England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
His Honour Judge Playford QC (Sitting as a High Court judge)
IN THE MATTER OF THE EVIDENCE (PROCEEDINGS IN
OTHER JURISDICTIONS) ACT 1975
AND IN THE MATTER OF ORDER 70 RSC 1965
AND IN THE MATTER OF PART 34 CPR 1998
AND IN THE MATTER OF A CIVIL MATTER NOW PROCEEDING BEFORE
THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW
YORK ENTITLED

		Royal Courts of Justice Strand London WC2A 2LL
		Wednesday 21 November 2001

LORD JUSTICE WALLER:

This is a judgment of the court.

Introduction

1. Once again time and money is being spent in the English courts over Letters Rogatory requesting the English court to order the production of documents and oral deposition from third parties to litigation in the United States of America. That time and money would be unnecessary, if those seeking the request from the United States Court appreciated the differences between the attitude of the United States Courts to the making of "discovery" orders against non-parties, and the attitude of the English court to the making of such orders. The United Kingdom, when becoming parties to the Hague convention concluded in 1970, registered a reservation pursuant to Article 23 which became enshrined in the Evidence (Proceedings in Other Jurisdictions) Act 1975 making it clear that discovery against non-parties was something the English court would not provide because it simply was not part of its procedure. It is only that Act which gives the English Court the jurisdiction to make orders to assist foreign courts. A number of authorities of the House of Lords since the coming into force of that Act have emphasised the position. But still much time is taken up in our courts trying to give effect to Letters of Request, problems in relation to which could have been avoided if proper steps had been taken to bring to the attention of the foreign court the constraints under which the English court operates.

The facts

2. Genira Trade & Finance Inc and Binzer Enterprises Corporation (Genira and Binzer) are plaintiffs in an action in the Supreme Court of the state of New York against Refco Capital Markets Limited and Refco Group Limited (Refco). Genira and Binzer are sister companies. For eighteen months they had an account with Refco. During that eighteen month period Ginera and Binzer engaged in bond and equity securities transactions with Refco. The particular securities were called "Brady Bonds" and were high risk bonds.
3. Genira and Binzer were introduced to Refco by Mr Ramlal Melwani (RM). RM had previously introduced Genira to two banks, (the Banks), Credit Suisse (First Boston) Limited, (CS First Boston) and Standard Bank (London) Limited, (Standard) with whom Genira had engaged in a similar line of business. According to Genira and Binzer's now pleaded case RM had told Genira and Binzer that he and his firm would be compensated by CS First Boston "in accordance with industry custom and practice, which he said would be only a small fraction of the spread between the bid and asked price for each transaction". Genira and Binzer plead that they had the same understanding from RM concerning his compensation from Refco.
4. So far as the trading with Refco was concerned it ran into difficulties and Refco required margins which Genira and Binzer refused to pay. Refco then liquidated the plaintiffs' accounts. Genira and Binzer sued Refco, originally for breach of contract. In the course of the proceedings depositions were taken from, amongst others, RM a non-party to the action. During the taking of that deposition counsel for Genira and Binzer began to ask questions in relation to the basis on which RM was remunerated. Objection was taken to the questions but subject to there being a "standing objection" the questioning continued. The questioning probed both the basis of remuneration between RM and Refco, and as between RM and the Banks. In the result it became apparent that Refco had entered into certain commission or profit sharing arrangements with RM and his entities such as Dimension Managers Ltd (Dimension) an entity controlled by RM's father and other members of RM's family. Such entities we shall call "Melwani Entities".
5. In the result Genira and Binzer abandoned their contractual claims and pleaded claims in fraud. In essence they alleged that the sharing arrangements between Refco and the Melwani Entities were improper and that the payments made to the Melwani Entities were inducements or kickbacks in order to induce Melwani Entities to bring customers to Refco and to trade through Refco. Examples of the allegations are in Bundle 1 pages 126-130:

"42. As alleged in detail in the paragraphs and sections below, as bribes, kickbacks or secret commissions for Melwani influencing his clients to do business with Refco, Refco agreed with Melwani: (a) that Refco Capital would charge plaintiffs and certain of his other clients fees from which Refco Capital would then pay Melwani and the other accomplices 90% of those fees; (b) to empower Melwani to set the prices, including a markup or markdown, to be charged to or received by each of his clients in purchase and sale transactions with Refco Capital from which Melwani and accomplices would take a 90% share of the markup or markdown; and (c) to empower Melwani to set the rate of financing charged by Refco Capital to plaintiffs and Melwani's other clients, including a markup from which Melwani and accomplices would take a 90% share.

