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Levera battle locked in court

The Chinese housing project now under construction at Levera in St Patrick

A high court judge in Grenada has ordered the Oveson brothers from Utah in the United States to come up with a financial undertaking for cost in order to hear a matter in the disputed Levera Development project in the north of the island.

The brothers are linked to the Grenada Citizenship Development Limited (GCDL) which entered into an arrangement with the then owners of the land, Levera Resort Development Ltd (LRDL) to undertake a multi-million dollar development tourism-related project.

The Levera outfit which includes businessman Lyden Ramdhanny and local attorney-at-law, Dickon Mitchell have been taken to court by Grenada Citizenship after it was asked to stop work on the site for breach of contract.

The Oveson brothers are seeking damages in the region of US$19.6 million as Levera sold the property to a wealthy Chinese businessman.

At the centre of the dispute is the deal which GCDL struck with LRDL to borrow some US$31.5 million for the project, secured through a mortgage involving the 256 acres at Levera.

As part of the arrangement, there was a clause for the Oveson brothers to be allowed to use Levera’s passport-selling status to raise money for the project.

The government-controlled Grenada Citizenship by Investment Committee (GCIC) ruled that this was illegal and the two brothers from the United States were left in the cold.

Following is part 4 of the ruling from Justice Raulston Glasgow on the matter:

[30] The applicants ground their request for security for costs in CPR 24.2 and section 548 of the Companies Act. CPR 24.2 states:

24.2 (1) A defendant in any proceedings may apply for an order requiring the claimant to give security for the defendant’s costs of the proceedings.

(2) Where practicable such an application must be made at a case management conference or pre-trial review.

(3) An application for security for costs must be supported by evidence on affidavit.

(4)The amount and nature of the security shall be such as the court thinks fit.”

CPR 24.3 sets outs the criteria to be satisfied if the court is to make an order for security for costs:

“The court may make an order for security for costs under rule 24.2 against a claimant only if it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order, and that-

(a) some person other than the claimant has contributed or agreed to contribute to the claimant’s costs in return for a share of any money or property which the claimant may recover;

(b) the claimant –

(i) failed to give his or her address in the claim form;

(ii) gave an incorrect address in the claim form; or

(iii) has changed his or her address since the claim was commenced; with a view to evading the consequences of the litigation;

(c)   the claimant has taken steps with a view to placing the claimant’s assets beyond the jurisdiction of the court;

(d) the claimant is acting as a nominal claimant, other than as a representative claimant under Part 21, and there is reason to believe that the claimant will be unable to pay the defendant’s costs if ordered to do so;

(e) the claimant is an assignee of the right to claim and the assignment has been made with a view to avoiding the possibility of a costs order against the assignor; the claimant is an external company; or

(f) the claimant is ordinarily resident out of the jurisdiction.

The court is also empowered to make an order for security for the costs where the claimant is a company. Section 548 of the Companies Act reads:

‘Where a company is plaintiff in any action or other legal proceeding any judge having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the company will be unable to pay the costs of the defendant if successful in his or her defence, require sufficient security to be given for those costs and may stay all proceedings until the security is given.”

The point is now well settled that the court has a discretionary power to grant an order for security for costs.

Lord Denning elucidated the principle succinctly in Sir Lindsay Parkinson” when he observed that:

“Turning now to the words of the statute, the important word is “may”. That gives the judge a discretion whether to order security or not. There is no burden one way or the other. It is a discretion to be exercised in all the circumstances of the case.”

[31]         GCDL’s principle concerns are that:

(1) An order may stifle its chances of bringing its claim. In this regard, GCDL asserts that its claim has good prospects of success;

(2) An order in this application would be oppressive.

[32] GCDL grounds these concerns in the fact that (1) the applicants have sought to rely on material filed in other claims to support their contention that GCDL may be unable to pay their costs if the applicants succeed on this claim; and (2) the applicants were the architect of any impecuniosity inflicted on GCDL. GCDL says that this issue forms the crux of the present litigation between the parties.

The applicant’s reliance on documents filed in other proceedings GCDL objects to the applicants’ use of a number of documents filed in GDAHCV 2017/0053 and 2019/0521. GCDL argues that CPR 3.14 restricts the applicants’ access to these documents. They surmise that Mr. Mitchell obtained access to and/or knowledge of these documents whilst he acted previously as GCDL’s legal counsel. They say that the applicants’ use of these documents is oppressive.

CPR 3.14 reads:

“3.14 (1) On payment of the prescribed fee, any person is entitled, during office hours, to search for, inspect and take a copy of any of the following documents filed in the court office, namely:

(a) a claim form;

(b) a notice of appeal;

(c) a judgment or order given or made in court; and

(d)   with the leave of the court, which may be granted on an application made without notice, any other document.

(2)     Nothing in paragraph (1) prevents a party in any proceedings from searching for, inspecting and taking a copy of any affidavit or other document filed in the court office in those proceedings or filed before the commencement of those proceedings but with a view to its commencement.

