In Re Robin Hood

Motion to discover accounts abroad, require an accounting, and

impose a constructive trust for 16,000 alleged victims abroad
pursuant the extraterritorial equitable authority of
United
States of America v A Ltd [2001]
United States of America v A Ltd [2001]
CKHC 4; Plaint 5 of 1!!! "4 #ecem$er
2001%
H&'H C(U)* (+ *H, C((K &SLA-#S
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Plaint no 5/1!!!
U-&*,# S*A*,S (+ A0,)&CA
v
A L&0&*,#
'),&' C1
1U#'0,-* #A*,2 4 #,C,03,) 2001
Conflict of la4s 5 Coo6 &slands 5 P7$lic la4s r7le 5 +orei8n stat7te
allo4in8 recover9: restit7tion and re;aration at instance of ;7$lic
a8enc9 ;otentiall9 in e<cess of 7n=7st enric>ment 5 A8enc9 o$tains
=7d8ment in US: t>en s7es for restit7tion of f7nds in Coo6 &slands
tr7st 5 ?>et>er @;7$lic la4@ and 7nenforcea$le in forei8n
=7risdiction 5 +ederal *rade Commission Act 1!14 "US%: s 45"a%"2%
*>e +ederal *rade Commission "+*C% o$tained =7d8ment a8ainst a
$7siness in t>e US on t>e 8ro7nd t>at it >ad defra7ded n7mero7s
c7stomersA *>e US co7rt made an order for t>e $7siness to ;a9 over
BUS 20m to t>e +*CA *>is 4as to $e 7sed ;rimaril9 for ;rovidin8
com;ensation to defra7ded c7stomersA C7stomers 4ere not necessaril9
to $e de;rived of an9 ot>er aven7e of redress: criminal or civilA &n
t>e event t>at re;aration ;roved im;ractical or t>e amo7nt a4arded
;roved to e<ceed 4>at 4as reC7ired for re;aration: t>e $alance 4as to
$e ;aid into t>e US *reas7r9 as an @eC7ita$le disco7ra8e remed9@A *>e
+*C s7ed in t>e Coo6 &slands for some BUS 2A25m >eld in a tr7st f7nd
to $e ;aid to t>e +*C as mone9 acC7ired fra7d7lentl9 and dis;osed of
to t>e tr7stA *>e tr7stee o$=ected t>at t>is amo7nted to t>e
enforcement of a ;7$lic la4 of a forei8n stateA
H,L#2
*>e +ederal *rade Commission Act 1!14 "US% 4as a re87lator9 ;rovision
to ;revent and control tradin8 t>at 4as fra7d7lent or ot>er4ise
ille8alA ?ide ;o4ers 4ere 8iven to t>e +*C to enforce t>ose
re87lations incl7din8 $9 o$tainin8 =7d8ments for s7ms in e<cess of
an9 a;;ro;riate redress and for t>e ;a9ment of f7nds in 4>ole or in
;art into t>e US *reas7r9A &t 4as t>e s7$stance of t>e interest
so78>t to $e enforced 4>ic> determined 4>et>er t>is 4as a ;7$lic la4
rat>er t>an t>e form of actionA *>e action ta6en $9 t>e +*C 4as ta6en
to enforce t>e la4 and 4as at least in ;art ;enalA &t 4as also a
;7$lic la4 so78>t to $e enforced $9 a forei8n state for re87lator9
;7r;oses and it 4as not to $e enforced in t>e Coo6 &slands "see ; D02
e to D0E e: ;ost%A Attorne95'eneral v (rtiF [1!D4] AC 1 and Attorne95
'eneral v Heinemann P7$lis>ers "1!DD% 1G5 CL) E0 a;;liedA
Coo6 &slands
Cases referred to in =7d8ment
A5' for t>e United Kin8dom v Heinemann P7$lis>ers A7stralia Pt9 Ltd
"1!D% 10 -S?L) DG: 5 AL) E5E: -S? CA; affd "1!DD% 1G5 CL) E0: D
AL) 44!: A7s HCA
A5' for t>e United Kin8dom v ?ellin8ton -e4s;a;ers Ltd [1!DD] 1 -HL)
12!: -H HC and CAA
A5' of -e4 Healand v (rtiF [1!D4] AC 1: [1!D2] E All ,) 4E2: CA; affd
[1!D4] AC 1: [1!DE] 2 All ,) !E: HLA