45. At the suggestion of Paul Scherer of Dimension Managers, Melwani, in breach of the fiduciary duty owed to plaintiffs, proposed to Refco, and Refco agreed, that Refco Capital would charge plaintiffs and certain other Melwani clients an annual "credit facility fee" of 0.1% of the facility extended to them and a "transfer fee" of 0.125% of the nominal amount of securities transferred from accounts at other financial institutions. It was further agreed that 80% of those fees received from plaintiffs would be paid to either Melwani or Dimension Managers or both and that 10% would be paid to Rocos.

53. As part of the scheme, in addition to the agreements to pay Melwani and accomplices 90% of the fees, Refco Capital made "Revenue Sharing Agreements" with Melwani and Dimension Managers in which Refco Capital agreed to pay each 75% of the "markup business," as is set forth in Exhibits 4-A and 4-B. Refco Capital also agreed to pay Rocos 15% of such "markup business." In the aggregate, 90% of the Refco markup business was to be paid to Melwani and the other accomplices.

54. Refco Capital also agreed to empower Melwani to set the price, including a markup or markdown, to be charged to or received by plaintiffs and each of his other clients in Brady Bonds purchase and sale transactions with Refco Capital. This agreement was implemented in the following manner: Anklesaria, on plaintiffs' behalf, would express an interest to Melwani in purchasing or selling a particular Brady Bond or When Issued Right. Melwani would then call Refco Capital to obtain a price for that transaction. Refco Capital would provide Melwani with its price on the proposed purchase or sale, including its own markup or markdown. Melwani would instruct Refco Capital as to the additional price markup or markdown that should be charged or credited in the transaction. Melwani would then call Anklesaria, misrepresent the true Refco Capital quote, and instead quote as Refco Capital's price the fully loaded price he had set.

55. By this means, with Refco Capital's agreement, and for the purpose of further increasing the amounts he and the other accomplices would receive as "revenue sharing," Melwani increased the amounts plaintiffs paid in purchasing Brady Bonds and When Issued Rights and decreased the amounts plaintiffs received in selling those securities."

6. Leave was given by the New York court to amend the claim to make the above allegations. It was resisted by Refco. One basis for the resistance was that further discovery would be necessary, including a further deposition from RM and possible depositions from the Banks. The basis on which Refco wished to depose the Banks was that they wished to ascertain and/or establish that the fee arrangements between the Banks and the Melwani Entities were little different from those as between Refco and the Melwani Entities. Refco wished to assert that the type of fee arrangements which Refco had with the Melwanis was in accordance with normal trading standards. Refco suggest that evidence of the Banks' trading arrangements will be evidence of such standards.
7. It is right to say that during the taking of the deposition of RM prior to any amendment, RM had been asked about the commission sharing arrangements with the Banks and had said that one Melwani Entity (Investment Services) had indeed revenue sharing agreements with CS First Boston and with Standard. In broad terms the split agreed between CS First Boston and Investment Services was 60/40 in favour of Investment Services, and so far as Standard was concerned the split was 75/25 in Investment Services favour.
8. As already indicated, it was an important aspect of Refco's resistance to the amendment that discovery was already complete and that to bring in the full claim at this stage would require further extensive discovery. Included in this further discovery was discovery from third-parties of additional relevant documents including "(1) documents showing the fees claimed and/or earned by Melwani, Investment Services, and/or Dimensions through entities other than Refco Capital; ….".
9. When ruling on the application for leave to amend The Hon Charles E. Ramos, Justice of the Supreme Court of the State of New York ruled:

"In many instances, courts have denied leave to amend where the proposed amended pleadings seek to drastically change the facts of the case after the discovery has been completed, and time and expenses have been expended. … Here, because defendants have not demonstrated that discovery on the fraud claim is unavailable, it is appropriate to grant plaintiffs leave to amend, subject to reimbursing defendants for the costs and expense of discovery relating to fraud claims."