(3) Any document filed in or in the custody of a court office must not be taken out of the court office without the leave of the court unless the document is to be sent to another court office or to a magistrate’s court.”

[33]  The provisions of the rule are not obscure. The applicants can obtain copies of the documents recited at CPR 3.14 (1)(a) to (c) without the leave of the court. They require the leave of the court to obtain copies of any other document. The applicants rely on copies of a request for the issue of a writ of execution, a winding up petition, the Oveson affidavit and other documents attached to the winding up petition. The applicants submit that they are allowed to rely on these documents because these are matters of “public record.” They argue that the winding up petition was listed on the court’s list of matters for hearing and GCDL’s application to strike out the winding up petition was heard in open court. They continue that the decision refusing the winding up petition is published on the court’s website. Mr. Mitchell also denies that these matters came into his knowledge and possession as legal counsel for GCDL since he asserts that he never served in that capacity.

I do not believe that the applicants are entirely correct in their arguments about the documents. As I have indicated above, CPR 3.14 is clear. The rule seeks to delineate the manner in which persons obtain copies of documents filed in the court office. A cursory reading of the rule suggests that the applicants could not obtain copies of the request for writ of execution filed in GDAHCV 2017/0053, the winding up petition and other documents filed therewith in GDAHCV 2019/0521 including the Oveson affidavit except with the permission of the court. They could rely on the mediation order made in GDAHCV 2017/0053 without obtaining the leave of the court. The parties have not presented me with a copy of Justice Actie’s ruling on the strike out application in the winding up petition but I am certain that CPR 3.14 allows the applicants to inspect and take copies of it without obtaining the leave of the court.

What then is the impact of all this? I must ignore the copies of the Oveson affidavit, the winding up petition and the documents attached to the same” because the applicants have not satisfied me that they obtained the copies of those documents in the manner prescribed by CPR 3.14. Further, they have not presented any basis on which they are otherwise entitled to obtain copies of those documents and rely on them in these proceedings.

Notwithstanding this finding, I observe that GCDL has acknowledged that a judgment subsists against it and 3 other entities in GDAHCV 2017/0053.GCDL claims that the judgment in that case arose from a breach of a mediation order.

GCDL pleads that it paid part of the sums owed pursuant to the mediation order. It explains that the non-payment that led to the judgment arose because of the default of the claimant in GDAHCV 2017/0053. The fact remains though that GCDL has accepted that a judgment subsists against it in GDAHCV 2017/0053 for substantial sums. It has accepted that, for whatever reason, it has not paid the sums due and owing under that judgment.

In respect of GDAHCV 2019/0521, GCDL does not deny the existence of a winding up petition filed against it in respect of an unsatisfied judgment. It contends, however, that the matter is a live one awaiting the court’s determination.

The discretion to grant the order

The court must carry out a balancing exercise. On the one hand it must weigh the injustice to the plaintiff if prevented from pursuing a proper claim by an order for security. Against that, it must weigh the injustice to the defendant if no security is ordered and at the trial the plaintiffs claim fails and the defendant finds himself unable to recover from the plaintiff the costs which have been incurred by him in his defence of the claim.

The court will properly be concerned not to allow the power to order security to be used as an instrument of oppression, such as by stifling a genuine claim by an indigent company against a more prosperous company, particularly when the failure to meet that claim might in itself have been a material cause of the plaintiffs’ impecuniosity.

But it will also be concerned not to be so reluctant to order security that it becomes a weapon whereby the impecunious company can use its inability to pay costs as a means of putting unfair pressure on the more prosperous company.

In considering all the circumstances, the court will have regard to the plaintiff company’s prospects of success. But it should not go into the merits in detail unless it can clearly be demonstrated that there is a high degree of probability of success or failure.

In this context it is relevant to take account of the conduct of the litigation thus far, including any open offer or payment into court, indicative as it may be of the plaintiffs prospects of success. But the court will also be aware of the possibility that an offer or payment may be made in acknowledgment not so much of the prospects of success but of the nuisance value of a claim.

The court in considering the amount of security that might be ordered will bear in mind that it can order any amount up to the full amount claimed by way of security, provided that it is more than a simply nominal amount; it is not bound to make an order of a substantial amount.

Before the court refuses to order security on the ground that it would unfairly stifle a valid claim, the court must be satisfied that, in all the circumstances, it is probable that the claim would be stifled.”

I have formed the view that GCDL may not be in a position to satisfy an order for costs made against it in this claim and that an order for security for costs is appropriate in all the circumstances. Equally, I have found and so rule that GCDL is incorrect in its position that an order would stifle its claim and that it would be oppressive.

GCDL grounds these positions on stifling and oppression on the assertion that, as stated above, it has a claim with good prospects of success. It also posits that the applicants’ alleged breach of the agreements has led to its purported impecuniosity. These are 2 sides of the same argument as far as I see it. They also make complaint about the applicants’ use of previously filed documents.

In terms of good prospects of success, this argument is inextricably tied up with GCDL’s contention that its present financial circumstances were brought on by the applicants’ breach of the agreements. The parties are correct that, at this stage, the court is not required to consider the matter in detail.

