Omega Group Holdings Ltd v Kozeny
| Jurisdiction | England & Wales |
| Judge | Peter Gross |
| Judgment Date | 06 September 2001 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 06 September 2001 |
Queen's Bench Division (Commercial Court).
Peter Gross QC (sitting as a deputy High Court judge).
Simon Mortimore QC and Dominic Dowley (instructed by Macfarlanes) for the claimants.
Bernard Eder QC and Huw Davies (instructed by SJ Berwin) for the defendants.
The following case was referred to in the judgment:
South Carolina Insurance Co v Assurantie Maatschappij “De Zeven Provincien” NVELR [1986] QB 348 (CA); [1987] AC 24 (HL).
Civil procedure — Conflict of laws — Anti-suit injunction — Claimants claimed damages against defendants for fraudulent misrepresentation, breach of fiduciary duty, breach of contract and conspiracy — Defendant sought to depose certain US witnesses intended to be called to give evidence in the English proceedings — Whether use of US deposition procedure unconscionable and an abuse of process — United States Code, Title 28, s. 1782.
This was an application by the claimants for an injunction restraining the first defendant from pursuing various proceedings commenced by him in the US.
The claimants were investment vehicles of various investment funds. In proceedings in England they claimed damages against the defendants for fraudulent misrepresentation, breach of fiduciary duty, breach of contract and conspiracy relating to an investment in the privatisation process in the republic of Azerbaijan. The claimants' case was that they had been defrauded into investing some US$182m into privatisation options and vouchers issued by the republic of Azerbaijan and that the defendants had misappropriated the moneys for their own purposes. They claimed an account of what the defendants had done with the moneys. They obtained worldwide freezing orders. There was satellite litigation in other jurisdictions to protect assets in those jurisdictions and thereby ensure the effectiveness of the English proceedings. The defendants alleged, among other defences, that the claimants' investments were accompanied by substantial corrupt payments and that accordingly their claims were tainted with illegality and should fail for that reason. The first defendant obtained orders from US District Courts, pursuant to s. 1782 of Title 28 of the United States Code, for employees and former employees of the claimants and for investors to make witness statements. The claimants objected to the proposed deposition of the witnesses who were going to give evidence in the English proceedings. The claimants argued that in the circumstances the use of s. 1782 was unconscionable and therefore an abuse of process and should be restrained by injunction. The first defendant argued that he was entitled to use US procedure to obtain evidence in the US. The first defendant further argued that the claimants had in effect agreed to that position when obtaining a stay in Colorado and resisting a stay of the English proceedings and should not be allowed to resile from it.
Held granting an injunction:
1. In general the English court left it to the parties to obtain the evidence they thought necessary for the advancement of their case by the means of their choosing, provided such means were lawful in the country where they were deployed. The fact that a party to English litigation was able to obtain evidence by means of a right available in a foreign country significantly different from that available in the English system did not by itself constitute unconscionable conduct. No injunctive relief was to be granted unless the applicant satisfied the threshold test of unconscionability. It could be unconscionable for a party to English litigation to apply for US pre-trial depositions under s. 1782. (South Carolina Insurance Co v Assurantie Maatschappij “De Zeven Provincien ” NVELR[1987] AC 24considered.)
2. In this case it would be unconscionable, in the sense that it would be oppressive, vexatious and an interference with the process of the court, for the first defendant to pursue the s. 1782 applications in respect of witnesses intended to be called to give evidence in the English proceedings. The witnesses would be subjected to unwarranted double cross-examination and the trial would suffer from unnecessary duplication. It did not matter that the witnesses might be familiar with US procedure; oppression had to be judged from the English perspective. There was also a real risk that a witness once deposed in the US might be discouraged from attending the trial in England.