The Letters Rogatory the subject in this case

10. Following the ruling that Binzer and Genira should have leave to amend handed down on 28th September 1999 an application was made to the Supreme Court of the State of New York for Letters of Request to be made to the High Court in England and Wales. It seems the application was made in or about February 2000, and it further seems that ultimately an Amended Request for "International Judicial Assistance pursuant to the Hague Convention of 18^th March 1970 " was made on 5^th June 2000. We do not have any copies of the application made to the New York Court nor any information as to the procedure under which the Letters of Request were issued. The form of the Letters of Request is in accordance with the Convention. Thus it is that the Hon. Charles E. Ramos Justice of the Supreme Court of the State of New York requested the Court of England and Wales in the following terms:

"It is hereby requested that, in the interest of justice, you cause by your usual and proper process, such orders to be entered as English law permits:

(1) granting the Refco Entities permission to take the deposition by oral examination on the topics set forth in Section 10, of R. Melwani, his father, H. Melwani, Standard Bank Limited London ("Standard Bank") and Credit Suisse First Boston, London ("CSFB"), and granting plaintiffs permission to cross-examine the witnesses; and

(2) directing that the documents set forth in Section 11, below, be produced for inspection and copying at a time and place to be determined by you."

11. The request then described the claim being made against Refco, and asserted that Refco would be severely prejudiced if it were not permitted to "depose" RM and his father. So far as the Banks were concerned what was asserted was that it was critical to Refco's defence that they be permitted to inspect the records of (the Banks) relating to such transactions and the amount and manner of payments by (the Banks). On the above bases it was said that counsel for Refco wished to take oral testimony from RM and HM, and from the Banks on the topics set out in various exhibits. (It will be noted that there was no averment that Refco would be severely prejudiced if they could not depose the Banks. It was the Banks' documents and records which were to be the subject of oral deposition).
12. As regards documents it was asserted that counsel for Refco sought production by RM and HM of documents identified in exhibits, and asserted that Refco would be severely prejudiced if Refco were not permitted to "inspect and copy the documents set forth in the exhibits". In relation to the Banks it was simply asserted that counsel for Refco sought production of the documents set forth in the exhibits identified.
13. So far as the exhibits were concerned, Exhibits D and E related to the topics on which Refco wished to examine RM and HM. Exhibits F and G related to the topics on which Refco desired to examine the Banks. The exhibits were in the same form for each, and the nature of the examination sought appears from that relating to Standard which was in the following form:

"Defendants Refco Capital Markets Ltd. ("Refco") and Refco Group Ltd. wish to examine Standard Bank London Limited ("Standard") on topics relating to the claims alleged by plaintiffs Genira Trade and Finance Inc. ("Genira") and Binzer Enterprises Corporation ("Binzer") of fraud and breach of fiduciary duty, including, (but not limited to), the following:

1. The documents produced by Standard pursuant to the accompanying document request.

2. The business dealings between Standard, on the one hand, and Ram Melwani, Investment Services UK Limited ("Investment Services"), on the other hand, relating to business introduced to Standard by or through Investment Services or Sigma Securities.

3. The business dealings between Standard, on the one hand, and Dimension Managers, Ltd. ("Dimension"), on the other hand, relating to business introduced to Standard by or through Investment Services or Sigma Securities.

4. The business dealings between Standard, on the one hand, and Gerrasimos Rocos ("Rocos"), on the other hand, relating to business introduced to Standard by or through Investment Services or Sigma Securities.

5. The business dealings between Standard, on the one hand, and Sigma Securities, on the other hand, relating to business introduced to Standard by or through Investment Services, Rocos or Sigma Securities.

