The Cayman Islands is a well-respected offshore jurisdiction with high-caliber professionals and judges that operate on efficient levels. I am currently working in The Cayman Islands and came across a great case on anti-suit injunctions that was decided last September. The case highlights the issues that derive from cross-border litigation and international parties.
Phoenix Meridian Equity Limited v Lyxor Asset management S.A., CICA No, 4 of 2009
The parties appealed an application to the Court of Appeal of the Cayman Islands. The issue raised by the appeal is whether the Chief Justice erred in principle in refusing an application on behalf of Lyxor for an order restraining Phoenix from continuing proceedings in the United States District Court for the Southern District of New York under Section 1782 of Title 28 of the United States Civil Procedure Code (the “section 1782 proceedings”) in the course of which it seeks to depose two individuals – Mr. Samuel Rosenberg (“Mr. Rosenberg”) and Mr. Anthony Philipponneau (“Mr. Philipponneau”) – who have given witness statements in, and are potential witnesses at the trial of the Cayman proceedings.
Phoenix was the sole investor in two funds of which Lyxor is the manager. Lyxor is a wholly owned subsidiary of a French bank, Societe Generale SA (“SG”). Phoenix sought to depose Mr. Rosenberg and Nr, Philipponneau, both managing directors of SG Americas Securities LLC (“SGAS”), a member of the SG group based in New York. On October 20, 2008, Phoenix obtained an order under section 1782 of the United States Procedure Code from the United States District Court for the Southern District of New York. The order required SGAS to produce documents at the offices of the New York counsel for Phoenix; and provided for Phoenix to serve on SGAS subpoenas for deposition testimony at a future date without the need for a further application. SGAS did not move to discharge that order. On 19 March, 2009, Phoenix gave notice – pursuant to the section 1782 order and Rule 30(b)(6) – requiring SGAS to identify and produce for deposition one or more officers or employees “who consent to testify on its behalf and are most knowledgeable as to” the eleven matters specified. Rule 30(b)(6) of the Federal Rules of Civil Procedure – which apply to deposition testimony under section 1782 in a case where the order does not prescribe otherwise – provides that a party may name a corporation as the deponent; and, where that has been done, that the corporation named must then designate one or more officers to testify on its behalf.
On the day after Phoenix had served its notice requiring deposition testimony in the section 1782 proceedings, Lyxor applied by summons in the Cayman proceedings for an order that Phoenix be restrained from continuing or seeking to enforce the section 1782 proceedings “to the extent that those proceedings seek the deposition of Mr. Rosenberg, Mr. Philipponneau (both residents of the State of New York) or any other officer, director, managing agent or employee of [SGAS] resident in the United States of America” whether by seeking to enforce the deposition notice of 19 March 2009 or otherwise. The summons sought an order directing Phoenix to withdraw or discontinue the deposition notice.
Lyxor asserted that the deposition notice was an improper and unconscionable intereference with the forthcoming trial in the Cayman proceeding for three reasons: (i) that it would be an unnecessary diversion of the parties’ legal and other resources to prepare for and attend such depositions; (ii) that the testimony sought at the depositions would be duplicative of the testimony to be given at trial; and (iii) that it would be vexatious and oppressive for Phoenix to subject Lyxor’s witnesses to double cross-examination. In response to the application, Phoenix argued that the discovery which it sought pursuant to Rule 30(b)(6) satisfied the standard for discovery under section 1782 as it would be relevant and useful. Phoenix also stated that the deposition testimony will also be useful in helping Phoenix prepare for trial, and will assist it in understanding how SG and SGAS interacted with other non-parties to the Cayman litigation, including Phoenix’s financial and legal advisors.
In the application to the Grand Court, the Chief Justice observed that the application raised an important issue of Cayman Islands Civil procedure: “whether the Cayman courts should intervene to prevent depositions in the United States ordered by the United States court to be given by deponents who are residents there and where the deponents are potential witnesses in a Cayman action in respect of which it is clear that the Cayman court is the only appropriate forum for the ultimate trial of the action.” Unlike the position in many other Commonwealth jurisdictions, including England, Cayman civil procedure allows, pursuant to GCR O.24 R. 16, oral discovery by way of depositions prior to trial. This is however limited to officers of companies which are parties to proceedings before the Court. Thus, while it may not be said that Cayman law is hostile to witnesses being cross-examined prior to trial, such a procedure remains unusual as no case has been reported concerning this procedure since the Grand Court rules allowed it.
