Bennett Enterprises Inc. v Lipton

• Jurisdiction: Ireland
• Judge: O'Sullivan J.
• Judgment Date: 01 January 1999
• Neutral Citation: [1998] IEHC 98
• Docket Number: [1998 No. 5663P]
• Court: High Court
• Date: 01 January 1999

BENNETT ENTERPRISES INC. v. LIPTON

BETWEEN

BENNETT ENTERPRISES INC., BONAIRE ENTERPRISES INC., EMPRESAS ENTERPRISES, de BRONCE S.A., EMPRESAS CAPRICORNIO CANAL S.A., HARMONY SERVICES INC., KARPUS ENTERPRISES INC., KEY SERVICES INC., LLOYDS ENTERPRISES INC., NOBLE TREE ENTERPRISES INC., ORTHOMEDIA FOUNDATION INC., PANOS ENTERPRISES INC., PENTHOUSE PLACE ENTERPRISES INC., PICCOLO MUSIC ENTERPRISES INC., PILOT ENTERPRISES INC., SHAMROCK GUARDIAN INC., WINTERGREEN ENTERPRISES INC., VILLA CATARTATA AZUL S.A., VISONEER ENTERPRISES INC., VOYAGE ENTERPRISES INC. AND ZANIBAR ENTERPRISES INC.

PLAINTIFFS

AND

JOHN LIPTON, DAVID JOHNSON, TONY JONES, J. LASHLEE, ARNOLD MITCHELL, BILL NURICK, WILLIAM KIRKHAM, VICTOR PRESTON, MIKE PUTTINAM, JOHN YU, RICHARD LEONARD AND TERESA VOGT (being sued as Trustees of and/or in a representative capacity on behalf of both the Genesis Trust Fund and the Exodus Trust Fund)

DEFENDANTS

[1998] IEHC 98

No.5663P/1998

THE HIGH COURT

Synopsis

Injunctions

World-wide Mareva injunction; trust funds; jurisdiction of the court; alleged breach of contract; reduction of monies in trust funds; whether plaintiffs failed to make full and frank disclosure; whether particulars of plaintiffs claim adequately set out; whether failure of plaintiffs to establish that defendent holds assets within the jurisdiction fatal to application; whether sufficient evidence to establish risk of assets being removed or dissipated for the purpose of the defendant evading his obligation to the plaintiff; whether adequate undertaking as to damages where plaintiffs have no assets within the jurisdiction but where defendant in possession of funds belonging to plaintiffs Held: Injunction granted (High Court: O'Sullivan J. 19/06/1998)- [1999] 2 IR 221 - [1999] 1 ILRM 81

Bennett Enterprises Inc. v. Lipton

The Court was satisfied that any non-disclosure by the plaintiffs was not relevant to the present application and further, the plaintiffs claim was sufficiently particularised. While the defendants did not have any assets within the jurisdiction this was not fatal to the plaintiffs application as the Court was concerned with an international operation and must be capable of adapting its practices in recognition of that fact. The Court was also satisfied on the basis of the voluminous documentation put before it that the plaintiffs had a reasonable apprehension that assets would be dissipated with a view to depriving the plaintiffs. The High Court so held in granting the injunction and saying that the defendants could not be heard to say that the plaintiffs had not given an undertaking as to damages when they were admittedly in possession of $5 million worth of the plaintiffs funds.

Citations:

RSC O.40 r7

BABANAFT INTERNATIONAL CO SA V BASSANTE 1990 1 CH 13

O'MAHONY V HORGAN 1995 2 IR 411

DERBY & CO LTD V WELDON (NO 3 & 4) 1990 1 CH 65

1 JUDGMENT of O'Sullivan J. delivered the 19th day of June 1998 .

2 The Plaintiffs are applying for an interlocutory world–wide Mareva type injunction restraining the Defendants from reducing the monies in the two trust funds referred to in the title of these proceedings below $;5 million, secondly, for the appointment of a new trustee of the said funds, and, thirdly, for an order joining a new party, Wintex Investment Corporation, to the proceedings.

3 Before briefly describing the factual background to these applications, I will deal with two preliminary points raised by the Defendants.

4 The first is that the Affidavits grounding the application have not been taken before an Irish representative or agent as required by Order 40 Rule 7 of the Rules of the Superior Courts. As will be seen by a perusal of Rule 7 where such a representative or agent is not conveniently available, the Affidavits can be taken before the other categories of official referred to in Rule 7. The evidence is that an Irish representative or agent of the specified categories were not conveniently available and in these circumstances I consider that the Affidavits filed are in order and comply with the aforesaid Order and Rule. A second preliminary point is that this Court has no jurisdiction to entertain the application.

