Jersey Unreported Judgments

[2006]JCA102

COURT OF APPEAL

14^th July 2006 

Before     :

The Hon Michael Beloff., Q.C., President; Sir John Nutting, Bt., Q.C., and; J. W. McNeill, Esq., Q.C.

 

Appeal by the second defendant against the decision by the Bailiff sitting as a single judge to refuse leave to appeal against a decision by the Deputy Bailiff on 27^th April, 2006 where he granted an injunction preventing the second defendant from pursuing a 1782 Application in the New York Courts.

Advocate M. H. Temple for the Appellants (First & Second Defendants).

Advocate S. J. Young for the Plaintiff.

Advocate P. D. James for the Fifth and Sixth Defendants.

judgment

the PRESIDENT:

INTRODUCTION

1.        By notice of appeal dated 22^nd June 2006, John Koonmen the Second Defendant applies for leave to appeal a judgment of the Deputy Bailiff made at the conclusion of a hearing inter partes on 27^th April 2006, granting the Plaintiff's application for an injunction to restrain the Second Defendant from (to paraphrase).

"(1)      proceeding with or seeking to enforce an application brought by him before the U.S. District Court (Southern District of New York) pursuant to 28 U.S.C. Section 1782 of the U.S. Federal Code by which it is sought against Linda and Joel Silverman, residents of New York (a) to produce and permit inspection of certain documents listed and referred to in the application on or about 22 April 2006 and (b) to testify at the taking of a deposition in connection with the Application on or about 8 May 2006, or continuing any further Application for any similar order, and ordering of the Second Defendant immediately to apply to the District Court to discontinue the application; and

(2)       to set aside the orders required the Silvermans to do such acts."

THE PLAINTIFF'S CLAIMS

2.        The factual and legal basis of the Plaintiff's claims are lucidly set out in [2006] JCA 094 in the Judgment delivered earlier today paragraphs 3-23.  What follows is a summary sufficient to contextualise the issues before us.

3.        The Plaintiff, United Capital Corporation, is a Gibraltar company, which brings its proceedings qua assignee of Mr. Silverman of New York of certain claims.  In essence, Mr. Silverman alleges that in 1996 in New York Mr John Bender, the First Defendant, made an oral agreement with him ("the 1996 Agreement") by which the First Defendant would, in perpetuity, hold 25% of fees he generated as the trading manager of a hedge fund formed in 1996 and wound up in 2000 ("the Amber Fund") for Mr. Silverman.  Mr. Silverman says that the First Defendant breached this agreement by not paying him the sums due, and the Plaintiff is seeking to recover such sums by way of proprietary and personal remedies.

4.        The First Defendant denies the existence of the 1996 agreement, but admits that he did not object to Mr. Silverman being paid ex gratia about USD1.7 million of fees generated by the First Defendant as trading manager of the Amber Fund.

5.        In 1999 Mr Koonmen, the Second Defendant, became the co-trading manager of the Amber Fund and as such he also generated fees.  Mr. Silverman claims that the Second Defendant was aware of and bound by the 1996 agreement and that the Second Defendant also owes him 25% of the fees generated.  The Second Defendant equally denies the existence of the 1996 agreement or accordingly, that he is indebted to the Plaintiff.

THE PRESENT STATE OF PROCEEDINGS

6.        On 5^th August 2005 the Plaintiff's Amended Order of Justice was signed, a freezing order was made over approximately USD100 million of the Defendants' assets [which remain frozen], and leave was given to the Plaintiff to serve proceedings out of the jurisdiction of Jersey on, inter alios, the First and Second Defendant.  

7.        The First, Second, Fourth and Fifth Defendants disputed the service out and applied to set it aside.  On 17^th & 20^th October 2005 the Deputy Bailiff heard that application.  On 16^th January 2006 he gave judgment in which he found that service out was properly made and that Jersey was the appropriate forum in which proceedings should be entertained ("the forum decision").  On the same day he heard the Defendants' application for the freezing injunction to be discharged.  On 10^th March 2006 he dismissed that application to lift the freezing injunction ("the injunction decision").