6. The commissions or fees generated by transactions conducted with or through Standard by Genira, Binzer, Laxil Securities, Inc., or any entity owned in whole or in part, controlled or managed by Bhagwan K. Mirchandani ("Mirchandani"), or any trust of which Mirchandani was a trustee or beneficiary, including Springbirne Investments, Inc. and Tulco International Corporation.

7. The commissions, fees or other payments Standard paid to Ram Melwani, Hiro Melwani, Investment Services, Dimensions, Rocos, or Sigma Securities in connection with business one or more of them introduced to Standard Bank.

8. The commissions, fees or other payments claimed against Standard by Ram Melwani, Hiro Melwani, Investment Services, Dimensions, Rocos, or Sigma Securities in connection with business one or more of them introduced to CSFB."

14. It will be noted that the matter on which questions were to be asked first was the documents produced "pursuant to the accompanying request".
15. The documents requested were set out in exhibit J and K, and again, so far as both Banks were concerned, they were in much the same form. To set out either of the requests would be tedious. The requests were for the production for inspection (my emphasis) and photocopying of documents for the period "January 1996 to the present". Documents were defined in the most compendious of forms. The requests were furthermore said to be "continuous in nature", the Banks, so it was asserted, being bound to serve "supplemental documents up to the time of the trial …". In the case of Standard there were 42 categories of documents all commencing with words such as "All documents constituting ….". In the case of CS First Boston there were 39 categories but again the wide words were the same.
16. The request from the New York Court is addressed to The Senior Master of the Supreme Court of Judicature (Queen's Bench Division). The Rules of Court set out the procedure to be adopted. (RSC Order 70). In accordance with those Rules the request was left with the Senior Master supported by an affidavit sworn by Mr Chesson, and no notice was given to any other party (see RSC O.70.2(1) page 1245 Volume 1 of The Supreme Court Practice. To that affidavit was further exhibited a draft order seeking an order in the full width of the Request.
17. The Senior Master, having regard to the notes in The Supreme Court Practice at 70/6/6 and 70/6/7, was not prepared to make any order in relation to the documents on the basis it was "too wide" (see the note endorsed on the original application dated 17^th October 2000 Bundle B2 page 60), but was prepared to make an order for the oral examination of witnesses provided persons were identified to give evidence on behalf of the Banks on the basis "corporations cannot of themselves give evidence". (see the same note).
18. Before the order was drawn up, Karen Fernandes, acting for Refco, put a witness statement and the papers again before the Senior Master seeking to amend the order before it was drawn up and to add a matter which had been missed out by mistake in the first draft. She further said that she had instructions from her clients as to the identity of the Banks' officials, and asked for their names to be added to the order. She then asked for an amendment in relation to documents. She described the nature of the issues and then said in paragraph 9:

"In order to defend the Plaintiffs' claims, it is necessary for RCM to obtain the evidence showing: the amount of fees paid by Standard and CSFB to Melwani, Investment Services, Rocos, Sigma Securities and/or Dimension; the bases for the fees claimed and paid; the amount of the fees claimed but unpaid and finally the agreements between and among witnesses to pay the fees. The following documents are believed to be in the possession of Melwani, Hiro Melwani, Standard and CSFB and are requested by the Defendants to present at trial:

(i) Specific agreements between Standard Bank or CSFB on the one hand and Ram Melwani, Hiro Melwani, Investment Services, Dimension, Primeway, Scherer, Sigma Securities or Rocos, on the other hand relating to payment of fees or commission.

(ii) Reports showing the calculation and payment of fees or commission by Standard Bank or CSFB to Ram Melwani, Hiro Melwani, Investment Services, Scherer, Dimension Managers, Rocos, Sigma Securities or Primeway.

(iii) Invoices for fees to Standard Bank or CSFB for fees or commissions claimed by Ram Melwani, Hiro Melwani, Investment Services, Dimension Managers, Primeway, Scherer or Rocos.

(iv) Wire transfer advices for the payment of fees or commissions by Standard or CSFB to R Melwani, H Melwani, Investment Services, Scherer, Dimension Managers, Rocos, Sigma Securities or Primeway."

