CONTRIBUTOR
ARTICLE
To print this article, all you need is to be registered or login on Mondaq.com.

The Need for Utmost Secrecy.

In general it may be said that any concealed asset recovery operation must proceed on a secretive and fast-paced basis, in order to minimize the risk that further asset secretion activity might take place, which it undoubtedly will if the alleged fraudster learns that he is the subject of investigation.

While the traditional form of discovery is inter partes, or out in the open so to speak, the circumstances in which relief is sought against an apparent fraudster are such as to warrant ex-parte or secret discovery designed to locate hidden wealth with a view to freezing the same to frustrate any attempts to further hide it.

There comes a time in most complex concealed asset inquiries when it is imperative that the victim seek the assistance of the judicial process to "unlatch the banker's door" to see what is inside, is it were.

Availability of Pre-emptive Relief.

British Commonwealth jurisdictions are, in general, blessed with a far-reaching, expansive legal framework. Anglo-Saxon legal norms hold the promise of affording the victim of serious fraud powerful and intimidating preemptive relief. Ironically, many of these jurisdictions are well-travelled by the asset-sequestering fraudsman and his counsellors. The Bahamas, the Cayman Islands, the Turks & Caicos Islands, the Cook Islands, Fiji, Hong Kong and Bermuda represent a smattering of vital places where billions of dollars are held on either end or journal entry deposit.

The chief extraordinary mechanisms available in the Anglo-Saxon (or commonwealth) jurisdictions include Mareva Injunctions (freezing assets), Anton Piller orders (authorizing civil search and seizures of evidence), Mini-Anton Piller orders and Norwich Pharmacal / Bankers Trust document disclosure orders "wrapped-with-a-gag". The Mareva Injunction has been in relatively frequent use in the Commonwealth since the early 1970's. It and the Anton Piller order have been aptly described as the "nuclear weapons" of the law because of the power they give a Plaintiff to freeze the assets of a Defendant on an ex parte basis, and before the merits of the case have been decided, and to pre-emptively seize evidence at the home or office of the defendant. Accordingly, English courts impose very strict requirements on parties seeking such extraordinary relief – the victim must show a good and arguable case on the merits, and make full and frank disclosure of both the victim's case and anticipated defences, by way of affidavit. It is also essential to show urgency and a real and substantial risk that assets may be dissipated or moved offshore in the absence of the order.

These remedies can be devastatingly effective, they have been described as 'draconian' in nature.

As the Right Honourable Sir Harry Woolf indicated in his September 1991 forward to the book authored by Goldrein, Ians and Wilkinson, titled, Commercial Litigation: Pre-Emptive Remedies (Sweet & Maxwell):

"... These remedies [referring to the Mareva injunction and the Anton Piller order] are, and need to be, of a draconian nature. They override the basic rights of a citizen to an unprecedented extent. They can achieve justice for a Plaintiff where this would be impossible if they did not exist, but they can also result in serious injustice if inappropriately granted. There is public concern in relation to the hardship that preemptive remedies can cause . . . the Courts strive to strike the correct balance between the interests of Plaintiffs and Defendants. As frequently, the applications for orders are made, in the first, without the Defendant being informed, the Courts are rightly insisting on the highest standards of compliance of the rules by Plaintiffs and their legal advisors. Often, the task of the practitioners is made even more difficult than it would otherwise be because of the urgency with which the applications have to be made."

Inter Partes and Ex-parte Discovery.

The distinction between inter partes and ex-parte discovery is, as the description suggests, one which takes place with the knowledge of, or acquiescence or court-ordered acquiescence of, the opposing party. The other takes place without the knowledge of the opposing party. Ex-parte discovery is rare, although that is not to say that an application for ex-parte discovery is difficult to mount, it is simply that inter partes discovery is more common, indeed it is a tool frequently used in everyday commercial litigation.

