountered in this case (approximately four months of inactivity) is consistent with a lack of confidence in the plaintiff’s own case. The more significant delay, in my opinion, was the delay of the defendant in bringing the application. The defendant’s initial counsel, Mr. Myers, wrote approximately nine months after the writ was issued, indicating that an application for security for costs was to be brought. This application was brought more than two years after the writ was filed. During that period of time, both the plaintiff and the defendant incurred significant costs in prosecuting the lawsuit and in particular concluding their documentary discovery obligations. No reason or explanation has been given by the defendant why there was such a delay in bringing this application. During the hearing, Mr. McCann indicated that, even if the
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future estimated costs were to be provided as security, the appropriate amount would be approximately $150,000. That $150,000 is a portion of the estimated cost that will be incurred between now and the conclusion of the trial.
Conclusion
28 I consider the following factors to be significant in this case:
(a) the plaintiff is a non-resident of the Cayman Islands with no assets here;
(b) the plaintiff was recruited to come to work in the Cayman Islands for the defendant. There is a contractual dispute between the parties and the plaintiff has left the jurisdiction to return to the United States. In such circumstances, the plaintiff should not be unduly restricted in his access to the courts and a significant order for security for costs may restrict that access;
(c) the plaintiff is a man of substance with disclosed assets in the United States. There is no evidence that he will take any steps to move, dispose of or secrete those assets. Nor is there any evidence that he will do anything to resist the enforcement of a costs order in the United States, should one be granted against him by this court;
(d) there is legislation in the United States which provides for a relatively simple mechanism for enforcement of a foreign judgment. I was not persuaded that the potential defences are likely to be significant and believe that enforcement of an award of costs would probably be fairly straightforward;
(e) there is a possibility that the plaintiff may raise some defences within the United States but I do not think that they could be substantial. There may be some expense associated with registering the judgments within the three states in the United States where the plaintiff has assets but the amount of legal expenses is probably not that significant;
(f) I cannot say on the merits of this case whether the plaintiff or the defendant is more likely to succeed. I can say, however, that I was not persuaded that the defendant has an absolute defence by virtue of s.12 of the Health Services Authority Law (2003 Revision); and
(g) the delay in prosecuting this case is not a factor that I consider significant. The delay of the defendant in bringing the application is, however, more significant in that substantial costs have already been incurred and it would be unfair at this stage to make any order for security for costs in respect of any costs that were incurred prior to this application being brought.
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Security ordered
29 In considering the above factors, I conclude that the plaintiff should be required to provide security for costs. The amount is primarily determined by my best estimate of what it might cost to have the judgments registered in the United States should it be necessary to do so. The plaintiff filed evidence indicating that it would cost approximately US$500 to register a judgment within the State of Florida. I find that estimate to be entirely too optimistic. The court must draw on its experience in enforcing foreign judgments in this court and its knowledge of enforcing Cayman judgments in foreign counties.
30 Considering all of these factors, I think the appropriate amount to order as security for costs is $15,000.00. Costs of this application will be costs in the cause.
Order accordingly.
Attorneys: Quin & Hampson for the plaintiff; Government Legal Dept. for the defendant.