Panda Corporation Ltd v Talisman Securities Ltd et Al

• Jurisdiction: Anguilla
• Court: High Court (Saint Christopher, Nevis And Anguilla)
• Judge: Rawlins, M.
• Judgment Date: 21 December 2001
• Neutral Citation: AI 2001 HC 9
• Docket Number: Civil Suit No. 54 of 2000
• Date: 21 December 2001

High Court

Rawlins, M.

Civil Suit No. 54 of 2000

Panda Corporation Limited

and

Talisman Securities Limited et al

Appearances:

Mr. Kenneth Porter, with him Ms. Edlin Hughes for the claimant.

Mr. Bruce Drummond, with him Ms. Andrea Young for the defendants.

Practice and procedure - Discharge of stay of proceedings — claimant sought order removing a stay and permitting continuation of an action brought by the plaintiff against the defendant on account of the latter's continued trading on the plaintiff's account despite having been terminated from supply of services — Whether Court had jurisdiction to discharge order for stay — Customer Agreement between parties provided that disputes should be dealt with by arbitration — Finding that the conduct of the defendants since the stay was granted amounted to an abuse of the process of the Court — Judgment for claimant with costs.

Rawlins, M.

1 The action in this case was instituted by Writ of Summons, specially indorsed with Statement of Claim, dated and filed on 12th May 2000. The Statement of Claim states, inter alia, that the defendants acted as stockbrokers and investment advisors for the claimant Company under an Agreement dated 27th May 1998. This was by way of a Customer's Agreement that was made in the first defendant's standard form Customer Application and Agreement. The Statement of Claim also states that on 14th February 2000, the claimant terminated the services of the defendant by written notice. It further alleges that subsequently, the defendants unlawfully and fraudulently continued to trade on the claimant's account, liquidated the claimant's stock portfolio and withdraw the sum of US$20,805.00 from the said account at Wall Street Access.

2 On 23rd October 2000, the defendants successfully moved Saunders, J. to stay the and all further proceedings in this case, on the ground that the action constituted an abuse of the process of the Court. The bases for that application were that by seeking to litigate the case in Court, the claimant had ignored Clause 10 of the Customer Agreement. That Clause provides that the determination of disputes that arise out of the course of business between the parties shall be determined by arbitration.

3 Clause 10 of the Customer Agreement provides that arbitration between the parties is to be determined in accordance either with the Rules of the Board of Directors of the New York Stock Exchange (NYSE) or in accordance with the Code of Arbitration of the National Association of Securities Dealers (NASD). The Clause states:

“It is agreed that all controversies which may arise between us, concerning business with the undersigned, this agreement, or any other agreement between us of the performance or breach thereof, or subsequent to the date thereof, shall be determined by arbitration. Any arbitration shall be in accordance with the provisions of the constitution and the Rules of the Board of Directors of the New York Stock Exchange or pursuant to the code of Arbitration of the National Association of Securities Dealers as the undersigned may elect. The undersigned authorized the contra party to make such election. The award of the arbitrators or the majority of them, shall be final and judgment on such award may be entered in any court having jurisdiction thereof.”

4 There is a related Margin Agreement to which the Affidavit deposed by the second defendant on 26th June 2000 speaks. This Agreement was executed by the parties on 2nd November 1999 and signed on behalf of Panda Corporation by Cathy Ogilvie Smith, the sole Director for the Corporation. Paragraph 5 of the Affidavit states that the first defendant is affiliated with a company called BT Alex Brown Incorporated. It also states that this latter company acts as an agent in providing certain services, which include trades on the US market for a fee. It further states that the customer (the claimant in this case) was required to acknowledge the relationship of BT Alex Brown Incorporated, together with the first defendant as the Customer's Agent.

