Phoenix Meridian v Lyxor

JurisdictionCayman Islands
Judge(Quin, J.)
Judgment Date22 June 2009
CourtGrand Court (Cayman Islands)
Date22 June 2009
Grand Court

(Quin, J.)

PHOENIX MERIDIAN EQUITY LIMITED
and
LYXOR ASSET MANAGEMENT S.A. and SCOTIABANK & TRUST (CAYMAN) LIMITED

G. Halkerston and Ms. M. Hudson for the plaintiff;

C.J.D. Style, Q.C. and C.D. McKie for the first defendant.

Cases cited:

(1) Allstate Life Ins. Co. v. Australia & New Zealand Banking Group Ltd., [1996] FCA 1270, referred to.

(2) Benfield Holdings Ltd. v. Richardson, [2007] EWHC 171 (QB), considered.

(3) Erinford Properties Ltd. v. Cheshire County Council, [1974] Ch. 261; [1974] 2 W.L.R. 749; [1974] 2 All E.R. 448, referred to.

(4) Hadmor Prods. v. Hamilton, [1983] 1 A.C. 191; [1982] 2 W.L.R. 322; [1982] 1 All E.R. 1042; [1982] I.C.R. 114; [1982] I.R.L.R. 102, considered.

(5) Imbar Maritima S.A. v. Gabon (Republic), 1988–89 CILR 286, referred to.

(6) Ketchum Intl. Plc. v. Group Public Relations Holdings Ltd., [1997] 1 W.L.R. 4; [1996] 4 All E.R. 374, referred to.

(7) Nokia Corp. v. Interdigital Technology Corp., [2004] EWHC 2920 (Pat), referred to.

(8) Omega Group Holdings Ltd. v. Kozeny, [2002] CLC 132, considered.

(9) South Carolina Ins. Co. v. Assurantie Maatschappij ‘De Zeven Provincien’ N.V., [1987] A.C. 24; [1986] 3 W.L.R. 398; [1986] 3 All E.R. 487; [1986] 2 Lloyd”s Rep. 317, referred to.

(10) United Capital Corp. v. Bender, 2006 JLR 269, referred to.

(11) Wilson v. Church (No. 2)ELR(1879), 12 Ch.D. 454; 41 L.T. 296, applied.

Injunctions-anti-suit injunctions-injunction against foreign proceedings-while appeal pending against refusal of injunction, interim relief may be granted against foreign proceedings (e.g. seeking deposition of witness) if (a) realistic prospect of success (e.g. in proving ‘unconscionable’ to allow them to continue); (b) appeal might otherwise be nugatory (e.g. depositions might be obtained); and (c) balance of convenience in favour of injunction

The plaintiff sought declaratory relief and damages in relation to the value of its investment in two Cayman unit trusts.

The plaintiff challenged the first defendant”s valuation of protected funds in which it had invested and as part of its trial preparations it sought depositions from the defendant”s key witnesses-both resident in the United States-under §1782 of Title 28 of the US Civil Procedure Code. The defendant applied for an injunction restraining the plaintiff from continuing proceedings in the United States to compel the witnesses to give depositions.

The Grand Court (Smellie, C.J.) held (in proceedings reported at 2009 CILR 342) that the defendant”s application seeking an injunction would be refused since it had not established that it would be ‘unconscionable’ to allow the plaintiff to proceed and it had therefore not overridden its legitimate right to invoke the procedure. The first defendant appealed against refusal of the injunction and, while awaiting the determination of its appeal, sought an interim injunction to prevent the plaintiff from continuing to seek the depositions.

The defendant submitted that the Grand Court had erred in law when deciding whether or not to grant the injunction because (a) it would be oppressive to subject the witnesses to double cross-examination; (b) the depositions would hinder the advanced preparation for the forthcoming trial; (c) the US proceedings were merely a ‘fishing expedition’ which would cause unnecessary inconvenience and costs; and (d) there was no reciprocity because none of the plaintiff”s employees would be subject to the depositions.

The plaintiff submitted in reply that (a) the depositions were genuinely needed for discovery of witnesses resident outside the Cayman Islands

and beyond the jurisdiction of the court rather than as an opportunity for double cross-examination; (b) the defendant”s appeal had no prospect of success since the Chief Justice had been correct to exercise his discretion to refuse the application and permit the plaintiff to exercise its legitimate right; (c) it would not render the appeal nugatory because it did not involve the dissipation of money and the Court of Appeal would have broad powers to restore the status quo; and (d) the balance of convenience was in favour of refusing the injunction.

