ROYAL COURT
(Samedi Division)
28 May 1998
Before: Sir Peter Crill, KBE Commissioner, sitting alone
Between1990 Trustee Company LimitedPlaintiff
AndNurnberg Company Limited
(Trustee of the Nürnberg Trust)Defendant
AndRichard Falle and Daniel Young,
trading under the style and
profession of advocate and solicitor
in the name of Bois and BoisParty Cited
Application by the Defendant Company to raise or vary the interim injunctions obtained
by the Plaintiffs Order of Justice of 7 May 1998
Advocate CPG Lakeman for the Defendant
Advocate J Martin for the Plaintiff
JUDGMENT
THE COMMISSIONER: On 7 May of this year, the learned Deputy Bailiff signed an Order of Justice against the Defendant, Nürnberg Co., Ltd., as Trustee of the Nürnberg Trust, and the Parties Cited, the Partners in Bois and Bois. That Order of Justice enjoined the Parties Cited from dealing with any funds held in the name of the Defendant up to DEM 106,479.00 and, secondly, "restraining them ... from transferring, disposing of, or alienating or in any other way whatsoever dealing with any funds up to the value of DEM 106,479.00 held in the name of or for the benefit of the Defendant or any similar title or name or together with a third party or third parties."
As regards the Defendant, "restraining it from disposing of, transferring, alienating or in any other way whatsoever dealing with any funds up to the value of (the same amount) held with the Parties Cited, or any bank or financial institution within this jurisdiction." Also requiring it, within seven days of service of these proceedings, to swear and file an affidavit detailing all its dealings with regard to the accounts opened with the Parties Cited. I am not concerned today with that side of the Order of Justice.
The Plaintiff was required to lodge - and has done so to fortify their undertaking in damages - the sum of £2,000 with Crill Canavan to be held by them until further Order.
The summons today is issued by the Defendant, asking me to lift the injunction, or, if I do not do so, to vary it.
The Plaintiff has asked me to maintain the injunction, but if I refuse to do so, then to impose it with conditions and possibly in a lesser sum as I shall mention in a moment.
The background to this application by the Defendant may be said to be this:
"The Plaintiff (I am reading from the Order of Justice which neither party has challenged in the essential outline) is a British Virgin Islands registered company with its registered office at PO Box 438, Road Town, Tortola, British Virgin Islands. It acts, inter alia, as trustee for trusts for clients of Wilson Associates, which is a firm of lawyers whose principal place of business is 9 Avenue Guillaume, Luxembourg.
Nürnberg Company Limited ("the Defendant") is a Jersey registered company, whose registered office is at 2 Bond Street, St. Helier, Jersey, and who acts as trustee for the Nürnberg Trust ("the Trust")." (The Trust was first set up on 1990).
The present directors of the Defendant are Mr Daniel Young, a solicitor partner and Advocate Richard Falle, an advocate partner in Bois and Bois. Mr Jeremy Johnson, a partner in the firm of English solicitors, Galsworthy and Stones, was a director until January 1998.
As I have said, the Nürnberg Trust was created on 20 December 1990, and as one may expect, in the creation of such a Trust, there were the usual charging clauses enabling it to charge for its services and to employ professional persons to undertake the work of the Trust and to remunerate them.
On 9 October 1997, Mr Stephan Schepers, the protector of the Trust, removed, or caused to be removed, the Trusteeship of the Trust from the Plaintiff Company and transferred it to the Defendant. He did so by way of an Instrument of Appointment in accordance with clause 21(b) and 21(d) of the Trust Deed.
It is claimed in the Order of Justice that it was an implied term of the Instrument that the Defendant would discharge the Plaintiffs outstanding fees and disbursements. Certainly there was no express term in the removal of the Plaintiff Company as Trustee. It is accepted that the assets of the Trust included shares in a Luxembourg holding company called Compagnie de Participation Financière (Luxembourg) SA, which has generally been called ("CPF").
It is alleged by the Plaintiff Company that there has been an agreement reached between the Defendant and/or Mr Schepers with a third party, a Mr Brian Schneider, which would involve a transfer of all shares in CPF to the order of Mr Schneider and that subsequently a substantial part of the monies involved in the completion of the transaction were to go, or, as alleged in the Order of Justice, have already gone to the Parties Cited and/or the Defendant for the benefit of the Trust.
The total amount charged by the Plaintiff for its services to the present Trustee (the Defendant Company) was DEM 106,479.00 which, I am told, comes to approximately £35,000. Of this figure DEM 40,000 is in respect of fees for the year 1997. The DEM 40,000 is a termination fee of 0.2% of the Trust assets and DEM 26,479 are disbursements according to a bill submitted by Galsworthy and Stones.
The joint invoice setting out those figures is dated 6 April 1998, and the first indication of a termination fee is recorded in that document. As regards the other two items, so far as the 1997 fee is concerned, according to an affidavit of Mr Wilson, who practices in Luxembourg under the title of Wilson Associates and is a director of the Plaintiff Company, it was understood that the annual administration fee would be payable on 1 January each year. As far as the bill from Galsworthy and Stones is concerned, that does not appear to have been submitted until January 1998.