Inter partes discovery is generally ordered to assist in the advancement of one party's claim, or the diminishing of another's. The criteria for ordering discovery in an inter partes context is generally relevance. While different countries have enacted detailed rules regarding how and when discovery may be applied, it generally may be said that inter partes discovery will be ordered where it is relevant to the facts at issue between the parties. It is also a tool to either enable one party to advance his claim or to harm that of his opponent's. While it is a powerful tool, its main function is in crystallizing the issues between the parties and ensuring that all of the facts which should be made available to either party before the actual trial of the action, are made available in the interests of ensuring the most comprehensive trial of the issues as is possible in the circumstances. It is conducted within the context of knowledge by both parties, in the sense that the party providing discovery is aware of what information he has discovered (at least this should be the case) and is able to consider the likely effect that the possession of that information by the other party will have.

Ex-parte discovery, on the other hand, is conducted without the knowledge of the opposing party. The advantage in obtaining ex-parte discovery is the access to information which the other party is not yet aware has been disclosed. It thus may provide profound strategic and tactical advantages. It is usually granted in circumstances where knowledge that such discovery is being conducted by the opposing party could lead to the opposing party to take evasive action, which in turn could have a severely detrimental effect on the chances of the party seeking discovery in satisfying its claim.

A court has jurisdiction in common law legal systems, to grant disclosure orders of the ex-parte category, based on common law and equitable principles. The jurisdiction exists separate and apart from the rules for discovery prescribed by the applicable statutory rules of court procedure, or civil procedure rules of the jurisdiction concerned.

The jurisdiction of the court to make ex-parte disclosure orders is founded on the former chancery procedure known as the equitable "bill of discovery" and can be traced back to at least 1785, when such discovery orders were made in the case of Moodalay v Morton (1785) 1 Bor. C.C. 469. The jurisdiction does not originate from statutory rules and regulations but from equitable principles.

In 1973, the House of Lords recognised and resurrected the "bill of discovery" procedure in the case of Norwich Pharmacal Co and Others v. Customs & Excise Commissioners [1974] AC 133. The purpose behind the old "bill of discovery," or the newly resurrected one as espoused in the case of Norwich Pharmacal, is that a party could file a bill of discovery before he commenced his action when he required that discovery in order to ascertain what form of action to bring, or in order to ascertain the proper person against whom to bring the action.

In modern-day practice, the availability of what English lawyers have come to refer to as Norwich Pharmacal relief, or pre-action discovery, is dependent upon a duty to assist a person wronged. The duty operates in circumstances where a party has become mixed-up in the tortious acts of another so as to facilitate their wrongdoing (even innocently). While the 'facilitator' may incur no personal liability, he nonetheless becomes subject to a duty to assist the person who has been wronged by giving him full information and disclosing the identity of the wrongdoers. This has led to law suits for information, and not for damages.

In more recent times, the English High Court has reconsidered the jurisdiction to order discovery against a non-party, drawing the previous authorities together and recognising that there are two different, but overlapping, types of circumstances which give rise to the jurisdiction. In the case of re Murphy's Settlements - Murphy v. Murphy [1998] 3 All ER 1, Neuberger J., at 9 A-B, had the following to say:

"The first type of case is where the defendant has, albeit quite possibly wholly innocently, become 'mixed up in' the wrongdoing of the proposed defendant and the plaintiff has a claim in respect of that wrongdoing ... I shall call this 'the discovery jurisdiction'. Secondly, there is what I shall call 'the equitable jurisdiction' considered and applied ... in A v. C ... also referred to in Bankers Trust Co v. Shapira." 1

What then are the requirements to be satisfied before Norwich Pharmacal jurisdiction can be exercised? Firstly, a wrong must have been committed. In this regard it is worth noting, however, that it is not necessary to "pigeon-hole" the wrong as a "cause of action," as this may and often does result in justice being denied where a wrong visited does not fall within an established category. The plaintiff must be required to show, however, that a strong prima facie case exists that a wrong has been committed.

