Re Nissan Motor Corporation et Al

• Jurisdiction: Bahamas
• Judge: Gonsalves-Sabola, C.J. (Ag.)
• Judgment Date: 23 April 1990
• Court: Supreme Court (Bahamas)
• Date: 23 April 1990

Supreme Court

Gonsalves-Sabola, C.J. (Actg.)

Re: Nissan Motor Corporation et al

Appearances:

MR. PHILIP DUNKLEY and MISS EDDA DUMONT, counsel for the applicant.

MR. ORVILLE TURNQUEST, counsel for Hyperion Trading, Sycamore S.A., Blenheim Insurance Company, and Creative Holdings, Inc.

MR. RALPH SELIGMAN, counsel for The Private Trust Corporation, Peter B. Evans, and Helga Miller.

MR. BRIAN MOREE and MRS. DIANE STEWART, counsel for Barclays Bank, PLC.

MRS. KELPHENE CUNNINGHAM, counsel for the Attorney General.

International Law - Foreign Tribunals Evidence Act, 1856 — Banks and Trust Companies Regulation Act, 1965 — Pending Civil Proceedings in the United States — Request for International Judicial Assistance on behalf of the United States District Court of the Central District of California for the examination of specified witnesses and the production of specified documents — Attitude of Bahamian court — International Comity — Request to the viewed with an intention to grant unless precluded by some rule Foreign Tribunals Evidence Act — Court not to restructure, re-cast or re-phrase request so as to make it conform to what can be allowed — Lack of specify document — Court not to embark on analysis.

Gonsalves-Sabola, C.J. (Ag.)

1 This is an application brought under order 65 of the Rules of the Supreme Court. The United States District Court for the Central District of California has requested the judicial assistance of the Supreme Court of the Bahamas in obtaining sworn testimony and certain documents from certain individuals and entities within the Bahamas for use in a civil trial in the said court.

2 The litigation involves Nissan Motor Corporation in the United States of America, a California corporation, as plaintiff in an action against a number of corporations compendiously described as the Adesco defendants; Republic Insurance Company, a Delaware corporation; Foremost Insurance Company, a Michigan corporation; and K. George Paganis, an individual. It is alleged against one Fred Gramcko, who is not a party to the suit but a former agent and employee of Nissan, that, in breach of his “fiduciary and loyalty duties” to Nissan, he participated in a scheme of fraud against Nissan, causing Nissan to award to the Adesco defendants under two agreements, respectively called the 1984 Agreement and the 1986 Agreement, for marketing and administering extended service contracts; in relation to Nissan automobiles and for maintaining and controlling the Nissan extended service contracts business. The alleged fraud allegedly resulted in damage done to Nissan and the exaction from Nissan in 1987 of the sum of $2,000,000. Nissan's further complaint was that defendant Paganis established for Gramcko an offshore bank account into which deposits of money were made on each extended service contract. Nissan contends that the conduct of which it complains constituted a pattern of racketeering activity in civil violation of the Racketeer Influenced and Corrupt Organizations Act of the United States of America. The defendants have denied the allegations, thus joining issue on them in the pending action in California. Pre-trial discovery in the California court produced depositions of a number of witnesses and certain documents, and those depositions and documents were exhibited to the letters of request by which the assistance of this court is sought.

3 Reference should be made to some inter-relationships between certain corporations and the defendant Paganis whose name featured most prominently in the arguments before me. The Adesco defendants are said to be owned by a corporation, the Kyri Corporation, which is owned by Paganis who is also the controlling official of Foremost Insurance Company, one of the defendants in the California suit. Fred Gramcko was Director, Consumer Services of Nissan, but his employment was terminated on 28 February, 1989 by Nissan. Republic Insurance Company and Foremost Insurance Company are involved in this suit because they undertook indemnification of Nissan under the extended service contracts entered into by Nissan with its dealers in automobiles. Each of the Adesco defendants is controlled by Paganis and it is alleged that these defendants were acting as agents of Republic Insurance Company with reference to the extended service contracts.