8.        Both judgments of 16^th January 2006 and 10^th March 2006 were appealed to the Court of Appeal (Smith, Jones and McNeill JJA).  After a hearing on 18^th May 2006, judgment was reserved, but has been delivered by McNeill JA on behalf of the Court earlier today.   The Court of Appeal has upheld both judgments [2006] JCA 094.

9.        Since the Deputy Bailiff's decisions were handed down, the First and Second Defendants have found a potential source for fresh evidence said to be directly relevant to the strength of the Plaintiff's substantive claim i.e. the records of Mr. Silverman's divorce battle in the New York courts (in about 1998 - 2000) in which he made claims under oath and otherwise about the payments to him by the First Defendant (and which would tend to show if he expected to be paid more and, if so, what).  Such evidence, it is asserted, is directly relevant to the existence of the 1996 agreement at the core of the Plaintiff's claim, but whether it is a pot of gold or a container of baser metal has not yet been ascertained.

10.      On 3^rd March 2006 the Second Defendant issued section 1782 proceedings seeking in broad terms documents in any way concerned with Mr Silverman's claim in respect of the Amber fees and depositions from, inter alios the Silvermans. 

11.      On 9^th April 2006 US Federal Judge Mukasey made orders authorising the issuance of subpoenas for production of documents and taking of depositions.  On 12^th April 2006 the subpoenas were made and they have been served.

12.      On 24^th April 2006 the Plaintiff issued an application for the injunction to restrain the Second Defendant for pursuing the Section 1782 proceedings.  On 27^th April 2006, as noted above, the Deputy Bailiff granted the injunction applied for [see paragraph 1 above] and on 4^th May 2006 gave his reasons.  On 2^nd May 2006 the Bailiff sitting as a single Judge of the Court of Appeal granted a stay of paragraph (2) of the order until further order, but otherwise refused to grant leave to appeal.

THE DEPUTY BAILIFF'S JUDGMENT

13.      The Deputy Bailiff proceeded on the basis that the Royal Court may grant an injunction when:

(i)        one party to an action can show that the other party has either invaded, or threatens to invade, a legal or equitable right of the former; or

(ii)       one party to an action has behaved, or threatens to behave in a manner which is unconscionable in the sense that it is oppressive, or vexatious or interferes with the due process of the court: South Carolina Co v Assurantie Maatachappij "De Zeven Provincien NV [1987] 1 AC 24 ("South Carolina") per Lord Brandon at 40 - 41.

14.      South Carolina concerned an application to injunct a party which had brought section 1782 proceedings.  The House of Lords held that an English Court will not restrain a litigant from continuing proceedings commenced in a foreign country for the purpose of obtaining pre-trial discovery of documents against a non-party in the country where such discovery is sought for the purpose of the English proceedings with the important proviso that the continuance of such proceedings did not fall within (materially) the second of Lord Brandon's two categories.  The principle, but subject to the same proviso, extends also to depositions: Nokia Corporation v Interdigital Corporation [2004] EWHC 2920, Pumphrey J.

15.      While South Carolina is not binding in this jurisdiction, this principle (and proviso) has been applied by the Royal Court in American Endeavour v Trueger [1997] JLR 18.  The Deputy Bailiff, pointed out the attractions of the more robust approach of Griffiths LJ in the Court of Appeal in South Carolina (i.e. that "as a matter of principle the Court must have an inherent jurisdiction to make any necessary order to ensure that litigation is conducted with accordance with its own procedures" at p.358.)  I also see the force of the minority view expressed by Lord Mackay and Lord Goff in the House of Lords that there is no reason to fetter the Court's power to grant an injunction in any appropriate circumstance to achieve justice when no such fetter expressly encumbers the jurisdiction which is in Jersey an aspect of the common law and not as in England statutory Walter v Bingham [1985-1986] JLR 439.  As Lord Goff said in South Carolina:

"Restraint of proceedings in a foreign forum simply provides one example of the circumstances in which, in the interest of justice, the power to grant an injunction may be exercised." [p.44].

