September, 2011
By admin
After ICSID arbitration, English court granted freezing orders against the Republic of Bolivia. Court of Appeal finds that arbitration proceedings were not “proceedings”� for the purpose of Civil Jurisdiction and Judgments Act 1982 to permit interim relief to preserve the outcome of the arbitration proceedings
Under the auspices of the World Bank, a large number of nations signed the Convention on the Settlement of Investment Disputes between States and Nationals of Other States [in force October 14, 1966; 17 U.S.T. 1270; T.I.A.S. 6090; 575 U.N.T.S. 159]. It created the International Center for Settlement of Investment Disputes (ICSID). While ICSID is based in Washington DC, arbitrations conducted under its auspices are not subject to any national law. The number of ICSID arbitrations has grown greatly in recent years as a result of the widespread use of bilateral investment treaties (BITs). Under the BITs, Contracting States agree in advance that nationals of the other state party will have a right of recourse to ICSID arbitral procedures and tribunals to resolve investment disputes. One such agreement, the Agreement on Encouragement and Reciprocal Protection of Investments between Netherlands and Bolivia, entered into force on November 1, 1994. This is an appeal from a decision of the London High Court which set aside freezing orders granted in favor of the Appellant (ETI) against the Republic of Bolivia and (Entel), the Respondents.
In 1995, ETI, a Dutch company, made a series of agreements with the Bolivian Government and Entel. At the time, the latter was a Bolivian state owned telecommunications company. The deals brought about [1] the privatisation of Entel, [2] ETI’s becoming owner of 50% of Entel’s shares, and [3] ETI’s receiving management control of Entel.
According to ETI, by December 2007, Entel had made investments in infrastructure and technology of more than US$741 million and was employing 1,500 Bolivians. In May 2007, ABN AMRO Bank N.V. (ABN AMRO) valued Entel’s business at between US$587 million and US$650 million. The result was that ETI’s interests amounted to between US$294 million and US$325 million.
In June 2006, however, Bolivia proclaimed an extensive National Development Plan. It entailed the re nationalisation of various formerly state owned companies which had become private during the 1990s. In ETI’s view, the Bolivian government began taking measures that would reduce the value of ETI’s investment in Entel; ETI also was afraid that the government planned to expropriate its interest in Entel without paying fair compensation. In April 2007, the Bolivian government did repeal several earlier decrees dealing with the privatization of Entel.
ETI filed a request for arbitration against Bolivia at the ICSID pursuant to the BIT between the Netherlands and Bolivia. ICSID registered ETI’s request which formally started the ICSID arbitration procedures. Bolivia formally denounced the ICSID Convention and refused to take part in the arbitration. The Bolivian government then re nationalized Entel. ETI complained that various decrees issued by Bolivia heightened ETI’s fears that that Bolivia was unlikely to compensate ETI for its expropriated shares.
On May 5, 2008, ETI obtained an ex parte order of attachment in a New York city federal court (the SDNY). The order provided that the U.S. Marshal was to levy upon such of Entel’s monies and/or interest on deposit within the court’s jurisdiction including certain time deposits held by Entel with JP Morgan Chase Bank N.A.
ETI then obtained from an English court a “without notice”� order against Bolivia and Entel; it purported to freeze certain bank deposits in London pursuant to § 25 of the Civil Jurisdiction and Judgments Act 1982 (CJJA) and the CJJA 1982 (Interim Relief) Order 1997.
Bolivia and Entel successfully applied have the order set aside; the Judge ruled that it had not made its freezing order applicable to the New York proceeding in the sense required by § 25 of the 1982 Act as extended by the 1997 order; § 25. First, neither the Act of itself nor as applied by the 1997 Order reach so far as to make an order in support of ICSID arbitrations; second, the court should not have issued the order because it was “inexpedient”� under § 25(2) to grant such relief; third, Bolivia was entitled to claim state immunity and, finally, there was no independent basis for the order against Entel.
ETI appealed to the U. K. Court of Appeal (Civil Division.). It contended, first, that one could properly treat the New York proceedings as “substantive”� for the purposes of § 25. Second, it maintained that there was nothing in the 1997 order that blocked its application to arbitration proceedings. Third, ETI pointed out that the subject matter of ICSID arbitration proceedings lay outside the scope of Article 1 of the Judgments Regulation ( Regulation 44/2001EC). The Civil Division disagrees, however, and dismisses ETI’s appeal.
The lead speech then outlines its rationale on the major issues. “The question on this point is whether the nature of the New York proceedings is such as to engage the power of the English court to grant interim relief under Section 25 of the 1982 Act. The background to Section 25 was the decision of the House of Lords in The Siskina [1979] A.C. 210 that the English court did not have jurisdiction to grant interim relief by way of Mareva injunction against a foreign defendant otherwise than in support of a cause of action in respect of which the defendant was amenable to the jurisdiction.”�
“Article 24 of the Brussels Convention (now Art. 31 of the Judgments Regulation) provided: “�Application may be made to the courts of a Contracting State for such provisional, including protective, measures as may be available under the law of that State, even if, under this Convention, the courts of another Contracting State have jurisdiction as to the substance of the matter’.”�
“When The Siskina was decided in October 1977 the United Kingdom had not acceded to the Brussels Convention, although negotiations were far advanced, and Lord Diplock, delivering the only speech, refused to exercise what he described (at 260) as a legislative function in order to grant a remedy, similar to that available in other member states, in support of foreign courts which were adjudicating on the merits of the claim.”�
“The 1982 Act was enacted primarily (but not exclusively) to enable effect to be given in the United Kingdom to the Brussels Convention. The United Kingdom signed the Convention acceding to the Brussels Convention in 1978, although it did not come into force until 1987.”�
“The main purpose of Section 25 was twofold: first, to give the English court jurisdiction to order provisional or protective measures where the courts of another Brussels Convention Contracting State had jurisdiction as to the substance of the matter; and second, to enable subordinate legislation to be enacted to reverse the effect of The Siskina so that interim relief could be granted in England where proceedings were pending abroad in non Convention cases, or where there were arbitration proceedings.”�
“Section 25 was headed “�Interim relief … in the absence of substantive proceedings’ and provided (in its original form as enacted in 1982): “�(1) The High Court … shall have power to grant interim relief “� … (2) On an application for any interim relief under subsection (1) the court may refuse to grant that relief if, in the opinion of the court, the fact that the court has no jurisdiction apart from this section in relation to the subject matter of the proceedings in question makes it inexpedient for the court to grant it. (3) Her Majesty may by Order in Council extend the power to grant interim relief inferred by subsection (1) so as to make it exercisable in relation to proceedings of any of the following descriptions, namely “� (a) proceedings commenced, or to be commenced, otherwise than in a Contracting State; (b) proceedings whose subject matter is not within the scope of the 1968 Convention as determined by Article 1; (c) arbitration proceedings.’”�
“Section 25 came into effect in 1987 at the same time as the Brussels and Lugano Conventions came into force for the United Kingdom (and it was amended in 1996 in a material respect to which I shall revert in the next section of this judgment), but the powers under Section 25(3) were not exercised until 1997, when the 1997 Order was made. The 1997 Order came into force on April 1, 1997. By contrast with Section.25 itself, the changes to the 1997 Order since it was first enacted are not material, since the changes are solely those consequential on the application of the Judgments Regulation.