H7ntin8ton v Attrill [1D!E] AC 150: PCA
0oore v 0itc>ell "1!2!% E0 + "2d% G00: US Ct of A;;s "2nd Cir%A
?isconsin v Pelican &ns7rance Co "1DDD% 12 US 2G5: US SCA
Co7nsel2
A 0 0anaran8i for t>e US 8overnmentA
3 'i$son for t>e tr7st com;an9A
'),&' C1A
*>is is an a;;lication to stri6e o7t t>e ;laintiff@s actionA &t is
made ;7rs7ant to )7le 1E1 of t>e Code of Civil Proced7re of t>e Hi8>
Co7rt 1!D1 on t>e 8ro7nds t>at t>e ;roceedin8s disclose no reasona$le
ca7se of actionA *>e ;rinci;al fo7ndation for t>is a;;lication is
$ased on conflict of la4s and ;rivate international la4 ;rinci;les
and in ;artic7lar >o4 t>e ;rinci;le or r7le: 4>ic> is stated as
follo4s "see #ice9 and 0orris Conflict of La4s "12t> edn: 1!!E% )7le
E ; !%: is a;;lied2
@,n8lis> co7rts >ave no =7risdiction to entertain an action2
"1% for t>e enforcement: eit>er directl9 or indirectl9: of a ;enal:
reven7e or ot>er ;7$lic la4 of a forei8n State; or
"2% fo7nded 7;on an act of stateA@
A secondar9 8ro7nd is $ased on s 1E# of t>e &nternational *r7st Act
1!D4A
39 a8reement of co7nsel t>is matter 4as dealt 4it> $9 s7$missions:
t>e last s7$mission $ein8 filed in t>e co7rt on 24 (cto$er 2001A *>e
defendant is t>e tr7stee of a tr7st settled $9 t4o American citiFens
"t>e settlors% $9 a deed of tr7st dated 10 17l9 1!!5A 39 its amended
statement of claim dated 2! 17ne 2001: t>e ;laintiff ma6es its claim
on $e>alf of t>e US +ederal *rade Commission "+*C% esta$lis>ed in
1!14 7nder t>e ;rovisions of t>e +ederal *rade Commission ActA &t is
alle8ed t>at t>e +*C enforces t>at Act 4>ic> ;ro>i$its false:
fra7d7lent and dece;tive acts of or ;ractices in commerce: and t>e
*elemar6etin8 Sales )7leA *>at r7le ;ro>i$its dece;tive or a$7sive
telemar6etin8 acts or ;ractices in commerceA &t is alle8ed t>at t>e
+*C ma9 initiate +ederal or #istrict Co7rt ;roceedin8s to en=oin
violations of t>e Act or t>e r7le and to sec7re eC7ita$le relief as
is a;;ro;riate in see6in8 redress and restit7tionA
(n 2E A;ril 1!!D t>e +*C commenced an action in t>e US #istrict Co7rt
in -evada a8ainst t>e settlors and ot>ers for contravention of t>e
Act and t>e r7leA &t 4as alle8ed t>at since 0a9 1!! t>e settlors and
ot>ers >ad made false: fra7d7lent and misleadin8 re;resentations in a
telemar6etin8 sc>eme in 4>ic> media 7nits 4ere sold alle8edl9 to
;rovide an o;;ort7nit9 for recei;t of ;rofits 8enerated from s7;;osed
and ;otential sales of some ;rod7cts to television commercialsA *>e
sc>eme as a 4>ole is descri$ed as a PonFi sc>eme: named after a
C>arles PonFi of 3oston 4>o in 1!20 offered ;romissor9 notes 4>ic>
de;ended on t>e tradin8 of international ;ostal re;l9 co7;onsA
Alt>o78> t>e 7nderl9in8 mar6etin8 as;ect of t>e sc>eme 4as
7ns7staina$le: and t>e recei;t of mone9 contin7ed: it seems t>at some
;a9ments 4ere made to investors o7t of t>e mone9s received $9 ne4
investorsA
*>e ;laintiff alle8ed a8ainst t>e settlors t>at t>e9 >ad received a
45I commission from eac> investment its telemar6eters ;roc7redA *>e