16.      But, as will appear, the outcome of this application does not depend upon resolution of this issue as to the reach of the injunction jurisdiction in Jersey on which we have not had the benefit of submissions from the Bar.

17.      The Second Defendant contended that matters derived from documents or depositions could assist him in showing in relation to both the forum and the injunction decision that the Royal Court was wrong to conclude that the Plaintiff had shown it had a good arguable case - a sine qua non of his success before the Deputy Bailiff on both issues.  See [2006[JCA094 para 33 and para 90.

18.      The Deputy Bailiff said that he had "no hesitation in concluding that Mr Koonmen's "conduct in this case is unconscionable and that an injunction should be granted", (para 15) expressing a concern that the Second Defendant's section 1782 proceedings would interfere with the hearing then set down for hearing in the Court of Appeal on 17^th/18^th May 2006 or, as he put it with "the due process of the Court" (para 15(v) and was calculated to cause delay).  He concluded "In my judgment the importance of (Mr Koonmen) having as much information as possible before the Court of Appeal is greatly outweighed by the requirements of the proper and expeditious dispatch of business of the Jersey Courts" (ditto)

19.      As to the discovery sought in the Section 1782 proceedings the Deputy Bailiff noted too that if (as has now occurred) the Court of Appeal confirmed that Jersey is the proper forum for resolution of the dispute, discovery of Silverman documents will be inevitable and that it would be "oppressive and an interference with the process of this Court for a party to insist on accelerating discovery in this manner" (para 15 (vi)).  While there was force in Mr Temple's submission that this observation might be construed as inconsistent with South Carolina, what may not be unconscionable in England may reasonably be thought to be so in Jersey.

20.      As to depositions the Deputy Bailiff noted:

"The structure of litigation within this jurisdiction is that a witness gives evidence once and he gives this at trial rather than at an earlier stage.  I consider it to be an interference with the due process of the Court to force a witness additionally to give evidence about the case, and to be cross examined about it at a much earlier stage by way of deposition (para 15)(viii)."

On this aspect Mr Temple's submissions seemed to me to be plainly inconsistent with authority.  

21.      In Omega Group Holdings v Kozeny [2002] CLC 137 it was held unconscionable for witnesses who were going to give evidence at trial to be deposed in the US and then cross examined again in England.  Peter Gross QC (now Mr Justice Gross) noting that the decision in South Carolina was confined to documentary disclosure continued:

"As it seems to me, in the case of such witnesses and as a matter of practical justice and good sense, the hybrid procedure produces the worst of all worlds:

(1)       If the relevant witnesses (i) give English witness statements, (ii) are then deposed in the US, (iii) thereafter attend to be cross-examined in the English trial, they will have been subjected to unwarranted double cross-examination and the trial will suffer from unnecessary duplication.  I am not persuaded to reach a contrary view by the fact that the witnesses are or may be familiar with US deposition procedures in the context of US litigation.  In any event, I accept Mr Mortimore's submission in this regard that, here, oppression must be judged by English standards.

(2)       Conversely, accepting as I do that there is a real, if unquantifiable, risk that a witness once deposed in the US may be discouraged from attending the trial in England in order to be cross-examined a second time, the s.1782 applications pose a risk of interference with the trial itself."

It is the first of those two reasons which is here germane. 

In the present case the Plaintiff's case without Mr and Mrs Silverman's evidence would indeed be Hamlet without the Prince and without Ophelia.

ANALYSIS

22.      In order to obtain leave to appeal from this Court, it is well established a party must show where the Royal Curt has the relevant principles and relevant facts well in mind that there is a "clear case of something having gone wrong".  Glazebrook v. Housing Committee [2002] JLR 43.

