Discover Investment Company v Vietnam Holding Asset Management Ltd and Saigon Asset Management Corporation
| Jurisdiction | Cayman Islands |
| Judge | (Kawaley, J.) |
| Judgment Date | 07 March 2019 |
| Date | 07 March 2019 |
| Court | Grand Court (Cayman Islands) |
(Kawaley, J.)
Civil Procedure — disclosure — Norwich Pharmacal order — costs — ordinarily applicant to pay reasonable costs of innocent respondent — rule displaced if respondent’s participation in proceedings unreasonable
Held, ruling as follows:
(1) Norwich Pharmacal applications were not ordinarily regarded as adversarial proceedings and the usual rule that costs followed the event did not apply. This was the position only in so far as the respondent to the application was not the alleged wrongdoer, or not alleged to be a wrongdoer when the application was made. The usual rule in Norwich Pharmacal applications was that the applicant must bear the reasonable costs of an innocent respondent. This rule could only be displaced to the extent that the respondent’s participation in the proceedings was unreasonable. It might be reasonable for a respondent to oppose a Norwich Pharmacal application where the respondent had a genuine doubt as to whether the applicant was entitled to the disclosure; the respondent was under an appropriate legal obligation not to disclose the information or the legal position was unclear; the respondent could be subject to proceedings if disclosure was voluntary; the respondent might suffer damage by voluntary disclosure; or disclosure might infringe a legitimate interest of another. Respondents’ costs were not ordinarily awarded on the indemnity basis (paras. 33–40).
(2) The respondents had not acted unreasonably to such an extent as to displace the usual Norwich Pharmacal costs rule. They had not positively opposed the application but merely raised principled objections. The first respondent had been threatened with legal proceedings for breach of confidentiality and both respondents were subject to contractual confidentiality obligations governed by Swiss law. The court considered that it was necessary and appropriate for the respondents to have sought guidance as to their obligation under the Confidential Information Disclosure Law and that their testing of the appropriateness of the Norwich Pharmacal order was of assistance to the court. The court considered the respondents’ approach to the Norwich Pharmacal application not sufficiently inconsistent with neutrality so as to make the dominant character of the application adversarial. They had not strenuously resisted the application. The respondents’ election to attend court was not unreasonable in the circumstances of the present case. The applicant must therefore pay the respondents’ costs to be taxed if not agreed on the standard basis (paras. 43–48).
(1)Cartier Intl. A.G. v. British Telecomms. plc, [2018] UKSC 28; [2018] 1 W.L.R. 3259; [2018] 4 All E.R. 373; [2018] 2 All E.R. (Comm.) 1057; [2018] Bus. L.R. 1417; [2018] E.M.L.R. 22; [2018] R.P.C. 11, considered.
(2)JSC BTA Bank v. Ablyazov, [2014] EWHC 2019 (Comm); [2015] 1 W.L.R. 1547, considered.
(3)Miller Brewing Co. v. Ruhi Enterprises Ltd., [2003] EWHC 1606 (Ch); [2004] F.S.R. 5, considered.
(4)Popov v. Deloitte LLP, [2018] EWHC 2326 (QB), considered.
(5)Totalise plc v. The Motley Fool Ltd., [2001] EWCA Civ 1897; [2002] 1 W.L.R. 1233; [2003] 2 All E.R. 872; [2002] C.P. Rep. 22; [2002] E.M.L.R. 20; [2002] F.S.R. 50, considered.
(6)XYZ Ltd., In re, 2019 (1) CILR 175, considered.
The applicant sought a Norwich Pharmacal order.
The applicant was an open-ended investment fund domiciled in the Cayman Islands which invested in securities and funds managed by third parties, including the respondents. It believed the respondents to have entered into “secret agreements” with entities controlled by one of its directors, whereby the director had earned “secret profits” in breach of his fiduciary duties to the applicant. The applicant further believed that the respondents had in their possession information about the suspected secret agreements and secret profits which would potentially be crucial to the applicant’s ability to plead a case of wrongdoing against the director and any others implicated in the suspected wrongdoing.
The applicant applied for a Norwich Pharmacal order to require the respondents to disclose certain documents in their possession. There was no basis for believing that the respondents were guilty of any wrongdoing.
