Hoyes v Gas Monitoring Inc.

JurisdictionCayman Islands
Judge(Smellie, J.)
Judgment Date08 October 1995
CourtGrand Court (Cayman Islands)
Date08 October 1995
Grand Court

(Smellie, J.)

HOYES
and
GAS MONITORING INCORPORATED CAYMAN and FOUR OTHERS

P. Lamontagne, Q.C. and M.S. Parkinson for the plaintiff;

D.M. Murray for the first, second, third and fourth defendants.

Cases cited:

(1) Crest Homes PLC v. Marks, [1987] A.C. 829; [1987] 2 All E.R. 1074, followed.

(2) Customs & Excise Commrs. v. A.E. Hamlin & Co., [1984] 1 W.L.R. 509; [1983] 3 All E.R. 654, considered.

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

(4) Sybron Corp. v. Barclays Bank PLC, [1985] Ch. 299; (1984), 128 Sol. Jo. 799, considered.

Civil Procedure-discovery-use of information obtained-court may in special circumstances waive undertaking by party obtaining discovery not to use documents disclosed for collateral or ulterior purpose if would not cause injustice to party giving discovery-court may do so if, e.g., discovery had to be compelled, party giving discovery cannot be prejudiced and is attempting to practise deception on foreign court

The plaintiff sought the discharge of an undertaking she had given the court in respect of evidence she had obtained by discovery.

The plaintiff and fifth defendant were estranged spouses who were in dispute over matrimonial property both in the Cayman Islands and in North Carolina, although the Cayman proceedings had subsequently been stayed as against the fifth defendant. The issue common to both sets of proceedings was the true beneficial ownership of shares in the first and fourth defendants and another related company. In the North Carolina proceedings the plaintiff was alleging that the true beneficial ownership had remained with the fifth defendant and that the assets were therefore family assets to be taken into account on divorce. The fifth defendant asserted that the shares in these companies had been sold to foreign investors. However, he subsequently made admissions by affidavits in the Cayman proceedings as to his ownership of the fourth defendant, and as a result of further discovery, which had to be compelled by an ‘unless order,’ it emerged in the Cayman proceedings that the majority of the shares in the companies were still family assets.

At the time of the ‘unless order’ the plaintiff had undertaken not to use the information obtained by discovery for any purpose other than the Cayman proceedings and she subsequently applied to the court for that undertaking to be discharged so that she could use the information as evidence in the North Carolina proceedings.

The plaintiff submitted that the defendants” mendacity and deliberate prevarication with regard to giving discovery, coupled with the fact that no prejudice could result to them since the fifth defendant had admitted his ownership of the companies here and that issue was central to both sets of proceedings, constituted exceptional circumstances which justified the court”s waiving her undertaking not to use the information obtained here in the proceedings in North Carolina.

The defendants, in reply, submitted that the undertaking should remain

in place since such undertakings were important to the preservation of public confidence in the process of litigation.

Held, granting the plaintiff”s application:

The observance of an undertaking given by a party obtaining an order for discovery not to use the documents disclosed for any collateral or ulterior purpose was important in order to preserve confidence in the process of litigation. Nevertheless, the court could, in special circumstances, waive or modify such an undertaking if doing so would not cause injustice to the party giving discovery. In this case, since (a) the defendants had only given discovery when compelled by the court; (b) they could not complain of possible prejudice because the fifth defendant had admitted his ownership of the companies in the Cayman proceedings and that issue was central to both the proceedings here and those in North Carolina; and (c) the defendants had attempted to practise a deception upon a foreign court to which the Cayman court owed obligations of comity, the case was an appropriate one in which to waive the undertaking and the plaintiff would therefore be given permission to use the information obtained here to support her claim in the proceedings in North Carolina (page 508, lines 15–20;page 509, lines 6–16;page 509, line 24 – page 510, line 9; page 511, lines 11–13).

SMELLIE, J.: The plaintiff and the fifth defendant are estranged
spouses who, apart from earlier in these proceedings (now stayed as
against the fifth defendant), also presently oppose each other in ancillary
matrimonial proceedings in Wake County, North Carolina. A common
40 issue to both sets of proceedings is the true beneficial ownership of the
shares in the first defendant (‘GMI Cayman’) and fourth defendant
(‘Pyramid’) and hence the shares in a related US company called Gas
Monitoring Incorporated U.S.A. (‘GMI USA’).
It is now to be admitted by the fifth defendant in the Wake County
45 proceedings-see the affidavit filed herein by Robert Ponton, his attorney
in those proceedings-that the majority of the shares in GMI USA were
sold and transferred to GMI Cayman in October 1992 and are now held by
Pyramid and are still held within the Hoyes family.
But that has not always been his stance in the Wake County
5 proceedings. Until September 29th, 1995 he had asserted that the transfer
to GMI Cayman in 1992 was actually for the purpose of sale to certain
‘foreign investors,’ that those investors (who remained anonymous
throughout) had indeed obtained the ownership of the shares and that the
plaintiff was aware and had benefited from that sale and that transfer of
10 ownership.
In the context of the matrimonial property dispute in North Carolina, the
fifth defendant had, in effect, been asserting that the true and ultimate
beneficial ownership of GMI USA was indefeasibly transferred to foreign
investors, for value, and was no longer available to be reckoned as part of
15 the matrimonial assets.
In summary, it is the plaintiff”s case in the Wake County pro-
ceedings-see the affidavit of her attorney Marc Sokol filed herein-that
GMI USA remains a successful private company in which she and her
husband worked and which was built over a number of years during the
20 marriage, the
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