Exceptional Circumstances Where Foreign Plaintiffs May Avoid or Limit Undertakings

Exceptional Circumstances Where Foreign Plaintiffs May Avoid or Limit Undertakings

The Supreme Court of Bermuda in Griffin Line General Trading LLC v Centaur Ventures Ltd and Another [2022] Bda LR 20, had to consider whether Griffin Line General Trading LLC (“Griffin”), a foreign plaintiff, in whose favour an interim freezing order was granted against Templar Capital Ltd (“TCL”), should be ordered to fortify its cross-undertaking in damages and also provide security for costs.

In the main proceedings, Griffin, an accepted creditor of Centaur Ventures Ltd (“CVL”), seeks to set aside the sale and assignment by CVL as seller to TCL as purchaser of a debt owed to CVL by a South African incorporated company, Optimum Coal Mine (the “OCM claim”). In this regard, Griffin alleges that the sale was made at undervalue and is therefore voidable in terms of the Conveyancing Act 1983. In light of the fact that OCM is currently under statutory business rescue proceedings in South Africa (South African version of debtor in possession proceedings) and the sale forms part of a mandated business rescue plan under South African law, Griffinsought andobtained an interim injunction prohibiting TCL from taking steps to implement the proposed statutory plan in South Africa.

In what is described on multiple occasions as “an exceptional case”, the court was satisfied, on the objective evidence, that the terms of the sale, as part of the proposed statutory plan, would allow TCL to create third party rights over the OCM claim which would render it practically impossible for Griffin to unwind the transaction if ultimately successful in the main setting aside proceedings.

During the course of the judgment, Chief Justice Narinder Hargun confirmed and accepted the following principles:

• When relief is sought aimed at compelling a foreign plaintiff to provide fortification for a damages undertaking in injunctive relief, the Bermuda court distinguishes between instances where a plaintiff seeks to prohibit a defendant dealing with its “own assets”, as opposed to, in this instance and at least on a prima facie basis, where the plaintiff seeks to prohibit the defendant from dealing with an “asset due to the plaintiff” so to speak (See Orb “CT-Mobile” v IPOC International Growth Fund Limited [2006] Bda LR 53).
• In accordance with the commentary in Gee on Commercial Injunctions 7^th Edition and relying on the dicta in Orb arl v Ruhan [2016] EWHC 850 (Comm), the court may consider it appropriate not to require fortification when arguably the plaintiff is unable to provide security by reason of the very conduct of which complaint is made in the proceedings for redress.

Consequently, the Chief Justice concluded that the Court was most reluctant to impose any steps on Griffin, other than a nominal security for costs order of $75,000.00, which may stifle the pursuit of its main claim, considering that on a prima facie basis, Griffin was seeking to recover loans of over $100 million made to CVL, used by CVL to acquire the OCM claim, after which CVL`s main protagonist Mr McGowan, caused the OCM claim to be assigned to TCL (a company of which he is the sole owner and director) and whilst the OCM claim, in reality, appears to be the only asset by which Griffin can hope to recover any part of its loan to CVL.

This judgment illustrates that under exceptional circumstances, foreign plaintiffs seeking redress in Bermuda may be able to avoid, alternatively, substantially limit, having to provide either fortification of cross undertakings in interim injunctive proceedings, or security for costs, where such proposed financial and procedural guarantees, may decisively negate against a foreign plaintiff’s ability to pursue the main proceedings. The extent to which a foreign plaintiff could avoid these onerous financial and procedural undertakings, would depend on the facts of a particular case and whether the objective evidence shows that the foreign plaintiff essentially seeks to preserve an asset which cannot necessarily be characterised as the “defendant`s asset” and where the reason for why a particular foreign plaintiff may be unable to pay security for costs forms the subject matter of the main proceedings.