Other than O. 24, R. 16, no power exists by which the Cayman courts on behalf of parties to actions before it can compel persons who are not parties to give a full measure of pre-trial discovery. The Chief Justice reasoned that while the Court must consider concerns of practitioners about the possibility of pitfalls, such as duplication of effort from the use of pre-trial depositions, the court should appropriately consider to what extent is it desirable or appropriate, that party to litigation before the Cayman courts, should be prevented from availing itself of a statutory right which it may have under foreign law, to apply for an order that persons resident in the foreign jurisdiction who are themselves not parties to the action before this Court, and so not amenable to its process, should give pre-trial discovery by way of deposition evidence relevant to the issues in dispute before this Court. The Chief Justice directed himself, in the light of his examination of the English authorities, that the main question which he had to decide was whether to allow the Title 28 deposition to proceed would be ‘unconscionable’. The Chief Justice found that it was not. He reasoned that the fact that witnesses had committed their positions to witness statements “is not of and in itself a bar to Title 28 depositions.” The question was whether there were proper concerns about vexation and oppression. The Chief Justice found that the courts of the United States “are shown to be alive to such concerns” and he could not proceed on the basis that those courts might fail to protect the witnesses from oppression. Furthermore, this was not a case where Mr. Rosenberg and Mr. Philipponneau could be treated as fully amenable to the jurisdiction of the Cayman Islands court, as they were not officers of Lyxor but officers of SG.
The Court of Appeal agreed with the findings and reasoning of the Chief Justice. The Court stated that the use to which the transcripts of depositions taken in New York may be put in the Cayman proceedings is, of course, a matter for the Grand Court. The Grand Court had ample powers to prevent abuse of its own process, should the need arise. The Court found that the Chief Justice was also entitled to proceed on the basis that he could leave objections as to abuse or oppression arising in the course of the deposition process to be taken on behalf of Mr Rosenberg or Mr. Philipponneau before the officer taken the depositions under the Federal Rules of Civil Procedure, and, if necessary, before the New York District Court. The Court also reasoned that the existence of a comparable, although not identical, procedure for oral discovery in the jurisdiction in which the anti-suit injunction was sought is a relevant factor. The court, by allowing the section 1782 proceedings to take their course, was not giving effect to procedure which (in its own eyes) is obviously oppressive or vexatious and was not going far beyond any process of discovery recognized by the law applicable in the Cayman Islands. Moreover, while Phoenix could obtain all the information that it needed for the pursuit of its claim by making further requests for further and better particulars, by administering interrogatories, or by seeking further and specific discovery, it was not relevant to the point of whether Phoenix should be prevented from continuing the section 1782 proceedings.
The Court quoted Lord Brandon, who explained in the South Carolina Insurance case ([1987] AC 24, 48G), prima facie a party who can invoke the jurisdiction of the United States District Court under section 1782 may choose to do so. The Court reasoned that the right to take pre-trial deposition testimony from Mr. Rosenberg and Mr. Philipponneau is a right conferred by the law of the United States: it is not a right conferred by or to be withheld under the law of the Cayman Islands. The relevant question is not whether Phoenix could achieve a similar result in the Cayman Islands; but, whether (if it could) it is acting oppressively or abusively in seeking to rely on the right which it enjoys under the law of the United States. The Court found that Phoenix was not acting oppressively or abusively by seeking to obtain pre-trial depositions under section 1782 of Mr. Rosenberg and Mr. Philipponneau.
The Court dismissed the appeal, but gave one further direction. Phoenix had previously asserted that the pre-trial depositions of Mr. Rosenberg and Mr. Philipponneau “would also be helpful in testing the credibility of key witnesses before trial.” The Court stated that the proper purpose of the pre-trial oral examination by way of discovery, in the context of a trial in this jurisdiction, is to ascertain what it is that the witnesses will say: not to seek to establish in the course of the oral examination that what they will say is not to be believed. It is for the trial court in the Cayman Islands to decide whether or not the evidence given at the trial is to be believed or not to be believed. Therefore, the Court provided that if Phoenix were to trespass, in the course of taking depositions in New York, into cross-examination as to credit – an exercise which is recognized by counsel as inherently unwise, then Lyxor should have the opportunity of applying to a judge of the Grand Court for an order redacting those parts of the transcripts.
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