“I am satisfied that the foreign proceedings to which Section 25 and the 1997 Order are referring are proceedings on the substance of the matter. First, that appears from the legislative purpose of Section. 25 which was to implement Article 24 of the Brussels Convention, and to reverse the effect of The Siskina. Article 24 itself speaks of the case where the courts of another Contracting State have jurisdiction “�as to the substance of the matter’. In The Siskina, Lord Diplock referred several times to the court in which the substantive relief was sought: supra at 256. Secondly, the heading of the section refers to the jurisdiction of the English court to grant interim measures “�in the absence of substantive proceedings’ and legitimate assistance may be derived from that in construing Section 25. [Cite]. Thirdly, the application of Section 25 to foreign substantive proceedings is confirmed by many references in decisions of this Court on Section 25 to the foreign court dealing with the “�substantive proceedings’ or the “�substantive dispute.’[Cites]“�
“Fourth, in Refco Inc. v. Eastern Trading Co. [1999] 1 Lloyd’s Rep. 159 at 170 172, this Court laid down a two stage test, which was applied in Motorola Credit Corp. v. Uzan (No.6) [2003] E.W.C.A. Civ. 752. The first stage was to consider whether the English court would grant interim relief if the substantive proceedings were in fact being conducted in England. The second was whether the fact those substantive proceedings were abroad made it inexpedient for the purposes of Section 25(2) to grant the relief.”�
“The first test would not be workable if the foreign proceedings were solely for interim relief in support of proceedings in a third country or in arbitration. The English court would simply not be able to apply the first test on the hypothesis that there were proceedings solely for interim relief in England. I accept that this point cannot be taken too far since the court in those cases was only considering the normal case of substantive proceedings abroad.”�
“As I have said, the judge accepted that Section 25 was limited to giving the court jurisdiction to assist foreign substantive proceedings, provided the expression “�substantive proceedings’ was not understood too narrowly, citing the decision of this Court in Kensington International Ltd. v. Congo [2007] E.W.C.A. Civ. 1128; [2008] 1 Lloyd’s Rep. 161 . ETI says that this decision shows that it is not necessary that the foreign proceedings be substantive proceedings on the merits of the claim, because the foreign proceedings were in fact “�interim attachment’ proceedings. Such proceedings could be regarded as “�substantive’.”�
“The case was concerned with an attempt by Kensington to execute English judgments in Switzerland by attaching debts due to the Republic of the Congo. Kensington applied to the Court of First Instance(CFIG) in Geneva for an interim attachment of debts said to be owed by a third party company, Vitol SA, to the Congo. The CFIG … granted an interim attachment order preventing Vitol SA from making certain payments to the Congo. The scope of that order was disputed between the parties. It was in respect of that order that the English court exercised its jurisdiction pursuant to Section 25 of the 1982 Act.”�
“It is important to emphasise again that the proceedings in Switzerland in that case were for enforcement of the English judgments. The issue of whether the Swiss proceedings were substantive or not was not before the Court of Appeal. I accept … that the fact that interim orders had also been obtained in Geneva pending a final third party debt order in full or partial satisfaction of English judgments against Congo did not derogate from the fact that the proceedings in Geneva were substantive proceedings to enforce a foreign judgment.”�
“But I would accept that the notion of substantive proceedings may have to be given a liberal interpretation to ensure international judicial co operation. … As a result of the decision of the U.S. Supreme Court in Grupo Mexicano de Desarrollo SA v. Alliance Bond Fund Inc, 527 U.S. 308 (1999), a U.S. federal court has no power under federal law to make an in personam order restraining disposal of assets pending judgment/award, but does have power under Rule 64 of the Federal Rules of Civil Procedure to order attachment of debts under the law of the state in which it sits: Karaha Bodas Co. LLC v. Perusahaan Pertambangan Minyak Dan Gas Bumi, 313 F. 3d 70, 83 (2d Cir. 2002), cert. den. 539 U.S. 904 (2003). [See 2003 International Law Update 37] The New York Court of Appeals has held that, under New York law, [its] courts can only attach property located in New York: ABKCO Indus. Inc. v. Apple Films Inc., 39 N.Y.2d 670 (1976); [Cite].”�
“In my judgment, this ground of appeal fails because, on any view, the English proceedings are not in aid of, or related to, any substantive proceedings in New York, however liberally those expressions are interpreted. As I have said, the complaint in the SDNY describes the proceedings as an “�an action for an order of attachment in aid of arbitration’ and founds jurisdiction and venue on the fact that property belonging to Entel and/or Bolivia was situate in New York. The SDNY attachment proceedings constitute interim relief to protect assets pending the outcome of the ICSID arbitration. The New York proceedings are directed solely at assets in New York, and proceedings in England directed at assets in England cannot be ancillary to the New York attachment.”� [Paras. 63 78]
The Court comes last to the question of the sovereign immunity of Bolivia and perhaps its agencies. “But it is, in fact, a matter of the greatest importance (as is made clear by the provision in Section 1(1) of the State Immunity Act 1978 that the court must give effect to immunity even if the State does not appear) and would normally fall to be considered first. I am satisfied that Bolivia is entitled to immunity, and that the appeal on this ground fails.”�
“As I have said, the judge decided this point on the basis of Section 9 of the 1978 Act, which provides: “�(1) Where a State has agreed in writing to submit a dispute which has arisen, or may arise, to arbitration, the State is not immune as respects proceedings in the courts of the United Kingdom which relate to the arbitration. (2) This section has effect subject to any contrary provision in the arbitration agreement and does not apply to any arbitration agreement between States.’”�
“But Section 13 of the 1978 Act provides: “�(2) Subject to subsections (3) and (4) below “� Relief shall not be given against a State by way of injunction or order for specific performance or for the recovery of land or other property; and [t]he property of a State shall not be subject to any process for the enforcement of a judgment or arbitration award or, in an action in rem, for its arrest, detention or sale. (3) Subsection (2) above does not prevent the giving of any relief or the issue of any process with the written consent of the State concerned: and any such consent (which may be contained in a prior agreement) may be expressed so as to apply to a limited extent or generally; but a provision merely submitting to the jurisdiction of the courts is not to be regarded as a consent for the purposes of this subsection. (4) Subsection (2) above does not prevent the issue of any process in respect of property which is for the time being in use or intended for use for commercial purposes; …’”�
“Consequently it is plain that there is nothing in Section 9 which overrides the prohibition in Section 13. Proceedings for a freezing order to preserve the position pending execution of an [arbitration] award are within Section 13 and are not “�proceedings which relate to the arbitration’ for the purposes of Section 9. The point can be tested by reference to commercial contracts. By Section 3, a State is not immune “�as respects proceedings relating to … a commercial transaction entered into by the State.’ It cannot be suggested that because of Section 3, and notwithstanding Section 1, the State could be enjoined from breach of the contract.”� [Paras. 110 113]
Citation: Euro Telecom International NV v. Republic of Bolivia , [2008] E.W.C.A. Civ. 880; 2008 WL 2872426 (CA (Civ Div)); [2008] 2 C. L. C. 153 (July 28).
Filed in: 2008 International Law Update, Issue10
By admin
In mandamus proceeding seeking to set aside restrictions on parent’s access to child, Court of Appeals of Texas interprets and applies Texas law against international parental abduction, using Uniform Child Abduction Prevention Act as interpretation aid
Axel Michael Sigmar is involved in several international legal disputes, and frequently travels to Mexico. Apparently he received threats, and equipped himself with a concealed handgun. In the midst of this turmoil, he and his wife Lucia divorced with identical visitation rights for their daughter A.J. Lucia subsequently moved for a modification of the divorce decree, also requesting that Sigmar have only supervised access to the child, and that he temporarily not dispose of any assets. The Judge Barbara Hale found that Sigmar posed a threat of international abduction, and ordered that he only have supervised visits with A.J. The Judge also ordered that he not sell any assets until an evidentiary hearing in the modification matter.
Sigmar is now seeking a writ of mandamus to compel the Judge to set aside the restrictions.
The Court of Appeals of Texas agrees with the Judge. In general, mandamus relief is available only to correct a clear abuse of discretion when there is no adequate remedy by appeal. Here, because temporary orders in child custody disputes are not subject to interlocutory appeal, mandamus is a possible remedy.
As for the restrictions on Sigmar’s access to A.J., the Court notes that Texas was the first state to implement laws against international parental abduction. See Tex. Fam. Code Ann. §§ 153.501 .503. In interpreting the Texas law, the Court refers to materials about the Uniform Child Abduction Prevention Act which resembles the Texas law.
Section 153.503 permits the trial court to impose abduction prevention measures if there is a “potential risk”� of international abduction. The court should consider the obstacles to finding and returning a child from a foreign country, and the harm to the child if he/she is abducted to a foreign country. In particular:
“Section 153.502 provides statutory “�abduction risk factors’ for a court to consider in determining whether there is a potential risk of international abduction. See TEX. FAM. CODE ANN. § 153.502 (Vernon Supp. 2008). Subsection (a) provides a list of six preliminary factors the court “�shall consider,’ including whether the parent: (1) “�has taken, enticed away, kept, withheld, or concealed’ the child; (2) has threatened to do so; (3) “�lacks financial reason to stay in the United States’; (4) “�has recently engaged in planning activities that could facilitate the removal of the child from the United States’; (5) “�has a history of domestic violence’; or (6) “�has a criminal history or a history of violating court orders.’ Id. § 153.502(a) …”�
“If upon consideration of the factors in subsection (a) the court finds “�credible evidence of a risk of abduction,’ “�the court shall also consider’:”�
“(1) whether the parent has strong familial, emotional, or cultural ties to another country, particularly a country that is not a signatory to or compliant with the Hague Convention on the Civil Aspects of International Child Abduction; and”�
“(2) whether the parent lacks strong ties to the United States, regardless of whether the parent is a citizen or permanent resident of the United States.”�
“TEX. FAM. CODE ANN. § 153.502(b) … ”
“�In addition, if the court finds “�credible evidence of a risk of abduction’ under subsection (a), “�the court may also consider’: (1) “�whether the parent is undergoing a change in status with the United States Immigration and Naturalization Service that would adversely affect that parent’s ability to legally remain in the United States’; (2) whether INS has denied the parent’s application for citizenship; (3) whether the parent has forged or presented misleading or false evidence to obtain a visa, passport, or other identification card or has made any misrepresentation to the federal government; or (4) whether the foreign country to which the parent has ties presents legal or practical obstacles to the recovery and return of a child who is abducted to that country or poses a risk of harm to the child.8 TEX. FAM. CODE ANN. § 153.502(c) …”� [Slip op. 3]
Here, the Judge found that Sigmar had strong ties to Mexico and Austria, and was liquidating U.S. assets. According to the Judge’s findings, both of those countries lack effective mechanisms for the enforcement of the child custody order. Also, the U.S. Department of State has issued a travel warning for Mexico.
“… [A]n affirmative finding on only one of these preliminary factors (if supported by the evidence) is all that is required to proceed to a consideration of the additional factors listed in subsections (b) and (c).”�
“To begin with, the statute states that “�the court shall consider evidence’ relevant to the six factors. Id. § 153.502(a) … The statute does not specify the number of factors on which a court must make an affirmative finding. … In addition, the statute lists these factors in the disjunctive.”�
“The comment to section 7 of the UCAPA suggests that no particular quantum of risk factors is required.”�
“The more of these factors that are present, the more likely the chance of an abduction. However, the mere presence of one or more of these factors does not mean that an abduction will occur just as the absence of these factors does not guarantee that no abduction will occur.”�
“UNIF. CHILD ABUSE PREVENTION ACT § 7 cmt., 9 Part IA U.L.A. at 42.”�
“For these reasons, we hold that evidence sufficient to support an affirmative finding on only one of the six preliminary factors may constitute “�credible evidence of a risk of abduction’ sufficient for a court to consider the additional factors listed in subsections (b) and (c).”� [Slip op. 4]
Applying this to the case at bar, the Court agrees with the Judge that Sigmar’s recent sale of an office building in Austin, and his insistence that A.J.’s passport be renewed, could facilitate A.J.’s removal from the U.S. Such events are credible evidence of a risk of abduction. Furthermore, Sigmar has ties to both Austria and Mexico. As for subsection (c) concerning the obstacles and risks which may be posed if Sigmar were to abduct A.J., the Court holds that such matters are legislative facts under Tex. R. Evid. 201(a), and a court may take judicial notice of them.
