In the course of international litigation a party seeks to depose a future witness of fact using powers available to that litigant under the laws of another jurisdiction or under powers of the domestic court. What approach does a Court take to such steps?
Four recent judgments in the Cayman Islands have considered these issues from the perspective of Cayman law. The judgments confirmed that in appropriate circumstances domestic and foreign depositions will be permitted to assist trial preparation, but confirmed that depositions will only be permitted in exceptional circumstances.
Depositions Under Foreign Systems – s.1782 Depositions
In the United States, Title 28 of U.S. Code s.1782 allows a litigant in non-U.S. proceedings to apply for permission to obtain evidence for use in such proceedings. The litigant must establish that it is an "interested person" in a foreign proceeding, including documentary discovery and the taking of depositions.
Most common law jurisdictions have been hostile to permitting depositions of future witnesses, even in circumstances where the law of the jurisdiction in which the witness was resident permits such depositions. An established body of case law has consistently indicated that anti-suit proceedings would be readily granted to restrain s.1782 depositions of intended witnesses largely on the basis that such depositions would constitute unwarranted double cross-examination, including decisions in England (Omega Group Holdings v. Kozeny [2002] C.L.C. 132), Australia (Allstate Life Insurance v ANZ Banking Group [1996] FCA 1270) and Jersey (United Capital Corporation v Bender [2006] JLR 269 (CA)).
However in Phoenix Meridian Equity Limited v. Lyxor Asset Management S.A ("Phoenix") [2009 CILR 553] the Cayman Islands Court of Appeal confirmed, after an expedited hearing and a special sitting of the Court, the Grand Court's refusal of an anti-suit sought by the Defendant to restrain s.1782 depositions of future witnesses. This decision was reached in part by applying the principles in the leading existing cases to the facts of the case and in part by taking into account specific issues of Cayman civil procedure.
Phoenix was a funds dispute which centred on the Defendant's alleged basis for the calculation of the NAV in respect of a principal protected investment product offered by Societe Générale. The parties' valuation of the redemption value of the product differed by some US$100m,
The Plaintiff sought s.1782 depositions in New York of two officers of a U.S. company affiliated to the Defendant. The Defendant had served an Amended Defence which the Plaintiff claimed contained a dramatic change in its case. It was the Plaintiff's case that there was a significant free-standing litigation benefit in the proposed oral examination to assist its trial preparation and that the proposed depositions would save time and costs.
The Defendant applied to restrain the depositions on the basis that those officers had provided witness statements in the Cayman action and would be giving oral evidence at the trial of the action. The Defendant argued that the depositions would subject the deponees to unwarranted double cross-examination, that the Cayman trial would suffer from unwarranted duplication and distraction, and that the topics covered by the s. 1782 notice were too broad and intrusive.
At first instance, applying the standard common law approach, the Grand Court ([2009 CILR 342] Smellie CJ) recognised that when a party has a right to avail itself of a legitimate foreign process, such as s.1782 proceedings, there must be very compelling reasons for preventing it from doing so (applying the leading English cases of South Carolina Insurance Co v Assurantie Maatschappij "De Zeven Provincien" NV [1987] AC 24, HL and Nokia Corporation v Interdigital Technology Corporation [2004] EWHC 2920, (Pumfrey J). The Chief Justice noted that there was no reported Cayman case involving the application of anti-suit principles other than in forum non conveniens disputes.
The Chief Justice considered in detail the arguments in favour of the proposed depositions. The Plaintiff was able to identify several reasons why the depositions would constitute discovery in the true sense of the word and why the process could not be dismissed as mere double cross-examination. Furthermore, the Plaintiff was able to identify time and cost saving benefits of using the s.1782 process over solely domestic Cayman methods of evidence gathering. The Court noted that the U.S. courts are live to concerns such as vexatiousness and oppression and have the power to control the s.1782 deposition process (Intel Corp v Advanced Micro Devices Inc 542 USC 241 (2004)).
The Court also considered important the differences between Cayman civil procedure and the procedures of most other common law jurisdictions. First, GCR Order 24 Rule 16 permits a party to litigation to make an application to the Grand Court for discovery by oral examination of a party or an officer of a corporate party. Therefore, depositions are permitted under Cayman law, including those of a potential trial witness. Second, Cayman law provides oral discovery through the right to seek pre-trial cross-examination of individuals who have responded to interrogatories under GCR Order 26 Rule 5(2). These provisions indicated that Cayman law should not consider the risk of double-cross-examination of a future trial witness as a per se abuse of process.
