THE COMPANIES ACT (2021 REVISION) and PRINCIPAL INVESTING FUND I Ltd and LONG VIEW II Ltd and GLOBAL FIXED INCOME FUNDS I Ltd Credit Suisse London Nominees Ltd Petitioner v Principal Investing Fund I Ltd Long View II Ltd Global Fixed Income Fund I Ltd First Respondents and Floreat Principal Investment Management Ltd LV II Investment Management Ltd Floreat Investment Management Ltd Second Respondents and (1) Blue Water Ltd (2) Amida Group Holdings Non-Party Applicants
| Jurisdiction | Cayman Islands |
| Judge | Justice Kawaley |
| Judgment Date | 26 January 2023 |
| Docket Number | FSD CAUSE NO. 268, 269, 270 OF 2021 (IKJ) |
| Court | Grand Court (Cayman Islands) |
IN THE MATTER OF THE COMPANIES ACT (2021 REVISION)
AND IN THE MATTER OF PRINCIPAL INVESTING FUND I LIMITED
AND IN THE MATTER OF LONG VIEW II LIMITED
AND IN THE MATTER OF GLOBAL FIXED INCOME FUNDS I LIMITED
and
and
The Hon. Justice Kawaley
FSD CAUSE NO. 268, 269, 270 OF 2021 (IKJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Discovery-application for release from implied undertaking to permit deployment of discovered material by non-parties in foreign arbitration-single law firm retained by parties and non-parties to oversee discovery process-whether documents belonging to non-parties within the parties’ ‘possession, custody or power’-application to inspect court file to permit non-parties to deploy joint provisional liquidators’ reports in foreign arbitration-GCR Order 24 rule 22-Companies Winding Up and Restructuring Rules 2018 rule 26 rule 4
Mr James Collins KC instructed by Mr David Lee and Mr David Lewis-Hall of Appleby (Cayman) Limited for the Petitioner and the Non-Party Applicants
Mr Tom Weisselberg KC instructed by Mr Ben Hobden and Mr Alan Quigley of Forbes Hare for the Second Respondents
IN CHAMBERS
The present proceedings were commenced by Petitions dated 14 September 2021 presented by the Petitioner acting by receivers Mr Michael Pearson and Ms Trudy-Ann Scott (who have been appointed over shares held by the Petitioner in each of the First Respondents) against each of the three First Respondents, respectively. The Second Respondents are the holders of the management shares in each of the First Respondents, respectively, who were referred to broadly as “Floreat Management”. The Petitioner seeks to wind up each of the First Respondents on the grounds that there has been a justifiable loss of confidence due to the mismanagement of the substantial assets invested by Mr Wang at the instance of the “Floreat Principals”.
The Non-Party Applicants controlled by Mr Wang are involved in London Court International Arbitration proceedings (the “LCIA Proceedings”) commenced against them by the “Floreat Parties” with a view to recovering substantial fees said to be due to them. Only the Second Respondent in FSD 269 of 2022 is a party to both one of the petitions and the LCIA Proceedings. However, the Non-Party Applicants herein as Respondents in the LCIA Proceedings dispute liability in significant part based on the same wrongdoing complained of by the Petitioner in the present proceedings. The Petitions herein are currently scheduled for hearing on 3 April 2023 while the arbitration hearing is scheduled to commence on 15 May 2023.
The Petitioner contends that the “substantial overlap” between the evidential issues to be explored by both factual and expert witnesses in the present proceedings and the LCIA Proceedings, and the timing of the two sets of proceedings, justify the present applications. The Petitioner seeks two heads of relief under their 12 September 2022 Summonses against each of the three respective Second Respondents:
“ 2. An Order that the Petitioner be granted a limited release from any implied undertaking not to disclose outside of these proceedings documents served by the Second Respondent, including discovered documents, so as to permit the Petitioner to provide copies of those of the documents that are relied upon by the Petitioner in these proceedings to Blue Water Limited and Amida Group Holdings solely for the specific purpose of them seeking to introduce those documents into the related ongoing arbitration proceedings, LCIA Arbitrations Nos. 215317 and 215318.
3. A declaration that the documents comprising the 2TB of documents provided to Herbert Smith Freehills ( HSF) from 61 custodians as described in the First Affidavit of Andrew John Cooke at paragraph 20.1, together with any further documents provided to HSF as part of the data collection exercise described therein, are in the possession, custody or power of the Second Respondents and are therefore discoverable in these proceedings.”
