In this issue, Diarmad Murray from Cayman Islands
firm Walkers, reviews the methods by which foreign courts can gather
evidence in the Cayman Islands. The Cayman Islands are historically a
popular destination for the proceeds of fraud, making this an article
of broad interest.
In our next issue, which is out at the end of January
2007, I, as the UK member of the AFN, will examine the implications of
the Fraud Act. Largely criminal in focus, it also affects civil litigation
and will be of great interest to organisations with a UK presence or
business interests there.
This is our last issue for 2006. It's been a very
successful six months for the AFN; we have seen great co-operation between
members leading to successful outcomes in jurisdictions throughout the
world.
I would like to take this opportunity to thank all our members and readers
for their support and wish you a happy holiday season.
Previous issues of the AFN newsletter are available
on the Anti-Fraud Network's website www.antifraudnetwork.com.
The newsletters include insights into fraud issues in different parts
of the world. They are a useful resource for anyone faced with fraud-related
issues.
Nick Burkill
Gathering Evidence
in the Cayman Islands to Support Proceedings Elsewhere
Gathering evidence in the Cayman Islands is governed
by the Evidence (Proceedings in Other Jurisdictions) (Cayman Islands)
Order 1978 (SI 1978/1890) (the 1978 Order). The 1978 Order extended to
the Cayman Islands the provisions of the Evidence (Proceedings in Other
Jurisdictions) Act 1975, a United Kingdom statute with modifications.
The 1978 Order makes provisions for requests for obtaining
evidence from foreign courts entertaining civil proceedings. The question
whether proceedings are a civil or commercial matter depends on the classification
of those proceedings according to the law of the requesting court and
the law of the court to which the request was made. In this case, Cayman
law.
The 1978 Order sets out, not exhaustively, some of
the things the court may order to be done to give effect to a request
from a foreign court for obtaining evidence. These are:
- the examination of witnesses, either orally or
in writing;
- the production of documents;
- inspection, photographing, preservation, custody
or detention of
any property;
- taking of samples of any property and the carrying
out of any experiments on or with any property or
- a medical examination of any person including
taking and testing samples of blood.
The power to require steps to be taken is limited
to those steps "which can be required to be taken by way of obtaining
evidence for the purposes of civil proceedings in the court making the
order." This prohibits the court from, inter alia, ordering
pre-trial production of documents to aid potential foreign proceedings.
Mr Justice Anthony Smellie QC (as he then was) summarised:
"Put in general terms, this court has a duty
to assist the foreign court to the extent that it is proper to do so
under local law... Full faith and credit must be given to the request
of the foreign court just as full faith and credit would be given to
a foreign judgment."
However, effect will not be given to a letter of
request whose function is shown to be merely exploratory or investigatory.
The 1978 Order is not intended to empower the court to assist fishing
for evidence.
Document Disclosure
The 1978 Order prevents the court from ordering a
party to give a general disclosure statement listing relevant documents
which were or are in his possession, custody or control.
"Particular" documents must be specified
in the order being made by the requested court. Where documents are sought,
the classes of documents must be clearly defined and the actual, "particular" documents
specified. It must also be shown that there is good reason to believe
that the documents actually exist. However, the standard of particularity
to be required in any given case will be considered in the context of
the circumstances of the case and the nature of the documents required.
Orders for the production or deposition of information
which is confidential will be regulated by the Confidential Relationships
(Preservation) Law, and the persons subject to the order may need to
seek directions regarding disclosure from the court. If the person would
be exempted from providing evidence under the laws of the requesting
court's territory, he is similarly exempt in the Cayman Islands.
The procedure for applying for an order pursuant to
a letter of request is governed by Order 70 of the Grand Court Rules.
The application may be ex parte, and must be supported by affidavit
evidence exhibiting the letter of request.
Norwich Pharmacal Relief Against a Person Domiciled
in the Cayman Islands
A Norwich Pharmacal order can be ordered by the court
against third parties involved in wrongdoing. The intention is to ascertain
the identity and address of the primary wrongdoer.
On an application against a third party to disclose
the identity of a wrongdoer, the court must be satisfied that:
- the order will not grant disclosure against a person
who is not a party to the action but who could be called as a witness
in the action;
- the wrongdoer has been involved in or facilitated
the wrongdoing; and
- the interests of justice favour the making of
the order.
There does not have to be a definite intention to
bring legal proceedings in the Cayman Islands. However, it would presumably
be an abuse of the court's process to issue a summons in Cayman for Norwich
Pharmacal relief for the sole purpose of fishing for "pre-trial" evidence
for proceedings in another jurisdiction.
Usually if a Norwich Pharmacal order is made, the
plaintiff is forbidden to use or rely on the disclosure for legal proceedings
without the permission of the court. The exception is in the current
action or in bringing civil proceedings against an individual identified
as the source of the documents coming into the possession of the defendant
An application may be made by way of Originating Summons.
Norwich Pharmacal relief may be the sole relief sought or ancillary relief.
The order may be granted under an interim application, normally with
notice but, in exceptional circumstances, without. The plaintiff should
clearly identify the wrongdoing and identify the purposes for which disclosure
will be used. Ordinarily the Applicant will be ordered to pay the costs
of the party making the disclosure, including the costs of reasonably
opposing the application.
