Phoenix Meridian Equity Ltd [A company incorporated under the laws of the Cayman Islands] Plaintiff v Lyxor Asset Management S.A. (a wholly owned subsidiary of Societe Generale) Plaintiff [A company incorporated under the laws of France] 1st Defendant Scotiabank & Trust (Cayman) Limted [A company incorporated under the laws of the Cayman Islands] 2st Defendant
| Jurisdiction | Cayman Islands |
| Judge | Before the Hon. Chief Justice |
| Judgment Date | 22 May 2009 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | Cause No. 311 of 2007 |
| Date | 22 May 2009 |
and
Before the Hon. Chief Justice
This is an application by the first defendant (‘Lyxor’) for injunctive relief restraining the plaintiff (‘Phoenix’) from continuing proceedings in the United States instituted by Phoenix and in which certain persons resident in the United States would be compelled to give depositions.
Those persons are Samuel Rosenberg and Anthony Phlipponneau or any other officer, director, managing agent or employee of SG Americas Securities LLC (‘SGAS’), resident in the United States. SGAS is an affiliate entity of Société Generate (‘Soc. Gen’) and is incorporated in and operating in the United States.
The background is as follows.
Phoenix sues Lyxor in these proceedings before this Court in respect of what Phoenix claims is the full value of its investment in a group of Phoenix Investment Funds administered by Lyxor.
The dispute is over the sum of approximately $100 million which Lyxor claims it is entitled to withhold on behalf of its parent Soc. Gen. This large sum is in respect of what Soc. Gen now claims as an ‘undisclosed margin’ or profit to which it is entitled for its part as investment advisor and leverage financier to the Phoenix Funds.
Lyxor's claim on behalf of Soc. Gen has only recently been clarified in the pleadings. Until then, it was rather differently pleaded in terms of a penalty or levy which Soc. Gen was entitled to impose because of Phoenix's early redemption of its investments.
Not surprisingly, Phoenix seeks to examine every aspect of Soc. Gen's claim and has required, through the discovery process, full and frank disclosure of any information in Lyxor's possession or control relating to Soc. Gen's claim. Lyxor has provided extensive witness statements and/or affidavits from Mr. Rosenberg in particular, in support of its discovery.
A complicating feature of the case is that while Lyxor asserts the claim on behalf of its principal Soc. Gen, the relevant institutional information is held by Soc. Genwhich is itself not a party to this action. And, while Lyxor claims to have made full and frank disclosure, the issues which Phoenix seeks to explore by way of the depositions in the United States, are matters within the knowledge of Messrs. Rosenberg and Phlipponneau (and perhaps others) who are officers of SGAS (and in the case at least of Mr. Rosenberg), of Soc. Gen itself; but not of Lyxor.
That being the nature of the inter-relationships, the witnesses Rosenberg and Phlipponneau are not immediately amenable to the process by which this Court can compel officers of companies, which are parties to proceedings before it, to submit to oral interrogation by way of discovery; that is: Grand Court Rules Order 24 Rule 16.
Phoenix has therefore resorted to the discovery process available by way of notice under Section 1782 of Title 28 of the United States Civil Procedure Code. By that process Phoenix seeks to depose Messrs. Rosenberg and Phlipponneau on a wide range of 11 separate topics relating to Soc. Gen's business as investment adviser and financier, not just of Phoenix Funds, but also - to the extent relevant to Soc. Gen's claims — relating also to Soc. Gen's dealing with other clients.
Phoenix argues that it should be allowed to pursue the depositions of Messrs. Rosenberg and Phlipponneau because Lyxor has significantly changed its case in a mainner which is inconsistent with the earlier sworn affidavit of its chief witness Mr. Rosenberg and that the deposition of Mr. Rosenberg and his colleague Mr. Phlipponneau, will provide significant ‘litigation benefits’ to Phoenix (and it is hoped this Court) in the trial to take place here in this action.
Lyxor objects to the Title 28 depositions on the grounds of oppression and prejudice. On its behalf, Mr. McKie argues that as Messrs Rosenberg andPhlipponneau have both given witness statements in these proceedings and will be attending to testify at the trial, the proposed depositions are unconscionable for three main reasons:
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(i) They will subject Mr. Rosenberg and Mr. Phlipponneau to unwarranted double cross-examination and the trial in this Court will suffer from that unwarranted duplication. Such interrogation of the proposed witnesses would be oppressive and could discourage them from attending for trial out of concern for being submitted to the same process again.
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(ii) The parties are working flat out to prepare for this complex trial, albeit now postponed from May 2009 to September 2009. It is unnecessary and undesirable for there to be the distraction of depositions.
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(iii) The area of enquiry defined by the 11 topics is far too broad and intrusive.
Phoenix's summons now before me, by which it seeks to restrain Lyxor from pursuing the Title 28 depositions, raises an important issue of Cayman Islands Civil procedure. This is 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.
While the case law on this point has developed in other places in the Commonwealth, it is a point of first impression for this Court; the question whether an anti-suit injunction should be issued to restrain foreign proceedingshaving been reported to have arisen before only in the context of cases where there were disputes over the forum conveniens. See In Re Cotorro Trust 1997 CILR 1; Lemos v Coutts and Co. (Cayman) Ltd l992–2013;93 CILR 460 and Unilever PLC v ABC International 2008 CILR 87. (In the first two of those cases, the foreign proceedings were restrained on the basis that Cayman was the proper forum. In the Unilever case, arbitration proceedings in Paris were restrained on the basis that the defendant, ABC International, a Cayman Islands company, was seeking vexatiously to compel the plaintiff to submit to those arbitration proceedings).
In the context of this application there are competing discernible issues of principle involved. Unlike the position in many other Commonwealth jurisdictions including England; Cayman civil procedure does allow - pursuant to GCR O. 24 R. 16 — oral discovery by way of depositions prior to trial. This is however, as already noted limited to officers of companies which are parties to proceedings before the Court. So while it may not be said that Cayman law is hostile to witnesses being cross-examined prior to trial, such a procedure remains unusual. No case concerning this procedure has been reported since O. 24 R. 16 was amended in September 2003 to allow it.
O. 24. R.16 apart, there is, generally, no power 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. That is: where discovery includes both the disclosure and production for inspection and copying of documents, as well as the giving of oral or written testimony. In this regard, Cayman law and procedurediffers essentially from that of several foreign jurisdictions, including the United States.
This Court must therefore be alive to natural concerns of practitioners about the possibility of such pitfalls as duplication of effort and oppression arising from the use of pre-trial depositions. These are considerations which are identified by Lyxor here as militating against the Title 28 proceeding from the perspective of the Court in ways which, perhaps, would not trouble the United States or other foreign courts where such pre-trial depositions are routine.
But the further issue of principle is the other side of the coin: it raises the question to what extent is it desirable or appropriate, that a party to litigation before our Courts, should be prevented from availing itself of a statutory right which it may have under foreign law (here United States Federal 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.
Framing the competing issues of principle in this way brings into stark relief the competing and equally important concerns which must be considered. It is plain from the outset, that where a party has a right to avail itself of a legitimate foreign process, there must be a very compelling reason to prevent it from doing so — something more than just the philosophical differences of...
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