$an6 records indicated t>at some BUS !:2D:41A5 4as received $9 4a9
of t>ese commissionsA &t 4as t>7s calc7lated t>at t>e total sales for
4>ic> t>e settlors 4ere alle8edl9 res;onsi$le amo7nted to BUS
20:G1D:D2EA &t 4as said t>at 4as a conservative estimate $7t t>e
;laintiff so78>t a monetar9 =7d8ment a8ainst t>e settlors and ot>ers
concerned in t>at ;art of t>e sc>emeA +7rt>er: it is alle8ed t>at BUS
2A25m 4as transferred to t>e settlors@ tr7st in t>e Coo6 &slands on 2
0arc> 2000A *>e #istrict Co7rt in -evada entered a final order for
=7d8ment and ;ermanent in=7nction a8ainst t>e settlors and ot>er
entities involved in t>at ;art of t>is PonFi sc>eme "see +*C v
Afforda$le 0edia LLC C.5!D500GG!5L#' ")LH% "1 17ne 1!!D:
7nre;orted%%A *>at order 4as 7;>eld in t>e United States Co7rt of
A;;eals for t>e !t> Circ7it "see +*C v Afforda$le 0edia LLC "1!!!% 2
&*,L) E: 1! + Ed 122D%A
*>e final order for =7d8ment and ;ermanent in=7nction 8ranted in t>e
#istrict Co7rt in -evada ma6es a n7m$er of findin8s and ordersA *>e
findin8s incl7de t>e findin8 t>at t>e settlors amon8 ot>ers >ad made
false re;resentations: and >ad en8a8ed in dece;tive acts or ;ractices
in violation of s 5"a% of t>e +ederal *rade Commission Act and >ad
violated ;rovisions of t>e telemar6etin8 r7leA
*>e co7rt fo7nd t>at it >ad ;o4er to iss7e in=7nctive and ot>er
relief a8ainst violations of t>e +ederal *rade Commission Act: and in
t>e e<ercise of its eC7ita$le =7risdiction to a4ard redress and
restit7tion to remed9 t>e in=7red cons7mers: to order dis8or8ement of
;rofits res7ltin8 from t>e defendants@ 7nla4f7l acts or ;ractices and
iss7e ot>er ancillar9 eC7ita$le reliefA *>e co7rt entered a monetar9
=7d8ment a8ainst t>e settlors and ot>ers for BUS 20:G1D:G2E 4it>
;ost5=7d8ment interest @for eC7ita$le monetar9 relief: incl7din8 $7t
not limited to cons7mer redress: and for ;a9in8 an9 attendant
e<;enses of administerin8 an9 redress f7ndA@ An9 f7nds collected $9
t>e +*C 4ere to $e ;aid into a redress f7nd for ;otentiall9 eli8i$le
cons7mers entitled to t>e f7ndA *>e order ;rovided >o4ever as
follo4s2
@&f: >o4ever: t>e Commission: in its sole discretion: determines t>at
redress is 4>oll9 or ;artiall9 im;ractical an9 f7nds not so 7sed
s>all $e de;osited into t>e United States *reas7r9 as an eC7ita$le
dis8or8ement remed9A *>e en=oined defendants s>all >ave no ri8>t to
contest t>e manner of distri$7tion c>osen $9 t>e Commission or its
desi8nated a8entA@
*>ere 4ere t>en f7rt>er ;rovisions: order and in=7nctions for orders
descri$ed as t>e t7rnover of assets and re;atriation of f7nds
overseas incl7din8 in ;artic7lar f7nds in t>e Coo6 &slands and
vario7s ot>er in=7nctions and a7t>orities to enforce com;liance 4it>
t>e orders and t>e o$tainin8 of t>e control over all t>e assets of
t>e settlors and ot>ersA
*>e ;laintiff in t>ese ;roceedin8s in t>e Coo6 &slands see6s to
enforce t>ese orders made in t>e United States #istrict Co7rt and in
;artic7lar t>at t>e defendant deliver 7; to t>e ;laintiff @for
