ROYAL COURT
(Samedi Division)
3 February 1998
Before: B I Le Marquand Esq., Greffier Substitute
BETWEEN Mayo Associates SA
Troy Associates Limited TTS
International SA PLAINTIFFS
AND
Cantrade Private Bank Switzerland (CI) Ltd FIRST DEFENDANT
AND
Touche Ross & Co (being the persons listed in Exhibit A to the Order of Justice)SECOND DEFENDANT
AND
Robert John Young FIRST THIRD PARTY (joined at the instance of the First Defendant)
AND
Anagram (Bermuda) Limited (joined at the instance of the First Defendant) SECOND THIRD PARTY
AND
Myles Tweedale Stott (joined at the instance of the First Defendant) THIRD THIRD PARTY
AND
Michael Gordon Marsh (joined at the instance of the First Defendant) FOURTH THIRD PARTY
AND
Monica Gabrielli (joined at the instance of the First Defendant) FIFTH THIRD PARTY
AND
Touche Ross & Co (joined at the instance of the First Defendant) SIXTH THIRD PARTY
AND
Cantrade Private Bank Switzerland (CI) Limited (joined at the instance of the Second Defendant)SEVENTH THIRD PARTY
Application by the first defendant for the plaintiffs
and the third fourth and fifth Third Parties to
make specific discovery of various documents
Advocate AR Binnington for the First Defendant
Advocate PC Sinel for the Plaintiffs and the
Third, Fourth and Fifth Third Parties
JUDGMENT
THE GREFFIER SUBSTITUTE: The facts in relation to this case have been clearly set out in previous judgments. The first plaintiff acted as a trustee in relation to investments being made by various investors in a scheme which was based around geared speculation in the foreign exchange markets and the third plaintiff was their nominee company in whose name various bank accounts representing the invested moneys were held. The second plaintiff was the company responsible for the running of the investment programme. The first defendant is the bank in which the moneys relating to investments were held in Jersey and which handled the foreign exchange dealings. The third third party is a director of the first plaintiff and the beneficial owner thereof and the fourth and fifth third parties are directors of the second plaintiff and between them the beneficial owners thereof.
There are numerous allegations against the first defendant relating to the assertion that although the investment programmes were losing money the impression was being given to the investors that the programmes were profitable.
The claim for damages against the first defendant will involve complicated calculations as to the dates upon which losses were made and the amounts thereof. In addition to the losses claimed by the plaintiffs on behalf of the investors there are also claims by the plaintiffs for losses and damages resulting from the failure of the programmes.
Both the plaintiffs and the third, fourth and fifth third parties have produced affidavits of discovery in the correct form. However, the first defendant is not satisfied that full discovery has been made by these parties and has issued a summons dated 3 September 1997, seeking specific discovery of various categories of document.
The principles in Jersey in relation to such applications are clearly set out in the Jersey Court of Appeal case of Victor Hanby Associates Limited & Hanby v Oliver (1990) JLR 327. The position is summarised in the following section which commences on page 350 and which reads as follows:
"A party seeking further discovery after an affidavit has been made following an order under r6/16 (1), must persuade the court that despite the affidavit, his deponent has not complied with the order. It seems to us that it must be necessary, in these circumstances, for the party seeking further discovery to show, by evidence on oath, not only a prima facie case that his opponent has, or has had, documents which have not been disclosed, but also that those documents must be relevant to matters in issue in the action. The court must be satisfied that the documents will contain information which may enable the party applying for discovery to advance his case, damage that of his opponent, or lead to a train of enquiry which may have either of those consequences. It is not enough to show only that the documents may be relevant in the sense described. A court faced with evidence which establishes no more than that the documents may or may not be relevant would not be entitled to disregard the oath of the party who, having (ex hypothesi) seen and examined the documents with the assistance of his advocate, has sworn, in effect, that they are not relevant.
We should add that, even where a prima facie case of possession and relevance is made out, an order for specific discovery should not follow as a matter of course. The court will still need to ask itself the question whether an order for specific discovery is necessary for disposing fairly of the cause or matter. It must be kept in mind that O.24, r7 of the English Rules of the Supreme Court is itself subject to r8 of the same order, which makes this further requirement explicit."