19. The Senior Master then amended his order to include the persons identified and ordered the production of the above documents as against the Melwanis, Investment Services (a Melwani company) and the Banks. The request for amendment and ultimately the order drew no distinctions as to which persons or entities might have which documents; there was no limitation in respect of the period to be covered; and indeed there was no limitation in the order even as to the type of business.
20. A further amendment to the above order was obtained "by consent". It seems that those acting for Binzer and Genira desired other categories of documents added to the order, and those acting for Refco were prepared to consent to that course. Thus by order dated 5^th March 2001 further categories of documents were added. Since Binzer and Genira are not concerned to support any order for documents on this appeal, and it is now accepted that these documents should be excluded from any order, it is unnecessary to go into the obtaining of that order save to say in fairness to those representing Refco and Binzer and Genira that the question whether these documents should be added to the order was the subject of some debate in the New York Court before the judge by then assigned to the case, Judge Freeman. (see page 69 Bundle B2).
21. The orders of the English court were served on the Banks under cover of letters dated 5^th April 2001. The response of Gouldens, acting for Standard, was first to raise the question of relevance putting the matter this way:

"Bearing in mind the nature of Genira's apparent claim against Refco in relation to improper fees, statements such as: "..it is necessary for [Refco] to obtain the evidence showing the amount of fees paid by [SBL]" (paragraph 9 of K. Fernandes' Statement), and "..it is critical [for] [Refco] to inspect the records of [SBL]" (paragraph 9(4) of the Request), in order to defend the proceedings brought by Genira, are, with respect, complete non-sequiturs."

22. They also asked a variety of questions about the procedure adopted into which it is unnecessary to go. Sheridans, for Refco, responded to the procedural questions by letter dated 20^th April 2001 but did not address, so far as we can see, the relevance issue. By letter dated 25^th April 2001 Gouldens responded stating that by this time they were also instructed by CS First Boston, and giving notice that they intended to apply to set aside the Master's orders.
23. By an application dated 11^th May 2001 the Banks applied to set the orders aside. The grounds are set out at page 3 of Bundle A taking points broadly as follows: (1) that the request was for discovery and not "solely" for evidence at trial; (2) the documents were not separately described as particular documents; (3) that there was an improper substitution by virtue of the replacement of the original schedules with the shorter version exhibited to Karen Fernandes' witness statement; (4) the order was oppressive; (5) the order would override the Banks' duty of confidentiality; (6) the court should not have been satisfied that the witnesses could give relevant evidence admissible in New York; (7) the list of topics was open-ended.
24. The Melwanis also applied to set the orders aside, but since any appeal concerning them has been disposed of by agreement, it is unnecessary to go into the grounds raised by them.
25. By consent the Senior Master transferred the matter to a judge and it came on before His Honour Judge Playford QC sitting as a High Court Judge. By a judgment handed down on 19^th July 2001 he decided:

1. "not without hesitation" that the substitution of the shorter schedule of documents was permissible the rewriting being essentially a blue-pencil exercise which has not resulted in a request which is different in substance from the original (page 3 line 13).

2. that a concluded view as to whether the evidence sought was admissible (about which he was in any event dubious ) could not be reached because the parties to the litigation "do not know what that evidence is"; the parties were still at the discovery stage, and still thus seeking "evidence in the nature of pre-trial disclosure to be used for the purposes of leading to a train of inquiry which might produce direct evidence for the trial" see Note RSC 70/6/6 and page 8 of judgment.

3. The fact that the request was part of a US discovery exercise did not preclude the court from giving some effect to the request, but in this case "the request both oral and documentary directed to the Banks goes far beyond anything that could properly be ordered in accordance with our rules of civil procedure." (see page 10)

4. The documents ordered lacked "specificity" and were not admissible (he may have meant permissible) pursuant to section 2(4)(b).