The Non-Party Applicants, under a second trio of 12 September 2022 Summonses, apply:
“ pursuant to the Companies Winding Up Rules 2018 O.26 r.4 for permission to access the Court File in these proceedings and take copies of documents, including the reports of the joint provisional liquidators in so far as they relate to the Cayman Funds…solely for the purpose of seeking to introduce those documents into confidential arbitration proceedings under LCIA Arbitrations Nos. 215317 and 215318.”
These applications were referred to by the parties as the Release Applications 1, the Declaration Applications and the Court File Applications.
As regards the critical factual matrix, the Skeleton of the Petitioner and Non-Party Applicants' Skeleton Argument submitted as follows:
“2. …the purpose of the Release Application and the Court File Application is to enable justice to be done in the Arbitration, and to avoid serious practical and other difficulties that would arise if the relief sought were not granted. The overwhelming majority of the documents the subject of these applications will enter the public domain during the trial of these proceedings and thus be available for deployment in the Arbitration in any event. The Release Application and Court File Application are designed to ensure that this can be done earlier and in an orderly manner, rather than materials only becoming available when the final preparations for the Arbitration are under way, with all the associated disruption…
13. There is very significant overlap between the issues in these proceedings and the issues in the Arbitration. As the Court knows, Mr Wang's position in these proceedings is that there has been substantial wrongdoing in the management and operation of the Cayman Funds (and the BVI Fund, RAGOF). The same wrongdoing is relied on by the Wang Parties as part of their defence and counterclaim in the Arbitration…
14. Previously, this overlap was common ground. See, for example, Forbes Hare's second letter dated 26 May 2022 which referred to the ‘substantial overlap’ between the two sets of proceedings, which contain ‘the same and similar detailed allegations of improper conduct by the Floreat Parties’. In previous submissions to this Court the Second Respondents recognised that the two disputes involved ‘the same factual and legal issues’.
15. Only when faced with the Release and Court File Applications did the Second Respondents seek to downplay the extent of the overlap. This is unconvincing. Of course, different relief is sought in each claim (here a winding-up order, there payment of fees), and so the framework differs, but the issues requiring determination are in many respects the same…
16. There is also substantial overlap between the parties…”
The nature of the factual matrix was not ultimately in controversy; the dispute centred on the true purpose of the legal principles applicable to granting a release and whether the circumstances of the present case justified exercising the discretionary judicial power in favour of the Petitioner. The Petitioner's submission that the only documents in issue were those produced upon discovery, and that the implied undertaking only applied to documents produced through compulsion, was also not disputed at the hearing 2. Nor were the following general summary of principles subject to any material dispute:
“ 23. In relation to release from the implied undertaking, the leading case is Crest Homes Plc v Marks [1987] AC 829, referred to by Smellie CJ in Grupo Torras SA v Bank of Butterfield International (Cayman) Limited (2000) CILR 452 at 471. The basic principle (per Lord Oliver in Crest Homes at 860B-C) is that the Court will not release or modify the implied undertaking given on discovery save in special circumstances and where the release or modification will not occasion injustice to the person giving discovery. The burden is on the applicant, and cogent and persuasive reasons must be shown (859G).
24. Beyond that, it is a question for the court on the particular facts of each case. However, the Courts have tended to look favourably on applications for a release for the purposes of use in other proceedings, at least where the two actions are closely related: see e.g. Sybron Corp v Barclays Bank Plc [1985] Ch 299 and Lakatamia Shipping v Su [2020] EWHC 3201 (Comm); [2021] 1 WLR 1097. Whilst the question is fact-dependent, there is a strong public interest in facilitating the just resolution of civil litigation: Tchenguiz v Serious Fraud Office [2014] EWCA Civ 1409 at [66].” [Emphasis added]
In oral argument, Mr Collins KC, submitted that it was common ground that special circumstances were required to justify a release and injustice would be an impediment although that was not an issue in the present case. The central aim of the Release Application (and the Court File Application) was to deal with documents “outwith” the Arbitral Tribunal. Moreover, the release was not sought in respect of all discovered documents, but merely those the Petitioner was positively relying upon in the present proceedings, and which would likely enter the public domain through being referred to in Open Court at trial (GCR Order 24, rule 22). While he submitted that the public interest in facilitating the just resolution of civil litigation applied to facilitating the deployment by non-parties in foreign arbitration...
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