4 Fred Gramcko and Rosalind Gramcko are part owners of American Wildlife Carvings, Incorporated. Between the 14th of April, 1986 and 1st of September, 1988, 13 cash transfers of funds were made from Barclays Bank, Nassau either to Gramcko or to Wildlife at the instance of certain entities viz. Sycamore SA, Blenheim Insurance Company or by cashier's cheque. Wildlife was financed by loans from another entity, Hyperion SA, in consideration of a stock option in Wildlife. Paganis it was who had issued instructions to Bill Leung, a California attorney, to incorporate Wildlife. On Paganis's orders, the stock of Adesco, Incorporated was transferred in 1978 to Sycamore in consideration of nothing more substantial than a hold harmless clause. In 1982 Sycamore sold to Minnehoma Insurance Company for a price ultimately calculable in millions of dollars. The witnesses whose testimony is requested, except Peter Evans and Helga Miller, are included among the directors and officers of Sycamore. Peter Evans is the Managing Director of Private Trust Corporation Limited, a licensee under the Banks and Trust Companies Regulation Act, Chapter. 287, and Helga Miller, a Vice-President.

5 Peter Evans voluntarily gave videotaped testimony in Nassau at the request of the Adesco defendants and Paganis. In a reference to Peter Evans's testimony, the letters of request stated that Evans testified that he acted directly or indirectly for a number of entities which did business for Paganis or companies with which he had been involved, including South Atlantic Insurance Company, Sycamore SA, Hyperion Trading Company, Prego Investments Limited, Kyri Corporation and Wildlife. Peter Evans, on his attorney's advice, took refuge in the duty of confidentiality sanctioned by condign penalty under the Banks and Trust Companies Regulation Act, and declined to disclose the nature of the transactions between Paganis and the companies represented by Peter Evans or whether or not documents existed reflecting payments from Adesco, Incorporated to Sycamore or Prego. Peter Evans was similarly uncommunicative about transactions between his clients, South Atlantic Insurance Company and Minnehoma, and documents relating to the business relationship between another client, Creative Holdings, Incorporated, and Paganis.

6 Thus it was that the United States District Court, through stipulation by the parties, came to proclaim its need for the judicial assistance) of this court relative to, inter alia, the identities of the direct, indirect and beneficial owners of Sycamore SA, Hyperion SA, Hyperion Trading Company, Blenheim Insurance Company Limited, Creative Holdings Limited, South Atlantic Insurance Company, Prego Investments Limited and the Private Trust Corporation Limited whose shares, incidentally, as a licensee under the Banks and Trust Companies Regulation Act, required prior approval of the Minister of Finance for issuance, transfer or other disposal (see section 5 of the Act).

7 It is not pretended that this summary of the letters of request may not have omitted a number of aspects on which counsel for the several parties may have laid stress, but it is sufficiently wide to portray the factual context in which the letters must be read and interpreted.

8 I remark, for what it is worth, that the inter-relationships disclosed are not ex facie of an unlawful character and, again ex facie, can be viewed in the light of the occurrence, internationally common, of interlocking corporate directorships and the infinite permutations of shareholding in subsidiary and holding companies. This, of course, is not to disacknowledge that dishonest persons may and do exploit the mechanisms of the corporate structure to facilitate secret frauds and to make the proceeds of such frauds difficult to trace. It is obviously in the interest of a plaintiff who considers that he is a victim of corporate chicanery to seek to explore the secret dealings of the suspected corporations to! uncover whatever data lies recorded in private documents or may lurk in the bosom of officers and associates beneath the protective cloak of confidentiality. The results of any inquisition that could be conducted for this purpose would greatly assist a plaintiff in ascertaining whether a suspicion of fraud or other wrong is supported by concrete facts provable in evidence in a suit. Indisputable proposition though this might be, it does not provide an open sesame to a plaintiff seeking access to testimony and documents by means of letters rogatory issued by a foreign court, even in ostensible conformity with the requirements of section 1 of the Foreign Tribunals Evidence Act, 1856. Case law spanning a century, ranging from Burchard and others v. Macfarlane and Others [1891] 2 Q.B. 241 to Re State of Norway's Application Number 1, [1989] 1 All E.R. 661 which deals with a cognate statutory provision, has elucidated the intendment of Section 1 of the Act and its application to varying combinations of facts. So that, when a Bahamian court is faced with a request for judicial assistance by way of letters rogatory, there is no dearth of authority; rather, there is an embarras de richesse. Counsel in this case laid all the main cases before me and argued for their application in ways most suitable to their individual purposes. It is left to the court to make selective reference to the most instructive teaching in all that abundant literature, having regard to the particular circumstances of this case.

9 Let me now quote the all-important section 1 of the Foreign Tribunals...