” … [W]e hold that facts regarding another country’s compliance with the Hague Convention on the Civil Aspects of International Child Abduction, or whether that country poses obstacles to the prompt return of a child taken there or poses risks to the child’s safety are legislative facts about which a trial or appellate court may take judicial notice without prompting by the parties.16 See [1 STEVEN GOODE ET AL., GUIDE TO THE TEXAS RULES OF EVIDENCE] § 201.2 (with regard to judicial notice of legislative facts, a court “�may employ whatever facts [it] reasonably believe[s], without any requirements of indisputability or of opportunity of parties to be heard concerning such beliefs’) …”� [Slip op. 5]
Here, the travel warnings provided by the U.S. Department of State supports the Judge’s finding under subsection (c). The Court concludes that the evidence, and the information of which it has taken judicial notice, support the Judge’s finding of potential risk of international abduction.
After making further findings that the restrictions are consistent with the public policy of Texas and the best interest of the child, the Court finds that the Judge did not abuse her discretion in requiring supervised visitation.
Citation: In Re Axel Michael Sigmar, No. 10 08 00328 CV (Court of Appeals of Texas, Tenth District, November 5, 2008).
Filed in: 2008 International Law Update, Issue10
By admin
After guardian of minor Plaintiff in child injury litigation gave deposition testimony, Canadian Supreme Court holds that, under Implied Undertaking Rule, lower court should, under circumstances, have denied attorney general’s request for authority to turn over deposition to police investigating potential criminal aspects of child’s injury at daycare home
In 2001, Jade Doucette, a 16 month old girl (Plaintiff) suffered a seizure while in the care of an employee of Wee Watch Day Care Systems Inc.(Defendant), a daycare organization in Vancouver, B. C. Doctors later diagnosed the Plaintiff as having suffered a brain injury. On Jade’s behalf, her parents sued the Defendant’s owners and operators for damages, alleging that the employee’s negligence had proximately cause Jade’s injury.
At the same time period, Vancouver police were looking into the circumstances leading to the Plaintiff’s injury, but did not filed charges. In November 2004, the employee moved to prevent the release of the information from the transcripts of her deposition to the Attorney General of British Columbia (AG) or to the police; she invoked the Implied Undertaking Rule (IUR).
The AG opposed the employee’s motions and cross moved for an order varying the IUR to allow the release of the transcripts to the police, or, alternatively, for an order permitting the police to apply for the transcripts by way of search warrant or subpoena. The employee’s deposition took over four days. and the transcripts had stayed in the possession of the civil parties and their counsel. In 2006, the parties settled the civil claim; as a result, no one ever entered the employee’s deposition into evidence at a trial, nor has anyone ever revealed its contents in open court.
The chambers judge rejected the argument that the IUR did not apply at all to evidence of crimes, since “evidence of crimes”� could range from statements giving rise to mere suspicion to downright admissions of guilt. The chambers judge held that it was more desirable to leave the discretionary power of relief to the courts, rather than to the parties. The B. C. Court of Appeal allowed the AG’s appeal. It held that the IUR could not “form a shield from the detection and prosecution of crimes in which the public has an overriding interest.”� The court also held that discovery material remained subject to search or seizure. The employee appealed to the Supreme Court of Canada which allows that appeal.
The opinion then explores these interesting issues. “Quite apart from the cases of exceptional prejudice, as in disputes about trade secrets or intellectual property, which have traditionally given rise to express confidentiality orders, there are good reasons to support the existence of an implied (or, in reality, a court imposed) undertaking.”�
“In the first place, pre trial discovery is an invasion of a private right to be left alone with your thoughts and papers, however embarrassing, defamatory or scandalous. At least one side in every lawsuit is a reluctant participant. Yet a proper pre trial discovery is essential to prevent surprise or “�litigation by ambush’, to encourage settlement once the facts are known, and to narrow issues even where settlement proves unachievable.”�
“Thus, Rule 27(22) of the B. C. Rules of Court compels a litigant to answer all relevant questions posed on an examination for discovery. Failure to do so can result in punishment by way of imprisonment or fine pursuant to Rules 56(1), 56(4) and 2(5). In some provinces, the rules of practice provide that individuals who are not even parties can be ordered to submit to examination for discovery on issues relevant to a dispute in which they may have no direct interest. It is not uncommon for plaintiff’s counsel aggressively to “�sue everyone in sight’ not with any realistic hope of recovery but to “�get discovery’. Thus, for the out of pocket cost of issuing a statement of claim or other process, the gate is swung open to investigate the private information and perhaps highly confidential documents of the examinee in pursuit of allegations that might in the end be found to be without any merit at all.”�
“The public interest in getting at the truth in a civil action outweighs the examinee’s privacy interest, but the latter is nevertheless entitled to a measure of protection. The answers and documents are compelled by statute solely for the purpose of the civil action and the law thus requires that the invasion of privacy should generally be limited to the level of disclosure necessary to satisfy that purpose and that purpose alone. Although the present case involves the issue of self incrimination of the [deponent], that element is not a necessary requirement for protection. Indeed, the disclosed information need not even satisfy the legal requirements of confidentiality set out in Slavutych v. Baker (1975), [1976] 1 S. C. R. 254 (S. C. C.). The general idea, metaphorically speaking, is that whatever is disclosed in the discovery room stays in the discovery room unless eventually revealed in the courtroom or disclosed by judicial order.”�
“There is a second rationale supporting the existence of an [IUR]. A litigant who has some assurance that the documents and answers will not be used for a purpose collateral or ulterior to the proceedings in which they are demanded will be encouraged to provide a more complete and candid discovery. This is of particular interest in an era where documentary production is of a magnitude (“�litigation by avalanche’) as often to preclude careful pre screening by the individuals or corporations making production.[Cite].”�
“For good reason, therefore, the law imposes on the parties to civil litigation an undertaking to the court not to use the documents or answers for any purpose other than securing justice in the civil proceedings in which the answers were compelled (whether or not such documents or answers were in their origin confidential or incriminatory in nature).”�
“The need to protect the privacy of the pre trial discovery is recognized even in common law jurisdictions where there is no implied undertaking. See J. B. Laskin, “�The Implied Undertaking’ (a paper presented to the CBA Ontario, CLE Conference on Privilege and Confidential Information in Litigation “� Current Developments and Future Trends, October 19, 1991), at pp. 36 40. Rule 26(c) of the United States’ Federal Rules of Civil Procedure provides that a court may, upon a showing of “�good cause’, grant a protective order to maintain the confidentiality of information disclosed during discovery. The practical effect is that the courts routinely make confidentiality orders limited to pre trial disclosure to protect a party or person being discovered “�from annoyance, embarrassment, oppression, or undue burden or expense’. See, e.g., Cipollone v. Liggett Group Inc., 785 F.2d 1108 (3rd Cir. 1986).”�
“Breach of the [IUR] may be remedied by a variety of means including a stay or dismissal of the proceeding, or striking a defence, or, in the absence of a less drastic remedy, contempt proceedings for breach of the undertaking owed to the court. See Lac d’Amiante, at ¶ 64, and Goodman v. Rossi (1995), 125 D.L.R. (4th) 613 (Ont. C.A.), at p. 624.”�
“The undertaking is imposed in recognition of the examinee’s privacy interest, and the public interest in the efficient conduct of civil litigation, but those values are not, of course, absolute. They may, in turn, be trumped by a more compelling public interest. Thus, where the party being discovered does not consent, a party bound by the undertaking may apply to the court for leave to use the information or documents otherwise than in the action, In such an application the judge would have access to the documents or transcripts at issue.”� [¶¶ 24 30].
