First American Corporation v Sheik Zayed Bin Sultan Al-Nahyan
| Jurisdiction | England & Wales |
| Judge | THE VICE-CHANCELLOR,LORD JUSTICE AULD,LORD JUSTICE SCHIEMANN |
| Judgment Date | 12 May 1998 |
| Judgment citation (vLex) | [1998] EWCA Civ J0512-13 |
| Docket Number | No QBENF 98/0133/1 |
| Court | Court of Appeal (Civil Division) |
| Date | 12 May 1998 |
[1998] EWCA Civ J0512-13
The Vice-Chancellor
(Sir Richard Scott)
Lord Justice Auld
Lord Justice Schiemann
No QBENF 98/0133/1
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM ORDER OF MR JUSTICE POPPLEWELL
Royal Courts of Justice
Strand
London WC2
MR STANLEY BURNTON QC and MR STEPHEN RUBIN (Instructed by Messrs Jones, Day, Reavis & Pogue of London) appeared on behalf of the Appellant
MR PETER GOLDSMITH QC and MR JOHN NICHOLLS (Instructed by Herbert Smith of London) appeared on behalf of the Respondent
This is an appeal from the judgment given on 16 December 1997 and the Order dated 12 January 1998 made by Popplewell J. The judge dismissed an application by First American Corporation and First American Bankshares Inc. for an order giving effect to Letters of Request which had been issued by the U.S. Court for the District of Columbia. The Letters sought to have three intended witnesses orally examined and to have one of the three ordered also to produce documents in aid of civil actions proceeding in the US District Court.
One of the Letters of Request, issued in respect of Mr Cowan, was issued on 1 August 1997. This was the Letter of Request that sought also the production of documents. The other two, issued in respect of Mr Chapman and Mr Hoult, were issued on 3 September 1997. Each of the three witnesses is, or was, a partner in Price Waterhouse UK and each of them was from 1986 until 1991 engaged in work relating to audits of the accounts of BCCI Overseas and other BCCI companies. The purpose of the Letters of Request was the obtaining of evidence for use in the civil actions in the U.S. The judge came to the conclusion that the attempt to obtain evidence via the Letters of Request was a fishing exercise that the courts of this country ought not to support. He refused, therefore, to give effect to the Letters. The applicants have appealed to this Court. In course of the progress of the application, from its institution through to the hearing of this appeal, significant changes in the scope of the application have taken place. First, the application for an order against Mr Cowan for the production of documents has been dropped. This happened in the course of the hearing before Popplewell J. Second, the application for oral evidence to be taken from Mr Hoult has been dropped. This happened shortly before the commencement of the hearing of this appeal. Third, the application for oral evidence to be taken from Mr Cowan and Mr Chapman has been substantially limited by the deletion of a number of paragraphs from the original Schedule of Requested Testimony. This took place in the course of the hearing before Popplewell J. And, fourth, the applicants, in the course of the hearing of the appeal, proposed that the order they seek for the examination of Mr Cowan and Mr Chapman should include certain provisions regulating the conduct of the examination and, in one important respect, limiting the type of questions that can be put. I will refer later in more detail to these proposals.
The result of these changes is that the order sought from this Court on appeal is significantly different from that which was sought from Popplewell J. Nonetheless, the points of principle on which the intended witnesses based their successful opposition in the Court below are essentially the same as those on which they have resisted the appeal before us.
I must endeavour to describe the U.S. litigation in aid of which these Letters of Request were issued by the U.S. District Court. There are two associated actions. In one action First American Corp. and First American Bankshares Inc. are the plaintiffs. There are, or were, some thirty defendants, two of whom are Mr Clifford and Mr Altman. Both of them had been directors of First American. Both had also been legal counsel to First American. What is alleged is, in brief summary, that BCCI, in contravention of U.S. regulatory statutes, conspired to obtain control of First American by acquiring control, through nominees, of First American's holding company, Credit and Commerce American Holdings NV (CCAH). Paragraph 1 of the Complaint describes the action as follows:-
"1. This is an action brought by First American for injury arising from multiple illegal acts committed by Defendants in conducting the affairs of BCCI. These acts included, but were not limited to, Defendants' scheme to fraudulently acquire and illegally maintain ownership of First American with funds provided by BCCI/ICIC by Defendant Zayed and other Abu Dhabi entities and individuals under Defendant Zayed's control and by depositors and creditors of BCCI. This scheme was carried out in violation of (1) the Racketeer Influenced and Corrupt Organisations Act, 18 U.S.C. para 1962(b), (c) and (d); (2) the Defendants' fiduciary obligations to First American; and (3) the common law of fraud and negligence".
