First American Corporation v Zayed

• Jurisdiction: Cayman Islands
• Judge: (Smellie, J.)
• Judgment Date: 21 May 1998
• Court: Grand Court (Cayman Islands)
• Date: 21 May 1998

Grand Court

(Smellie, J.)

FIRST AMERICAN CORPORATION

and

ZAYED

A.J. Jones and N.R.F.C. Timms for Price Waterhouse Cayman and the witnesses;

S.C. Rubin and S.J. Barrie for First American Corp.

Cases cited:

(1) -First American Corp. v. Zayed, Queen”s Bench Division, December 15th, 1997; on appeal, [1999] 1 W.L.R 1154; sub nom. First American Corp. v. Sheikh Zayed Al-Nahyan, [1998] 4 All E.R. 439, considered.

(2) -Minnesota (State of) v. Philip Morris Inc., [1998] I.L. Pr. 170, dicta of Lord Woolf, M.R. applied.

(3) -Norway”s (State of) Application (No. 1), In re, [1987] Q.B. 433; [1989] 1 All E.R. 661; on appeal, [1990] 1 A.C. 723; [1989] 1 All E.R. 745, dicta of Kerr, L.J. applied.

(4) -Norway”s (State of) Application (No. 2), In re, [1989] 1 All E.R. 701; [1988] FTLR 293; on appeal, [1990] 1 A.C. 723; [1989] 1 All E.R. 745, not followed.

(5) -Rio Tinto Zinc Corp. v. Westinghouse Elec. Corp., [1978] A.C. 547; [1978] 1 All E.R. 434.

(6) -Voluntary Purchasing Group Inc. v. Insurco Intl. Ltd., 1994–95 CILR 84, applied.

Legislation construed:

Evidence (Proceedings in Other Jurisdictions) (Cayman Islands) Order 1978 (S.I. 1978/1890), Schedule, s.2(3):

‘An order made under this section shall not require any particular steps to be taken unless they are steps which can be required to be taken by way of obtaining evidence for the purposes of civil proceedings.’

s.2(4): ‘An order under this section shall not require a person-

(a) to state what documents relevant to the proceedings to which the application for the order relates are or have been in his possession, custody or power; or

(b) to produce any documents other than particular documents specified in the order as being documents appearing to the court making the order to be, or to be likely to be, in his possession, custody or power.’

Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (The Hague, March 18th, 1970; UK Treaty Series 20, (1977), Cmnd. 6727), art. 1: The relevant terms of this article are set out at page 66, lines 26–28.

art. 3(f): The relevant terms of this paragraph are set out at page 73, lines 29–33.

Evidence-assistance to foreign court-examination of documents and witnesses-court may not modify oppressively broad request for oral evidence if changes nature of request-renewed request containing specific list of questions for proposed witness may be presented

Evidence-assistance to foreign court-examination of documents and witnesses-request for oral evidence refused if so broad as to be oppressive or unnecessarily seeks to impeach witness-discretion in requesting court under Hague Convention, art. 3(f) to adopt ‘subject-matter’ format is subject to requirement of fairness to witness

Evidence-assistance to foreign court-examination of documents and witnesses-request for oral evidence refused if amounts to ‘fishing’-no pre-trial discovery by reference to documents needed to support evidence-under Evidence (Proceedings in Other Jurisdictions) (Cayman Islands) Order 1978, Schedule, s.2(3) may not make order in aid of foreign proceedings unavailable in domestic action

The applicant applied for an order for compliance with a letter of request from a court in the United States.

The applicant was a bank holding company operating in the United States. The shares of its parent company were acquired by BCCI without the approval of the US Federal regulators, using nominee shareholders. The Cayman affiliated bank, ICIC (Overseas), provided some of the funds to the nominees for these purchases and held certain shares, through the nominees, for BCCI. The shares of another US bank, acquired by a similar scheme, were sold by a principal of BCCI to the applicant at an

inflated price in order to defeat his creditors. As a result of such misuse of the applicant”s funds and the loss of public confidence following the revelation of BCCI”s involvement in its ownership, the applicant ultimately went into liquidation.

The applicant commenced proceedings in the US District Court for the District of Columbia against all the individuals involved in the BCCI share acquisition schemes, to recover damages for the losses it had suffered. The court issued a letter of request seeking evidence from two witnesses for use in the trial. The intended witnesses were partners in the Cayman branch of an international accountancy firm, and had been responsible for the BCCI (Overseas) and ICIC (Overseas) audit engage-ments at the relevant times.

