Deutsch-Sdamerikanische Bank AG v Codelco

JurisdictionCayman Islands
CourtGrand Court
Judge(Smellie, J.)
Judgment Date09 December 1995
Grand Court

(Smellie, J.)

DEUTSCH-SÜDAMERIKANISCHE BANK A.G.
and
CORPORACION NACIONALE DEL COBRE DE CHILE and ATTORNEY GENERAL

A.J. Jones for the applicant;

G.F. Ritchie for the first respondent;

W. Helfrecht, Crown Counsel, for the Attorney General.

Cases cited:

(1) -Alterskye v. Scott, [1948] 1 ALL E.R. 469; (1948), 92 Sol. Jo. 220, distinguished.

(2) -Bankers Trust Co. v. Shapira, [1980] 1 W.L.R. 1274; [1980] 3 All E.R. 353.

(3) -Church of Scientology of California v. D.H.S.S., [1979] 1 W.L.R. 723; [1979] 3 All E.R. 97, distinguished.

(4) -Distillers Co. (Biochemicals) Ltd. v. Times Newspapers Ltd., [1975] Q.B. 613; [1975] 1 All E.R. 41.

(5) -Dubai Bank Ltd. v. Galadari (No. 6), [1992] T.L.R. 476.

(6) -Home Office v. Harman, [1983] 1 A.C. 280; [1982] 1 All E.R. 532, considered.

(7) -Norwich Pharmacal Co. v. Customs & Excise Commrs., [1974] A.C. 133; [1973] 2 All E.R. 943, considered.

(8) -Société Romanaise de la Chaussure S.A. v. British Shoe Corp. Ltd., [1991] F.S.R. 1.

Confidential Relationships-discovery-compliance with order for discovery-extent and manner of discovery in discretion of court-may, on application by bank under Confidential Relationships (Preservation) Law (1995 Revision), s.4, limit discovery to prevent disclosure of confidential information relating to innocent clients-affidavits permitted in place of production

Civil Procedure-discovery-confidential information-risk of abuse of confidential information obtained on discovery justifies requiring written undertaking not to use in other proceedings-usual implied undertaking less adequate in such cases in Cayman than in England

The applicant bank applied for directions under s.4 of the Confidential Relationships (Preservation) Law (1995 Revision).

The first respondent company had brought actions in a number of jurisdictions to trace and recover money which it alleged it had lost as a result of the fraud, inter alia, of one of its senior executive officers. It obtained an ex parte order for discovery against the applicant bank on the basis that although the bank had not itself been at fault, it had innocently facilitated the commission of the alleged fraud and that the first respondent was therefore entitled to full discovery in order to ascertain the identity of all the wrongdoers and the extent of the fraud perpetrated. The bank consequently made the present application for directions to enable it to comply with the ex parte order without disclosing confidential information when such disclosure would be prejudicial to the interests of innocent third parties or to the bank itself.

It submitted that (a) because of its accounting system, giving full disclosure would involve disclosing confidential information about innocent third parties and about innocent transactions by the bank itself, and to prevent this the court should permit it to give relevant information by the only practical means, i.e. by affidavit without producing the underlying documents from which that information was obtained; and (b) the first respondent should give a written undertaking not to use the information obtained in any other proceedings.

The first respondent submitted in reply that (a) as a victim of fraudulent conduct it was in the normal course of events entitled to full discovery from a third party such as the bank that had innocently facilitated the

tortious acts of the wrongdoers, and was at least entitled to an edited version of the bank”s transaction ledger; and (b) there was no need for it to give a written undertaking as the bank would be adequately protected by the undertaking normally implied that improper use would not be made of the information.

Held, permitting the applicant to give information by affidavit and requiring a written undertaking from the first respondent:

(1) If a person, although not himself at fault, innocently facilitated the tortious acts of others, that person came under a duty of care to assist the victim of those acts by giving, if possible, information disclosing the identity of the wrongdoers. Although ordinarily a victim such as the first respondent would be entitled to full discovery, the extent of discovery to be allowed was a matter for the court”s discretion and in the instant case the court was justified in protecting the bank and innocent third parties from the risk of disclosure of confidential information by the only practicable means open to it, i.e. by ordering that the bank give relevant information by affidavit but without having to produce the underlying documents from which that information had been obtained (an edited version of the bank”s transaction ledger being insufficient to protect confidentiality) (page 5, lines 22–39; page 6, lines 20–33; page 7, lines 11–27).

(2) Although a party giving discovery would usually be adequately protected by the implied undertaking by the other party not to make improper use of the information obtained, the risk in this case of confidential information being used by the first respondent in other jurisdictions justified the court”s requiring a written undertaking from it not to use the information in any other proceedings. Such written undertakings might well be more commonly required in the Cayman Islands than in England because the risk of abuse in foreign proceedings was likely to be greater (page 8, lines 11–25).

SMELLIE, J.: In Cause No. 468 of 1995, Corporacion Nacionale del
Cobre de Chile (‘Codelco’) has presented strong prima facie evidence in
10 support of its Norwich Pharmacal application (Norwich Pharmacal v.
Customs & Excise Commrs. (7)), which discloses that one of its senior
executive officers is the central figure in a fraudulent conspiracy
perpetrated against it. As a result Codelco has been defrauded of very
large sums of money, in the order of US$175m.
15 Cause No. 468 of 1995 in this jurisdiction is one of a number of actions
brought by Codelco outside Chile to trace and recover its money. These
civil proceedings are being directed by the Consejo de Defensa del
Estado, a council of experienced lawyers convened to conduct the actions
on behalf of the Chilean state. At the same time, Congressional and
20 criminal proceedings are under way in Chile.
The evidence presented in Cause No. 468 of 1995 reveals a trail of
transactions leading to the applicant bank and involving the person at the
centre of the fraudulent scheme. The evidence also suggests that others
have become involved in those transactions-some, like the bank itself,
25 innocently; others with culpability.
Thus, the basis of the discovery action in Cause No. 468 of 1995 and of
the
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7 cases
2 firm's commentaries
  • The Dispute Resolution Review - Cayman Islands
    • Cayman Islands
    • Mondaq Cayman Islands
    • 6 March 2014
    ...Co v. Commissioners of Customs & Excise [1974] A.C. 133 and applied in numerous Cayman Islands cases (e.g., Deutsche Bank v. Codelco [1996] CILR 1). 15 Named after the English decision Bankers Trust Co v. Shapira [1980] 1 WLR 1274 and recognised in the Cayman Islands (e.g., in Braga v. ......
  • The Dispute Resolution Review, 9th Edition: Cayman Islands
    • Cayman Islands
    • Mondaq Cayman Islands
    • 2 August 2017
    ...Co v. Commissioners of Customs & Excise [1974] AC 133 and applied in numerous Cayman Islands cases (e.g., Deutsche Bank v. Codelco [1996] CILR 1). 9 Named after the English decision Bankers Trust Co v. Shapira [1980] 1 WLR 1274 and recognised in the Cayman Islands (e.g., in Braga v. Equ......
1 books & journal articles
  • The Protection of Offshore Confidentiality: Policy Implications and Legal Trends
    • United Kingdom
    • Journal of Financial Crime Nbr. 7-1, March 1999
    • 1 March 1999
    ...will also consider the effect of disclosure on innocent third parties. In re I and R [1994-95] N 9 and Deutsch-Sudamerikamsche Bank v AG [1996] CILR 1. (117) Note that in the 1987 Memorandum of Understanding (MOU) between the US and Switzerland, assistance was extended to cases involving ta......

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