Secondly, the person from whom the relief is sought must be mixed-up in the wrongdoing. The expression "mixed-up" does not impute any impropriety to the Norwich Pharmacal defendant.2 Norwich Pharmacal discovery will not, however, lie against a "mere witness." The reasoning behind such rule is that a witness' testimony would in any event be compellable at the trial of the action, and it would thus be unnecessary to compel a witness to speak twice. The "mere witness" rule does not apply in cases where the identity of the alleged wrongdoer is not known, for in such a case there will be no trial unless the order for discovery is made.3

In addition to the above, a number of guidelines can be deduced from the line of authority following Norwich Pharmacal. The duty is to assist the person who has been wronged by giving them full information and disclosing the identity of wrongdoers. While there has been a tendency by some members of the judiciary to restrict Norwich Pharmacal relief by limiting its application to the provision of the identity of the wrongdoer only, authority weighs strongly against such a narrow interpretation.4 Probably the greatest example of this is provided by the case of P v. T Ltd (referred to above) in which the plaintiff was entitled to obtain information and documents necessary for the bringing of an action in libel or malicious falsehood. He was not confined to obtaining identity information only.

Absence of physical harm or financial loss does not preclude the granting of Norwich Pharmacal relief. In some cases, such discovery may be granted in order to facilitate the bringing of a claim to prevent some future wrongdoing from occurring, as opposed to providing reparation for some past wrongdoing. The Plaintiff in the case of Harrington v. Polytechnic of North London and Others, Queens Bench Division, 1984-H-1722, had not suffered any physical harm or financial loss. He was, however, prevented from exercising a right, namely the right to attend lectures. He was entitled to the relief in order to ascertain the names of the individuals for the purpose of serving them with restraining orders.

In addition, the plaintiff need not necessarily ultimately wish to pursue a cause of action for damages in order to obtain relief. The court will not, however, entertain applications which are mere "fishing expeditions." The plaintiff must show the real probability of the existence of a claim against someone, although not necessarily the probability of a claim being established at trial.

A court will take into account a number of factors before exercising its discretion in favour of either granting or refusing the relief sought. These factors include:

  • Whether the disclosure of the information sought would be in breach of some ethical or social value;

  • Whether any immunity attaches to the information sought to be disclosed, for example public interest or crown immunity;

  • Whether irreparable harm would be caused to either party if the order sought was granted; and

  • Whether the interests of justice would be served by the granting of the relief or whether the refusal of the relief would result in a denial of justice.

While these factors are not exclusive, they do provide a general guideline for the type of factors which are taken into account by a court in exercising its discretion.

The use of Norwich Pharmacal relief has proved an invaluable tool in many complex asset concealment cases. In view of the ex-parte nature of this type of discovery order, banks, airlines, travel agents, telephone companies, credit card service providers, securities dealers and all manner of other intermediaries can be compelled to provide information without disclosing the fact that such information is being sought to the person in respect of whom the information is pertinent. The Norwich Pharmacal / Bankers Trust disclosure order, as it is commonly referred to, is invaluable in any exercise which involves the tracing of misappropriated funds. Discovery provided under the "equitable jurisdiction" by a Bankers Trust type order is distinguished from general discovery, being limited to the discovery of information which a plaintiff can demonstrate has a real prospect of leading to the location or preservation of assets to which he is making a proprietary claim.

In practical terms, a Bankers Trust type order will allow a claimant, provided he satisfies the necessary pre-requisites, to obtain access to information which will enable him to trace stolen funds. Thus, a claimant could seek discovery from a bank in which a wrongdoer was known to have deposited funds, or maintained banking arrangements, obtaining access to information such as cash deposits and withdrawals; cheques drawn upon the account; routing instructions, and so on. Armed with such information, the claimant would be in a better position to draw a picture showing where the assets have gone, if indeed they have gone from that location, and where they have been routed to. Because of the danger of monies being further transferred, such orders are usually accompanied by sealing and gagging relief.

Sealing and gagging relief operates so as to preclude any disclosure of either the fact of the court-ordered investigation, or the information being disclosed, to the party in respect of whom the information is relevant. An English court has power to grant an order sealing the court's file and restraining all persons having notice of the disclosure order from disclosing or communicating the fact or nature of such order by virtue of its inherent powers to make any order necessary to enable it to act effectively. The court, by definition, must enjoy such powers in order to enforce its own rules of practice and to guard against any abuse of its process. The necessity for such orders springs from the risk that if the fraudster or any person connected with him were to discover the fact and the nature of the claimant's endeavours to locate and identify concealed assets, there would be a real risk that he would take further steps to put those assets beyond the claimant's reach.

