Select Vantage Inc. v Cayman Islands Monetary Authority
| Jurisdiction | Cayman Islands |
| Judgment Date | 21 September 2017 |
| Date | 21 September 2017 |
| Docket Number | CIVIL APPEAL NO. 22 OF 2017 (GRAND COURT CAUSE NUMBER FSD 90 of 2017 (RPJ)) |
| Court | Court of Appeal (Cayman Islands) |
CIVIL APPEAL NO. 22 OF 2017 (GRAND COURT CAUSE NUMBER FSD 90 of 2017 (RPJ))
IN THE COURT OF APPEAL OF THE CAYMAN ISLANDS
1) The application for leave to appeal by SVI from the judgment of Raj Parker J dated 12 July 2017 is granted in respect of the proposed grounds of appeal set out at paragraphs 3–7 of the draft Memorandum of Grounds of Appeal dated and filed 11 September 2017. Leave to appeal in respect of all of the other proposed grounds is refused.
2) Stay of execution of the orders of Raj Parker J dated 17 May 2017 and 12 July 2017 granted until the hearing of the appeal or further order.
3) Liberty to apply to both parties generally.
4) Costs to be costs in the appeal.
Given under my hand and the seal of the Court this 21 day of September, 2017.
Registrar of the Court of Appeal
The applicant (SVI) applies for leave to appeal from the judgment of Raj Parker J (‘the judge’) dated 12 July 2017. SVI also seeks a stay of execution of the obligations imposed on it by the judgment. Both applications, which I will refer to as the leave application and the stay application respectively, were previously heard and refused by the judge on 8 September 2017.
In support of the leave application, SVI has filed a draft notice and memorandum of grounds of appeal, a copy of the judge's judgment and a brief skeleton argument in support of the application. 1
In support of the stay application, SVI has filed the Second Affidavit of Shaun Joseph Maloney, sworn to on 14 September 2017 and a brief skeleton argument. In opposition to the stay application, the respondent (CIMA) has filed the First Affidavit of Jennifer Hydes, sworn to on 15 September 2017.
CIMA has also lodged with the court a bundle of other documents, containing skeleton arguments and other materials which were before the judge. However, having regard to what the rules require at this stage, I have confined consideration of the leave application to the document referred to in paragraph 2.
By his judgment dated 12 July 2017, the judge refused SVI's application for an order discharging his previous order made ex parte on 16 May 2017 (the ex parte order).
The ex parte order required SVI to comply fully with a direction to provide information (the direction) given to it by CIMA on 7 March 2017. The direction, which was issued following on from a request for assistance from the Australian Securities and Investments Commission (ASIC), was purportedly given under powers given to CIMA by section 34(9) of the Monetary Authority Law (MLA), to give directions to, among others, “a person reasonably believed to have information relevant to enquiries to which the request relates”.
As part of the ex parte order, the judge also (i) gave SVI liberty to apply to vary or discharge it within five days (which it did); and (ii) ordered that all papers relating to the ex parte application (the ex parte material) should be sealed and not be open for inspection on the court file without the leave of the court having been obtained on notice to CIMA.
However, in advance of the inter partes hearing, the judge directed that a redacted summary of the skeleton argument relied on by CIMA at the ex parte hearing should be disclosed to SVI, and this was done (although SVI's counsel complained that the resultant redactions were so extensive as to deny SVI proper disclosure).
Before the judge at the inter partes hearing, SVI sought the discharge of the ex parte order, as the judge records it (at para 14), on the following grounds:
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(i) SVI is unable to comply with the ex parte order, because SVI is not the entity which has custody of the records containing the relevant information.
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(ii) The relevant entity is in fact Elite Vantage, the parent company of SVI, which is an Anguillan registered company physically based in Costa Rica.
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(iii) The ex parte originating summons procedure used by CIMA was irregular and the judge ought not to have made the order ex parte, that procedure having denied SVI the opportunity to properly defend itself, in circumstances in which it still does not know the case against it.
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(iv) SVI has now challenged the basis of the information sought by ASIC in judicial review proceedings in Australia and compliance with the direction may render those proceedings nugatory.