redress and restit7tion to t>e settlors@ defra7ded investors:
c7stod9: ;ossession and control of t>e assets and mone9s acC7ired
fra7d7lentl9 $9 t>e settlers [sic] and dis;osed of to t>e tr7st
to8et>er 4it> all acc7m7lation t>ereto >eld in c7stod9 ;ossession and
control of t>e defendant@A
*>e +ederal *rade Commission Act of 1!14 4>ic> is titled 15 United
States Code ss 41 to 51: esta$lis>ed a commission of five
commissioners a;;ointed $9 t>e President $9 and 4it> t>e advice and
consent of t>e SenateA &t 4as ;rovided t>at not more t>an t>ree of
t>e commissioners 4ere to $e mem$ers of t>e same ;olitical ;art9A
Under s 45"a%"2% t>e +*C is em;o4ered to ;revent ;ersons:
;artners>i;s or cor;orations e<ce;t certain s;ecified entities from
7sin8 7nfair met>ods or com;etition in or affectin8 commerceA *>e +*C
4as entitled to ta6e ;roceedin8s if it a;;eared to t>e +*C t>at s7c>
a ;roceedin8 4o7ld $e in t>e interest of t>e ;7$licA *>e =7risdiction
of t>e co7rts in 8rantin8 tem;orar9 restrainin8 orders and ot>er
orders 4as on t>e $asis of t>e interest of t>e ;7$lic rat>er t>an on
an9 stricter 8ro7nd s7c> as reasona$le ca7seA *>is 4as noted in an
earlier a;;eal on t>e 8rant of t>e ;reliminar9 in=7nction in t>e
United States Co7rt of A;;eals for t>e !t> Circ7it decision of 17ne
15 1!!! -o !D51GEDA *>is section ;laces a li8>ter $7rden on t>e +*C
t>an t>at im;osed on ;rivate liti8ants $9 t>e traditional eC7it9
standardA *>e +*C need not s>o4 irre;ara$le >arm to o$tain a
;reliminar9 in=7nctionA
*>e defendant claims t>at in t>is case t>e enforcement of t>e
=7d8ment and of t>e la4 of t>e United States 4ill amo7nt to t>e
enforcement directl9 or indirectl9 of a ;enal or ot>er ;7$lic la4 of
a forei8n state as descri$ed in r7le E in #ice9 and 0orrisA *>at is
not a r7le of stat7te $7t is: 7nder t>e s9stem ado;ted in t>at
te<t$oo6: a ;rinci;le 4>ic> >as $een reco8niFed over time in t>e
co7rts of ,n8land: A7stralia and -e4 HealandA &t is & t>in6: a
;rinci;le 4>ic> a;;lies eC7all9 in t>e Coo6 &slandsA &n #ice9 and
0orris "; 101% it is said2
@&n H7ntin8ton v Attrill [1D!E] AC 150 at 15G t>e Priv9 Co7ncil
defined ;enal to incl7de not onl9 crimes in t>e strict sense: $7t
Jall $reac>es of ;7$lic la4 ;7nis>a$le $9 ;ec7niar9 m7lct or
ot>er4ise: at t>e instance of t>e state 8overnment: or someone
re;resentin8 t>e ;7$licJ: and "ado;tin8 t>e test laid do4n $9 t>e
United States S7;reme Co7rt [in ?isconsin v Pelican &ns7rance Co
"1DDD% 12 US 2G5 at 2!2]% Jall s7its in favo7r of t>e state for t>e
recover9 of ;ec7niar9 ;enalties for an9 violation of stat7tes for t>e
;rotection of its reven7e or ot>er m7nici;al la4s: and to all
=7d8ments for s7c> ;enaltiesAJ @
So in Attorne95'eneral of -e4 Healand v (rtiF [1!D4]AC 1 at E45E5:
[1!D2] E All ,) 4E2 at 4G t>e stat7tor9 ;rovisions in -e4 Healand
for forfeitin8 >istoric articles ille8all9 e<;orted 4as >eld to $e
;enal t>o78> not ;art of t>e Criminal codeA *>e cate8or9 of ot>er
;7$lic la4 referred to in t>e r7le is descri$ed in #ice9 and 0orris