The Order of Justice is based and on - indeed virtually copied from - an affidavit sworn by another director of the Plaintiff, Mr Sean Patrick O'Brien. In that affidavit he deposes as to the matters I have already mentioned, but further recites a number of letters which passed between Mr Wilson and Mr Daniel Young. It was necessary for the arrangements that were being concluded with CPF and Mr Schneider that there should be no impediment on the transfer of shares and that required the consent of the Plaintiff Company. That consent was given in a letter signed by Mr. Wilson and addressed to the Nürnberg Company Limited, 2 Bond Street, St. Helier, Jersey, (the Defendant) of 30 March 1998. Mr Wilson deposes that that was as a token of goodwill and no more.
Mr Wilson followed that letter up with a further letter in reply to a request from Mr Young. Mr Young had written to Mr Wilson as a result of the invoices I have mentioned of 6th April, on 22 April asking for "all the relevant documentation including all contracts in relation to the services you were to perform, the basis upon which a termination fee is payable, documentation concerning any percentage fees to be paid etc." He then goes on to say - he has written 'one', but it must be 'once' - "Once I have received the above information I shall be in a position to consider the matter further." That letter produced a reply on 28 April in which details were given by Mr Wilson of the amounts due. It is not necessary for me to go through the figures; these are claims which are disputed. The penultimate paragraph of his letters says this: "The services provided by Mr Johnson were, I believe, largely related to matters that he was dealing with in conjunction with the protector to the trust. If you require further details on the exact nature and extent of the services covered, may I suggest you contact Galsworthy and Stones direct." He concludes: "I trust that this provides sufficient information for you to establish that the fees claimed are entirely legitimate and I look forward to you settling our client's bill with despatch." However, that was not the last of the correspondence. Without waiting for a reply to that letter, Mr Wilson wrote again on the 4 May. In the third paragraph of his letter he said: "The annual fees in question have been outstanding since January, 1997, while the remainder date from October, 1997." (There is a dispute about that and I have mentioned the dates upon which figures were actually supplied and it is not necessary for me to go into that point any further). The last sentence in the last paragraph is this: "If this is not made within the next seven days, (the payment) we reserve the right to take whatever steps we deem appropriate to recover the sums due including, without limitation, taking legal action." As I have said the Order of Justice was issued on 7 May without any further reference to the Defendant, or indeed the Third Party.
Furthermore, in the affidavit of Mr O'Brien he refers to an alleged agreement, because no documents appear to be attached to the affidavit to support it, with Galsworthy & Stones between the Defendant and that firm reducing the amount of the bill. He than makes an assumption which is as follows: "This suggests to me that the Defendant is seeking to avoid paying the Plaintiffs fees and disbursements as invoiced." I have to say that I am unable to follow the jump in the logic. He concludes that he "believes that the monies held by the Defendant and/or Parties Cited will be removed from this jurisdiction, and that the Plaintiffs claim for the fees and disbursements will not be met."
The application this morning is to lift the injunction and the basis of that application is this: first of all there was a material non-disclosure or any accurate disclosure of information. Where is the scale fee for example upon which the application is based? It has been produced to me; it was not produced to the Deputy Bailiff. Secondly, the assets of the Plaintiff Company were not disclosed. It now transpires from subsequent affidavits that there is something like £10,000 held to its order by brokers in England and there are still some 20,000 shares over which they have control but the value of those shares is in dispute, although Mr Johnson, in a letter which was never received by Mr Schepers (or so I was told by Mr Lakeman) in October, 1997, put the value of those shares at £5 per share whereas they are now not tradable and when they were suspended their value had dropped from the £5 mentioned by Mr Johnson in October, 1997, to a little over £3.
In a second affidavit Mr O'Brien deals with the assets and suggests that the shares (for the reasons I have mentioned) are in fact valueless. In that affidavit, at p.2, he confirms what I have said: that there were 23,353 shares held by the Plaintiff Company at the brokers in London. He says that the current value is zero as they have been suspended but he would have no objection to the transfer of those shares to the new Trustees i.e. the Defendant. He explains the 10,510 in respect of the 2,000 CPF shares, being the proceeds of sale held with the brokers, by saying that they (that is to say the Plaintiff) have checked their records and at no time had they received any statement showing these monies were due. He also refers to a loan to Mr Schepers of DEM 500,000 which was concluded on 14 April 1995, and matures for repayment on 15 April 2005. It is not reasonable, he suggests, for the former Trustee to wait for a further seven years in order to recover its fees and therefore he considers that this asset is of little value to the Plaintiff Company.
There is a further claim disclosed in Mr Wilsons affidavit: the Plaintiff Company has a claim on a loan account against CPF the precise amount of which is unknown at the time of the swearing of the affidavit until CPF has completed its financial statements. It seems to me that not to disclose those matters which should have been within the knowledge of the Plaintiff Company was itself a material irregularity.