The Grand Court (Kawaley, J.) granted a Norwich Pharmacal order, although in substantially narrower terms than originally sought. The contested hearing assisted the court to clarify the necessity limb of the Norwich Pharmacal jurisdiction and to clarify the uncertain state of the law and practice as to applications under the Confidential Information Disclosure Law (2016 Revision) and avoided the need for an additional freestanding application by the respondents under that Law (that decision is reported at 2018 (2) CILR 424).
The respondents sought their costs from the applicant. The first respondent submitted inter alia that (a) there was nothing to take the present case out of the usual rule that in Norwich Pharmacal applications the applicant paid the respondents’ costs; and (b) it had not opposed relief being granted but merely disputed the wide-ranging disclosure initially sought. The second respondent also submitted that the usual costs rule in Norwich Pharmacal applications should be applied as it had acted reasonably throughout.
The applicant submitted that it had not been necessary for the respondents to have participated in the hearing and that their stance had rendered the proceedings adversarial in nature. As such, the ordinary rule that costs follow the event should be applied.
A. Salem for the applicant;
J. Colegate and F. Sbaiti for the first respondent (“VNHAM”);
D. Lee and H. Froude for the second respondent (“SAMC”).
RULING ON COSTS
1 KAWALEY, J.:
Background
On November 5th, 2018, I delivered a reserved judgment declaring that the applicant was entitled to a Norwich Pharmacal order (“NP order”) following a hearing in which both of the respondents, VNHAM and SAMC, participated. Paragraph 3 of the NP order provided that in the absence of agreement on costs the parties should be entitled to file written submissions. It was implicitly agreed that the court should determine the issue of costs on the papers.
2 The essence of the substantive hearing to which the present costs application relates was described in the opening paragraphs of this court’s judgment dated November 5th, 2018 herein (2018 (2) CILR 424, at paras. 5–6):
“5 The respondents’ position was not to positively oppose the application but rather to raise such principled objections as they could identify with a view to ensuring that they did not in substance consent to the making of an order which ought not properly to be made. VNHAM, it appeared to me, had received some encouragement to adopt this stance as MW had apparently threatened legal action for breach of the confidentiality obligations in one or more of the contracts which Discover was seeking to obtain copies of. The contract sought from SAMC is also believed to be subject to similar confidentiality obligations governed by Swiss law. The principles governing the grant of Norwich Pharmacal relief being essentially common ground, issue was joined as to whether or not:
(a) Discover had demonstrated that the order sought was necessary in the requisite legal and factual sense;
(b) assuming this court possessed general jurisdictional competence to make the order, the scope of the order sought was sufficiently proportionate to justify exercising the jurisdiction on the facts of the present case; and
(c) if an order were granted, it should be on Discover’s undertaking not to use the information obtained in proceedings against the respondents without further leave of the court.
6 Issue was also joined on a fourth, important ancillary matter. VNHAM contended that it could not properly be required to produce the information sought without directions being given under the Confidential Information Disclosure Law 2016 (‘CIDL’). Discover and SAMC contended that CIDL did not apply. This was a difficult point not directly addressed by previous authority which was dealt with by counsel in an economical way. Counsel understandably focused their effort on a detailed analysis of the Norwich Pharmacal jurisdiction, and their submissions greatly assisted the court.”
3 The result of the hearing may be summarized as follows:
(a) it was common ground that the applicant needed to establish three conditions to obtain the NP order: (1) good grounds for suspecting that it was the victim of wrongdoing; (2) necessity for the information sought in terms of both (i) a legitimate purpose, and (ii) a proportionate request; and (3) that the respondent was “mixed up” in the wrongdoing so as to be more than a mere witness;
(b) the respondents only seriously challenged and/or tested whether limb 2(i) and 2(ii) were satisfied;
(c) the applicant succeeded in establishing that limb 2(i) was made out and the respondents succeeded in establishing that limb 2(ii) had not been made out and the scope of relief sought was substantially narrowed in the form of order granted;
(d) the contested hearing assisted the court to clarify the necessity limb of the Norwich Pharmacal jurisdiction after a careful review of authorities which could reasonably have been viewed as being somewhat inconsistent or unclear, as applied to the facts of the present case;
(e) the contested hearing also assisted the court to clarify the uncertain state of the law and practice as to applications under the Confidential Information Disclosure Law (2016 Revision) (“the CIDL”), and (through establishing the existence of jurisdiction to grant the NP order) avoided the need for an additional freestanding application by the respondents under the CIDL; and
(f) I expressed no provisional view on costs in...
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