“An application to modify or relieve against an [IUR] requires an applicant to demonstrate to the court on a balance of probabilities the existence of a public interest of greater weight than the values the implied undertaking is designed to protect, namely privacy and the efficient conduct of civil litigation. In a case like the present, of course, there weighs heavily in the balance the right of a suspect to remain silent in the face of a police investigation, and the right not to be compelled to incriminate herself.”�
“The chambers judge took the view (I think correctly) that in this case that factor was decisive. In other cases the mix of competing values may be different. What is important in each case is to recognize that unless an examinee is satisfied that the undertaking will only be modified or varied by the court in exceptional circumstances, the undertaking will not achieve its intended purpose.”�
“I would prefer to rest the discretion on a careful weighing of the public interest asserted by the applicant (here the prosecution of a serious crime) against the public interest in protecting the right against self incrimination as well as upholding a litigant’s privacy and promoting an efficient civil justice process. What is important is the identification of the competing values, and the weighing of one in the light of the others, rather than setting up an absolute barrier to occasioning any “�injustice to the person giving discovery’. Prejudice, possibly amounting to injustice, to a particular litigant may exceptionally be held justified by a higher public interest, as in the case of the accused whose solicitor client confidences were handed over to the police in Smith v. Jones , [1999] 1 S. C. R. 455 (S.C.C.). …”�
“Of course any perceived prejudice to the examinee is a factor that will always weigh heavily in the balance. It may be argued that disclosure to the police of the evil secrets of the psychopath at issue in Smith v. Jones may have been prejudicial to him but was not an “�injustice’ in the overall scheme of things, but such a gloss would have given cold comfort to an accused who made his disclosures in the expectation of confidentiality. If public safety trumps solicitor client privilege despite a measure of injustice to the (unsympathetic) accused in Smith v. Jones, it can hardly be disputed in this jurisdiction that the [IUR] would yield to such a higher public interest as well.”� [¶ 32]
“As stated, the onus in each case will be on the applicant to demonstrate a superior public interest in disclosure, and the court will be mindful that an undertaking should only be set aside in exceptional circumstances. In what follows, I do not mean to suggest that the categories of superior public interest are fixed. My purpose is illustrative rather than exhaustive. However, to repeat, an undertaking designed in part to encourage open and generous discovery by assuring parties being discovered of confidentiality will not achieve its objective if the confidentiality is seen by reluctant litigants to be too readily set aside.”� [¶ 38]
“Another situation where the deponent’s privacy interest will yield to a higher public interest is where the deponent has given contradictory testimony about the same matters in successive or different proceedings. If the contradiction is discovered, the [IUR] would afford no shield to its use for purposes of impeachment. In provinces where the [IUR] has been codified, there is a specific provision that the undertaking “�does not prohibit the use of evidence obtained in one proceeding, or information obtained from such evidence, to impeach the testimony of a witness in another proceeding.’[Cites].”�
“While statutory, this provision, in my view, also reflects the general common law in Canada. An undertaking implied by the court (or imposed by the legislature) to make civil litigation more effective should not permit a witness to play games with the administration of justice. [Cite]. Any other outcome would allow a person accused of an offence “�[w]ith impunity [to] tailor his evidence to suit his needs in each particular proceeding’ R. v. Nedelcu (2007), 41 C.P.C. (6th) 357 (Ont. S.C.J.), at ¶¶ 49 51).”� [¶ 41]
“The chambers judge took the view that “�leaving the discretionary power of exemption or variation with the courts is preferable to giving litigants the power to report to the police, without a court order, anything that might relate to a criminal offence’ (¶ 27). I agree. On such an application, the court will be able to weigh against the examinee’s privacy interest the seriousness of the offence alleged, the “�evidence’ or admissions said to be revealed in the discovery process, the use to which the applicant or police may put this material, whether there is evidence of malice or spite on the part of the applicant, and such other factors as appear to the court to be relevant to the exercise of its discretion. This will include recognition of the potential adverse effects if the protection of the implied undertaking is seen to be diluted or diminished.”� [¶ 44]
“As mentioned earlier, the lawsuit against the appellant and others was settled in 2006. As a result, the appellant was not required to give evidence at a civil trial; nor were her examination for discovery transcripts ever read into evidence. The transcripts remain in the hands of the parties and their lawyer. Nevertheless, the [IUR] continues. The fact that the settlement has rendered the discovery moot does not mean the appellant’s privacy interest is also moot. The undertaking continues to bind. When an adverse party incorporates the answers or documents obtained on discovery as part of the court record at trial the undertaking is spent, but not otherwise, except by consent or court order. …”� [¶ 51].
“I would not preclude an application to vary an undertaking by a non party on the basis of standing, although I agree with Livent Inc. v. Drabinsky that success on such an application would be unusual. What has already been said provides some illustrations of potential third party applicants. In this case the [AG] supported by the Vancouver Police, demonstrated a sufficient interest in the appellant’s transcripts to be given standing to apply. Their objective was to obtain evidence that would help explain the events under investigation, and possibly to incriminate the appellant. I think it would be quite wrong for the police to be able to take advantage of statutorily compelled testimony in civil litigation to undermine the appellant’s right to silence and the protection against self incrimination afforded him by the criminal law.”�
Accordingly, in my view, the present application was rightly dismissed by the chambers judge. On the other hand, a non party engaged in other litigation with an examinee, who learns of potentially contradicting testimony by the examinee in a discovery to which that other person is not a party, would have standing to seek to obtain a modification of the [IUR] and for the reasons given above may well succeed. Of course if the undertaking is respected by the parties to it, then non parties will be unlikely to possess enough information to make an application for a variance in the first place that is other than a fishing expedition. But the possibility of third party applications exists, and where duly made, the competing interests will have to be weighed, keeping in mind that an undertaking too readily set aside sends the message that such undertakings are unsafe to be relied upon, and will therefore not achieve their broader purpose.”�
“While I would not deny the [AG] standing to seek to vary an implied undertaking to which he is not a party, I agree with the chambers judge that his application should be rejected on the facts of this case. The purpose of the application was to sidestep the appellant’s silence in the face of police investigation of her conduct. The authorities should not be able to obtain indirectly a transcript which they are unable to obtain directly through a search warrant in the ordinary way because they lack the grounds to justify it.”� [¶ 53]
“I would allow the appeal with costs to the appellant both here and in the courts below.”� [The other Justices concur]. [¶ 59].
Citation: Doucette (by guardian ad litem) v. Wee Watch Day Care Systems Inc., 2008 CarswellBC 411; [2008] 1 S.C.R. 157 (Can.Sup. Ct. 2008).
Filed in: 2008 International Law Update, Issue10
By admin
In litigation arising out of Argentinean automobile accidents involving Ford Explorers with Firestone Tires, Florida appellate court rules that trial court did not abuse its discretion by denying Defendants’ motion to dismiss for forum non conveniens, where Argentinean courts would impose 3% filing fee in this case where Plaintiffs sought large amount of damages
A series of rollover accidents occurred in Argentina, involving Ford Explorers with Firestone tires. The injured parties and the families of the deceased parties (Plaintiffs) brought suits against Ford Motor Company and Bridgestone/Firestone North American Tire, LLC (Defendants), in Florida state court. Defendants moved to dismiss on forum non conveniens grounds, arguing that the balance of convenience to the parties and witnesses would favor litigation in Argentina’s courts. The trial court denied the motions.
The District Court of Appeal of Florida reverses and remands. It finds that that the trial court did not conduct an adequate analysis of the forum non conveniens issue pursuant to Kinney System, Inc. v. Continental Insurance Co., 674 So. 2d 86 (Fla. 1996). On remand, the trial court again denied the forum non conveniens motions. Defendants again appealed. The Court of Appeal affirms the lower court’s discretionary ruling that Argentina is an inadequate and unavailable alternative forum under the circumstances.
“A Defendant seeking dismissal on forum non conveniens grounds bears the burden of persuasion as to each Kinney factor. [Cite]. The first factor the court must analyze is whether there is an available adequate alternative forum which possesses jurisdiction over the whole case. [Cite].”�
Both Plaintiffs and Defendants offered affidavits from Argentinean legal experts containing their opinions of the Argentinean courts’ jurisdiction over the case. “Upon reviewing these affidavits, the trial court determined that the existence of jurisdiction in Argentina was arguable and concluded that it could not ensure that an Argentine court would not dismiss the case for lack of jurisdiction … [Hence] the trial court’s conclusion that Appellants did not carry their burden of persuasion on this issue was not unreasonable.”�
“[Defendants]‘ experts asserted that Argentine law provides causes of action and remedies analogous to those sought by Plaintiffs in the United States, and allows for actual and foreseeable damages, as well as pain and suffering damages. However, Plaintiffs’ experts explained that Plaintiffs in Argentina are required to pay a filing fee of 3% of the damages sought in the lawsuit as a prerequisite to consideration of the case.”�
“The trial court concluded that Defendants did not satisfy their burden of persuasion as to the adequacy of the Argentine forum, finding the 3% filing fee of particular importance to its decision. We find this conclusion to be reasonable in light of the affidavits submitted by Defendants’ experts. The 3% filing fee may deprive Plaintiffs of a remedy in Argentina, particularly in cases such as these, where Plaintiffs are seeking a substantial amount of monetary damages.”� [Slip Op. 5 6].
Citation: Bridgestone/Firestone North America Tire, LLC v. Garcia, No. 4D07 1793 (Fla. App. August 6, 2008).
Filed in: 2008 International Law Update, Issue10
By admin
In case of a foreign banking conglomerate involved in a leveraged bond scheme, the Court of Appeal of California rules that the California trial court had personal jurisdiction over the defendants, where bank representatives solicited business in person in the State of California
The Anglo Irish bank, a corporation with its principal place of business in Ireland, is the parent company of the Isle of Man bank and the trust company, corporations with their principal places of business in Isle of Man. The Irish bank, Isle of Man bank and the trust company sought investors to borrow funds form the Isle of Man bank to purchase bonds to be held by the trust company. In March 2000, Davies, who was at that time managing director of the trust company, and Connolly, who was at that time director of the Isle of Man bank, met with 10 or 11 potential investors in California.
Kal Brar and Imelda Brar (“plaintiffs”�), California residents, are co-trustees of the Satnam Trust. Plaintiffs transferred more than $4 million form the Satnam Trust to the Kivrar Trust, that had been created to purchase bonds. After meeting with Davies and Connolly, plaintiffs appointed the trust company trustee of the Kivrar Trust. In June 2000 the Kivrar Trust II was created. The Kivrar Trust II borrowed funds to purchase additional bonds. The plaintiffs’ investments suffered losses, estimated to be approximately $2 million by December 2007.
Plaintiffs filed suit against Anglo Irish bank, Isle of Man bank, the trust company and others (“defendants”�) in May 2005, alleging intentional misrepresentation, fraudulent concealment, securities fraud, breach of fiduciary duty, negligent misrepresentation and an accounting.
Defendants moved to quash service for lack of personal jurisdiction. The trial court denied the motion finding that each defendant had sufficient contacts with the State to be subject to specific personal jurisdiction. Defendants Appealed to the Court of Appeal of California filing petitions for a writ of mandate, challenging the denial of their motions to quash. The Court of Appeals stayed the trial court proceedings and issued an order to show cause. After considering the case the Court of Appeals denied the petitions and lifted the stay of trial court proceedings and discharged the order to show cause. [Slip Op. 1 2].
