Phoenix Meridian v Lyxor

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 22 May 2009
• Court: Grand Court (Cayman Islands)
• Date: 22 May 2009

Grand Court

(Smellie, C.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.D. McKie and J.F. Pennay for the first defendant;

The second defendant did not appear and was not represented.

Cases cited:

(1) Benfield Holdings Ltd. v. Richardson, [2007] EWHC 171 (QB), referred to.

(2) Cotorro Trust, In re, 1997 CILR 1, referred to.

(3) Intel Corp. v. Advanced Micro Devices Inc.UNK(2004), 542 U.S. 241; 124 S. Ct. 244; 159 L. Ed. 2d 355, considered.

(4) Lemos v. Coutts & Co. (Cayman) Ltd., 1992–93 CILR 460, referred to.

(5) Nokia Corp. v. Interdigital Technology Corp., [2004] EWHC 2920 (Pat), considered.

(6) Omega Group Holdings Ltd. v. Kozeny, [2002] CLC 132, referred to.

(7) 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, dicta of Lord Brandon of Oakbrook followed.

(8) Unilever Plc v. ABC Intl., 2008 CILR 87, referred to.

Legislation construed:

Grand Court Rules 1995, O.24, r.16: ‘(1) In an action begun by Writ, the Court may make an order for discovery by oral examination of any party or, if the party is a body corporate, any officer thereof . . .’

O.26, r.5(2): ‘Where any person on whom ordered interrogatories have been served answers any of them insufficiently, the Court may make an order requiring him to make a further answer, either by affidavit or on oral examination as the Court may direct.’

Injunctions-anti-suit injunctions-injunction against foreign proceedings-on application to enjoin foreign proceedings, to show compelling reason to prevent other party from invoking legitimate right under foreign law (e.g. ‘unconscionable’ to allow it to proceed)-not ‘unconscionable’ to seek Title 28 depositions under US law if witness not amenable to Cayman discovery and since US courts aware of dangers of oppression

The plaintiff brought an action against the defendant to recover the value of its investment in a group of funds administered by the defendant.

The defendant withheld a sum from the plaintiff”s funds which it claimed it was entitled to do on behalf of its parent company, for the part it had played as investment adviser and leverage financier to the funds. The claim had only recently been clarified, having previously been pleaded as a penalty for early redemption, and consequently the plaintiff sought full and frank disclosure of all relevant information through the discovery process. The key witnesses were officers of the parent company resident in the United States and, since they were not parties to the proceedings, they could not be subject to oral interrogation under O.24, r.16 of the Grand Court Rules.

The plaintiff therefore resorted to the discovery process under §1782 of Title 28 of the US Code to seek oral depositions from the defendant”s key

witnesses resident there. The defendant applied for an injunction restraining the plaintiff from continuing proceedings in the United States to compel the employees of the principal to give depositions.

The plaintiff submitted that it should be allowed to pursue the request to obtain depositions because (a) the defendant had changed its pleadings so considerably that they were inconsistent with the earlier affidavits of the witnesses; (b) it would provide significant benefits for the forthcoming trial in the Cayman Islands; and (c) Cayman law could not be invoked here and there were several significant and legitimate reasons why they wished to seek depositions from these officers.

The defendant objected to allowing the taking of the depositions on the ground that they would be unconscionable since (a) the witnesses to be deposed were due to testify at the Cayman trial and it would therefore amount to unwarranted and oppressive double cross-examination and the procedure could discourage them from attending the trial; (b) they were working towards the trial and it would be an unnecessary distraction; and (c) the inquiry was too broad and intrusive.

Held, dismissing the application:

The application seeking to enjoin the Title 28 proceedings would be refused since the defendant had not established that it would be unconscionable to allow the plaintiff to proceed and thus, given the need to show a compelling reason to prevent a party from availing itself of a right it enjoyed under foreign law, their legitimate right to invoke that procedure had not been overridden. The key witnesses were not amenable to the full Cayman discovery process under O.24, r.16 of the Grand Court Rules since they were not parties to the action, and as the US courts were well aware of the dangers of vexation and oppression (including the risk of the plaintiff”s conducting a ‘fishing expedition’) under the procedure, it would not be unconscionable for the plaintiff to seek these depositions under US law. Moreover, there was no suggestion that Cayman law regarded double cross-examination as an abuse of process (since O.24, r.16 provided for pre-trial discovery by way of depositions) and, further, it had been established that witnesses could be subject to pre-trial cross-examination under O.26, r.5(2) on the basis of their written interrogatories (para. 14; para. 19; paras. 25–26; para. 28; para. 30).

1 SMELLIE, C.J.: 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 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 Générale (‘SG’) and is incorporated and operating in the United States.

2 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...