Without delving too much in the details of the claim, as I have previously said on the discharge application, GCDL may be hard pressed to prove that Levera breached its obligation to assign the tax concessions and planning permission in the face of evidence that GCDL utilised the very planning permission and tax concessions for quite some time. In respect of the obligation to assign the CBI licence, I have previously opined on the discharge application, and I maintain the view, that Clause 1.5 of the SPA did not obligate Levera to assign the CBI approval to GCDL. Rather the clause obligated Levera to permit GCDL’s use of the CBI approval. It would appear that this is precisely what Levera did. Levera appears to have permitted GCDL to use its CBI approval until the CBI committee “plugged the plug” so to speak from GCDL’s use of the approval after a number of years.

The facts so far suggest that the committee’s action was a matter over which Levera may have had no control. On this latter score, there is no evidence thus far that Levera or GCDL knew or ought to have known that GCDL could not utilise the CBI approval. There is also no pleading or evidence thus far that Levera instigated or caused the withdrawal of the use of the CBI approval.

Equally I fear that, in terms of breach of the agreement to make the loan, transfer the lands and Levera’s consequent forfeiture of the lands for non-payment of the agreed sums, GCDL would have to surmount the numerous disclaimers made by Levera when it granted extensions of time to pay the sums due.

However, my view is that on the material thus far, GCDL has not presented the strongest case that Levera was not well placed to rely on its contractual remedies for GCDL’s apparent failure to meet its obligations to make the agreed payments under the SPA and the adjustments or extensions thereto. I stated on the discharge application, GCDL’s case is not very strong but it may succeed.

All in all, it seems that the charge that the applicants’ conduct and in particular, Levera’s conduct, has led to GCDL’s alleged impecuniosity is not very strong. In addition to these seemingly evident challenges facing GCDL’s claim, what also concerns me on this application is the lack of any proof of GCDL’s means to satisfy any judgment that the court may make against it. GCDL laments the fact that an order may stifle its chances of presenting its case.

GCDL has not presented any information that it would in fact be in a position to meet any orders for costs that the court may make against it or that its principals or third parties would be in a position to do so. This, the learning suggests, it was enjoined to do. Rather, GCDL has presented this court with a claim that, while not bound to fail, must overcome a number of challenges if it is to succeed. Equally, while I have ignored the Oveson affidavit and the winding up petitions and supporting documents, GCDL’s own evidence on this application concedes that there are outstanding judgments against it that remain unfulfilled. In fact, I have commented above on the fact that it took nearly 10 months for GCDL to pay a costs order made by this court on the discharge application in the somewhat paltry sum of $1500.00. This state of affairs does not leave this court with the impression that GCDL is in a liquid financial state to meet a costs order made against it.

The burden is quite clear in these sorts of cases. GCDL must not only show that there were reasonable grounds to believe that its alleged impecuniosity was brought on by the applicants but that an order would probably stifle its claim. I fear that GCDL has failed to meet this burden on this application. I must add that GCDL’s claim that the application is oppressive is without merit. In exercising its discretion, a court should not allow a small company to be shut out from making a genuine claim. However, this is but one of the relevant factors. On the other hand, the court should not permit an impecunious company to use its impecuniosity as a means to pressure a more prosperous company. In this case, based on all the material before this court, the balance appears to fall in favour of the grant of the order for security for costs.

Quantification of the award
GCDL makes the further point that the sum claimed by the applicants is without basis. CPR 24.2(4) gives the court the discretion to make an order for security for costs in an amount and nature that it sees fit. Indeed the discretion stated at CPR 24.2(4) is replicated in the 5th proposition of Lord Justice Peter Gibson’s guidelines recited above. His Lordship concluded that the discretion permits the court to award any sum up to the full amount claimed by way of security so long as it is more than a nominal sum.

The proposition that the court can award any sum up to the sum sought by the applicant is somewhat more nuanced in our court’s approach to quantification.

It would therefore appear that as a first step the court is required to determine the applicable sum based on the costs regime set out in CPR65. Indeed this was the instruction of our Court of Appeal as far back as the case of Next Level Engineering Services Ltd. v the Attorney General et al”. The applicants acknowledge in Mr. Mitchell’s reply to the Wade affidavit that the court is required to approach the matter in the manner directed by the Court of Appeal in Ultramarine and Next Level Engineering Services Ltd. At paragraph 3 of the Mitchell reply to the Wade affidavit he states that the sum requested as security was “derived from a simple mathematical calculation of the value of the Respondent’s claimant’s claim and is based on the prescribed costs formula set out in the Civil Procedure Rules.'”‘ This is no doubt a correct assertion.

I think that 50% is an appropriate figure to adopt on this application.

(69] I therefore award the applicants the sum of USD138,195.82 as security for costs. I award the applicants the sum of $3000.00 as costs on this application. GCDL has 60 days from today’s date to pay both of these awards. The claim is stayed until both awards are paid. If GCDL fails to pay both awards as ordered, the claim will stand as struck out with costs to the applicants, if not agreed, to be assessed.

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