Athene Holding Ltd v Imran Siddiqui, Stephen Cernich and Caldera Holdings Ltd

• Jurisdiction: Bermuda
• Judge: Hargun,Chief Justice Hargun
• Judgment Date: 15 March 2019
• Neutral Citation: [2019] SC Bda 20 Com
• Date: 15 March 2019
• Docket Number: CIVIL JURISDICTION 2018: No. 149
• Court: Supreme Court (Bermuda)

[2019] SC (Bda) 20 Com

In The Supreme Court of Bermuda

Before:

Hon. Chief Justice Hargun

CIVIL JURISDICTION 2018: No. 149

Athene Holding Limited

Plaintiff

and

(1) Imran Siddiqui

(2) Stephen Cernich

(3) Caldera Holdings Ltd

Defendants

Appearances:

Mr. Kevin Taylor and Mr. Benjamin McCosker, Walkers, for the Plaintiff

Mr. Alex Potts, QC and Mr. Lewis Preston, Kennedys Chudleigh Ltd, for the Defendants

Application for recusal on ground of apparent bias; test for apparent bias; previous professional association with a law firm; implied undertaking as to confidentiality; existence of implied undertaking; conditions necessary for the release of such an implied undertaking

RULING

INTRODUCTION

1 This is an application by Athene Holdings Ltd (“Athene”), the Plaintiff, seeking an order that Athene be released from its implied confidentiality undertaking and permitted to use in proceedings pending before, the United States District Court for the Southern District of New York and the Supreme Court of the State of New York, County of New York, to which it is a defendant:

• (a) the First Affidavit of Stephen Cernich sworn 1 June 2018, together with its exhibit (“the Cernich Affidavit”);

• (b) the Sixth Affidavit of Imran Siddiqui sworn 10 December 2018, together with its exhibit (“the Siddiqui Affidavit”); and

• (c) the Defendants' supplemental submissions filed and dated 10 September 2018 (together “the Documents”)

2 The Plaintiff also wishes to argue that in fact the Documents are not subject to a confidentiality undertaking, implied or otherwise, and have made an application to amend the Summons accordingly. As the point has been fully argued, I give leave to file an Amended Summons in the form as annexed to the Summons dated 5 February 2019.

3 As a preliminary issue, the Defendants request that I recuse myself from considering this application on the grounds of apparent bias and/or predetermination. For reasons set out in paragraphs 42 to 96, I do not consider that it is necessary or appropriate to recuse myself from considering this particular application. I deal with my involvement in future applications at paragraphs 98 to 100 below.

APPLICATION RELATING TO IMPLIED UNDERTAKING

Outline of parties' position

4 The Plaintiff argues that, on a proper analysis, the Documents are not subject to the implied undertaking. It is said that such an undertaking to the court is only implied where the documents are obtained as a result of the compulsory process of the court. In particular no such undertaking is implied where a party produces the affidavits and exhibits voluntarily. The test of compulsion, the Plaintiff argues, is not whether the affidavits and documents are produced pursuant to any court order but only in respect of court orders, the breach of which is a contempt of court. The Plaintiff draws a distinction between orders, the breach of which is a contempt of court and those orders which merely give rise to a default and argues that the principle of compulsion applies only to those orders where the failure to comply results in a contempt of court.

5 In the event that the Court determines, contrary to the Plaintiff's position, that the Documents are subject to the implied undertaking, the Plaintiff submits that the disclosure of the Documents in the US proceedings will facilitate the just and expeditious resolution of those proceedings and that it is in the interests of justice that permission be granted for the use of the Documents for this purpose.

6 The Defendants contend that it is a mischaracterisation of the factual position to assert that they “voluntarily disclosed” the Documents. They rely upon the orders made by the Court dealing with the filing of the affidavit evidence. The Defendants further argue that there may be “special circumstances” which may give rise to an implied undertaking despite the absence of an order, the breach of which results in contempt of court.

7 The Defendants argue that the burden on the Plaintiff in establishing a case for release of the undertaking is a heavy one. It requires the Plaintiff to establish (a) there are special circumstances which constitute “ cogent and persuasive reasons” for permitting collateral use and (b) the release or modification will not occasion injustice to the Defendants.