Advocate Sinel brought to my attention the English Court of Appeal case of Lonrho plc v Fayed and Others (No 3) (24 June 1993) Times Law Reports. The following sections are of particular importance:-
"Where, at the interlocutory stage of an action, an affidavit or affirmation was made by a party pursuant to an order for specific discovery of documents, under Order 24, r7 of the Rules of the Supreme Court, the party was not entitled to contravene what was sworn or affirmed there by a further contentious affidavit or by obtaining an order to cross-examine that party, since the latter’s oath in answer was conclusive."
"His Lordship, having drawn attention to the notes to Order 24, rule 7 in The Supreme Court Practice 1993 (vol.1, p 456), said that the further affidavit made pursuant to rule 7 was simply a further and better or amending affidavit, when the deponent’s attention had been drawn to the fact that there was a prima facie case, either based on materials emanating from the party making the affidavit or the belief of the opposite party, that such documents existed. What could not be done was to assert in a further contentious affidavit that the answer made, if it was in proper form, was untrue, so as to establish a breach of the other party’s obligations to discovery. The rule that prohibited cross-examination on affidavits of documents was affirmed by the Court of Appeal in Jones v Monte Video Gas Co ((1880) 5 Q B D 556, 558-559)."
The Lonrho case highlights the fact that the procedure in England in relation to such applications as this takes two stages. In the first stage the applicant establishes a prima facie case that documents exist which have not been discovered and if no such documents exist then the other party produces an affidavit to that effect, which affidavit cannot be challenged at a subsequent hearing. The position in Jersey is that once an application for specific discovery is brought by summons then there is only one hearing and the party against whom the order is sought will, where no documents exist, depose to this effect in an affidavit in answer to the affidavit in support of the application. However, where that occurs I have no doubt that in Jersey we ought to follow the English practice that the affidavit stating that no such documents exist cannot be challenged.
The first two categories of documents being sought are similar. They are statements, mandates and all correspondence including debit and credit instructions (including electronic fund transfers) for the period from 1 January 1984 to 30 June 1994 for each and every account held at AMRO Bank or other banks by Mayo and/or Troy and/or Galt Investment Research and/or Troy Managers Limited and/or Mr Stott and/or Mr Marsh and/or Ms Gabrielli into which TTS Investors monies were received, or from which monies were transferred to TTSI accounts at Cantrade, or into which monies were transferred from TTSI or other accounts at Cantrade, or from which monies were paid to TTS Investors (including but not limited to the accounts identified in Appendix 1 hereto).
Advocate Binnington outlined 5 sources of fees which he alleged were paid by investors to the plaintiffs or the third parties. These were as follows:-
a) an initial fee on joining the scheme;
b) a profit related fee;
c) a trustee and administration fee;
d) a fee received by the first third party, one third of which allegedly went to the fourth and fifth third parties; and
e) a share of commissions paid by other funds or investments on the introduction of new business to them in relation to the investors’ money.
Advocate Binnington submitted that the calculation of the quantum of damages due by the first defendant, if a finding of liability were to be made against it, would be complicated. This would involve, in the case of each investor, determining the date upon which their investment ought to have ceased if the first defendant had acted properly and the losses which had flowed therefrom. As some of the losses related to commissions which had been paid on non-existent profits to the plaintiffs and to the third parties there would need to be a precise investigation as to what had happened to the funds of each investor from the time when the investment had first been made onwards. Advocate Binnington submitted that the third party claims against the third, fourth, and fifth third parties also required a careful investigation of payments of false commissions to them.
Advocate Sinel submitted that, as the investors were not the plaintiffs in this action, all that had to be determined was which of the moneys which had been in accounts held with the first defendant had been lost due to the fault of the first defendant. Advocate Sinel also referred me to paragraph 41 of the affidavit of Myles Tweedale Stott which reads as follows:
"41. As explained above, the Plaintiffs have already disclosed all bank accounts at Cantrade and AMRO as far as they were in our possession. All accounting records of TTSI showing receipt of funds and the use to which they were put have already been disclosed to Cantrade. It appears that Advocate Wilson is out of touch with his accountants or has not bothered to consult them."
However, in the three paragraphs before paragraph 41 which relate to requests 1 and 2 Mr Stott is actually saying that disclosure of accounts into which no moneys were paid by investors is completely unjustified and an irrelevant request. Although Advocate Sinel submitted that, upon the basis of paragraph 41 of Mr Stotts affidavit, I should hold that the principles set out in the Lonrho case came into effect, it is not at all clear to me that Mr Stott is saying in his affidavit that no documents exist in the categories being sought. It seems to me that what he is saying is that documents in the categories being sought have either been provided or are not relevant.