3. The balance of convenience was in favour of an injunction. If the witnesses did give evidence in England, the first defendant had nothing to gain from the US pre-trial depositions. If the witnesses did not produce witness statements in the English proceedings, the defendant could apply to lift the injunction. The risk of a last minute failure to appear did not outweigh the factors which led to the conclusion that pursuit of the s. 1782 applications was unconscionable.
4. The claimants were right to have brought the application for an injunction in England rather than raising it in each individual court in the US. The US courts had no selfish interest in s. 1782 applications and recognised that parties might be enjoined by foreign courts from invoking the section.
5. The stay in Colorado was obtained by the claimants on the basis only that the first defendant would be entitled to make such use of s. 1782 as was proper in all the circumstances. Likewise the claimants, resisting a stay in England, refused to give an undertaking to permit the defendant to adopt US deposition procedures.
6. The claimants were entitled to an injunction, conditional on the giving of an undertaking to use best endeavours to produce witness statements and to call the relevant witnesses at trial and to inform K promptly if they believed that that was not going to happen.
Peter Gross QC: Introduction and overview
1. The claimants are investment vehicles of various investment funds. In proceedings in this country, they claim damages against the defendants for fraudulent misrepresentation, breach of fiduciary duty, breach of contract and conspiracy relating to an investment in the privatisation process in the republic of Azerbaijan; they further claim an account of what the defendants have done with their moneys. In essence, the claimants' case is that in March to June 1988 they were defrauded by the defendants into investing some US$182m into privatisation vouchers and options issued by the republic of Azerbaijan; they allege that moneys paid by them were misappropriated by the defendants for their own purposes.
2. As is apparent, the first defendant is an individual (“Mr Kozeny”). He, together with the third and fourth defendants (collectively, “the Kozeny defendants”) allege, amongst other defences, that the claimants' investments were accompanied by substantial corrupt payments, totalling over US$50m, to the president of Azerbaijan and other Azeri officials. The Kozeny defendants say that these arrangements were known to and agreed by the claimants; accordingly, the claimants' claims are tainted with illegality and corruption and must fail. I shall refer to this as the “illegality and corruption” defence.
3. It follows from this briefest of factual summaries in litigation replete with factual controversy, that the parties are advancing grave allegations against each other. Moreover, it is at once plain that Mr Kozeny faces claims of a most substantial nature.
4. Against this background, which is all or virtually all that needs be said concerning the underlying issues in the English litigation, the claimants make the present application. In summary, the claimants apply for an injunction restraining Mr Kozeny from pursuing various proceedings commenced by him in the US. Again in summary, those proceedings, in the courts of New York and Connecticut, were brought by Mr Kozeny pursuant to s. 1782 of Title 28 of the United States Code, for the purpose of deposing certain individuals in accordance with the well-known US procedure and in order to obtain documents from them. As I understand it, in each case the s. 1782 applications were made without prior warning to the witnesses or the claimants and in each case the District Court made the orders sought.
5. In the event and following the hearing before me, the parties have helpfully agreed that the question of documentary disclosure from the individuals in question can be stood over for the time being. I am therefore concerned only with the deposition aspect of the US proceedings brought by Mr Kozeny and the claimants' application to injunct him from pursuing those proceedings in that regard.
6. Section 1782 provides, in so far as material, as follows:
“Assistance to foreign and international tribunals and to litigants before such tribunals: (a) The district court of the district in which a person resides or is found may order him to give his testimony or statement… for use in a foreign or international tribunal. The order may be made… upon the application of any interested person and may direct that the testimony or statement be given… before a person appointed by the court… To the extent that the order does not prescribe otherwise, the testimony or statement shall be taken… in accordance with the Federal Rules of Civil Procedure. ”
7. The claimants object to the proposed deposition of witnesses who may be identified and categorised as follows (“the relevant witnesses ”):
(1) Employees
(i) Mr Leon Cooperman, chairman and chief executive officer of Omega Advisors Inc (the parent of claimants 1-5 in the Omega action);
(ii) Mr Clayton Lewis, a former employee of Omega Advisors Inc...
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