"; 10E%2
@*>e e<;ression Jot>er ;7$lic la4J refers to all t>ose r7les "ot>er
t>an ;enal and reven7e la4s% 4>ic> are enforced as an assertion of
t>e a7t>orit9 of t>e central or local 8overnmentA@
*>at ;art of t>e r7le >as $een s7$=ect to disc7ssion and criticism
and t>ere >ave $een conflictin8 dicta in vario7s co7rts in t>e
Common4ealt>A *>e e<istence of t>at s7$r7le 4as acce;ted $9 #avison
C1 in >is =7d8ment in t>e Hi8> Co7rt in Attorne95'eneral for t>e
United Kin8dom v ?ellin8ton -e4s;a;ers Ltd [1!D1] 1 -HL) 12!A &n t>e
-e4 Healand Co7rt of A;;eal t>e iss7e in t>e case 4as decided on t>e
$asis t>at a secret service a8ent@s d7t9 of secrec9 arose from t>e
relations>i; of em;lo9ment and t>at t>e r7le 4as not desi8nated to
meet t>e sort of ;ro$lems t>at arises o7t of t>e international
im;eratives of secrec9A *>ere is no re=ection of t>e r7le so far as
it mi8>t a;;l9 to ;7$lic la4sA 37t t>e co7rt ref7sed to e<tend t>e
r7le to t>e ;artic7lar circ7mstancesA Coo6e P 4>o 8ave t>e leadin8
=7d8ment in t>e Co7rt of A;;eal referred "[1!DD] 1 -HL) 12! at 1E5
14%: it a;;ears 4it> a;;roval: to an article $9 #r + A 0ann entitled
@*>e &nternational ,nforcement of P7$lic )i8>ts@ "1!D% -K Univ
1o7rnal of &nternational La4 and Politics G04 in 4>ic> >e 4rites @t>e
decisive C7estion is 4>et>er t>e ;laintiff asserts a claim t>at: $9
its nat7re: involves t>e assertion of a soverei8n ri8>t@A L7otin8
'roti7s: #r 0ann s788ests t>at claims are ca;a$le of international
enforcement: @if t>e9 arise from acts t>at ma9 $e done not onl9 $9
t>e Kin8 $7t also $9 an9one elseA@
*>e a;;lication of t>e r7le to ;7$lic la4s 4as clearl9 endorsed $9
Lord #ennin8 0) in Attorne95'eneral of -e4 Healand v (rtiF: *>e r7le
4as also endorsed $9 Kir$9 P in Attorne95'eneral for t>e United
Kin8dom v Heinemann P7$lis>ers A7stralia Pt9 Ltd "1!D% 10 -S?L) DG:
5 AL) E5E and $9 a ma=orit9 in t>e Hi8> Co7rt of A7stralia in Her
0a=est9@s Attorne95'eneral in and for t>e United Kin8dom v Heinemann
P7$lis>ers A7stralia Pt9 Ltd "1!DD% 1G5 CL) E0: D AL) 44!As
*>e e<;lanation of t>e r7le is set o7t $9 Lord #ennin8 0) in t>e
(rtiF case [1!D4] AC 1 at 21: [1!D2] E All ,) 4E2 at 45 as follo4s2
@A;;lied to o7r ;resent ;ro$lem a class of la4s 4>ic> 4ill $e
enforced are t>ose la4s 4>ic> are an e<ercise $9 t>e soverei8n
8overnment of its soverei8n a7t>orit9 over ;ro;ert9 4it>in its
territor9 or over its s7$=ects 4>erever t>e9 ma9 $eA 37t ot>er la4s
4ill not $e enforcedA 39 international la4 ever9 soverei8n state >as
no soverei8nt9 $e9ond its o4n frontiersA *>e co7rts of ot>er
co7ntries 4ill not allo4 it to 8o $e9ond t>e $o7ndsA *>e9 4ill not
enforce an9 of its la4s 4>ic> ;7r;ort to e<ercise soverei8nt9 $e9ond
t>e limits of its a7t>orit9A@
&n t>e leadin8 =7d8ment in t>e Hi8> Co7rt of A7stralia in A5' v
Heinemann t>ere is an e<tensive disc7ssion as to t>e e<;lanation of
t>e ;rinci;le as it a;;lies to t>e enforcement of ;7$lic la4sA *>ere
is a C7otation from 17d8e Learned Hand in 0oore v 0itc>ell "1!2!% E0