“The proper jurisdictional question is not whether the defendant can be liable for the acts of another person or entity under state substantive law, but whether the defendant has purposefully directed its activities at the forum state by causing a separate person or entity to engage in forum contacts.”�
“Davies, Connolly, and McGee visited California for the purpose of engaging in economic activity with California residents. Contrary to Petitioners’ argument that they only sought to satisfy Isle of Man’s “know your customer”� requirements, the purpose of satisfying those requirements was to make the leveraged investments possible. They discussed leveraging “with profit bonds”� with the [plaintiffs] and other potential investors during the visit by Davies and Connolly in March 2000, McGee’s visit a few months later, and Davies’s visit in May 2001. Through those visits, they succeeded in garnering millions of dollars in investments from California residents.”�
“… [W]e conclude that the Irish bank, the Isle of Man bank, and the trust company purposefully directed their activities at California residents by and through the individuals who visited California on their behalf. We conclude further that Petitioners, and each of them, purposefully derived benefit from their activities in California and deliberately engaged in significant activities within this state, and that they therefore purposefully availed themselves of forum benefits.”� [Slip Op. 5]
“[Defendants] argue that after creating offshore trusts for the apparent purpose of removing assets from the jurisdiction of California courts, the plaintiffs should not be allowed to sue foreign defendants in California courts “just because their investment did not prove as fruitful as they had hoped.”� We conclude that by investing in foreign trusts, the plaintiffs did not waive the right to sue Petitioners in a California court to seek redress for injuries related to or arising out of Petitioners’ California activities. Moreover, the plaintiffs do not allege only that the investments were unsuccessful, but that Petitioners made material misrepresentations and omissions in California in connection with the investments.”� [Slip Op. 6]
Citation: Anglo Irish Corporation, PLC v. Superior Court of Los Angeles County, B206714 (Cal. App. 2008).
Filed in: 2008 International Law Update, Issue10
By admin
Where young woman of prior good character sent note to member of friend’s criminal jury asking her to acquit friend, U. K. Court of Appeal (Criminal Division) reviews Defendant’s good references, clean record and plea of guilty and reduces length of her confinement
The Defendant on appeal is Kelly Leanne Cameron aged 20, a young woman of previous good character. She was a student at Huddersfield University in West Yorkshire NE, majoring in hospitality management. By the summer of 2008, she had successfully finished two years of a four year course. As part of the curriculum, Defendant was scheduled to take up a work placement at “Disney World”� in Florida on September 4, 2008. She was the only student to obtain such a notable opportunity.
On August 12, 2008, the Defendant attended the first day of a jury trial of a close friend named Gavin Conroy in the Crown Court of Bradford in the north of England. The criminal trial by jury was for violating Section 18 of the Offences against the Person Act 1861. The Defendant watched the trial from the public gallery throughout the first day. At some point, she became aware that one of the jurors was Katie Walker, whom Defendant knew through a mutual friend, Samantha McSheffery. The juror also recognized the Defendant, from seeing her at the public house where Mr. Conroy was alleged to have committed his offense.
Having recognized the juror, and apparently unaware of the consequences, the Defendant decided to ask Miss McSheffery to get a message to the juror asserting that Mr. Conroy was not guilty. To that end, at 2.48pm, the Defendant sent the following message to Miss McSheffery: “Sam, please do a favour and text Katie that you have brought into “�spinks’ before. Just text her saying [Mr. Conroy is] not guilty. I will call and explain later but please do this for me.”�
As a result of that message, Miss McSheffery sent a text message to the juror saying that she had received a text from the Defendant saying: “Please tell friend he is not guilty. He did not do it.”� When the court was adjourning that afternoon, the municipal judge gave the customary direction to the jury as to what to do if anyone approached them about one of their cases. At that moment, the Defendant began to realize the potential seriousness of what she had asked Miss McSheffery to do. She tried to get in touch with her to find out whether she had sent the message and, if not, to prevent it being sent. Unfortunately, she had already forwarded the text message to the juror.
The following morning, the juror responsibly reported the matter to the court. Fortunately, she did not tell any of her fellow jurors about the message that she had gotten. The judge was, therefore, able to release her from jury service and to get on with the trial. The jury eventually acquitted Mr. Conroy of the Section 18 offense, but found him guilty instead of a Section 20 offense.
The police arrested Defendant and interviewed her on August 13, the same day as the juror had reported the approach. The Defendant fully admitted arranging the sending of the message. She said that, until she heard the judge’s cautionary instruction, she had very little knowledge of court procedures and thus had no idea how serious her action was in trying to influence the juror. She fully accepted that her actions were wrong. Two weeks later, on August 27, 2008, the Defendant pleaded guilty. The particulars of the charges made clear that she admitted trying to sway the juror’s vote in favor of Mr. Conroy.
In view of the pre existing arrangements for the Defendant to travel to Florida a few days later to take up her job placement, the court adjourned overnight to allow time for an urgent pre sentence report. The following day the judge obtained the pre sentence report that recommended a community order or a suspended sentence order with one or more requirements. The report also indicated that there was a low risk of re offending and that the Defendant was remorseful. The judge also had before him five character references from responsible individuals at the university and from a family friend, all of whom spoke highly of the Defendant. The report cited the judge to a number of authorities in relation to sentence in this type of case.
When passing sentence, the judge indicated that he was inclined to believe that the Defendant had been naive and stupid, but he rightly stressed the paramount need for jurors to perform their public service without outside interference. He pointed out that the case law had often made plain that custody ( sometimes substantial in length) is typically unavoidable in cases of this type. In his view, he should not suspend sentence, and thus he handed down an immediate sentence of twelve months’ detention in a young offender institution. He made it clear on the record that he had shortened the sentence by one third to reflect the prompt guilty plea. Defendant then sought review of the length of her sentence by the Court of Appeal (Criminal Division).
Defendant’s counsel contended to the appellate tribunal that the sentence below was manifestly excessive. She has referred the Court to the material authorities that were before the judge below, to the various points that were made in mitigation, and to the additional penalties that the Defendant has already suffered in the light of her immediate custodial sentence, most particularly the loss of her work placement in the United States, an inability to continue with her degree program to date, and the uncertainty as to whether she will ever be able to travel to the United States in the future.
This is the Court’s response. “To state the obvious, … it is the very foundation stone of our system of jury trial that jurors are able to carry out their duties uninfluenced and unaffected by outside interference; most particularly that they are able to do so absent any threat or encounter, direct or indirect, designed, or having the tendency, to persuade them from the proper performance of their task in accordance with the oath that they have taken. The naive and indirect approach to a juror may be just as disturbing for the juror as a more calculated one, and the consequences may be disastrous. That is why, to deter others, custody is inevitable for those who interfere with jurors, and sometimes substantial periods of custody.”�
“That said, in passing sentence, regard must be had to the facts of the particular case, and especially to the nature and the degree of the interference. Here a custodial sentence was, as we have indicated, inevitable. The length of the sentence imposed by the judge was within the general range indicated by the authorities. The real question on this application, as it seems to us, is whether, given the exceptional facts of this case, the custodial sentence should have been shorter.”�
“In the end, we are persuaded that it should have been. As we have indicated, the Defendant is 20 years of age and of previous good character. She acted out of naivety. The moment she appreciated the gravity of what she had set in train, she tried to prevent the juror from being contacted. The message that was passed to the juror was delivered indirectly and was not a threatening one. Fortunately for the Defendant, the juror behaved entirely responsibly and thus the trial was able to continue to a conclusion with little disruption. The Defendant made an immediate and full confession. She pleaded guilty at the first available opportunity. She has lost already her prime job placement in the United States and as a result of this conviction may not be able to travel there in the future to take up any similar opportunity. In those circumstances, we grant the application for leave, and reduce the sentence to one of four months’ detention in a young offender institution.”�
“In closing, we would emphasise that this is a case decided entirely upon its own exceptional facts. It should not be regarded as providing any sort of sentencing guideline. Against that background, and to the extent that we have indicated, the appeal against sentence is therefore allowed.”� [¶¶ 14 18].
Citation: Regina v. Cameron, [2008] E.W.C.A. Crim. 2493; 2008 WL 4699009 (CA (Crim Div)) (15 October).
Filed in: 2008 International Law Update, Issue10
By admin
Plaintiff, Nova Scotia resident injured in Wyoming auto accident where limitations law requires filing suit within four years of accident sued U.S. residents in own provincial court where Plaintiffs (unlike in Wyoming) may commence civil actions merely by filing complaint; Nova Scotia Court of Appeal rules that suit was timely since Plaintiff had filed his pleadings in compliance with Nova Scotia procedural rules within four years of collision in obedience to Wyoming substantive law
Back in 2000, a motor vehicle accident in Wyoming, U.S.A. injured Richard Vogler (Plaintiff), a Nova Scotia resident. In January 2003, he filed an action in the Nova Scotia courts against the Defendants Christopher Szendroi, the driver, and Carole Sheehan, the owner of the vehicle in which Plaintiff was riding at the time. Service of these pleadings has been, at the very least, delayed. It was not until May of 2006, some three years after the filing of the action and six years after the accident, that the Plaintiff served Defendant Sheehan in California. It appears that the Plaintiff has not yet served Defendant Szendroi, a resident of Quebec.
A Wyoming statute requires a Plaintiff to file a civil action such as this within four years of the accident. At the heart of this appeal is Wyoming’s Rule of Civil Procedure 3 which seems to link the commencement of an action to service of process. Subparagraph (a) provides that a Plaintiff commences an action by filing a complaint with the court. Subparagraph (b) then specifies that, if Plaintiff fails to serve the pleadings within 60 days of filing, Plaintiff does not “commence”� the action until the date of service:
In Nova Scotia, on the other hand, a Plaintiff starts an action simply by filing the appropriate pleadings. Civil Procedure Rule 9.01 provides: “Subject to rule 9.06(2) every proceeding, … shall be commenced by filing an originating notice and a copy thereof in the prothonotary’s office, and the notice is deemed to have been issued on the day it is filed.”�
The following basic choice of law principles govern this appeal. Regardless of where Plaintiff files an action, the substantive laws of the jurisdiction where the alleged tort took place (the lex loci delicti) apply “� here the State of Wyoming. The law generally classifies limitation periods as “substantive.”� In this case, all parties acknowledge that Wyoming’s four year rule is substantive and does apply to the Plaintiff’s case.