23.      The decision against which permission to appeal is sought, is as the Deputy Bailiff himself observed "a matter of judicial discretion having regard to the particular facts of the case" (paragraph 14).     

24.      The two leading cases in this area in England are the Abdin Daver [1984] 1 AC 398 ("Abdin Daver") and Hadmor Productions Limited v Hamilton [1983] 1 AC 191 ("Hadmor").  In The Abdin Daver Lord Brandon held that the appellate court could interfere in the exercise by a judge of his discretion in three cases only i.e. where:

"(1)     the judge has misdirected himself with regard to the principles in accordance with which his discretion had to be exercised;

(2)                         if he had taken into account matters which he ought not to have done, or had failed to take into account matters which he ought to had done;

(3)                         when his decision was plainly wrong. "    (p.420)

25.      In Hadmor Lord Diplock described the correct approach by an Appellate Court on an appeal against a discretionary decision as follows:

"An interlocutory injunction is a discretionary relief and the discretion whether or not to grant it is vested in the High Court by whom the application for it is heard.  Upon an appeal from the judge's grant or refusal of an interlocutory injunction the function of an appellate court, whether it be the Court of Appeal or your Lordships' House, is not to exercise an independent discretion of its own.  It must defer to the judge's exercise of his discretion and must not interfere with it merely upon the ground that the members of the appellate court would have exercised the discretion differently.  The function of the appellate court is initially one of review only.  It may set aside the judge's exercise of his discretion on the ground that it was based upon a misunderstanding of the law or of the evidence before him or upon an inference that particular facts existed or did not exist, which, although it was one that might legitimately have been drawn upon the evidence that was before the judge, can be demonstrated to be wrong by further evidence  has become available by the time of the appeal; or upon the ground that there has been a change of circumstances after the judge made his order that would have justified his acceding to an application to vary it.  Since reasons given by judges for granting or refusing interlocutory injunctions may sometimes be sketchy, there may also be occasional cases where even though no erroneous assumption of law or fact can be identified the judge's decision to grant or refuse the injunction is so aberrant that it must be set aside upon the ground that no reasonable judge regardful of his duty to act judicially could have reached it. ... It is only if and after the appellate court has reached the conclusion that the judge's exercise of his discretion must be set aside for one or other of these reasons, that it becomes entitled to exercise an original discretion of its own." [220]

26.      In Rahman v Chase Bank [1984] JLR 127, this Court of Appeal adopted these statements of principle which accordingly represent the law of Jersey.

27.      In my judgment it cannot be said that the Judge committed any of the errors identified as grounds for appeal in the Abdin Daver or that any of the circumstances identified in Hadmor warrants this Court in interfering with his decision.  There is a change of circumstance which has occurred since his decision in the sense that the May hearing has come in the Court of Appeal and gone.  But even if that were the kind of change which Lord Diplock had in mind, it would only be a ground on which we could, not that we necessarily should, still less than we must, set the injunction aside.  It is better, for reasons I develop later, that the Deputy Bailiff take that decision.

28.      I repeat that the Deputy Bailiff directed himself by reference to principles conventionally applied in English Courts and which are certainly relevant, even if (see paragraph 13 above), more restrictive than those which Jersey law may recognise, but which if anything, favours the Second Defendant.  He took into account all relevant matters and ignored none.  His decision far from being plainly wrong, is, in my view, plainly right

29.      It has been pertinently observed in an English case:

           "the jurisdiction to interfere is based on the need to show the application is abusive in its context in the English proceedings."  Nokia Corporation v Interdigital [2004] EWHC 2920, paragraph 26 of the judgment. 

30.      Mutatis mutandis context is equally important where the jurisdiction to interfere is deployed in Jersey.

31.      A judge hearing applications such as those here under consideration is likely to be better equipped to evaluate the procedural context than an appellate court, particularly in a case where he (or she) has acquired a detailed knowledge of the case and its procedural history, such as was here enjoyed by the Deputy Bailiff.  He has been closely involved in a series of interlocutory hearings over the course of the last year and is familiar with the parties involved, the issues and the evidence.  [There have been, we are told, in excess of eleven hearings, including three full court days.] He was (and is) well able to gauge what would or would not be abusive or oppressive in this context.