Held, granting the injunction:

In order to grant the interim injunction while the appeal was pending against refusal of permanent injunctive relief, the court would have to be satisfied that (a) the defendant had a realistic prospect of success on appeal; (b) the refusal of the injunction would otherwise render the appeal nugatory; and (c) the balance of convenience favoured granting the injunction. The defendant had, in the instant case, a realistic chance of successfully persuading the Court of Appeal that it would be unconscionable to allow the use of depositions at this late stage in proceedings-given that it might lead to unwarranted double cross-examination of the defendant”s witnesses and hinder preparations for the trial which were at an advanced stage. Moreover, if the court did not grant the injunction before the determination of the appeal, it was likely that the depositions would be obtained and, if the appeal were then to be successful, it would be difficult to remedy any resulting prejudice to the defendant and there was thus the possibility of the appeal being rendered nugatory if injunctive relief were not now granted. Finally, on the balance of convenience, any prejudicial impact on the plaintiff of granting the injunction would be minimal (as there would only be a short delay in it obtaining the depositions) in comparison with the potential effect on the defendant and therefore the injunction would be granted (para. 15; paras. 45–47; paras. 49–54).

1 QUIN, J.: On May 22nd, 2009, the first defendant, Lyxor Asset Management S.A. (‘Lyxor’), issued a summons to restrain the plaintiff, Phoenix Meridian Equity Ltd. (‘Phoenix’), on an interim basis from continuing or seeking to enforce proceedings or any related actions commenced by it in the US District Court for the Southern District of New York, or any other US District Court, pursuant to §1782 of Title 28 of the US Code. This was to the extent that those proceedings seek the deposition of Mr. Samuel Rosenberg and Mr. Anthony Phlipponneau (both residents of the State of New York) or any other officer, director, managing agent or employee of SG Americas Securities LLC (‘SGAS’) resident in the United States, whether by continuing or seeking to enforce the notice of deposition pursuant to r.30(b)(6) of the US Federal Rules of Civil Procedure (dated March 19th, 2009, in Case No. M19–374 entitled In re Application of Phoenix Meridian Equity Ltd.) or otherwise pending final determination of the first defendant”s appeal, filed on May 21st, 2009. The first defendant”s summons is grounded by the affidavit of Rachel Millen, sworn on May 21st, 2009.

2 On May 21st, 2009, the first defendant filed a notice of appeal against the ruling of the Chief Justice (delivered in draft form on May 15th, 2009 to the parties) dated May 22nd, 2009, in which he refused the first defendant”s application for an injunction to restrain the plaintiff from continuing with proceedings in the US District Court, seeking depositions pursuant to §1782 in relation to certain employees of SGAS, Samuel Rosenberg and Anthony Phlipponneau.

3 In these proceedings, the plaintiff seeks declaratory relief and an inquiry as to damages in relation to the value of its investments in two Cayman unit trusts, originally totalling US$550m. The investments are now housed in the Patriot I Protected Fund and the Patriot Focus Protected Fund (the ‘protected funds’). The first defendant is sued as the fund manager of the protected funds.

4 The central issue in this case is whether the first defendant has calculated the net asset value (NAV) of the protected funds correctly. The

plaintiff claims the published NAV of the protected funds should be higher. The amount in dispute is in excess of US$100m.

History of proceedings and current discovery

5 On July 25th, 2007, the plaintiff issued its writ of summons and statement of claim and, on December 3rd, 2007, the first defendant served its defence. On December 18th, 2007, Henderson, J. dismissed the plaintiff”s application for summary judgment.

6 On May 20th, 2008, the plaintiff filed an application for a trial of a preliminary issue, and on September 2nd, 2008...

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2 firm's commentaries
  • The Use of Depositions in Cayman
    • Cayman Islands
    • Mondaq Cayman Islands
    • 20 December 2010
    ...and that it could be described "...as an unwanted and unloved orphan that has received little or no use since its introduction..."([2009 CILR 353], Quin This approach was subsequently approved in another ruling in Phoenix by Foster J (4 August 2009). He held that Order 24, Rule 16 was a ver......
  • Cayman Grand Court Permits U.S. Depositions of Future Trial Witnesses
    • Cayman Islands
    • Mondaq Cayman Islands
    • 4 August 2010
    ...discovery" and that it could be described "as an unwanted and unloved orphan that has received little or no use since its introduction"([2009 CILR 353], Quin This critical approach to O.24, r.16 was subsequently approved in another ruling in Phoenix by Foster J. on a separate application by......

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