A Norwich Pharmacal / Bankers Trust order may be sought against a bank where there are circumstances suggesting that money held on account in that particular bank belongs, in equity, to the plaintiff, and has been obtained inequitably. The plaintiff must, however, provide, inter alia, evidence of fraud sufficient to justify the order. The circumstances of each particular case will naturally dictate the requisite degree of fraud. In addition, the plaintiff may be required to give an undertaking in damages to the bank along with the universal undertaking that the documents disclosed will be used only for the purpose of tracing the funds in question. On the basis of the evidence supplied, the relevant court shall then consider whether the order so requested should be made and whether it can in fact make such an order, having regard, inter alia, to whether there exists some statutory prohibition to the making of such an order.

Above all, the interests of justice must warrant the making of the order and the balance of the public interest must lie in favour of its grant. The order enables the plaintiff to frame causes of action which otherwise would fail for lack of specificity. It enables the plaintiff to determine that his funds still exist, and the location and route of same. It comes to the aid of the innocent victim of fraud.

Pre-action Discovery (U.S.).

The concept of pre-action discovery in the United States is both recognised and well developed. Perhaps the most striking example of the breadth of pre-action discovery is provided by §1782 of Title 28 of the United States Code which provides for discovery in aid of foreign proceedings. This provision enables any 'interested' party who is about to institute, or has already commenced proceedings, in any foreign or international tribunal, to seek discovery, including depositions, from any person or entity either resident in, or who may be found within, the jurisdiction of a U.S. District Court. This discovery is available, notwithstanding the fact that the person or entity to whom it is directed is not a party to the contemplated or pending foreign proceeding, or the fact that such discovery might not be available to the party seeking it within the jurisdiction in which the primary proceedings are venued. §1782 has been held to refer to foreign criminal and administrative investigative proceedings as well as civil cases. At least one court has held that §1782 applies to foreign arbitral proceedings (as being encompassed by the language 'international tribunal' in the section).

Although the wording of §1782 is broad, the interpretation of the section has varied from circuit to circuit within the United States. The more limited interpretation of the section, is that it confers only a mechanism for discovery to applicants where similar types of document discovery would be provided in the foreign court in question. However, the broader view of the scope of §1782, which has been accepted by courts in the States of New York and Connecticut, for instance, is that the party opposing a §1782 petition bears the burden of establishing that the courts of the country in which the litigation is pending, forbid the seeking and obtaining of evidence in the way provided pursuant to §1782. Federal judicial circuits are divided as to whether §1782 contains a requirement of discoverability abroad of the evidence sought in the application under §1782.

Interestingly, §1782 discovery applications are brought ex parte – in that the rule does not require or contemplate the presence of the foreign counter-party to the applicant.

Switzerland

Although pre-trial discovery is unknown in Switzerland, there exists a residual power in a private party to conduct an inquiry in Switzerland through the means of asking pertinent questions relevant to a concealed asset recovery exercise in the context of serious fraud. In addition, through a relatively under-used provision in the Swiss Civil Code, it is possible to commence what is known as a Swiss mini-bankruptcy. In theory, to attach monies in a Swiss bank account, and to secure evidence tying the funds to the protagonist, one should consider involuntarily bankrupting the fraudster in an Anglo-Saxon jurisdiction and then, immediately thereafter, applying ex parte in Switzerland for the appointment of a Swiss bankruptcy trustee, who has reasonably expansive investigatory powers, in aid of the foreign bankruptcy. Theoretically, documents can be obtained and bank accounts frozen through this mechanism although it is complex and burdensome.

Under the Hague Convention on the Taking of Evidence Abroad in Civil and Commercial Matters, to which Switzerland is a signatory, information for a foreign action may be obtained by judicial assistance proceedings. Moreover, Switzerland grants assistance to pre-trial discovery proceedings of common law countries.

The most efficacious way of advancing a concealed asset inquiry in Switzerland is through the institution of local criminal proceedings with a local criminal magistrate. The victim of a fraud has standing to participate in such a proceeding.

The Anton Piller Order.