26. He did not need to rule on any confidentiality point and he did not deal with any point on the oppressive nature of the request so far as the Banks were concerned. He simply set aside the order of the Senior Master. He further refused permission to appeal on the basis that the prospects of success were insufficient.
27. Refco applied to this court for permission to appeal, and on 5^th September 2001 May LJ, stating that he was not "immediately persuaded that the proposed appeal has a real prospect of success", but recognising as is already apparent by the length of this judgment so far, that the matter was "complicated in detail", adjourned the application to the full court with appeal to follow immediately if permission was given. It is that application which came before us. Just prior to the hearing agreement was reached as between the Melwanis and Refco, and thus Refco were only concerned to pursue an appeal in relation to the Banks. We heard full argument from Mr Steinfeld QC for Refco, and we heard full argument from Mr Stephen Smith QC for the Banks, thus in one sense the matter was treated as a full appeal as it had to be if the detail was to be digested. However, because at the end of that argument we are quite clear that the judge's decision to set aside the order was the right one, we believe the right course is to refuse permission and that we accordingly do. That being so we will attempt to give our reasons as shortly as possible, but before doing so we should set out the relevant provisions of the Act and the relevant principles.

The Relevant Provisions of the Act.

"2. – (1) Subject to the provisions of this section, the High Court, the Court of Session and the High Court of Justice in Northern Ireland shall each have power, on any such application as is mentioned in section 1 above, by order to make such provision for obtaining evidence in the part of the United Kingdom in which it exercises jurisdiction as may appear to the court to be appropriate for the purpose of giving effect to the request in pursuance of which the application is made; and any such order may require a person specified therein to take such steps as the court may consider appropriate for that purpose.

(3) An order under this section shall not require any particular steps to be taken unless they are steps which can be required to be taken by way of obtaining evidence for the purpose of civil proceedings in the court making the order (whether or not proceedings of the same description as those to which the application for the order relates); but this subsection shall not preclude the making of an order requiring a person to give testimony (either orally or in writing) otherwise than on oath where this is asked for by the requiring court.

(4) An order under this section shall not require a person –

(a) to state what documents relevant to the proceedings to which the application for the order relates are or have been in his possession, custody or power; or

(b) to produce any documents other than particular documents specified in the order as being documents appearing to the court making the order to be, or to be likely to be, in his possession, custody or power."

The principles

28. The first principle is of course that we should afford foreign courts all the assistance we can – in Lord Denning's often quoted phrase "It is the duty and the pleasure of the English courts to do all it can to assist the foreign court, just as it would expect the foreign court to help it in like circumstances". (see Lord Denning MR in RTZ v Westinghouse [1978] A.C. 547 at 560).
29. Second, the jurisdiction to make the order is statutory. Such an order "shall not require any particular steps to be taken unless they are steps which can be required to be taken by way of obtaining evidence for the purposes of civil proceedings" in the English court (section 2(3)). It is that provision which precludes the English court from making orders for the taking of oral depositions from a non-party simply as part of the discovery exercise which takes place under the United States procedure (see Lord Diplock in RTZ v Westinghouse at p.634). The position is clearer still so far as documents are concerned. (see section 2(4) above).
30. Third, the fact that Letters of Request may have been issued for the purpose of obtaining discovery or pre-trial depositions which fall foul of the above does not mean that the English court has no jurisdiction to attempt to give effect to the same (see most recently Golden Eagle Refinery v Associated International Insurance COT 19^th February 1998). The court, so far as documents are concerned, can by application of the blue pencil identify particular documents, and so far as oral testimony is concerned make it subject to terms that for example "the examination of witnesses shall be for the purpose only of eliciting and recording testimony appropriate to be given at trial" and that "no question may be asked of the witness that in the opinion of the examiner is not a question of the nature that could properly be asked by counsel examining a witness-in-chief at a trial before the High Court of England and Wales". Those were the terms on the basis of which the Court of Appeal in the Golden Eagle Case upheld the orders for examination of witnesses.
31. Fourth, "In the face of a statement in letters rogatory that a certain person is a necessary witness for the applicant … the court of request should not be astute to examine the issues in the action and the circumstances of the case with excessive particularity for the purpose of determining in advance whether the evidence of that person will be relevant and admissible". (see Lord Keith in RTZ v Westinghouse at 654).
32. Fifth, it was in the context of seeking to take oral evidence that Lord Woolf in State of Minnesota v Philip Morris Inc [1998] I.L.Pr. 170 said because of the approach of the English court to try and give effect to Letters of Request if they could that the court "will take into account any limitations, corrections or conditions which the party seeking the order is willing for the court to take into account. It will if appropriate, be prepared to give the request an amended effect." (see paragraph 18). So far as documents are concerned however, the words in section 2(4) by which it is provided that "an order" under this section shall not require any documents other than "particular" documents to be produced has been strictly construed. It has been construed so as to allow documents to be compendiously described but only so long as the exact documents were clearly indicated, and the documents were shown to exist or to have existed, rather than being conjectural documents. (see In re-Asbestos Insurance Coverage Cases [1985] 1 WLR 331). Furthermore it has been construed so as not to allow an order to be made which would involve altering the letter of request other than by the operation of striking out words in the Letter of Request with a blue pencil (see RTZ v Westinghouse Lord Wilberforce at 610–611; Lord Diplock at 635-6; and Lord Keith at 654; they were the majority and the minority would not have allowed even the operation of the blue pencil).