The alleged "scheme" was that BCCI (or ICIC) would fund the acquisition by nominees of CCAH shares. This funding would be represented in the books of BCCI as being loans to the respective shareholders. But in reality these apparent loans were not loans at all and the individuals who held the shares acquired with these 'loans' were not borrowers but nominees holding the shares on behalf of BCCI (or ICIC). So it is alleged. It appears to be common ground that very substantial funds indeed were provided by BCCI or ICIC for acquisition of CCAH shares and that the Defendants, including Mr Clifford and Mr Altman, had become CCAH shareholders through the use of these funds. What is in issue, therefore, is whether these funds were genuine loans to the shareholders or whether the shareholders were merely nominees holding the shares for BCCI/ICIC. Paragraphs 76 and 77 of the Complaint plead as follows:-
"76. In conspiracy with BCCI, Defendants created the false impression that the CCAH shareholders constituting the Abu Dhabi Emirates and Adham Groups of Defendants were wealthy Arab investors, prominent businessmen and independent investors in and owners of CCAH and its First American subsidiaries. These individuals and entities made, and acquiesced in, false and fraudulent representations, omissions and promises to United States banking regulators, to First American and others regarding the ownership and control of First American's parent, CCAH. These misrepresentations continued until at least July 5, 1991, when BCCI was closed down by bank regulatory authorities world-wide and indictments began to issue for the conduct complained of herein.
77. Ownership of CCAH, the purported ultimate parent holding company of First American, was illegally acquired and illegally maintained with funds provided by BCCI/ICIC and the Ruling Family of Abu Dhabi under secret agreements that gave BCCI/ICIC illegal ownership of First American".
The alleged illegal acquisition of CCAH shares commenced in 1982 and continued through to 1986. The funds provided by BCCI/ICIC appeared in the BCCI or ICIC accounts as loans. First American are concerned to establish whether, or to what extent, these apparent loans were treated as loans would normally be treated. e.g. Was interest ever paid? If not, was any action taken to remedy the non-payment of interest? Was there ever any enquiry as to the creditworthiness of any of the apparent borrowers? If not why not? Was any reserve ever created to take account of any likely inability of a borrower to repay his apparent loan? The action, it need hardly be said, is a highly complex one in which the issues raised require a careful perusal of BCCI and ICIC documents from at least as far back as 1980.
In the second action Mr Clifford and Mr Altman are the plaintiffs. They seek an indemnity from First American for fees and costs incurred in defending criminal and civil proceedings in the U.S. arising out of their involvement, as directors or legal counsel, in the affairs of First American.
The main action has, we are told, been settled against all defendants bar six. Two of the six are Mr Clifford and Mr Altman. It appears that First American propose to prepare and serve an amended Complaint confining the pleaded issues to those which affect the remaining defendants. Whether or to what extent issues raised by the present Complaint will be dropped from the amended Complaint remains to be seen. It may be that the amended Complaint will, on the one hand, drop some of the existing allegations but, on the other hand, include new allegations and raise new issues arising out of the discovery process that has been taking place in the United States.
As I have said, the involvement of Price Waterhouse UK in the affairs of BCCI dates from 1986 when the firm assumed a supervisory role in respect of the BCCI audits. Price Waterhouse UK is not, as yet, a defendant or otherwise a party to any civil proceedings brought by First American. Nor are any of its partners. Whether or not that will remain the position is uncertain. On 19 August 1997 First American obtained a subpoena from the U.S. District Court of New York directed to Price Waterhouse. The subpoena ordered Price Waterhouse to produce a number of documents. Price Waterhouse U.S. filed objections to the subpoena. First American responded with a Petition to compel Price Waterhouse to comply with the subpoena and supported its Petition with a Memorandum dated 29 September 1997. The Memorandum sets out First American's...
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