The Anton Piller order compels a Defendant to permit a Plaintiff, subject to certain conditions, to enter upon his premises and to remove evidence. The order is mandatory. It is granted ex parte, and it presents the Defendant with a fait accompli. He is at risk of being imprisoned or fined for contempt of court if he does not comply with the terms of the order. It is an exceptional remedy, and will only be granted if it can be established that there exists a grave danger that vital evidence will be destroyed or, as Lord Denning held in the case that established the remedy, Anton Piller KG v. Manufacturing Process Ltd [1976] Chancery 55:

"... [that] the papers would be burnt or lost or hidden, or taken beyond the jurisdiction, and so the ends of justice be defeated, and when the inspection would be of no real harm to the Defendant or his case."

An Anton Piller order permits the Plaintiff to seize illicit material, chattels, computerised records, the contents of filing cabinets and essential evidential documents in the possession of the Defendant. 5

Anglo-Saxon courts impose very strict and high standards on plaintiffs seeking an Anton Piller order. These orders have been described by some commentators as representing the nuclear bomb in Anglo-Saxon civil litigation. Indeed, there are five very specific and stringently upheld criteria which must be met.

  1. Firstly, one must establish a very strong prima facie case. This requirement stands in contrast with the less demanding standard required to obtain a Mareva injunction — namely, a showing that the Plaintiff has a good and arguable case.

  2. Secondly, there must be a showing that there exists a serious risk of damage to the Plaintiff's case, in the absence of the order.

  3. Thirdly, the materials filed with the Court must be sufficient to permit the Court to draw the inference that the Defendant has in his possession incriminating documents or relevant evidence.

  4. Fourthly, the Plaintiff must show that there exists a risk that the Defendant will dispose of or destroy evidence, in the absence of the order.

  5. Finally, there must be full and frank disclosure of all material facts, good and bad. In the absence of full disclosure, any Mareva injunction or Anton Piller order would be subject to attack and collapse.

The Mini-Anton [or Stand and Deliver] Order.

Given the high burden of proof and legal professional cost associated with securing an Anton Piller order, a more modest yet reasonably effective form of relief has been developed by the High Court in London. This alternative, more modest form of relief is known as a mini-Anton. It was developed in London in 1993, in part, as a consequence of the adverse reaction by the Court to the occasional outrageous abuse in the execution of an Anton Piller. Such abuses included forceable entry into a Defendant's premises in the deep of night. Such conduct is not countenanced by Anglo- Saxon courts. Naturally, this found expression in an increasing circumspection on the part of certain members of the English judiciary, as demonstrated by a reluctance to exercise the court's inherent discretion to grant Anton Piller relief, save in those cases where such relief is essential.

A Mini-Anton is also known as a Stand and Deliver order. The order provides that a Plaintiff is authorised to stand at the doorstep of the Defendant's premises and indicate to the Defendant that, by order of the Court, he is commanded to immediately deliver up certain specific papers, chattels or evidence. If the Defendant fails to comply, then he may be imprisoned for contempt. Such an order does not entitle the applicant to enter upon the premises of the Defendant in a blind foray in search of papers, as a full Anton Piller does. Rather, it is a passive yet reasonably effective method of instant discovery. Further, it should protect against the possibility of destruction of critical documents.

Request for Judicial Assistance Abroad/Letters Rogatory.

Letters Rogatory constitute a formal request from a court in one country to "the appropriate judicial authorities" in another country requesting compulsory testimony or documentary or other evidence or to effect service of process. Although statutory authority generally refers to the instrument as "Letters Rogatory" the terms "Letters Rogatory" and "Letter of Request" (which is used specifically in the Hague Evidence Convention) have come to be virtually synonymous in actual practice. In some countries which do not permit the taking of depositions of willing witnesses, Letters Rogatory are the only method of obtaining evidence or serving process. Letters Rogatory can be used in civil and criminal matters and have been used in administrative matters. The execution of a request for judicial assistance from a foreign court is based on comity between nations, absent be specific treaty obligations such as the Hague Evidence Convention or Mutual Legal Assistance in Criminal Matters (MLAT) treaties. Consular conventions generally include language which authorizes the transmission of Letters Rogatory through diplomatic channels. This does not actually obligate the foreign country to execute the request, but simply provides a formal avenue or channel by which a request may be made. If there is no consular convention in force between the requesting country and the foreign (or requested) country, then the Letters Rogatory are received by foreign authorities on the basis of comity. Letters Rogatory are, however, a time-consuming, cumbersome process and ideally should not be utilised unless there are no other options available. An appendix is set out at the end of this paper which summarizes the process involved in the execution of Letters Rogatory.