Reasons for refusing permission

33. First, there cannot be any doubt that the Letters of Request originally issued were for pre-trial discovery both so far as documents were concerned and so far as taking depositions from the witnesses were concerned.
34. Second, it is extremely doubtful whether the attempt by Refco to salvage the position, so far as the documents were concerned, by requesting a different schedule of documents was permissible. A request to the court in effect to substitute such a schedule now compendious as far as all witnesses were concerned and taking the place of four extensive exhibits by operation of the blue-pencil technique would seem to us extremely difficult. We were indeed quite unconvinced by Mr Steinfeld's attempts to demonstrate that on examination of the exhibits the court could somehow spell out a request for the particular classes of documents now described in the new schedule.
35. Third, even if we are wrong in our view as to how a blue-pencil technique could have been applied, the documents in the new schedule simply cannot be described as "particular documents". The suggestion is that the schedule compendiously describes actual documents as found permissible in Asbestos. For that to be so however the various categories would have to describe documents that existed rather than conjectural documents. It seems to us plain that they do not. For example, in relation to the first category, "Specific agreements" between the Banks and a variety of different entities or persons "relating to payment of fees or commission" requested from the Banks and the Melwanis alike, is a request to search for documents and disclose; it is not an identification of particular documents which are known to exist and which should be produced. To put it another way, it is not a request for "the" agreements, it is a request for "any" or "all". The same point can be made in relation to the other three categories.
36. Fourth, it would be quite impossible to attempt some further blue-pencil exercise to try and identify exact documents because there is no evidence to identify particular documents as existing, and indeed no suggestion was made that the English court should do so. We were informed, it is fair to say, of one draft document which had been identified by RM in his deposition in New York, which the Banks had searched for and which they could not find. It would appear that Refco will obtain this document in any event from RM pursuant to the settlement reached.
37. Fifth, when one turns attention to the question of whether oral depositions should be taken from the bank witnesses, the starting point is that the impression given by the Letters of Request is that it was really documents which Refco were seeking from the Banks, and what was being sought by way of examination in reality related to what the documents might show. One notes again the absence of phrases such as "Refco would be severely prejudiced without the evidence of these witnesses". The fact that the witnesses from the Banks were not originally identified, supports the conclusion that it was not first hand evidence of particular witnesses which was in contemplation. But if no order for the production of documents can be made at this stage, then the primary basis on which Refco desired and persuaded the New York court to have Bank witnesses provide a deposition i.e. to be examined about the documents, has disappeared. This was in reality a typical United States style discovery deposition which was being requested and that is an exercise which the English Statute simply does not allow.
38. Furthermore, unlike the Golden Eagle case where the judge had found there was relevant evidence that the individuals concerned in that case could give, it is very difficult to identify any relevant evidence that the bank employees could give. If one goes to paragraphs 16 and 17 of the witness statement of Therese Doherty ultimately relied on by Mr Steinfeld as demonstrating relevance, the point that it is discovery of documents which Refco desires is emphasised. Paragraphs 16 and 17 say:

16. "The Refco Entities further advised the Court that, if the Plaintiff's motion to amend was granted, the Refco Entities would require the disclosure of additional documents in order to allow the Refco Entities to investigate and prepare their defence to the new claims. The Refco Entities advised the Court that the additional disclosure would include documents held by R. Melwani, Standard and CSFB relating to (a) the fees claimed from Refco, CSFB and Standard by R. Melwani, Investment Services, Dimension, Rocos and Steinberg, and (b) whether, and to what extent, those fees were disclosed to the Plaintiffs.