On appeal the Court of Appeal affirmed the first instance decision, although the Court did order that the transcripts of the depositions could not be used at trial without the leave of the Court. The Justices of Appeal reiterated that the more appropriate venue for specific arguments of oppression was the U.S. and that the special regime for the taking of depositions under Cayman law was relevant to the exercise of discretion when considering allegations of oppression.
The Phoenix decision is of considerable practical importance, particularly given the regular involvement of entities resident in the U.S. in Cayman litigation. It allows and encourages practical co-operation between courts in the U.S. and the Grand Court, particularly in cases where a litigant is providing limited information in respect of an important aspect of the case.
In passing, it is worth noting the prominence given to Canadian jurisprudence both at first instance and on appeal. GCR O.24, Rule 16 is loosely based on analogous Canadian processes, and a Canadian decision on depositions of future witnesses, Sternson Ltd v. CC Chemicals Ltd (1981) 124 DLR (3d) 78, was relied upon by both courts in support of the refusal of the injunction. There have been several recent Cayman decisions where Canadian judgments have been influential, for example in Miller v. Gianne [2007 CILR 18] the Grand Court relied upon the Supreme Court decision in Pro Swing Inc v. Elta Golf Inc [2006] SCR 612 in the context of the Cayman approach to enforcement of foreign judgments.
GCR O.24, r.16 – Domestic Depositions and the Unloved Orphan
The Phoenix litigation also provided two judgments which indicated the restrictive approach which would be taken under Cayman law for domestic deposition applications under O.24, Rule 16.
Although O.24, Rule 16 was introduced into the Grand Court Rules in 2003, there are no reported cases in which the Grand Court had ordered a deposition under the Rule. When considering an interim injunction pending the appeal, Quin J. stated that he considered the rule "foreign to all our well-established and well recognised rules governing discovery" and that it could be described "as an unwanted and unloved orphan that has received little or no use since its introduction"([2009 CILR 353], Quin J).
This critical approach to O.24, r.16 was subsequently approved in another ruling in Phoenix by Foster J. on a separate application by the Defendant in which it sought a deposition under O.24, Rule 16 of the Plaintiff's main witness [2009 CILR Note 18]. Foster J. held that O.24, Rule 16 was a very exceptional procedure and that it should be used only in exceptional and unusual circumstances. He further held that other discovery processes could have been used to obtain the information which the Defendant stated it wanted to obtain by deposition. The Defendant's summons was dismissed.
The English and Australian authorities were relied upon by Foster J. to reject the application. The application was heard some 7 weeks before the listing of a 4 week trial. His Lordship considered this too late and too much of an interference with trial preparation citing Allstate and Benfield Holding v. Richardson [2007] EWHC 171.
The practical effect of these two judgments is that it should be considered very rare for parties to Cayman litigation to be subject to deposition process under domestic civil procedure. O.24, Rule 16 should only be considered in circumstances where oral discovery can be shown to be necessary for the fair trial of the action and where other discovery processes such as documentary discovery or interrogatories are inadequate. Furthermore, any such application ought to be precisely limited in scope and made sufficiently in advance of any trial so as to avoid any allegation of distraction from trial preparation.
Conclusion
The Phoenix litigation has provided valuable guidance on the availability of depositions in aid of Cayman litigation. The practical effect is that it may be easier to obtain depositions of witnesses resident in foreign jurisdictions using the procedures of those jurisdictions than under Cayman law provided it can be shown that the taking of such foreign depositions will not constitute oppressive or abusive conduct in the context of the trial of the Cayman action. While this result may seem odd as a matter of initial impression, it is an indirect effect of the role of comity in international litigation. As the decision of the House of Lords in the South Carolina acknowledged, foreign legal systems may offer litigants opportunities to obtain evidence by means which are not available in the domestic legal system, but absent oppression such the domestic court will not step in to prevent the foreign process.
The judgments also indicate the importance of considering specific principles of Cayman law, particularly Cayman civil procedure, when applying principles derived from judgments in other common law jurisdictions.
A party seeking assistance under s.1782 to seek depositions of future witnesses in aid of Cayman litigation will still have to be ready to face the challenge of an anti-suit injunction in Cayman. The judgments in Phoenix indicated that the Court considered carefully the reasons given for the depositions in the specific context of the procedural history of the litigation. In other circumstances the Grand Court may be persuaded to intervene in order to protect the integrity of the domestic trial process.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