Discussion on the existence of the implied undertaking

8 The most common situation where an implied undertaking is imposed on the parties is where the affidavits and documents are produced under compulsion. In this situation, the existence of the undertaking is justified on the basis that a party is forced to disclose its private documents and does not depend upon the information in the affidavit or the documents being confidential. A classic example of the operation of this rule is the implied undertaking in the context of discovery obligations imposed upon the parties. The clearest exposition of the concept of “compulsion” in this context appears in the judgment of Hobhouse J. (as he then was) in Prudential Assurance Co. Ltd. v Fountain Page Ltd. [1991] 1 WLR 756, 765:

“In litigation a party may be subjected to orders or rules of procedure which require him to do various things or take various steps in the action. It was argued that whenever a party was in this position he was acting under a compulsion which brought the implied undertaking into force. This argument can be attractively developed. It is said that many things in actions are done because a party is ordered or otherwise required to do them. They are required to deliver pleadings, swear and lodge affidavits, call witnesses, or, in the present context, serve advance copies of the evidence upon which he proposes to rely at the trial. In all these situations the practical sanction is similar to that which arises from a failure to give discovery or respond to other orders. The primary sanction that the court imposes is to strike out the claim or the defence. If a party fails to deliver a pleading or to lodge or adduce evidence he will fail to protect his rights and the other party's claims or defences will prevail. The outcome for the litigant is in practical terms the same. However in legal terms this is not correct. There is distinction between orders, the breach of which is a contempt of court and those orders or rules which merely give rise to a default. The principle of compulsion applies to the former category only. This has been made clear in a number of cases.”

The common law position is summarised in Matthews and Malek, “Disclosure” (5th edition):

“19.12 At common law the undertaking covers not only the documents disclosed on discovery, but also any other documents disclosed by a party under compulsion of court process. Thus the undertaking has been held to apply to documents produced under a subpoena duces tecum, or under an order made pursuant to s.7 of the Bankers' Books Evidence Act 1879, or for the purposes of detailed assessment of costs, or under the procedure for giving effect to letters of request, as well as affidavits and exhibits produced only because the court has ordered them to be provided by way of discovery of assets pursuant to the asset freezing (Mareva) jurisdiction or search (formerly Anton Pillar) order, or in matrimonial proceedings. The undertaking also extends to information in Lists of Documents given on discovery as well as the documents themselves”

“19.14 The undertaking does not apply to documents voluntarily disclosed, such as affidavits and exhibits put in voluntarily and not by an order of the court in opposition to an application for asset freezing (Mareva) relief, or in support of a strike out application. This is consistent with the rationale of the implied undertaking. In relation to documents voluntarily disclosed, the court has not invaded the privacy of the party; it is the party himself who has destroyed the privacy of documents”.

9 English cases post-CPR dealing with the collateral undertaking should be read with care as the English Court of Appeal has held in SmithKline Beecham plc v Generics (UK) Ltd [2003] EWCA Civ 1109, that the “compulsion” principle has not survived the introduction of the CPR in England. Post-CPR, the issue in England is not whether the documents were disclosed by compulsion (as was the RSC position) but whether the documents have been “disclosed” in the proceedings within the definition of CPR r 31.2 (See: Phipson on Evidence (19th edition) para 27–09).

10 The position in Bermuda is the pre-CPR position and the starting position is to consider whether the document was produced under compulsion (See Re Lehman Re Ltd ( ruling: discovery) [2011] Bda LR 56, at [32]; Trustee N and Others v The Attorney General [2015] SC (Bda) 50 Com at [46]).

11 However, decided cases do indicate that the implied undertaking may also arise other than by the application of the principle of compulsion. This was recognised by Hobhouse J. in Prudential Assurance at 770 B-E:

“I accept the submission of Mr. Hamilton that if the London plaintiffs are to succeed on this line of argument it must be by the demonstration of a duty owed to the court, analogous to that owed under the implied undertaking, which derives from the circumstances of the case and in particular as a matter of implication from the relevant rules of court. I consider that this is not only correct in principle but is also in accordance with what was decided by Sir Nicolas Browne-Wilkinson V.C. in Derby & Co. Ltd. v. Weldon (No.2) The Times, 20 October 1988. Prima facie, the use of documents and information in litigation is inconsistent with any such restriction or the reservation of any private law right. However, such restrictions are capable of existing and where they do they derive from rules of procedure or principles of law recognised by the courts as being incidents of such procedure.

There is no conceptual...