It is clear to me that the court at trial will need to investigate in some detail what commission payments were being received by the plaintiffs and by the third, fourth and fifth third parties and what has actually happened to the moneys of each investor. The latter question is particularly relevant because of the allegation of the breach of the 10% down side limit. How is the court to determine the date upon which that limit was breached without an investigation of what has happened to the moneys of a particular investor? It also seems to me that the first defendant is bound to attack the conduct of the plaintiffs and of the third, fourth and fifth third parties in relation to the management of the investments and that in order so to do they ought to have access to accounts of those parties in order to see what those parties were actually doing with investors moneys.
I am, therefore, satisfied, in principle, that orders ought to be made in accordance with requests 1 and 2 for a period of time. The dates set out in requests 1 and 2 allow for an investigation of dealings with moneys of the investors prior to moneys being paid to the first defendant provided that those moneys eventually went into the investment. Such an order is consistent with the approach which I have set out above and will allow the first defendant to investigate what the plaintiffs and the third parties were doing with the investors’ moneys from the inception of the schemes.
Advocate Binnington conceded that the precise identity and addresses of individual investors ought to be protected and I am therefore directing that the documents which are disclosed can be edited in order to remove such details provided that there is some reference by letter or number to the individual investor involved.
In relation to requests 3 and 5, Mr Stott had deposed that all documents in the categories sought had been disclosed and Advocate Binnington accepted that he could not challenge this under the principles held in the Lonrho case.
Request 4 related to all files of Mayo and/or Mr Stott from which the undisclosed documents identified in appendix 2 to the summons (total 120) came from (including but not limited to such undisclosed documents).
Request 6 was similar and related to all files of Troy and/or Mr Marsh and/or Ms Gabrielli from which the undisclosed documents identified in appendix 3 to the summons (total 230) came from (including but not limited to such undisclosed documents).
What has happened here is that, in the course of the criminal prosecution against the first defendant relating to matters raised in this action, the prosecution has disclosed a number of documents to the first defendant which were originally obtained by the plaintiffs by virtue of an Anton Piller Order obtained against the first and second third parties herein in action 94/6. The 120 documents and the 230 documents were documents which the first defendant considered relevant to this action and which it obtained in the way set out above but which were not disclosed in the affidavits of discovery of the plaintiffs or of the third, fourth or fifth third parties. The point was that the documents obtained from the first third party were his copies of the documents and that there ought to be corresponding original documents or copy documents on the files of the plaintiffs or the third, fourth and fifth defendants.
At the hearing before me on 30 December 1997 I indicated that I would not be prepared to make any orders under requests 4 and 6 which went beyond the specific 120 and 230 documents. This was because I was not satisfied that a prima facie case had been made out for the existence of additional documents or that such documents must be relevant or that disclosure of these was necessary for disposing fairly of the action. The request for the additional categories was speculative and there was insufficient evidence to establish that an order ought to be made.
It appeared to me that the plaintiffs and the third, fourth and fifth third parties had not understood the nature of the request of the first defendant here. In particular, Advocate Binnington submitted that it was common ground between the parties that the fourth third party often wrote notes upon documents which he received. For this reason, it was alleged that there might well be copies of documents obtained from the first third party under the Anton Piller Order which were in the possession of the fourth third party and which would have such notes thereon and would therefore constitute different documents.
In paragraph 6 of his affidavit, Mr Stott stated as follows:-
"It is to be noted that of the 120 documents requested in appendix 2, 113 have already been disclosed and of the 230 documents requested in appendix 3, 197 have been disclosed either by Mayo, or Troy or through Youngs papers (Anton Piller) so far as can be ascertained. I believe that many documents are not in the possession, custody or control of the Plaintiffs, the Third and Fifth Third Parties or their Advocate."
It was clear to me that, because the plaintiffs and the third, fourth and fifth third parties have not understood the issue in relation to different copies of the same document being held by them or of different documents being created by virtue of notes being written, the affidavit of Mr Stott has not addressed in detail the request being made under paragraphs 4 and 6 of the Schedule to the Summons.