+ "2d% G00 at G04 "see "1!DD% 1G5 CL) E0 at 4E: D AL) 44! at 45%2
@ J*o ;ass 7;on t>e ;rovisions for t>e ;7$lic order of anot>er state
is: or at an9 rate s>o7ld $e: $e9ond t>e ;o4ers of a co7rt; it
involves t>e relations $et4een t>e states t>emselves: 4it> 4>ic>
co7rts are incom;etent to deal: and 4>ic> are entr7sted to ot>er
a7t>oritiesA &t ma9 commit t>e domestic state to a ;osition 4>ic>
4ill serio7sl9 em$arrass its nei8>$o7r AAA -o co7rt o78>t to
7nderta6e an inC7ir9 4>ic> it cannot ;rosec7te 4it>o7t determinin8
4>et>er t>ose la4s are consonant 4it> its o4n notions of 4>at is
;ro;erAJ @
And later t>e =7d8ment of t>e Hi8> Co7rt 8oes on "see "1!DD% 1G5 CL)
E0 at 4G: D AL) 44! at 45!%2
@+or t>e ;7r;oses of t>e ;rinci;le of 7nenforcea$ilit9 7nder
consideration t>e action is to $e c>aracteriFed $9 reference to t>e
s7$stance of t>e interest so78>t to $e enforced: rat>er t>an t>e form
of t>e action AAA *>7s: to concentrate on t>e ;rivate la4 c>aracter
of t>e ca7ses of action or to 8ro7nds for relief ;leaded $9 t>e
a;;ellant is to overloo6 t>e a;;ellant@s central interest in $rin8in8
t>e actionA *>at interest is to ens7re t>e contin7ed secrec9 of t>e
o;erations of t>e 3ritis> Sec7rit9 Service $9 en=oinin8 disclos7re of
information relatin8 to t>ose o;erations and $9 disco7ra8in8
revelations $9 ot>ersA@
& acce;t t>at t>ose ;rinci;les and o$servations and e<;lanations
a;;l9 >ereA *>e +ederal *rade Commission Act is a re87lator9
;rovision to ;revent and control fra7d7lent and ot>er tradin8 4>ic>
is contrar9 to t>e Act and ot>er ActsA ?ide ;o4ers are 8iven to t>e
+*C and to t>e co7rts to en=oin cond7ct 4>ic> is said to $e contrar9
to t>e Act or )7les and to ta6e ste;s for t>e enforcement of t>ese
re87lations and ;reventative meas7res $ot> ;ersonall9 and ot>er4ise
t>ro78>o7t t>e 4orldA Po4er is 8iven to 8ive =7d8ments in mone9s
4>ic> ma9 e<ceed an9 a;;ro;riate redress and 4>ic> in t>e end ma9 in
;art or 4>ole $ecome ;art of t>e 8eneral ;7$lic f7nds of t>e US
*reas7r9A
*>e action ta6en >ere $9 t>e ;laintiff is to enforce t>ese re87lator9
ri8>ts and ;o4ersA *>e9 are or >ave a flavo7r of ;7nis>ment and &
concl7de t>at t>ese are: at least in ;art: ;enal ;rovisions and fall
4it>in t>e relevant ;rinci;leA &t is also a ;7$lic la4 4>ic> is
so78>t to $e enforced $9 t>e state or t>e soverei8n alone for
re87lator9 ;7r;oses and is one 4>ic> o78>t not to $e enforced >ereA
As & mentioned at t>e o7tset t>e defendant also claims t>e $enefit of
s 1E# of t>e &nternational *r7st ActA Ho4ever it did not ma6e an9
claim ot>er t>an t>at a;;lied to t>e enforcement directl9 or
indirectl9 of t>e ;enal or ;7$lic la4s of t>e forei8n stateA &t is
not t>erefore a 8ro7nd 4>ic> is se;arate or inde;endent of t>e
;rinci;al 8ro7nd alread9 dealt 4it>A
&n t>e res7lt t>en t>ere 4ill $e an order stri6in8 o7t t>e claim of
t>e ;laintiffA Costs 4ill follo4 t>e eventA & 4ill receive
s7$missions from t>e co7nsel as to t>e C7ant7mA
Claim str7c6 o7tA