Mareva Injunctions
In the event that an injunction was sought from the
Grand Court, substantive proceedings would need to be commenced, or an
undertaking given that they will be commenced. Within those proceedings,
injunctive relief may be sought seeking to either freeze assets in the
jurisdiction and/or require parties to provide information by way of
disclosure.
If proceeding by Mareva injunction, the court must
be satisfied that:
- there is a good arguable case again the defendant;
- assets belonging to the defendant are within the
court's
jurisdiction; and
- there is a real risk that unless the injunction
is granted, judgment
will go unsatisfied.
The affidavit(s) providing this evidence must also
make full and frank disclosure of all matters, good or bad, that the
court should consider in making any order.
The initial application to the court will likely be
on an ex parte basis and, once the order has been made and served,
the defendant may apply to the court for its discharge. The order will
require the recipient to provide an affidavit disclosing assets. The
defendant can then challenge the order or seek payment of living expenses,
legal costs and other reasonable expenses.
At the same time as applying for the disclosure order,
an order that the respondent file an affidavit verifying the information
required should also be filed. There should also be an order that the
respondent bank or financial institution not communicate the existence
of the order to its customer or client.
Three practical issues arise on applications of this
nature. One is the provision of an undertaking in damages in the event
that the plaintiff was not entitled to an injunction or disclosure order.
The second is security for costs in the event that the plaintiff is resident
outside Cayman. The third is the question of confidentiality.
Confidentiality
The disclosure of confidential information is governed
by the Confidential Relationships (Preservation) Law (1995 Revision)
(CRPL).
The CRPL was enacted with a view to protecting business
activities by defining what constitutes confidential information, the
circumstances in which such information can lawfully be disclosed and
prescribing penalties for unlawfully disclosing confidential information.
The CRPL makes it a criminal offence to "divulge" or "attempt,
offer or threaten to divulge" confidential information. The term "confidential
information" is very widely defined and essentially includes all
information.
There are several exceptions. The CRPL does not apply
to the seeking, divulging or obtaining of confidential information if
information is given to a Court Tribunal or other relevant authority,
whether within or outside the Cayman Islands, "and" directions
have been obtained from the Grand Court of the Cayman Islands authorising
such disclosure.
The applicant must state the circumstances in which
the evidence is to be given, identifying the principal of the information
and the basis of the confidential relationship, the nature of the evidence
and an explanation as to why it constitutes confidential information,
and the grounds on which the principal objects to the proposed disclosure.
The application is heard by a Judge sitting alone
and in camera. In making any determination the Judge will consider the
interests of justice (in a criminal case) and public policy, any offer
of compensation or indemnity, and whether an order would operate as a
denial of the rights of any person in the enforcement of a just claim.
Accordingly, in circumstances where, for example
Mareva relief and related disclosure or Norwich Pharmaceutical relief
is ordered, it will be necessary for a third party to either obtain consent
of the principal concerned or, failing that, make a Section 4 application
to the court seeking an order from the Grand Court that the disclosure
be made.
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Diarmad Murray worked in
the Litigation Department at a major firm in Glasgow on a wide
variety of general commercial litigation before moving to first
the London and then the Oman office of a large commercial firm.
Whilst working there Diarmad was involved in banking, construction
and insurance litigation. Diarmad joined Walkers' Litigation Department
in 1994 and became a partner in 2000. He continues to specialise
in banking and commercial fraud litigation, asset tracing and general
commercial litigation.
Contact Details:
T: +1 345 949 0100
E: diarmad.murray@walkersglobal.com |
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The Anti-Fraud Network
The Anti-Fraud Network is a network of lawyers who specialise in the pursuit of claims arising out of the theft or other dishonest appropriation of assets, corruption, misuse of confidential information or similar breaches of duty. Recovering the proceeds of fraud and corruption is one of the truly global problems facing organisations today. Proceeds rarely stay in the country where they have been stolen. For organisations to recover stolen or corrupt assets they need access to lawyers specialising in their recovery across the world.
News and Events
London held a number of fraud conferences in September, including the 2006 Fraud World conference at which AFN member Nick Burkill chaired a discussion on ‘Anti-Money Laundering, Legal and Regulatory Issues.’ The discussion included consideration of the UK’s Fraud Bill, expected to come into law shortly. Recipients of the AFN newsletter who wished to attend were eligible for a discount from conference organisers IIR if they applied through the AFN.
Future conferences in London on fraud issues include the IQPC conference on Regulatory and Internal Investigations due to take place on 27 and 28 November. AFN member Nick Burkill will be speaking and taking part in a Q&A panel. Email us if you wish to receive details of the IQPC conference.
Click here for a list of upcoming events
AFN member Jerry Carter recently appeared in Money Media, talking about his practice on the Isle of Man and the Anti-Fraud Network. Click here to read the article in full.
If you would like to draw attention to fraud related issues, developments in the field, or key events of interest to anti-fraud professionals, please let us know at info@antifraudnetwork.com. We welcome contributions and articles from all jurisdictions.
Additional Resources
The AFN site now includes additional articles and items of interested from our worldwide members. Review available articles. If you would like to contribute to this section or to the newsletter, please contact us.
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