5 The evidence shows that the instruments creating the trust funds already referred to specify that the funds are domiciled in Ireland and that they are subject to Irish law. Furthermore, the Defendants have appeared on this application and argued the case on its merits. In these circumstances, I am satisfied that this Court has jurisdiction to entertain the Plaintiffs' application.

6 The factual background to this application is that save for the three mentioned parties in the next paragraph each of the Plaintiff companies is an investment vehicle for a client or clients of a further company, namely, Privacy Consultants International Inc. ("Privacy Consultants"), which is a company having offices in both Panama and Costa Rica as well as a mailing address in Miami, Florida.

7 The principals behind Privacy Consultants are Mr. George Sprague, who has sworn the principal Affidavit on behalf of the Plaintiffs in this application, and his wife Ms. Rosibel Gonzalez Sosa. Privacy Consultants provides international off–shore and management investment services to its clients. Villa Catartata Azul S.A. is beneficially owned by Ms. Sosa and Lloyd Enterprises Inc. and Orthomedia Foundation Inc. are beneficially owned by Mr. Sprague. Each Plaintiff is incorporated in either Panama or Costa Rica. The affairs of each Plaintiff, including investments, is conducted by Mr. Sprague.

8 During the period from 1994 to 1997, the Plaintiffs invested various sums in the two funds referred to in the title of these proceedings. The founder of both these founds was the first named Defendant, John Lipton, who owns houses in California and Costa ???

9 The two funds (hereinafter "Genesis" and "Exodus") are involved in foreign. exchange cash currency trading. According to their prospectuses they are "Irish ??? The difference between the two is that investments of less than US$;100,000 are made through Exodus: larger investments are made through Genesis. Both funds have accounts with International Bright Investments Limited ("IBI"). There are two IBI companies.??? Macau and one in Hong Kong. Genesis and Exodus have master trading accounts width ??? These accounts in turn contain sub-accounts representing the investments made by the ???including the Plaintiffs, of Genesis and Exodus.

10 Until December 1997, Genesis and Exodus furnished monthly Statements???Account to Privacy Consultants in respect of the investments of the Plaintiffs in these???funds. Since then no Statements of Account have been forthcoming.

11 In May 1997 specific rules regarding withdrawal of monies from the???and Exodus Trust Funds were put in place. The Plaintiffs say that these rules were put??? place unilaterally, the Defendants say these rules were put in place by agreement. A number of investment programmes were introduced, some long term and some short term. Different notice periods for withdrawal applied. The Plaintiffs opted for various investment programmes and in the case of five Plaintiffs (Orthomedia Foundation Inc., Panos Enterprises Inc.., Visoneer Enterprises Inc., Penthouse Place Enterprises Inc. and Bennett Enterprises Inc.) notice of withdrawal was given between May and August 1997 and it is common case that such notice complied with the new rules and that monies due to these Plaintiffs amounting to some $300,000 became due in November 1997. These monies have not been paid.

12 The Defendants say that the reason why these monies have not been paid is that they fear that Mr. Sprague will not pay the appropriate beneficiaries entitled and they say that the Plaintiffs would have to disclose the identity of the beneficiary before such payment is made.

13 Relations deteriorated between the sets of parties and the Defendants have stated that they will no longer accept instructions from Privacy Consultants but they have indicated that the Plaintiffs' funds would be "quarantined" and inter-pleaded into a Court system for adjudication and disbursement. At the hearing of this motion, this was clarified to mean that the Defendants would not pay these funds forthwith to the Plaintiffs but would make them available on a phased basis commencing with a payment of almost $1.8 million in mid-September of this year and comprising further periodic payments totalling just over $5 million in approximately 18 months time. The Defendants have indicated that they would not pay out money direct to Privacy Consultants or any of its representatives or affiliates.

14 The Plaintiffs say that the attempt unilaterally to impose new withdrawal conditions constitutes a fundamental breach of contract by Genesis and Exodus and they also say that the introduction of the quarantining provision, the refusal to accept instructions as before from Privacy Consultants, their failure to furnish Statements of Account and an apparent dissolution of Exodus referred to by Mr. Lipton in his replying Affidavit all constitute fundamental and repudiatory breaches of contract.

15 An interim Mareva type injunction was granted by me on the ex parte application of the Plaintiffs on the 8th day of May 1998 and on the following day, which was a Saturday, similar Orders were granted to the Plaintiffs by the Court in Hong Kong and these Orders in both jurisdictions are continuing in effect. The Defendants say that it is onerous on them that they should be obliged to meet the Plaintiffs' cases in two jurisdictions but the Plaintiffs respond that the curtailing of the initial and any subsequent Orders (in line with the restriction adopted by the Court of Appeal in Babanaft International Company S.A. v. Bassante and Another( 1990: 1: Ch: 13) implies that proceedings in one or more jurisdictions are likely if not...