5 Paragraph 6, 7 and 8 of the second defendant's Affidavit, which is referred to in the foregoing paragraph, sets out his perspective on the purport of the arbitration process that is contained in the Margin Agreement. They state;

• 6. In Clause 19 of that Agreement there is an arbitration clause which outlines in summary that should there be any controversy between inter alia the Correspondent Company (BT Alex Brown Incorporated) or the Financial Service Organization (the first defendant), pertaining to the ‘construction, performance or breach of this or any other agreement pertaining to securities’ then such matters are to be conducted by arbitration before the National Association of Securities Dealers Incorporated or any other securities industry self-regulatory organization. Further, it is stipulated, “the award of the arbitrators shall be final and judgment on such award may be entered in any court having jurisdiction thereof.”

• 7. The claims alleged in the Statement of Claim are all matters, which the plaintiff allege (sic) arose because of the business relationship with the defendants. As such the plaintiff ought to be bound by the contractual terms of the agreements entered into, to bring any and all such claims by way of arbitration proceedings to any of the regulatory bodies referred to in the contracts.

• 8. By virtue of my relationship with BT Alex Brown Incorporated and Wall St Access, the first defendant is itself bound by the Laws of the State of New York and subject to regulation by any of the said regulatory authorities to which its correspondent companies, the said BT Alex Brown Incorporated and Wall St Access are subjected and which include the same regulatory companies mentioned in the contracts outlined above.

6 On 25th January 2001, the claimant filed an ex parte Summons herein by which it prayed for an Order removing the stay of proceedings pursuant to the Ruling of Saunders, J. and prayed the court to permit the action to proceed.

7 On 14th February 2001, the claimant also filed an Ex parte Summons by which it prayed for an Injunction restraining the defendants, their servants, agents, Directors, officers or subsidiary companies from disposing of or changing, transferring, dissipating, diminishing or in any way dealing with any of the claimant's assets within this jurisdiction, prior to the determination of this case. In February 2001, Saunders, J, granted the Mareva Injunction on this Ex parte Summons. He also adjourned the application to remove the stay of proceedings to be heard before the Master on 23rd February 2001.

8 When the matter came before me on 23rd February 2001, Mr. Porter, on behalf of the claimant, which was represented by its sole Director, Mrs. Cathy Ogilvie Smith, informed the Court that he was ready to proceed. Ms. Andrea Young of the Solicitors for the defendants appeared on behalf of the defendants. She informed the court that she was merely holding papers for the purpose of requesting an adjournment. She said that she had received no instructions in the matter that could be of assistance in the hearing. Neither the second defendant nor anyone else on his behalf was present. In the light of this, I ordered the parties to file written submissions and any further Affidavits necessary by 30th March 2001. I also ordered the defendants to pay costs for the day, and adjourned the hearing on the Application to 5th April 2001.

9 The claimants duly filed their submissions and relevant documented authorities in the form of a Chamber Memorandum. The defendants filed no submissions. The second defendant filed an Affidavit on 6th April 2001. This was the same day on which the matter was actually heard. On this hearing, oral submissions were made by Mr. Kenneth Porter on behalf of the claimant and by Mr. Bruce Drummond on behalf of the defendants. The Director of the claimant Company and the second defendant were present in Chambers.

10 The Submissions

11 Some of the submissions, written and oral, tended to raise issues that would have come for consideration on the hearing of the Application for the stay of proceedings. These include issues such as hardship, unmeritorious conduct and adhesion aspects of the contract that go to the impeachment of the validity of the arbitration clause or proceedings. These will not be considered on this application that is presently before me, since this is an application for the removal or discharge of the stay, rather than an appeal from the Ruling of Saunders, J. by which the stay in proceedings was granted.

12 The first issue that arises on the present application relates to the jurisdiction of the court to discharge the Order for stay. On this issue, Mr. Porter submitted that the court may discharge the Order for stay of proceedings on proof of developments, which have occurred since that Order, which warrant the discharge of the Order. This will be, for example, where the court is of the opinion that its Order is not being obeyed. It may also be where a subsequent development amounts to an abuse of the process of the court. Mr. Drummond submitted that the court may discharge stay in proceedings, where it is...