Phoenix Meridian v Lyxor

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 02 March 2009
• Court: Grand Court (Cayman Islands)
• Date: 02 March 2009

Grand Court

(Smellie, C.J.)

PHOENIX MERIDIAN EQUITY LIMITED

and

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

G. Halkerston and M.A. Loberg for the plaintiff;

C.D. McKie and J.F. Pennay for the first defendant.

Cases cited:

(1) Church of Scientology of California v. D.H.S.S., [1979] 1 W.L.R. 723; [1979] 3 All E.R. 97, followed.

(2) Deutsch-Südamerikanische Bank A.G. v. Codelco, 1996 CILR 1, referred to.

(3) Home Office v. Harman, [1983] 1 A.C. 280; [1982] 2 W.L.R. 338; [1982] 1 All E.R. 532, referred to.

(4) Norwich Pharmacal Co. v. Customs & Excise Commrs., [1974] A.C. 133; [1973] 2 All E.R. 943; [1973] FSR 365; [1974] R.P.C. 101; (1973), 117 Sol. Jo. 567, referred to.

(5) Warner-Lambert Co. v. Glaxo Labs. Ltd., [1975] R.P.C. 354, followed.

Civil Procedure-discovery-confidential information-inherent jurisdiction to prevent abuse of confidential information by imposing additional undertakings on parties receiving information-categories of cases for such undertakings not closed-court to balance need for plaintiff to prove his case and substantial cost and time of undertaking against allowing defendant to protect secrets from competitors

The plaintiff sought to challenge a charge for early redemption from an investment fund, which had been levied against it by the management of the fund.

The plaintiff had sought discovery of the methodologies by which the contested redemption charges were calculated, but the first defendant”s principal wished to protect the confidentiality of the information, as a key part of its business, which would otherwise be revealed to its competitors. The first defendant, on behalf of its principal, therefore sought to impose additional written confidentiality undertakings on the plaintiff, its legal advisers and its expert witnesses so that the information to be released would be adequately protected.

The first defendant submitted that the undertakings were necessary given that release of the information was inevitable (even advertently) since there was a likelihood that someone employed by the plaintiff would move to work for a competitor and disclose their methodologies.

The plaintiff submitted in reply that the additional written undertakings sought by the defendant were unnecessary because (a) the implied undertaking, automatically imposed on the parties, not to misuse the discovery process was sufficient and that any additional undertakings would be of little practical value; and (b) they had already put in place sufficient safeguards, and the concerns of the defendant were therefore fanciful, given that they only wanted discovery of the information to resolve the current legal dispute.

Held, refusing to order the plaintiff to enter into the additional confidentiality undertakings:

(1) There was no need to impose any further written undertakings upon the plaintiff since sufficient protection was provided by the implied

undertaking, especially considering the substantial cost and time an additional requirement would entail. Moreover, it would develop an unwelcome precedent for the control and protection of confidential information released in the discovery process. The court possessed an inherent jurisdiction to protect litigants against the risk of abuse of information in the discovery process by imposing additional undertakings on the parties in receipt of the information, and the categories of cases in which they could do so were not closed, but this power would not be invoked here (para. 13; para. 18; para. 26).

(2) The discovery process created a balance between the need for the plaintiff to have enough evidence to prove his case and allowing the defendant to prevent competitors from gaining information about their trade secrets. The court had to decide what measure of disclosure would be appropriate, to whom it should be made and on what terms it should be given. In these circumstances, the court felt that the safeguards proposed by the plaintiff to fulfil its obligations under the implied undertaking-including ensuring the disclosed documents would not leave their control and making those who were engaged to analyse it enter into confidentiality agreements-would be acceptable. A further requirement would be imposed in that a list should be created of every person to whom the information would be disclosed which would be made immediately available to the principal. This would reinforce the obligation of confidentiality and inform the principal who was receiving the confidential information (para. 14; para. 27).

1 SMELLIE, C.J.: This case is in the preparatory stages for trial and the parties are in the midst of having to meet their discovery obligations. A question arises whether the plaintiff (‘Phoenix’), its legal advisers and expert witnesses should be required to enter into written confidentiality undertakings in a form proposed by the first defendant (‘Lyxor’) for the protection of information which Lyxor is required to disclose.

2 Lyxor”s concerns in this regard can only be understood when set in the context of the case. The dispute between the parties relates to charges which Lyxor, on behalf of its principal (the well-known French bank Société Générale (‘SG’)), has levied upon an investment fund which it manages on behalf of...