On the other hand, forum law and/or rules will govern procedures in such a case as this, i.e., the rules of Nova Scotia procedure. From this flows an important corollary. Wyoming’s rules of procedure have no application in Nova Scotia. This leads to the ultimate issue on appeal: Is Wyoming Rule 3(b) substantive or procedural in nature? If it is substantive, then it applies to the Plaintiff and bars this Nova Scotia action. On the other hand, if it is procedural, it does not apply in this case and the Plaintiff’s action remains timely because it complied with Wyoming’s substantive four year rule.
The lower court granted Defendant’s motion to quash and Plaintiff appealed. The Nova Scotia Court of Appeal decides it need only address the first two of Plaintiff’s claims of error: [1] that the trial judge erred in law in failing to apply the law of Nova Scotia in determining whether Wyoming R. Civ. P. Rule 3(b) was substantive or procedural in nature; [2] that the trial judge erred in law in finding that Rule 3(b) was substantive rather than procedural in nature. Finding merit in Plaintiff’s contentions, the Court allows Plaintiffs appeal and sets aside the dismissal order.
The lead opinion then sets forth the Court’s rationale. “The second ground identifies the ultimate issue that I have noted above, namely: Is Rule 3(b) substantive or procedural in nature? As observed, the Plaintiff asserts that the judge erroneously found it to be substantive. As the analysis of that ultimate issue also addresses the first ground, I will deal with them as a single ground of appeal.”� [¶ 14]
“Let me begin by initially addressing the standard upon which we should review the judge’s decision. This is an appeal from a discretionary interlocutory order which normally would attract significant deference. However, because the effect of this order was to finally dispose of [Plaintiff's] action, less deference is owed. Our review, therefore, examines whether there was an error in law resulting in an injustice.”�
“In considering this question, it is noteworthy that there was no factual dispute before the Chambers judge. He was engaged strictly in legal analysis involving a question of private international law. In other words, if the judge did err in his analysis, it would be an error of law that would leave us free to substitute what we would view as the proper result. [Cites].”�
“I begin my analysis by explaining, in some detail, the distinction between substantive law and procedural law. Consider the respective definitions as set out in Black’s Law Dictionary, 8th ed. (St. Paul, MN: Thomson West, 2004). Substantive law involves a litigant’s rights or obligations. [It is] the part of the law that creates, defines, and regulates the rights, duties, and powers of parties. On the other hand, procedural law involves the process by which a litigant’s rights or obligations are enforced or defended. Thus, procedural law is defined as: [t]he rules that prescribe the steps for having a right or duty judicially enforced, as opposed to the law that defines the specific rights or duties themselves.”�
“Thus, as noted over 60 years ago by John Salmond in Jurisprudence 476 (Glanville L. Williams ed., 10th ed. 1947), these two concepts are inextricably linked: “�So far as the administration of justice is concerned with the application of remedies to violated rights, we may say that the substantive law defines the remedy and the right, while the law of procedure defines the modes and conditions of the application of the one to the other.’”�
“This court has described the distinction between substantive and procedural law in these terms: “�[S]ubstantive law creates rights and obligations and is concerned with the ends which the administration of justice seeks to attain, whereas procedural law is the vehicle providing the means and instruments by which those ends are attained. It regulates the conduct of Courts and litigants in respect of the litigation itself whereas substantive law determines their conduct and relations in respect of the matters litigated.’”� [¶¶ 16 20]
“… [T]here is no dispute that Wyoming’s substantive law applies in this matter. As the parties have acknowledged, Wyoming’s statutory four year limitation period is a matter of substantive law. See Tolofson v. Jensen, [1994] 3 S.C.R. 1022 (S.C.C.) at ¶¶ 86 88. Therefore, [Plaintiff] had four years to commence his action. His present Nova Scotia action was filed within four years.”�
“…[T]here is no question that matters of procedure, on the other hand, are governed by the law of the domestic forum, in this case Nova Scotia (see Tolofson at ¶ 41). Thus, the consequences of determining [Wyoming] Rule 3(b) as either substantive or procedural come to the fore. If Rule 3(b) is substantive, it applies in this case and [Plaintiff's] action, because of the late service, will have lapsed. If it is procedural, Rule 3(b) has no application in this case and the Nova Scotia action is preserved.”�
“There exists this further underlying question. When approaching and resolving this issue, is our analysis governed by domestic Nova Scotia law or does Wyoming’s jurisprudence on this provision apply? The undisputed answer is that Nova Scotia jurisprudence governs the analysis. Thus, we should ask: If such a provision existed in Nova Scotia, applying Nova Scotia’s jurisprudence, would it be considered substantive or procedural? See Somers v. Fournier , [2002] O.J. No. 2543 (Ont. C.A.) at ¶¶ 20 &31, and Brown v. Flaharty, [2004] O.J. No. 5278 (Ont. S.C.J.) at ¶ 9.
“Returning to the ultimate question of whether Rule 3(b) is substantive or procedural, we must draw our attention to the true subject matter of the impugned provision. In other words, is Rule 3(b) about timing as the respondents suggest, i.e., concerning when an action must be commenced? If so, and given its alignment with Wyoming’s four year statutory rule, it would appear to be more substantive than procedural in nature. On the other hand, the Plaintiff suggests that this provision is not about timing but about methodology. In other words, it describes the manner in which an action is (or is deemed to have been) commenced. That would be a subject matter more akin to procedure.”�
“In summary, when approaching questions such as these, I would advocate a three step analysis: 1. identify the exact subject matter covered by the impugned foreign provision; 2. determine whether, in the domestic forum (in this case Nova Scotia), this subject matter would be considered procedural or substantive; and, 3. if the subject matter would be characterized as substantive, then the foreign provision should be applied. On the other hand, if the subject matter is characterized as procedural, then the foreign provision should not be applied.”� [¶¶ 24 28]
“By tying Rule 3(b) to the Wyoming Statute of Limitations, the judge, erroneously I believe, concluded that Rule 3(b) involved filing deadlines “� i.e., when an action must be started. However, in my view, Rule 3(b) does not involve when an action must be commenced. That issue is clearly set out in Wyoming’s Statute of Limitations, which prescribes four years. As acknowledged, this four year rule, like most limitation period provisions, is substantive in nature. Instead I view Rule 3(b) as directing how an action is commenced. In Wyoming this task involves both filing and service. In Nova Scotia, as noted, the task is completed simply by filing the relevant documentation.”� [¶ 32]
“I disagree with this submission. In my view, this introductory phrase in Rule 3(b) simply identifies the rationale for the provision. In other words, Rule 3(b) sets out the process for complying with statutory deadlines for filing actions. In this case, the limitation period is four years and that is prescribed by statute. Nothing in Rule 3(b) changes that. Again, it simply directs how one can comply with this prerequisite. In summary, Rule 3(b) is not about how long you have to file a claim; it is about how a plaintiff commences a claim.”� [¶ 35]
“[T]wo substantive rights are at stake in this appeal: [Plaintiff's] right to sue the [Defendants] in negligence and the [Defendants'] corresponding right not to be sued after four years…. Rule 3(b) sets out the manner in which [Plaintiff's] right is pursued. Viewed in this light, Rule 3(b) does not alter, nor is it linked to, the [Defendants'] rights not to be sued after four years. All this, in my opinion, leads to the inescapable conclusion that Rule 3(b) is procedural and not substantive in nature.”�
“In summary, the Chambers judge erred in concluding that Rule 3(b) was substantive in nature and thereby enforceable as a bar to [Plaintiff's] Nova Scotia action. Instead, Rule 3(b) is a Wyoming Rule of Civil Procedure and therefore has no application to this case. Pursuant to Nova Scotia Civil Procedure Rule 9.01, [Plaintiff] commenced his action by filing it. He did so within four years. His claim should not have been dismissed.”� [¶¶ 40 41]
Citation: Vogler v. Szendroi, 2008 CarswellNS 85; 2008 N.S.C.A. 18; 50 C.P.C. (6th) 264 (2008).
Filed in: 2008 International Law Update, Issue9
By admin
In libel action by parental opponent of gay rights curriculum in British Columbia schools against radio “shock jock”� who seemed to compare her to historic rabble rousers as Hitler, George Wallace, Orval Faubus and others, Canadian Supreme Court upholds judgment for Defendants based on “fair comment”� defense
Kari Simpson (Plaintiff) belonged to an organization which opposed the placement and use of materials in schools showing families with same sex parents. It also was against any promotion of, or tolerance for, gay lifestyles in the schools. She helped put together a document aimed to assist parents to successfully oppose gay rights related teachings in public schools called the Declaration of Family Values; she also spoke at a rally where she vigorously advanced her position on the school controversy.
In October 1999, Rafe Mair (Defendant), a so called “shock jock”� radio talk show host, wrote and read an editorial on a private radio station owned and operated by radio station CNKW a subsidiary of station WJC (Defendant 2). In the editorial, Defendant referred to the Plaintiff’s speech and made statements which compared the Plaintiff to violent and intolerant historical figures.