Some years after their involvement, the true extent of the fraud perpetrated and the falsification of financial statements and accounts by BCCI had come to the attention of the auditors. The applicant had commenced proceedings in New York seeking the discovery of information by, inter alia, the Cayman firm, and alleging complicity in the illegal acquisition of its parent company by BCCI. An order had been made in respect of the New York and UK branches of the firm, but not the Cayman branch.

The allegation of complicity did not feature in the proceedings in the District of Columbia, but the applicant refused to undertake not to use evidence given by the two witnesses under the letter of request in proceedings against them. In response to the witnesses” concerns as to the scope of the enquiry entailed in the letter of request, the applicant submitted an amended schedule of testimony sought. The witnesses were willing to give evidence of a more limited nature.

The applicant submitted that (a) the court was best placed to approve amendments to the schedule of testimony in order to ensure compliance with the Evidence (Proceedings in Other Jurisdictions) (Cayman Islands) Order 1978 and the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters; (b) the topics of questioning in the schedule were intended not to impeach the witnesses but to reveal the scale of the losses sustained by BCCI and the fraudulent means by which it had sought to conceal them; (c) under art. 3(f) of the Convention the requesting court could make its request in the form of a statement of the subject-matter of the evidence sought, rather than the specific form required for requests for the production of documents; (d) the witnesses were not obliged to refer to documentary evidence to support their oral testimony, but examination on the contents could not offend against the legislation if that was a natural consequence of giving evidence effectively; and (e) since the evidence requested was relevant to the matters in issue in the proceedings, and the intention behind the request was not to elicit information beyond those issues, the request should not be refused as a case of ‘fishing.’

Held, dismissing the application:

(1) The reductions and amendments to the schedule of testimony proposed by the applicant were so extensive that to implement them would be to change the nature of the request, which the court had no power to do. Furthermore, the assurances given and qualifications made to the court as to the scope of examination on the matters in the schedule would be of no effect before the examiner, as counsel for the applicant and the various defendants in the District Court action would be free to ask any question legitimately arising from the contents of the schedule. Accordingly, the court could not comply with the request in its amended form (page 67, lines 10–45).

(2) In any event, even as amended, the request was oppressive in the breadth of the issues which it covered. A number of the topics contained in the schedule related to matters which could be (or in some cases had already been) proved by other means, and appeared to cast suspicion on the extent of the witnesses” knowledge of BCCI affairs. Even though the requirement of specificity related to the production of documents only, and art. 3(f) of the Convention permitted a requesting court to adopt the ‘subject-matter’ approach, this was subject to the requirement that the request must be enforceable without oppression or unfairness to the wit-nesses. The witnesses could not be compelled to testify unless the court was first satisfied that they had relevant evidence to give and understood what was required of them. Moreover, the witnesses would need to refer extensively, in their own time and at their own expense, to documents in order to prepare for giving evidence and to refresh their memories in court. This in itself would be oppressive to them (page 64, lines 29–44; page 68, line 32 – page 70, line 15; page 70, line 35 – page 71, line 11; page 73, line 41 – page 74, line 37; page 77, line 32 – page 78, line 9).

(3) Quite apart from the issue of oppression, the request could not be complied with since it constituted ‘fishing’ and was open to abuse. The court had to determine objectively whether the evidence sought was for direct and immediate use in the proceedings or whether it would simply result in new lines of inquiry leading to such evidence. In this case, whatever the intentions behind the request, and notwithstanding that the witnesses could give evidence relevant to the issues before the District Court, it clearly went beyond the scope of the specific allegations pleaded. Furthermore, the presentation of documentary evidence in support of the witnesses” oral evidence would effectively give pre-trial discovery in favour of the applicant in the District Court, which was not available under Cayman law. The court was prohibited by s.2(3) of the Schedule from making an order in aid of foreign proceedings which it could not make in a domestic context. Clearly, this had not been explained to the District Court when the request was drafted (page 66, lines 20–38; page 70, lines 18–34; page 72, line 28 – page 73, line 12; page 76, line 28 – page 77, line 17; page 79, line 3 – page 80, line 19).

(4) However, given the willingness of the witnesses to assist if provided with a schedule of testimony...