32.      The Court of Appeal conventionally respects a case management decision of the Royal Court unless the judgment was plainly flawed, Mayo Associates SA et au v Cantrade Private Bank Switzerland (CI) Limited et au CA: (Carlisle, Gloster and Beloff JJA) September 26^th, 1997 unreported, following Ashmore v Lloyds [1992] 1 WLR 446 at page 448.  The decision appealed has affinity to such a decision.

33.      Insofar as the argument for the Second Defendant was based on the potential utility of the material in the appeal to this Court on the forum and injunction decisions, it has been overtaken by events.  The Court of Appeal has heard the appeals and delivered judgment.  The horse has bolted.  It is too late to shut the stable door!

34.      Insofar as the argument for the Second Defendant was based on the utility of the material, in the substantive proceedings, now that Jersey's jurisdiction has been confirmed, we draw attention to two significant passages in the Deputy Bailiff's judgment.

(i)        "If following discovery in Jersey, Mr Koonmen believes that there are further documents in the possession of Mr or Mrs Silverman which have not been discovered, I would certainly be willing to give sympathetic consideration at that stage to a variation of the injunction so as to allow him to reactivate the proceedings in the District Court with a view to obtaining discovery of such additional material"   (paragraph 15 (viii)."

(ii)       Should it become clear at a subsequent stage that Mrs Silverman is not going to give evidence, I would give further consideration to whether Mr Koonmen should be entitled to depose her on the basis that this would not be an interference with the due process of this court" (para 15 (viii)."

Furthermore, UCC has given an undertaking that Mr. Silverman will , if necessary be joined as a plaintiff to the proceedings, and Mrs Silverman called to give evidence and in letters of 3^rd and 12^th July has offered early disclosure of the documents [referred to in the s.1782 application] where within the Silverman's' possession, custody or content (offered early disclosure.)

35.      In my view the Deputy Bailiff will be in a position to protect the legitimate interests of the Second Defendant pursuant to any appropriate applications made to him at any appropriate time, in circumstances, it maybe, of a forthcoming and timely directions hearing, not least in the light of the Plaintiffs undertaking and offer to which I have just referred.  It is not for us at this juncture to gaze into a crystal ball, or to pre-empt the Deputy Bailiff's management of the proceedings.

36.      Mr Temple made by way of footnote a discrete point about the reach of the injunction and its reference to "any similar order", and disclaimed any intention on the part of his clients to seek the same.  In the circumstances that part of the injunction may not be required: but if belt is not always needed to complement braces, it does no harm. If the injunction as a whole is ever discharged, this part will be discharged with it.  Until then it can, ex abundanti caueila, remain in place.

37.      For those reasons I would refuse leave to appeal.

Sir John Nutting QC "I agree".

 

James McNeill QC "I agree too".

Authorities

United Capital Corp -v- Bender and Ors [2006] JCA 094.

South Carolina Co v  Assurantie Maatachappij "De Zeven Provincien NV [1987] 1 AC 24.

Nokia Corporation v Interdigital Corporation [2004] EWHC 2920.

American Endeavour v Trueger [1997] JLR 18.

Walter v Bingham  [1985-1986] JLR 439.

In Omega Group Holdings v Kozeny [2002] CLC 137. 

Glazebrook v Housing Committee [2002] JLR 43.

Abdin Daver [1984] 1 AC 398.

Hadmor Productions Limited v Hamilton [1983] 1 AC 191.

Rahman v Chase Bank [1984] JLR 127.

Mayo Associates SA et au v Cantrade Private Bank Switzerland (CI) Limited et au CA: (Carlisle, Gloster and Beloff JJA) September 26^th, 1997 unreported.

Ashmore v Lloyds [1992] 1 WLR 446 at page 448.