17. The Refco Entities advised the Court that the discovery also would include conducting depositions of CSFB, Standard, and alleged co-conspirtors, H. Melwani, Dimension, Scherer, Primeway, Rocos and Steinberg."

39. In their skeleton argument before the judge those acting for Refco put the question of relevance in this way. They submitted that if evidence could be obtained of what commissions the Banks were paying the Melwanis that would be relevant to Refco's case for a variety of reasons.

"(i) It would belie the suggestion, upon which the Plaintiffs invite the Court to infer fraud, that the amount of commission paid to Mr. Melwani was so large in amount that it exceeded by a large margin "industry standards";

(ii) It would belie the suggestion that there is something unusual or underhand in commission being payable to the introducing broker/financial adviser;

(iii) It would demonstrate that the Plaintiffs have no objection in principle to commission being payable to Mr. Melwani or his companies (and have only raised the fraud allegation based thereon against the Defendants as a last and desperate "throw of the dice" to recover losses arising from their own failure to put up sufficient margin to protect their trading positions).

(iv) If it emerged that the Plaintiffs were aware of the commissions being paid by the Banks, it would go a long way towards establishing that they knew or must have known that it was at the very least likely that similar commission was being paid by the 1^st Defendant."

40. We, like the judge, are extremely dubious about the relevance or admissibility of any evidence in relation to the fee arrangements between the Banks and RM or the Melwani Entities. It would seem to us that "industry standards" covered by (i) and (ii) above should be the subject of expert evidence. We cannot see how the level of fees charged by the Banks can establish industry standards. The Banks could establish what their fee arrangements were but that is no better evidence of industry standards than Refco's own arrangements. This also appears to be the view that a New York court could well take (see the opinion of John Fellas Bundle B2-191).
41. In any event at present we cannot see how the fee arrangements between the Banks and RM or the Melwani Entities can assist a New York court to determine the allegations brought against Refco. If the Banks had different arrangements then that does not assist Refco. If their arrangements are the same, then that may establish doubts as regards the behaviour of the Banks, but again not to any benefit so far as Refco is concerned. If there were to be any risk of the information casting doubt on the behaviour of the Banks, that is a further reason why it would not be reasonable to allow a deposition under which not just Refco could ask questions but Binzer and Genira could also cross-examine.
42. As regards the suggestion in (iii) that the plaintiffs could be shown to have had no objection to commission being payable to RM or his companies, we do not understand that of itself to be in issue. It is the quantum and nature of the commission split which is in issue.
43. We can see that if it did "emerge" that Genira and Binzer were aware of the commission being paid by the Banks to RM or his entities, that might go some way towards establishing that they would appreciate similar commissions might be being paid by Refco. Refco will have discovery in the course of the U.S. proceedings which may enable them to make that allegation. However, the one thing that the English court will not allow Refco to do is to have a "fishing" expedition so far as the Banks are concerned in order to see whether it might "emerge" that Genira and Binzer had been so informed by the Banks.
44. Finally, in any event, the request is not simply to take evidence about the fees or commission charged on a particular business with which the action is concerned. The request is in very broad form. We do not think it should be the function of this court to redraft Letters of Request where there are serious doubts about the admissibility of the evidence. That is particularly so where it does not appear that the New York court has considered precisely what evidence is being sought for the trial, or its likely weight if it were obtained.
45. Accordingly this is a case where it seems to us clear that the order so far as the Banks were concerned was rightly set aside by the judge. This is a case where if further Letters of Request are to be made they should only be made after further consideration by the New York court.

Order:

46. Appeal refused.
47. Costs agreed in sum of £32,218.15 by consent to be paid within 14 days.
(Order not part of approved judgment)