This is a partial quote: “For [Plaintiff's] homosexual, one could easily substitute Jew. I could see Governor Wallace in my mind’s eye I could see Governor Wallace of Alabama standing on the steps of a schoolhouse shouting to the crowds that no Negroes would get into Alabama schools as long as he was governor. It could have been blacks last Thursday night just as easily as gays. Now I’m not suggesting that [Plaintiff] was proposing or supporting any kind of holocaust or violence but neither really in the speeches, when you think about it and look back neither did Hitler or Governor Wallace or [Orval Faubus] or Ross Barnett. They were simply declaring their hostility to a minority. Let the mob do as they wished.”�
The Plaintiff brought a civil action for libel in the British Columbia courts against Defendant 1 and Defendant 2. The court of first instance dismissed it. The judge found that Defendant’s statements were indeed defamatory, but that the issue in question was a matter of public interest and thus applied the defense of “fair comment”� to Defendant 1′s words.
The Court of Appeal allowed the Plaintiff’s appeal. It ruled that the defense of fair comment was not available because no evidentiary foundation existed for the imputation that the Plaintiff “would condone violence toward gay people”�, nor had Defendant testified that he had an honest belief that the Plaintiff would do so. Defendant 1 and Defendant 2 appealed. The Supreme Court of Canada allows the appeal and dismisses the action.
In the Court’s view, the editorial made clear the factual basis of the controversy. Defendant’s listeners were generally aware of it. In the absence of proven malice on his part, which the trial judge had held was not a dominant motive, the law shielded his expression of opinion. Defendant was a radio personality with strong opinions, not a reporter of facts. Thus, the applicable defense was Fair Comment.
“This is a private law case that is not governed directly by the Canadian Charter of Rights and Freedoms. Yet it was common ground in the argument before us that the evolution of the common law is to be informed and guided by Charter values. Particular emphasis was placed on the importance of ensuring that the law of fair comment is developed in a manner consistent with the values underlying freedom of expression. However, the worth and dignity of each individual, including reputation, is [also] an important value underlying the Charter and is to be weighed in the balance with freedom of expression, including freedom of the media.”�
“The Court’s task is not to prefer one over the other by ordering a “�hierarchy’ of rights (Dagenais v. Canadian Broadcasting Corp., [1994] 3 S. C. R. 835 (S.C.C.)), but to attempt a reconciliation. An individual’s reputation is not to be treated as regrettable but unavoidable “�road kill on the highway of public controversy,’ nor should an overly solicitous regard for personal reputation be permitted to “�chill’ freewheeling debate on matters of public interest. As it was put by counsel for the intervener, Media Coalition, “�No one will really notice if some [media] are silenced; others speaking on safer and more mundane subjects will fill the gap.’”� [¶ 2]
“The [Plaintiff] on this appeal did not challenge the view that [Defendant's] imputation that [Plaintiff] “�would condone violence toward gay people’ was a comment not an imputation of fact. I agree that the “�sting’ of the libel was a comment and it would have been understood as such by [Defendants'] listeners. “�What is comment and what is fact must be determined from the perspective of the reasonable viewer or reader. [Cite]. [Defendant] was a radio personality with opinions on everything, not a reporter of the facts. The applicable defence was fair comment. On that point, I agree with the trial judge.”� [¶ 27].
“… [A] properly disclosed or sufficiently indicated by the audience factual foundation (or [one] so notorious as to be already understood by the audience) is an important objective limit to the Fair Comment defence, but the general facts giving rise to the dispute between [Defendant] and [Plaintiff] were well known to [Defendants'] listening audience, and were referred to in part in the editorial itself. [Plaintiff's] involvement in the Declaration of Family Values was familiar to [Defendants'] audience. Her repeated invitations to her followers to pick up the phone and call talk shows and politicians assured her views a measure of notoriety. [Cite].”�
“The [Plaintiff] has offered no persuasive reason to justify the Court of Appeal’s interference with the trial judge’s conclusion that the defence has established that every element of the factual foundation was either stated or publicly known; that [Defendant] was aware of them all; and that they were all substantially true in the sense that they were true in so far as they go to the pith and substance of the opinion [Defendant] expressed.”� [¶ 34]
“Of course the law must accommodate commentators such as the satirist or the cartoonist who seizes on a point of view, which may be quite peripheral to the public debate, and blows it into an outlandish caricature for public edification or merriment. Their function is not so much to advance public debate as it is to exercise a democratic right to poke fun at those who huff and puff in the public arena.”�
“This is well understood by the public to be their function. The key point is that the nature of the forum or the mode of expression is such that the audience can reasonably be expected to understand that, on the basis of the facts as stated or sufficiently indicated to them, or so generally notorious as to be understood by them, the comment is made tongue in cheek so as to lead them to discount its “�sting’ accordingly.”� [¶ 48]
“Applying the law of Fair Comment to the facts of the case, the trial judge dealt with the issues in an appropriate sequence. The defamatory meaning of the words complained of was considered in their full context in determining that the comments were defamatory. No reason existed to interfere with that conclusion, as it was plainly correct. The public debate about the inclusion in schools of educational material on homosexuality clearly engaged public interest. No statement existed which would be understood to be a matter of fact, and the language in which it was couched was such that it was clearly opinion. The comment was based on a sufficient substratum of facts to anchor the defamatory comment.”�
“The Plaintiff did not dispute the contents or tone of her speeches in the court record. Further, the Defendants satisfied the honest belief requirement. Notwithstanding the absence of a subjective honest belief that the Plaintiff would condone violence, Defendant was entitled to rely on the objective test. The [Plaintiff's] use of violent images could support an honest belief on the part of at least some of her listeners that she “�would condone violence toward gay people’. Considering both the content of the [Plaintiff's] speeches and the broad latitude allowed by the defence of Fair Comment, the defamatory imputation that while the [Plaintiff] would not engage in violence herself she “�would condone violence’ by others, was an opinion that could honestly have been expressed on the proved facts by a person “�prejudiced, exaggerated or obstinate [in] his views’.”�[¶ 62]
Citation: Simpson v. Mair, 2008 CarswellBC 1311, 2008 S.C.C. 40 (Sup. Ct. Can. June 27).
Filed in: 2008 International Law Update, Issue9
By admin
House of Lords panel reverses Court of Appeal, ruling that Illinois nonprofit international umbrella company is covered for default and collapse of Parmalat, Italian member company, under accountants’ indemnity policy specifically covering its ninety three member companies
This is an appeal by the insured from a decision in favor of the insurers on the interpretation of an extension to an accountants’ professional indemnity policy. The appellant is Grant Thornton International (GTI) a “not for profit”� umbrella corporation with its headquarters in Illinois. It is broadly responsible for managing and maintaining the worldwide organisation of Grant Thornton firms. The policy covered as the “Assured Firm”� listed 93 GTI member firms, not including GTI itself. Extension 3, however, did include GTI as an insured firm but “solely in respect of claims made against [GTI] arising from claims made against a member firm of [GTI] insured by the terms and conditions of the policy”�.
The financial collapse of Parmalat Finanziaria SpA , an Italian company, led Parmalat investors to file class action lawsuits in the United States against GTI’s Italian firm as auditors of Parmalat and against GTI as an entity in control of GT Italy. This followed the revelation that Bonlat Financing Corporation, its Cayman Island subsidiary, did not have the Euro 3.95 billion credit balance with Bank of America, New York branch, which had appeared in its, and the Parmalat group’s, accounts. GT Italy had audited these accounts, later known as Italaudit SpA in liquidation.
The insurers then avoided the policy for GT Italy’s alleged non disclosure and breach of warranty; they also notified GTI that, since they had avoided GT Italy’s insurance ab initio, GTI had lost any cover otherwise available to GTI. The insurers sued for a declaration that they had validly avoided the policy or were discharged from liability by reason of breach of warranty and obtained a default judgment against GT Italy. GTI obtained summary judgment in its favor on the ground that, even if the insurers succeeded against GT Italy, GTI would be entitled to an indemnity, since the claims made against it arose from claims made against GT Italy and were within Extension 3. The Court of Appeal upheld the insurers’ appeal.
The Court of Appeal agreed with the insurers’ case. Thus, it came down to these two issues: [1] whether the claim was one for which the policy did not cover GT Italy and [2] if so, whether GTI could still obtain coverage under it.
GTI argued that Extension 3 did cover it as an assured within the insuring clauses and that the wording of Extension 3 was merely a shorthand reference to the second insuring clause in that the phrase “insured by the terms and conditions of this policy”� was merely descriptive. Thus it did not amount to a positive requirement that either the claim or the member firm had to be validly covered.
Upon granting review, four members of the House of Lords unanimously agree with the reasoning in Lord Mance’s opinion and allow the appeal. The most telling consideration on the appeal was the hodgepodge nature of the coverage that would result from the insurers’ reading of the policy.