The merits of the claim were not fully canvassed. As a result of reading the affidavit of Mr Schepers it is clear that the claims will be contested and that allegations will be made at the hearing for the reasons that led to the dismissal of the Plaintiff Company and its replacement by the Defendant as Trustee of the Nürnberg Trust. Again, it is inconceivable that the Plaintiff Company was not aware - although it claims at the moment to have been unaware - of any form of dissatisfaction - but the removal itself raises a question in my mind as to what was the reason for it. Therefore, in addition to the failure to disclose the assets, the merits were not properly canvassed in full and, thirdly, no mention was made - as it should have been - of certain litigation which had been launched in Luxembourg and according to the evidence on affidavit of Mr Schepers - again I think this is his second affidavit - he claims that one of the issues raised by Mr Wilson and his lawyers in Luxembourg was denying the existence of Nürnberg Company Limited and Nürnberg Trust. In the affidavit it says: "...knowing that he signed the Trust Deed of Nürnberg Trust and knowing that he had been elected on 30 October (he has put 1998, but that must presumably be 1997) by Nürnberg Company Limited as the majority shareholder of CPF (representing the Trust) as chairman of CPF." These are very strange matters which no doubt will be canvassed more fully at the actual hearing. In his affidavit, referring to the question of the removal of the Plaintiff he asserts that the Plaintiff had been fired as a Trustee of Nürnberg Trust Ltd by not accounting for the assets of the Trust. He goes on to say: "To excuse these failures of 1900 Trustee with the statement that nobody in the past has asked for a balance sheet for the Trust, is in my point of view not acceptable...." As I say, these are matters which are likely to take up the time of the Court at the main hearing.
I have to ask myself whether there was material non-disclosure and I have to look at the RSC (1997 Ed'n) Vol. 1, part 1: O.29 for assistance an authority which has been followed in the Jersey Courts and I look at Rule 29/1/23:
"(i) it is the duty of the plaintiffs to make full and frank disclosure of the material facts in applying for an injunction; (ii) materiality is to be decided by the Court and not by the plaintiffs or their advisers; (iii) the duty of disclosure applies to material facts known to the plaintiffs and to any additional facts which should be known if proper inquiries are made; (iv) the extent of such inquiries depends on all the circumstances of the case; (v) the Court will ensure that the party seeking to obtain the injunction is deprived of any advantage derived from a breach of the duty of disclosure; (vi) the question whether a fact not disclosed is sufficiently material to justify the immediate discharge of the injunction depends on the importance of the fact to the issues to be decided; and (vii) the Court has a discretion to continue the injunction to grant a new one."
However, although I have been invited by Miss Martin for the Plaintiffs even if I do lift the injunction, to reimpose it, over the page is an important paragraph which reads:
"Where there has been non-disclosure of material facts at the ex parte application for a Mareva injunction, but full disclosure is made at the hearing inter partes, the Court has a discretion to continue the ex parte injunction or to discharge it and immediately regrant substantially the same injunction if, had full disclosure been made at the ex parte application, the injunction could properly have been granted."
It is possible - and I say no more than that - that had the disclosure of the assets of some £10,000 in the hands of the Plaintiff been known to the Deputy Bailiff, he would have granted a lesser injunction than in fact he did.
The next sentence is one to which I pay particular attention:
"This, however, (that is to say the discretion to regrant an injunction)is a discretion to be exercised sparingly; generally it will not be right to require a defendant to wait until after trial and then seek damages for the non-disclosure. The parties have to be restored to their respective positions before the making of the ex parte application; if this carries a risk of the defendant dissipating his assets, the plaintiff has only himself to blame for not making the ex parte application properly. Moreover post-trial damages may not adequately compensate the defendant for his loss."
There is some suggestion that without the enjoined assets it will not be possible for the Defendant Company to embark through CPF on some form of commercial activity which has been described by Mrs Martin as speculative. I am not in a position to say whether it is or not, but on the affidavits I have it is claimed that this money is needed to enable the company to carry out a joint commercial venture with some other companies.
Looking at the matter therefore in the round I am satisfied that had all the matters that are now before me been before the Deputy Bailiff, he would not have granted the injunction. In my opinion there is insufficient urgency both as regards the content of the Order, what is claimed, and the suggestion that the assets are going to be dissipated. In this connection I would say that the two directors of the Company are in fact reputable Jersey lawyers and to me it seems strange that it was not possible - and Mrs Martin has done her best to persuade me that it was not, but I am not convinced - to contact Mr Young with a view to getting his undertaking not to dispose of assets. None of this was done; it was an unsatisfactory arrangement; and I have no hesitation in discharging the injunction and I am not going to reimpose it.
Authorities
Talika Investments Ltd -v-Olec Properties Ltd and 7 others (1990) JLR 200
Alpha Print Ltd -v- Alphagraphics Printshops of the Future (UK) Ltd and Caxton Connections Ltd (1989) JLR 152
AC Mauger & Son (Sunwin) Ltd -v- Victor Hugo Management Ltd (1989) JLR 295.
RSC (1997 Ed'n): Vol. 1, Part 1: 0.29