A foreign court will execute Letters Rogatory in accordance with the laws and regulations of the foreign country. Where a witness is not willing to testify or produce documents or other evidence voluntarily, the assistance of foreign authorities generally must be sought (obviously where that witness is in a foreign country). The customary method of compelling evidence is by Letters Rogatory. Letters Rogatory should be written in simple non-technical English and should not include unnecessary information which may confuse the court in the receiving foreign state. It is best to avoid the use of the term "Discovery" as this is not an all encompassing phrase, or a term that is used across boundaries. Similarly, to avoid the appearance of a fishing expedition which may result in a refusal by the foreign country to execute the request, the phrases such as "any and all documents" should be avoided. Requests for documents must be as specific as possible. If particular procedures to be followed by the foreign court are preferable, include the specifics in the Letters Rogatory (for example, you may wish to provide that you want a verbatim transcript, to place the witness under oath, or to require permission for an American or Foreign Consular official to attend or participate in the proceedings if possible).

The Hague Evidence Convention codifies the taking of depositions on notice and commissions before consuls and court-appointed commissioners, providing minimum standards with which contracting states agree to comply. The Convention's primary purpose is to reconcile different and often conflicting discovery procedures in civil and common law countries. The Convention also streamlines procedures for the compulsory taking of evidence, utilising a form "Letter of Request" which can be sent directly by the court in the foreign country to another foreign central authority – thereby eliminating the cumbersome "diplomatic channel". It is important to note that most countries which are party to the convention, with the exception of the Czech Republic, Israel, the Slovak Republic and the United States, make the specific declarations objecting to article 23 in respect of pre-trial discovery of documents.

Given the cumbersome nature of the Letters Rogatory procedure and the number of intermediaries through which the request must pass before it is finally executed, it is always preferable to ascertain first whether there are alternative avenues for evidence gathering available. Evidence taken voluntarily will always be far preferable to that taken under compulsion. Where at all possible, enquiries should be made to ascertain whether the witness in question would be agreeable to providing the evidence voluntarily, obviating the necessity of engaging this lengthy and cumbersome procedure.

28 U.S.C. § 1782 [Discovery in Aid of Foreign Litigation].

While most countries will provide a procedure for obtaining evidence from foreign witnesses, or witnesses resident abroad, it is possible to obtain such evidence via an alternative route where the witness or evidence in question is within the jurisdiction of a U.S. Federal Court. §1782 of Title 28 of the United States Code is designed to avail foreign litigants of the opportunity to obtain discovery in respect of documents or tangible evidence reposed in the United States. Effectively, all the foreign litigant needs to establish or demonstrate is that if the parties against whom discovery is sought were located within the foreign jurisdiction in which the underlying proceedings are situate, that the applicant could in fact seek the same discovery relief they seek in the United States District Court in that foreign jurisdiction, and that the only reason the applicant comes for relief to the U.S. District Court is that the evidence sought is not otherwise available to the applicant in the foreign jurisdiction, physically speaking. While there has been some discussion of §1782 above, this section aims to explain the procedure whereby persons in the United States may be compelled to produce documents or testimony for use in a foreign litigation. This can be an invaluable tool.

Under §1782 a court order for discovery may be made upon the application of any "interested person". There is no exhaustion requirement in §1782 requiring an interested person first to seek discovery from the foreign or international tribunal. It does not require that judicial proceedings be pending at the time assistance is sought under §1782. It is for this reason that it is sometimes referred to as pre-trial discovery. As noted above, the United States does not have any objection to the concept of pre-trial discovery, despite its unpopularity in many other jurisdictions. The determination on whether to grant assistance under a §1782 application turns not on whether the proceeding is pending but on whether the requested evidence will likely be of use in a judicial proceeding.