Lord Mance preferred GTI’s reading of Extension 3 because it gave GTI, as an assured firm, the protection of the second insuring clause without any need to show that the claim against GT Italy was itself one which was insured under either of the two insuring clauses. That meant that the phrase “insured by the terms and conditions of this policy”� did not relate to the earlier words “claims made”�, but rather to the words “a member firm of [GTI].”�
“The Court of Appeal took the view that the second insuring clause was likely only to be relevant in relation to International Work as defined in the policy. I am not persuaded by this. Question 18 in the proposal addresses the risk of liability arising from mere association in, or with, the [GTI] family. Allegations of vicarious or partnership liability of this nature, however tenuous they might appear to an English lawyer, are a foreseeable risk of such association.”�
“Indeed, in the present New York litigation, GTI is said to be liable “�as an entity … in control of [GT Italy]‘, i.e. simply because of the association between them within the Grant Thornton family or organisation. There is also a claim against GTI for violating United States securities laws, but GTI does not suggest that that this can be covered by the second insuring clause, read with Extension 3.”� [¶ 17]
“If individual member firms are, as between themselves, given full cover in respect of liability for such claims incurred by reason of their membership in [GTI], it would seem very odd that GTI itself should not enjoy similarly full cover in respect of claims holding it responsible on a vicarious or partnership for, or with, one of the insured member firms in its international family. The submission that this would not, because GTI is not, as the umbrella entity, itself a “�member’ of [GTI] and that it cannot therefore incur liability “�by reason of its membership in [GTI] is formalistic in the extreme; and anyway [it] ignores the different potential shades of meaning attaching to “�Grant Thornton International’.”�
“If insurers are right, then GTI, in respect of the acknowledged risk of claims (however tenuous) made against it, only achieved cover under this policy in two particular situations: [1] one where a member firm received a claim relating to International Work as defined, [2] the other where a member firm was itself the recipient of a claim that it was liable for another member firm on some vicarious or partnership basis by reason of its membership in [GTI]. [GTI] would then have cover if, “�arising from’ the claim made against a member firm, [GTI] itself also received a claim.”�
“This limited patchwork cover would mean, on insurers’ case, that [GTI] needed another policy insuring it for vicarious or partnership type claims arising in other circumstances, such as (it appears) the present [ones]. In the vacuum surrounding the present policy, all that can be said is that there is no indication of any relevant gap filling insurance, and that insurers’ construction appears on any view to postulate an unlikely allocation and splitting of insurance risks.”�
“In these circumstances, I have come to a different conclusion to the Court of Appeal. I consider that [GTI's] construction of Extension 3 is to be preferred. It gives to [GTI] as an Assured Firm the protection of the second insuring clause, without any need to show that the claim against GT Italy is itself one which is insured under either of the two insuring clauses. This means that the phrase “�insured by the terms and conditions of this policy’ do not relate to the earlier words “�claims made’, but rather to the words “�a member firm of Grant Thornton International’.”� [¶¶ 20 22]
Citation: Brit. Syndicates Ltd. v. Italaudit SpA. & Ors., [2008] U.K.H.L. 18; 2008 WL 576931(HL); [2008] All. E. R. 1140 (House of Lords).
Filed in: 2008 International Law Update, Issue9
By admin
In case concerning extraterritorial application of U.S. Rule 10b, Second Circuit encounters “foreign cubed”� securities action for first time and rules that actions by Australian bank as to American company did not require application of Rule 10b to its actions
In 1998, National Australia Bank (NAB), headquartered in Melbourne, acquired HomeSide Lending, Inc. (HomeSide), an American mortgage service company. HomeSide had made inaccurate assumptions about its future earnings, causing NAB to suffer several write downs, along with falling share values.
The Plaintiffs in this case bought NAB shares that lost value, and sued NAB, HomeSide, as well as certain officers and directors (jointly Defendants). They allege numerous violations of securities rules, including Rule 10b 5, because of HomeSide’s unreasonably optimistic valuations. A New York federal court dismissed the complaint for failure to state a claim. This appeal followed. The U.S. Court of Appeals for the Second Circuit affirms.
The main difficulty here involves the extraterritorial application of Rule 10b 5: “When Congress wrote the Securities Exchange Act, however, it omitted any discussion of its application to transactions taking place outside of the United States. See Itoba Ltd. v. LEP Group PLC, 54 F.3d 118, 121 (2d Cir. 1995) (“�It is well recognized that the Securities Exchange Act is silent as to its extraterritorial application.’) …. Therefore, when faced with securities law claims with an international component, we turn to “�the underlying purpose of the anti fraud provisions as a guide to discern whether Congress would have wished the precious resources of the United States courts and law enforcement agencies to be devoted to such transactions.’ Europe & Overseas Commodity Traders, S.A. v. Banque Paribas London, 147 F.3d 118, 125 (2d Cir. 1998) ….”�
“The underlying purpose of Section 10(b) is “�to remedy deceptive and manipulative conduct with the potential to harm the public interest or the interests of investors.’ … Harm to domestic interests and domestic investors has not been the exclusive focus of the anti fraud provisions of the securities laws. As our case law makes clear, we believe that it is consistent with the statutory scheme to infer that Congress would have wanted “�to redress harms perpetrated abroad which have a substantial impact on investors or markets within the United States.’ …”�
“We decided in Psimenos v. E. F. Hutton & Co., 722 F.2d 1041, 1045 (2d Cir. 1983) that, in determining the extraterritorial reach of Section 10(b), we look to whether the harm was perpetrated here or abroad and whether it affected domestic markets and investors. This binary inquiry calls for the application of the “�conduct test’ and the “�effects test.’ … We ask: (1) whether the wrongful conduct occurred in the United States, and (2) whether the wrongful conduct had a substantial effect in the United States or upon United States citizens. … Where appropriate, the two parts of the test are applied together because “�an admixture or combination of the two often gives a better picture of whether there is sufficient United States involvement to justify the exercise of jurisdiction by an American court.’ … In this case, however, [Plaintiffs] rely solely on the conduct component of the test.”�
“Under the “�conduct’ component, subject matter jurisdiction exists if activities in this country were more than merely preparatory to a fraud and culpable acts or omissions occurring here directly caused losses to investors abroad. … Our determination of whether American activities “�directly’ caused losses to foreigners depends on what and how much was done in the United States and on what and how much was done abroad. … “� [Slip op. 7 9]
Plaintiffs contend that the fraud took place mainly in Florida, because that is where the false forecasts were created. The district judge disagreed. HomeSide’s knowing use of phony numbers is an insufficient basis for subject matter jurisdiction, because it was only part of the events that lead to the present lawsuit. There would have been no securities fraud allegations “but for”� the (1) alleged use of false information, (2) in public filings and statements made abroad, (3) to investors abroad who relied on it for securities purchases abroad.
Furthermore: “The district court believed that the difficulty of this case is heightened by its novelty. Here, a set of (1) foreign plaintiffs is suing (2) a foreign issuer in an American court for violations of American securities laws based on securities transactions (3) in foreign countries. This is the first so called “�foreign cubed’ securities class action to reach this Circuit. See Stuart M. Grant & Diane Zilka, The Role of Foreign Investors in Federal Securities Class Actions, in Corporate Law and Practice Handbook Series (Number B 1442) 91, 96 (Practicing Law Institute ed., 2004) (coining the term “�foreign cubed’) … But despite this unusual fact pattern, the usual rules still apply. As we noted, subject matter jurisdiction exists over these claims only “�if the Defendant’s conduct in the United States was more than merely preparatory to the fraud, and particular acts or culpable failures to act within the United States directly caused losses to foreign investors abroad.’”� [Slip op. 10]
In the end, the issue for the Court to resolve is what conduct forms the core of the alleged fraud. “We conclude that we do not have subject matter jurisdiction. The actions taken and the actions not taken by NAB in Australia were, in our view, significantly more central to the fraud and more directly responsible for the harm to investors than the manipulation of the numbers in Florida.”�
“HomeSide, as a wholly owned, primarily operational subsidiary of NAB, reported to NAB in Australia. HomeSide’s mandate was to run its business well and make money. The responsibilities of NAB’s Australian corporate headquarters, on the other hand, included overseeing operations, including those of the subsidiaries, and reporting to shareholders and the financial community. NAB, not HomeSide, is the publicly traded company and its executives “� assisted by lawyers, accountants, and bankers “� take primary responsibility for the corporation’s public filings, for its relations with investors, and for its statements to the outside world.”�
“Appellants’ claims arise under Rule 10b 5(b), which focuses on the accuracy of statements to the public and to potential investors. Ensuring the accuracy of such statements is much more central to the responsibilities of NAB’s corporate headquarters, which issued the statements, than those of HomeSide, which did not. Liability under Rule 10b 5(b) requires a false or misleading statement. “�Anything short of such conduct is merely aiding and abetting, and no matter how substantial that aid may be, it is not enough to trigger liability under Section 10(b).’ … NAB’s executives possess the responsibility to present accurate information to the investing public and to the holders of its ordinary shares in accordance with a host of accounting, legal and regulatory standards. When a statement or public filing fails to meet these standards, the responsibility, as a practical matter, lies in Australia, not Florida.”�
“Another significant factor at play here is the striking absence of any allegation that the alleged fraud affected American investors or America’s capital markets.[Plaintiffs] press their appeal solely on behalf of foreign plaintiffs who purchased on foreign exchanges and do not pursue the “�effects’ test. They do not contend that what [Defendants] allegedly did had any meaningful effect on America’s investors or its capital markets. This factor weighs against our exercise of subject matter jurisdiction.”�
“A third factor that weighs against jurisdiction is the lengthy chain of causation between the American contribution to the misstatements and the harm to investors. HomeSide sent allegedly falsified numbers to Australia. [Plaintiffs] do not contend that HomeSide sent any falsified numbers directly to investors. If NAB’s corporate headquarters had monitored the accuracy of HomeSide’s numbers before transmitting them to investors, the inflated numbers would have been corrected, presumably without investors having been aware of the irregularities, much less suffering harm as a result.”�
“In other words, while HomeSide may have been the original source of the problematic numbers, those numbers had to pass through a number of checkpoints manned by NAB’s Australian personnel before reaching investors. While HomeSide’s rigging of the numbers may have contributed to the misinformation, a number of significant events needed to occur before this misinformation caused losses to investors. This lengthy chain of causation between what HomeSide did and the harm to investors weighs against our exercising subject matter jurisdiction. …”�
This particular mix of factors “� the fact that the fraudulent statements at issue emanated from NAB’s corporate headquarters in Australia, the complete lack of any effect on America or Americans, and the lengthy chain of causation between HomeSide’s actions and the statements that reached investors “� add up to a determination that we lack subject matter jurisdiction.”� [Slip op. 17 19]
Citation: Morrison v. Nat’l Australia Bank Ltd., 07 0583 cv (2d Cir. October 23, 2008).
Filed in: 2008 International Law Update, Issue9
Next Page »