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(v) SVI should in any event be given access to the documents which were sealed by the court as a matter of fairness and natural justice, so as to enable it to consider the case against it and to assess its options.
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(vi) In keeping with section 6 of the MAL, “CIMA is obliged to use its resources in the most efficient and economical way having regard to its engagements with SVI, the burden placed on SVI to comply with the Direction, and the need for transparency and fairness”.
The judge's findings against SVI on all grounds were based on a detailed analysis of the affidavit evidence relied on by each party, the Grand Court Rules and various provisions of the MAL.
Evidence was given on behalf of SVI on affidavit by Mr Daniel Schlaepfer (DS), the President and Chief Executive Officer of SVI. DS is also the self-described “controller” of the Vantage Group, a group of companies comprising Elite Vantage, SVI and others.
Among other things, DS said that SVI is not the entity within the group which has or has ever had the information and documents covered by the direction, in that any and all such information is held by Elite Vantage. However, again among other things, DS also said that, “[a]s the effective controller of the Vantage Group, I have the power (subject to my legal obligations and fiduciary responsibilities) to cause members of the Vantage Group to share information with one another for the purpose of business activities in the ordinary course”. 2 DS also said that he had “a corresponding power (again, subject to my legal obligations and fiduciary responsibilities) to cause members of the Vantage Group to provide information to the regulatory authorities for the purpose of complying with inquiries”. 3
On the issue of SVI's ability to comply with the ex parte order, the judge found DS' affidavit evidence “less than convincing”, commenting that the points taken by DS were “at best technical and … on the whole unmeritorious”. 4 In the light of DS' evidence, the judge found that “the information and documents are in the control of SV, in that DS could procure them to be provided in the form requested”. 5 The judge accepted that while DS, as President and CEO of SVI and Elite Vantage, might need to consider his separate legal and fiduciary duties to each company, taking legal advice
On the other hand, the judge accepted fully the affidavit evidence relied on by CIMA 7, which showed that SVI had initially taken no point that the information and documentation sought in the direction was not in SVI's possession or control. Indeed, so the evidence went, SVI's correspondence with CIMA proceeded on the basis that SVI had information, relevant to the direction, which could be provided. 8
On the question of the appropriateness of the ex parte procedure, the judge observed 9 that, as the judge who had heard the ex parte application, he had “the advantage of seeing material which [counsel] has not had an opportunity to see, including all the evidence relied on by CIMA”. He went on to explain 10 that he “was persuaded that … the giving of notice, would have resulted in a defeat of the application by reason of further delay, or it may have precipitated action which the application was designed to prevent, that is to say the potential disappearance of the material”.
As regards the question of prejudice to SVI, the judge considered 11 that any such prejudice (which he found to be “minimal”) had been adequately mitigated by the provision to it of CIMA's redacted skeleton argument (“which has allowed it to properly understand the legal basis of the case against it, whilst preserving the obligations of confidentiality CIMA has assumed”); and
Taking all factors into account, the judge considered 12 that “… SVI has had a fair hearing as to the determination of its rights and has had more than enough opportunity to know the gist of the case against it and to challenge it through this application”. 13
However, the judge also found 14 that section 50(1) of the MAL, which imposes criminal liability on any director, officer, agent and employee of CIMA who discloses information shared by an overseas regulatory authority that he has acquired in the course of his duties (section 50(1)(e)), “affords CIMA a complete answer to the disclosure of material sealed by this Court” (para 60).
The judge therefore concluded as follows: 15
“In my judgment there are no grounds upon which to either discharge the ex parte order … or to grant a stay of it in view of the Australian judicial review proceedings. This Court should not be used to delay the investigation by ASIC any further.”
In its proposed grounds of appeal, SVI seeks to contend that (i) the judge's decision to grant the ex parte order under section 34(1) of the MAL was “wrong in law and/or on principle and/or constituted a serious procedural irregularity and/or breach of the principles of natural justice”; (ii) the judge was wrong in law or in principle to refuse disclosure of the ex parte material
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