§1782 of the United States Code provides a flexible procedure for the taking of the depositions. The section is supplemented by safeguards in the Federal Rules of Civil Procedure, and particularly rules 26-32, which are designed to prevent misuse of the section.

The procedure is relatively straightforward, involving an application made to the appropriate district court in which the party from whom the evidence is sought is resident. This application is grounded on affidavit of the applicant, who must be an interested person, that is, a party to the (anticipated) foreign litigation in question.

It must be remembered that §1782 is not an act to provide litigants in an international tribunal with liberal American discovery rules whenever an adversary is a United States resident, but instead was enacted to assist the efficiency of the proceeding in a foreign nation without infringing upon the procedural rules established by that foreign nation. A person may not be compelled to give his or her testimony or statement or to produce documents or other items in violation of any legally applicable privilege. This includes privileges recognised by the foreign law. With regard to discoverability, the primary burden falls upon the applicant who has to make a showing that the information is discoverable under foreign law. 6

Although in practice discovery orders are granted without the necessity of delving into the technicalities of the foreign court's discovery rules, where an application is opposed or the order granted is subsequently challenged, the discoverability issue is one of the most frequently raised in that context and once raised must be dealt with by the applicant to the satisfaction of the court.

One important consideration however, which is not immediately apparent upon a reading of §1782, is whether in fact the information procured pursuant to the §1782 order will ultimately be admissible in the foreign court. While, as noted above, issues of discoverability may arise within the context of the §1782 application, this will usually only occur if the matter is raised. It is important to bear in mind when taking a deposition or seeking evidence in documentary form, that this evidence may not in fact be admissible in the jurisdiction in respect of whose proceedings the §1782 assistance jurisdiction is invoked. Thus, care should be taken when asking questions or seeking information, to ensure that the rules of evidence applicable in the foreign jurisdiction are adhered to or at least born in mind.

In fact, the House of Lords of England & Wales have had occasion to consider such evidence in the case of South Carolina Insurance Co v. Assurantie Maatschappij "De Zeven Provincien" N.V. ; South Carolina Insurance Co v. Al Ahlia Insurance Co [1987] 1 A.C. 24. While this decision focuses mainly on the power of the court to restrain a party to U.K. venued proceedings from proceeding with the petition in the United States Federal Court for pre-trial discovery pursuant to 28 U.S.C. §1782, it touches upon the issue of the power of a party to proceed to seek discovery pursuant to §1782 rather than by way of letter of request, or the traditional channels. In this case notice of the application was provided to the opponent. The plaintiff sought an injunction in England restraining the defendants from proceeding further with their application and also sought a declaration that the application was an abuse of process of the English court. The trial judge declined to make the declaration but granted the injunction, his decision was affirmed on appeal by the Court of Appeal. On appeal to the House of Lords, the decision of the Court of Appeal was overturned. Lord Brandon of Oakbrook gave the main opinion, drawing attention to the distinct differences between civil procedures of the High Court in England and the Courts of the United States with regard to pre-trial discovery. Lord Brandon went on to consider a number of United States authorities which refer to the exercises of the District Court Powers under §1782, and to the concern that §1782 could be used to provide a discovery of evidence which was not discoverable under the law of the state where the requesting party was involved in court proceedings. Lord Brandon did not consider that the defendants, by seeking to exercise a right potentially available to them under the Federal Law of the United States, had in any way departed from, or interfered with, the procedure of the English Court. It is clear that the judiciary will not disallow evidence obtained pursuant to the §1782 where that evidence would be admissible if obtained pursuant to an alternative procedure provided for by the rules of the local court and provided overall that there is no abuse of procedure. However, it must be remembered that the court in which the evidence is sought to be admitted will be master of its own procedure and will decide whether or not ultimately the evidence produced is admissible. This is the ultimate protection.

Conclusion.

The above should serve to demonstrate that there are many ways of obtaining information with the assistance of the judicial process. The choice of which one to use depends largely upon the means at one's disposal, including, of course, the financial means. Some of these procedures can prove more costly than others and, as has been noted in the section dealing with Letters Rogatory, some are more cumbersome and lengthy than others. Overall, the goal to be achieved must be borne in mind and the alternative methods available for obtaining that evidence thoroughly reviewed in each case. In most cases the need for secrecy will drive the decision making process, it being evident from the above that some methods of discovery or evidence procurement are, or can be, more secure than others.

