Re Ontario Superior Court's Request

• Jurisdiction: Cayman Islands
• Judge: (Levers, J.)
• Judgment Date: 13 October 2006
• Court: Grand Court (Cayman Islands)
• Date: 13 October 2006

Grand Court

(Levers, J.)

IN THE MATTER OF A REQUEST FROM THE SUPERIOR COURT OF ONTARIO, CANADA

P.A.K. Broadhurst and Ms. T. Caudeiron for the Canadian receiver;

Ms. L. Hatfield and S.M.P. Dawson for the liquidators;

N.D. Robinson for Univest Diversified Fund II;

M. Crawford for Mr. David Bree.

Cases cited:

(1) Ansbacher (Cayman) Ltd., In re, 2001 CILR 214, distinguished.

(2) D, In re, 1984–85 CILR 296, considered.

(3) Dunne”s Payments, In re, 1997 CILR 330, distinguished.

(4) International Power Indus. NV, Re, [1985] BCLC 128, applied.

(5) Norway”s (State of) Application (No. 2), In re, [1989] 1 All E.R. 701; [1988] FTLR 293, considered.

(6) Norwich Equitable Fire Ins. Co., In reELR(1884), 27 Ch. D. 515; 54 L.J. Ch. 254; 51 L.T. 404; 32 W.R. 964, referred to.

(7) Rio Tinto Zinc Corp. v. Westinghouse Elec. Corp., [1978] A.C. 547; [1978] 1 All E.R. 434, considered.

(8) Voluntary Purchasing Group Inc. v. Insurco Intl. Ltd., 1994–95 CILR 84, distinguished.

Legislation Construed:

Evidence (Proceedings in Other Jurisdictions) (Cayman Islands) Order 1978, Schedule 1, s.1: The relevant terms of this section are set out at para. 8.

s.2: The relevant terms of this section are set out at para. 9.

s.9(1): The relevant terms of this sub-section are set out at para. 10.

Evidence-assistance to foreign court-‘civil proceedings’-under Evidence (Proceedings in Other Jurisdictions) (Cayman Islands) Order 1978, Schedule 1, s.1(b), assistance only granted if ‘civil proceedings’ instituted or contemplated before requesting court-winding up and appointment of liquidator not ‘civil proceedings’ for purpose of Order

Evidence-assistance to foreign court-‘proceedings contemplated’-no assistance given under Evidence (Proceedings in Other Jurisdictions) (Cayman Islands) Order 1978, Schedule 1, s.1(b) if no identifiable cause of action or defendant-request barred as ‘fishing expedition’ for information to initiate proceedings-proceedings not contemplated within s.1(b)

A letter of request was issued by the Ontario Superior Court, asking the Grand Court to obtain evidence in the Cayman Islands to assist in the management of the receivership proceedings of a group of Canadian companies.

Pursuant to the letter of request, the Grand Court made an ex parte order which provided for the examination of representatives of certain investment companies (‘the Strategy Funds’) who were resident in the Cayman Islands and for the production of company documents. The applicants, who were the joint voluntary liquidators of the Strategy Funds, one of the companies required to give evidence under the order, and a director of that company, applied to have the order set aside.

The applicants submitted that the order should be set aside because (a) the Evidence (Proceedings in Other Jurisdictions) (Cayman Islands) Order 1978, Schedule 1, s.1 provided that the court could only obtain the

requested evidence if it was to be used in ‘civil proceedings,’ and in this case no civil proceedings had been instituted and there was no evidence that any were being considered-the letter of request itself did not specify that civil proceedings had either been instituted or were pending; (b) the appointment of a receiver in Ontario should not be considered ‘civil proceedings’ for the purposes of the Order as the winding-up proceedings did not relate to the trial of a justiciable issue, which was necessary to satisfy the statutory requirements; (c) the case relied upon by the respondent to support its contention that a liquidator performing his duties would be treated as a ‘proceeding’ before the Cayman court was decided under different legislation which had no bearing on that being considered in this case; (d) the court”s power to grant the Ontario court”s request was statutory only, and it had no inherent jurisdiction to exercise discretion in deciding whether or not to grant a request; and (e) even if the court did have jurisdiction to make the order, it should not do so as it was merely a ‘fishing expedition’ for pre-trial discovery; although there could be an investigation to ascertain whether there was sufficient evidence to support a case, that presupposed the existence of an opponent and here there was no evidence that proceedings were contemplated against any specific defendant, but rather the proposed enquiry was to see if there could be a defendant.

The respondent submitted in reply that the court had reasonably granted the request, and the order should not be varied because (a) the court had jurisdiction to make the order as the appointment of a receiver would ordinarily be treated as a step in a ‘civil proceeding’; (b) additionally, the receiver was a court-appointed officer with a mandate to determine what claims needed to be brought on behalf of the company he represented and, when made, those claims would be justiciable issues before the Ontario Superior Court sufficient to satisfy the Order”s requirement of civil proceedings; (c) in any case, comity was of the utmost importance in cross-border insolvency cases, and the court should therefore refuse to vary the order even if the application was not correctly brought under the 1978 Order; and (d) the request was not invalid for being a ‘fishing expedition’ as such an order could be made to allow a party to ascertain whether there was sufficient evidence to support his own case or contradict that of his opponent.

Held, granting the application and setting aside the ex parte order:

(1) The court did not have jurisdiction to grant the request, as the appointment of a receiver did not constitute a justiciable issue sufficient to be considered ‘civil proceedings’ for the purpose of the Evidence (Proceedings in Other Jurisdictions) (Cayman Islands) Order 1978, Schedule 1, ss. 1(b) and 2(3). Whilst the Cayman courts had previously held that a liquidator exercising his functions could constitute ‘proceedings,’ that was under a different statute and in the present context there had to be a justiciable issue capable of trial. The court”s power extended only so far as the statutory provision, and it did not have

inherent jurisdiction to exercise discretion to grant the request outside that provision (para. 21; para. 25; para. 28).

(2) Moreover, even if winding up were considered a ‘civil proceeding,’ giving the court jurisdiction to grant the request, the court would not exercise it in this case as the application clearly amounted to a ‘fishing expedition.’ To be able to give assistance, it had to be presupposed that there was a cause of action between a plaintiff and a defendant which would eventually lead to a judgment; in the absence of an established opponent or cause of action in the letter of request, it was clear that the aim of the investigation was the pre-trial discovery of facts which might eventually lead to the commencement of proceedings. This was not sufficient to satisfy the requirement under the Evidence (Proceedings in Other Jurisdictions) (Cayman Islands) Order 1978, Schedule 1, s.1(b) that the evidence was requested for use in proceedings ‘whose institution before [the requesting court] is contemplated’ (para. 34).

1 LEVERS, J.: This is an application by the joint voluntary liquidators of Univest Convertible Arbitrage Fund II Ltd., several other companies, collectively called ‘the Strategy Funds,’ and Mr. David Bree, a director

of the Univest Diversified Fund II to set aside an ex parte order, dated August 24th, 2006, which provided for the examination of witnesses and the provision of documents within the Cayman Islands, pursuant to a letter of request of the Ontario Superior Court of Justice, dated August 18th, 2006.

2 The applicant in the original application was appointed receiver over the companies known as the Norshield Financial Group, pursuant to an order of the Ontario Superior Court dated June 29th, 2005. The order was made upon the application of the Ontario Securities Commission pursuant to s.129 of the Securities Act (Ontario).

3 The applicant”s powers as receiver are set out under the appointment order as well as any subsequent order made by the...