Jersey Unreported Judgments

ROYAL COURT

(Samedi Division)

27 May 1998

Before: Sir Peter Crill, KBE, Commissioner

and Jurats Potter and de Veulle

BetweenLynn BlumenthalFirst Plaintiff

Robert DunnSecond Plaintiff

AndNeil KatzFirst Defendant

Stephen GainesSecond Defendant

Tekiah LimitedThird Defendant

The Beenah Group Inc.Fourth Defendant

The Cornerstone Group LtdFifth Defendant

Citizens Finance CorporationSixth Defendant

AndAnsbacher (Jersey) LimitedParty Cited

Application by the Plaintiffs for an order:

(1)releasing them from their implied undertaking to the Court not to use documents supplied by the Party Cited for other purposes, to enable the Plaintiffs to use the documents in proceedings before the Bahamian Courts; and

(2)forgiving the Plaintiffs for their unintentional contempt of Court in using some of the said documents in the said Bahamian Courts.

JUDGMENT

THE COMMISSIONER: The Plaintiffs in this action are the present Trustees of a Trust known as the TAM II Trust. It is not necessary for us to set out the background to the establishment of that Trust. Suffice it to say that there were certain financial dealings with the Defendants and/or groups or companies controlled by them which led eventually to a promissory note issued by one of the Defendants, the Beenah Group Inc. for US$4,050,000 on 16 March 1997, bearing an interest rate of 6%.

There was a default on the payment under the provisions surrounding that promissory note and as a result on 27 February 1998, certain proceedings were started in the Marin County Court in California. The proceedings were between the same Plaintiffs as in this case and the same Defendants, except in today’s case there was a Party Cited, Ansbacher (Jersey) Limited, which has now been released following the execution of Norwich Pharmacal and Mareva injunction orders in respect of assets believed to be held there and certain documents belonging to one or more of the Defendants.

In the Californian action, so far as the Defendants are concerned, this action is broken up into a number of parts. The first cause of action is against Beenah and is for breach of contract. The second cause of action is in respect of fraud, deceit and misrepresentation against Beenah, Capital Access, Mr Gaines, Mr Katz and DOES 1 through 500. The third cause of action is conversion against Beenah, Capital Access, Citizens, Cornerstone, Tekiah, Gaines, Katz and DOES 1 through 500. The fourth cause of action is civil conspiracy against Beenah, Capital Access, Citizens, Cornerstone, Tekiah, Gaines, Katz and DOES 1 through 500. At about the same time - that is to say on 6 March, 1998 - an Order of Justice was obtained from the learned Deputy Bailiff. That Order of Justice was in fact a tracing order resulting in the Norwich Pharmacal and Mareva injunction orders to which I have already referred, but it also contained a number of other allegations. It does in fact refer to the action in Marin County in California: at paragraph 16 of the Order of Justice it says "These proceedings have not yet been served upon the defendants therein. (and that is still the position). But it continues "In commencing the California proceedings, the Plaintiffs have obtained from the Californian Court orders freezing the accounts of Beenah, Capital Access, Mr Gaines, Mr Katz and Tekiah the full terms and effect of which the Plaintiffs will refer to at the trial hereof." That is incorrect. It is possible - it is not for us to make a conjecture - that had that not been stated the learned Deputy Bailiff might not have made the Order he did; we cannot say because that is a matter which is going to be dealt with in due course depending on what happens in the State of California and should the Defendants apply to have the injunctions lifted, which they have done, but the Judicial Greffier has put off the date on which these applications were to be made pending a decision of a Judge in California - to which I shall return in a moment.

In subparagraph (j) of paragraph 17 of the Order of Justice there is an aversion that "accounts at the Party Cited in the name of Tekiah, Cornerstone and Citizens have been used to make payment to and from Beenah or Capital Access." They further aver "that monies standing to the credit of Tekiah represent monies received from Beenah and/or Capital Access and belong to or are owned by or are held on constructive trust for Beenah/Capital Access pending determination of the California proceedings." I should say that Tekiah is a company registered under the law of the Bahamas with its principal business in Marin County in California.

It may be said, therefore, that in general terms the allegations both in the California proceedings and the Order of Justice are substantially the same except of course the divisions and more details to which I have referred in the Californian proceedings are not reflected in the Order of Justice. However, the basic allegations remain the same.