Above all, the crucial considerations in deciding which method to use will be cost; time available; effectiveness in the context and circumstances; location of evidence; limits within jurisdiction; and the degree or level of necessity in each case.

Footnotes

1. In Bankers Trust Co v. Shapira [1980] 1 WLR 1274, the English Court of Appeal applied the Court's powers, as exemplified in Norwich Pharmacal and applied in A v. C [1980] 2 All ER 347, granting discovery to an intended plaintiff against a bank for the purpose of tracing funds, allegedly obtained by fraud, prior to any proceedings having been taken against the alleged fraudsters. The principal was stated by Goff J in A v. C thus:

"The Court of Equity has never hesitated to use the strongest powers to protect and preserve a trust fund in interlocutory proceedings on the basis that, if the trust fund disappears by the time the action comes to trial, equity will have been evoked in vain. That is why orders of this sort were made long before the recent orders for discovery, and they are the heart of the Chancery Division's concern, and it is a concern of any Court of Equity, to see that the stable door is locked before the horse has gone."

2. See, Credit Suisse Fides Trust SA v. Cuoghi; Credit Suisse Trust Fides SA v. Amhurst Brownes Colombotti, Court of Appeal of England & Wales (Civil Division), 14 December 1995.

3. Axa Equity and Life Assurance plc and Others v. National Westminster Bank Plc and Others [1998] EWCA 156.

4. Shelly Films Ltd v Rex Features Ltd, Chancery Division, 26 November 1993. However, contrast this with the case of A v. Company B Ltd (P v. T Ltd) Chancery Division [1997] IRLR 405. In this case it was not certain whether a tort had been committed at all. The plaintiff thought one had been committed, however. The court in this case held that without the information sought it was not possible for the plaintiff to know for certain whether he had a viable cause of action against the informant, and there was no reason why the principle should be regarded inapplicable to assist a prospective plaintiff to obtain information and documents necessary for the bringing of an action of liable or malicious falsehood in the circumstances. In this case, the protection of the plaintiff's reputation was considered to be of paramount importance.

5. Crest Holmes plc v. Marks [1987] AC 829; and Piver (LT) Sarel v. S & J Perfume Co [1987] 1 FSR 159.

6. Re application of Asta Medica S.A. 981 F 2d 1.

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.

AUTHOR(S)
Martin Kenney
Martin Kenney & Co. Solicitors
POPULAR ARTICLES ON: Wealth Management from British Virgin Islands
Webinar: It's Complicated: Estate Planning And Administration For The Modern Family
O'Sullivan Estate Lawyers LLP
Join O'Sullivan Estate Lawyers LLP for their upcoming webinar.
Planning For A Superyacht? Here Is What You Need To Consider (1 Of 2)
Dixcart Group Limited
When you or your client think about their new Superyacht it might conjure visions of luxurious relaxation, crystal clear blue waters and basking in the sun; conversely, ...
Using An Isle Of Man SPV For Financing International Investment
Dixcart Group Limited
We have now had an extended period in which world markets have been shaken by international events.
Trustee's Duty And Anti-Bartlett Clauses – The Ivanishvilli Redux
Conyers
Just when trustees are feeling safe to go back into the water after the Hong Kong Court of Final Appeal spoke in Zhang Hong Li v. DBS Bank ..
Snapshot: Private Wealth Trends In The Middle East
Ogier
As the Middle East's ultra-high-net-worth individuals encounter unprecedented growth in personal wealth, there is a notable shift towards the professionalisation and institutionalisation of family offices.
Nevis Trusts: The Logical Choice For Asset Protection Structures
Dixcart Group Limited
The most commonly found type of Trust in an offshore jurisdiction is the Common Law Trust, which is usually Discretionary in nature.
FREE News Alerts
Sign Up for our free News Alerts - All the latest articles on your chosen topics condensed into a free bi-weekly email.
Upcoming Events
Mondaq Social Media