As a matter of principle, where different parties hold originals or copies of documents which are disclosed by other parties, the copies so held ought to be separately listed on each affidavit of disclosure. Where notes are made on any such documents then these ought again to the separately disclosed as they are different documents. If the first third party had copies of documents which had either come to him from the plaintiffs and the third, fourth and fifth third parties or have been sent by him to any of them then there is a prima facie case for the existence of corresponding copies of these documents in the hands of the plaintiffs and/or the third, fourth and fifth third parties. I am satisfied that the individual documents being sought by the first defendant must be relevant to matters in issue. The only question remaining, therefore, is as to whether the disclosure of such documents is necessary for disposing fairly of this action. It is possible that issues might arise as to whether or not documents sent by the first third party were received by the plaintiffs or by the third, fourth and fifth third parties. I am satisfied that these parties or their directors may have made notes on their copies of such documents. Accordingly, on balance I have decided that it is necessary for the fair disposal of the action that these categories of documents be disclosed, and accordingly, I am making an order under both paragraphs 4 and 6 limited to the 120 and 230 documents. If any of these documents are not currently in the possession of the plaintiffs or of the third, fourth or fifth defendants, then they should have been listed in any event in the part of the affidavit of discovery which relates to documents which are no longer in their possession, custody or power.
At the hearing before me on 30 December 1997, I granted request 7. I was satisfied that different notes existed on different copies of the original document, and that the first defendant ought to have access to all copies held by the plaintiffs and the third, fourth and fifth defendants in order that he have access to all notes made by them on those copies.
In relation to request 8, Advocate Binnington had conceded that in the light of Mr Stotts affidavit he could no long proceed with request 8.2.
In relation to 8.1 I refused the request as I was not satisfied that discovery of all copies of Dr Youngs paper was necessary for disposing fairly of the action. In relation to 8.3 I refused the request because it is was not appropriate to seek to tag on to the request for copies of Dr Youngs papers a general request in the form of 8.3. If there were specific documents in relation to which a specific application could properly be made then a further application could be brought for this but the current request was worded far too widely.
In relation to request 9 I refused the application both because I was not satisfied that the "must be relevant test" had been met and because I was not satisfied that disclosure of these documents was necessary for disposing fairly of the action.
Request 10 related to a letter dated 11 May 1994 (and any later versions thereof) from Mr Stott of Mayo to "all T T S General Account Investors" together with all enclosures and/or attachments thereto (including but not limited to a standard form document headed "Mandate for Legal Action" (and any later versions thereof)). Further, all originals and/or copies of executed versions of the Mandate for Legal Action (and any later versions thereof).
These Mandates for Legal Action related to authority being given by specific investors to the plaintiffs for the commencement of these and other proceedings and to the financing thereof. Advocate Binnington conceded that these could be disclosed in a form which blanked out the names and addresses of individual investors.
I am refusing this application because, although the documents undoubtedly exist, the relevance test and the necessary for disposing fairly of the action test have not been met by the first defendant. Although Advocate Binnington submitted that there were relevant issues as to whether the plaintiffs have title to pursue the claims on behalf of the investors, it seems to me that the plaintiffs are not claiming that their right so to do arises from these documents. The issue in this action will be what losses, if any, the plaintiffs are entitled to recover. There is no allegation in the current form of Order of Justice that the investors have assigned any rights of action to the plaintiffs and the plaintiffs are bringing the action in their own right or as trustees on behalf of the investors. Accordingly, I have dismissed request 10.
In relation to request 11, Advocate Sinel conceded that these notes had existed and had previously been in the possession, custody or power of the plaintiffs or of the third, fourth and fifth third parties but alleged that they had now gone missing. He conceded that they ought to be dealt with in some way by a further affidavit and I am ordering accordingly.
Finally, I will need to be addressed both in relation to the time period for the provision of specific discovery of those documents in relation to which I have made an order and in relation to the costs of and incidental to the first defendants summons dated 3 September 1997.
AUTHORITIES
Royal Court Rules 1992: Rule 6/16
RSC (1997 Ed’n) Order 24, Order 62, r10, 11.
Victor Hanby Associates Limited & Hanby -v- Oliver (1996) JLR 327
Practice Direction on Case Management (1995) WLR 262
Compagnie Financière du Pacifique -v- Peruvian Guano Company (1882) 11 QBD 55
Taylor v Anderton (1995) 1WLR 447
Re Bank of Credit and Commerce International (No. 4) 1994 1 BCLC 419
Khan (David) Inc -v- Conway Stewart & Co Ltd (1972) FSR174
Lonrho -v- Fayed (no. 3) (24 June 1993) Times Law Reports
Bankers Trust Co. -v- Shapira (1980) 1WLR 1274 CA
Fowkes -v- Duthie (1991) 1 All ER 337