The learned Deputy Bailiff made an Order in paragraph 5 of the Order of Justice to the effect that "All or any documents disclosed by the Party Cited pursuant to the orders contained in this Order of Justice may be used by the Plaintiffs in the California proceedings."

As a result of the confirmation of his Order which took place shortly afterwards in the Royal Court, in open hearing, the documents obtained were sent by counsel acting for the Plaintiffs in Jersey to the Plaintiffs representative in California who was Mr William L Twitchell, a certified accountant. Without referring the matter to his instructing Jersey counsel of the firm of Messrs. Ogier & Le Masurier, and not being aware - and we are satisfied by the affidavit Mr Twitchell has sworn that he was not so aware - of the implied undertaking that these documents would not be used in any other jurisdiction without the leave of this Court, he commenced proceedings on 6 April in the Bahamas, using those documents. At about the same time, however, the Defendants took out proceedings in California asking a different Court to rule that the basis of the claim against them was a simple debt and secondly, that being so, there were provisions in the document that the matter should go to arbitration and asking that an order be made preventing the continuation of the proceedings in this jurisdiction which of course could be enforced against the Plaintiffs who are within the jurisdiction of the Californian Court.

Mr Journeaux submitted to us, and Mr Thompson for the Plaintiffs agreed, that the essence of a tracing order which was the basis of the actions in Jersey and in California was that there should be a proprietary claim to the money. Mr Journeaux said however that that claim appears to have been abandoned in the reply of the Plaintiffs to the representation by the Defendants and asks, in effect, that the Plaintiffs should desist from the action in Jersey. Mr Journeaux says this because in what is called one of the responsive points filed at 9 a.m. on 30 April 1998, the Plaintiffs say as regards the promissory note of US$4,050,000 to TAM II that it is due and payable on 15^th January, 1998, and then says at the bottom of p.2 of its response "This note and its default are the foundations of the above entitled litigation". Furthermore, on p.7 in the first paragraph of the response is to be found the following sentence:

However, Mr Thompson has drawn our attention to the fact that the whole basis of the claim looked at in the round is that there has been fraud and wrong dealings in the Defendants’ commercial relationship with the Plaintiffs.

We understand from the papers submitted to us that the Judge, in relation to the application made by the Defendants, has taken time to give his ruling and no date has yet been set for it. It follows that if he were to rule as asked by the Defendants, that would be the end of the Jersey proceedings. On the other hand, if he declined to do so, then the Jersey proceedings would only be terminated as regards the injunctions by a ruling in this Court on an application by the Defendants to lift the injunctions in toto.

As regards the action launched in the Bahamas we are satisfied that there was no intentional disrespect or contempt of this Court by Mr Twitchell as he has deposed, but the fact remains that a number of documents have in fact been used and are now before the Bahamian Court. That is something we cannot change. It seems to us that looking at the question of justice in the round we think that we should give a ruling on the application today which is to give retrospective authority to the use of those documents, because as I say they are already before the Bahamian Court, and we think it is not necessary to decide whether in fact consent was needed or not. We are giving consent on the basis that it would be needed. We are satisfied that Omar & Ors. -v- Omar & Ors. [1995] 3 All ER 571, the other authority cited to us entitles us to do that and we accordingly do so, but we go further than that; we say that those documents which will include an additional three to the ten which have already been used will not be used in any other jurisdiction without leave of this Court.

As regards anything further we decline to make any further order until we have a ruling from the American Court. We keep the status quo; we cannot do any more at this stage.

Authorities

Gee: "Mareva Injunctions and Anton Piller Relief" (3^rd Ed’n): pp. 150-155, 245-253

Matthews and Malek: "Discovery": pp. 250-266

Matthews and Malek: "Discovery": (3rd Supplement): pp. 78-81

Cala Cristal SA and Ors. -v- Emran Al-Borno and Ors. (6 May 1994) TLR

AC Mauger & Son (Sunwin) Ltd -v- Victor Hugo Management Limited [1989] JLR 295.

Baptiste Builders’ Supply Limited -v- FW Smith and Ors. (1 August 1995) Jersey Unreported

Claes Enhörning -v- Nordic Link Limited & Ors. (24 January 1997) Jersey Unreported

Mayo Associates & Ors. -v- Anagram (Bermuda) Ltd (25^th February, 1998) Jersey Unreported

Omar & Ors. -v- Omar & Ors. [1995] 3 All ER 571

Wilden Pump and Engineering Co. -v- Fusfield [1985] FSR 581