ROYAL COURT
(Samedi Division)
25 February 1998
Sir Peter Crill, KBE, Commissioner
and Jurat Vibert and Quérée.
Action 94/6
Between:Mayo Associates SA
Troy Associates Ltd
TTS International SA Plaintiffs
And:Anagram (Bermuda) Limited
Robert Young
Maureen Young Defendants
And:Lionrock Limited
Edgefield Properties Limited
Box Limited
Starshield Limited
Cantrade Private Bank Switzerland
(CI) Limited
TSB Bank Channel Islands Limited Parties Cited
Action 94/254
Between:Mayo Associates SA
Troy Associates Limited
TTS International SA Plaintiffs
And:Cantrade Private Bank Switzerland
(CI) Limited
Touche Ross & Co
(Being the person listed in Exhibit A to the
Order of Justice) Defendants
And:Robert John Young
(joined at the instance of the First Defendant)
Anagram (Bermuda) Limited
(joined at the instance of the First Defendant)
Myles Tweedale Stott
(joined at the instance of the First Defendant)
Michael Gordon Marsh
(joined at the instance of the First Defendant)
Monica Gabrielli
(joined at the instance of the First Defendant)
Touche Ross & Co
(joined at the instance of the First Defendant)
Cantrade Private Bank Switzerland
(CI) Limited
(joined at the instance of the
Second Defendant) Third Parties
(A)Application by the Plaintiffs
Application by the Plaintiffs for leave, in respect of documents discovered to the Plaintiffs by the Defendants in both actions (the "Discovery Documents") to:
1.disclose such of the Discovery Documents as they think fit to the investors who stand behind Mayo Associates SA and Troy Associates Ltd, and;
2.to utilise the Discovery Documents for the purpose of instituting and prosecuting action No. 97 Civ 8835 in the Courts of the United States of America, Southern District of New York (the ‘New York proceedings’).
(B)Application by Cantrade Private Bank (Switzerland) (CI) Ltd ("Cantrade") for an order that:
1.the implied undertaking given by Cantrade in relation to documents disclosed by the parties be varied to permit use for the purposes of the conduct of Cantrade’s defence of criminal proceedings brought against Cantrade and others by Her Majesty’s Attorney General due for trial on 16th February, 1998.
2.no party shall be entitled to make use in the New York proceedings of any documents disclosed on discovery by any other party until the Court’s determination of Cantrade’s proposed motion to dismiss the complaint or any amended complaint in the New York proceedings on grounds that Jersey is the forum conveniens for resolving the issues in the New York proceedings.
3the Court make such order as it thinks fit in relation to the Plaintiffs and the Fourth Third Party having already made use of documents disclosed to them on discovery by Cantrade in breach of the implied undertaking as to confidentiality for the purposes of commencing and/or prosecuting the New York proceedings without Cantrade’s prior consent or the prior leave of the Court.
4.the implied undertaking given by Cantrade in relation to documents disclosed by the parties be varied to permit use for the purposes of Cantrades conduct of the action: Tiarks and Tigon Ltd -v- Cantrade and Touche Ross & Co.
Advocate PC Sinel for the Plaintiffs
Advocate DF Le Quesne for Anagram (Bermuda) Ltd Robert Young, and Maureen Young
Advocate DR Wilson for Cantrade Private Bank Switzerland (CI) Ltd
Advocate NF Journeaux for Touche Ross & Co
JUDGMENT
THE COMMISSIONER: The Court is sitting to determine three summonses, the first issued by the Plaintiffs and the second and third by Cantrade Private Bank Switzerland (CI) Ltd ("Cantrade"), the First Defendant and the seventh Third Party in Action No. PL 94/254. That action together with action No. PL 94/6 had been ordered by the Court to be heard together. The Plaintiffs are the same in both actions. Touche Ross & Co are the Second Defendants in action No. PL 94/254.
In both cases discovery has been made and the three summonses concern the use of certain documents that have been disclosed. Some documents were disclosed following the execution of an Anton Piller Order and there seems to be no reason why the rules relating to the use to which documents obtained on discovery and documents in the hands of a party as a result of an Anton Piller Order, may be put should be any different. In both cases there is an element of compulsion.
Action number 94/6 was begun in December, 1993, with an Anton Piller Order and a Mareva injunction. Action 94/254 was begun in September 1994. In January 1995, the Plaintiffs succeeded in establishing that - contrary to the arguments of Touche Ross - London was the appropriate forum. Jersey was the appropriate forum in fact. The Royal Court lifted the Mareva injunction on 10 August 1994, and that judgment was upheld by the Court of Appeal on 23 June 1995. The Appeal Court held also that material obtained through the Anton Piller Order was improperly used. The Plaintiffs have made serious allegations of gross improper financial behaviour against Cantrade and others. For the purposes of this hearing it is not necessary to go into the details except to say that a number of prosecutions were launched in the course of which Cantrade admitted a number of infractions. When the prosecutions against other defendants have been concluded, Cantrade will be sentenced also.
During their investigations the Plaintiffs’ commissioned a report from a firm of accountants, Coke-Wallis & Tomes ("CWT"). That report dated 24 July 1997, contains a number of items that could be said to offend against the implied undertakings attached to the documents discovered. That report was sent to Cantrades advocates on 29 July 1997. In the meantime Cantrade had made an offer of compensation to investors through Advocate Philip Sinel & Co. We were told that the total number involved was around 90 of whom between 15 and 20 had accepted.
On 7 February 1997, the Judicial Greffier made a Consent Order in both actions which concerned what were called "the protected documents" and were files and documents relevant to the two cases in the possession of Cantrade. They were to be released subject to stringent safeguards.
Following the compensation offers the Plaintiffs wished to have the opportunity of commenting on them to Cantrades customers. On 7 March 1997, Cantrade made a representation to the Royal Court asking that the Viscount should be appointed as the channel of communication between Cantrade and its investors in place of the Plaintiffs. That action was heard in December 1997, and the Plaintiffs were required to supply the Viscount with a list of the investors and Cantrade was to supply the Viscount with a list of those investors with whom they had been dealing. In other words, both sides distrusted the other and the Court’s purpose was to ensure that the offers were put plainly, without tendentious arguments. The Plaintiffs have appealed against that judgment.
On 7 October, 1997, the Court authorised the Plaintiffs to release to the Finance and Economics Committee CWTs report and any relevant documents on which that report had been based.
On 26 November 1997, the Plaintiffs and others began an action in New York against, inter alia, Cantrade, its parent bank UBS and Touche Ross. There is pending an application by UBS to strike out that action as not being brought in the appropriate forum conveniens.
The summons by the Plaintiffs seeks firstly for them to be authorised to disclose such of the discovery documents as it thinks fit to the investors who stand behind Mayo Associates SA and Troy Associates Ltd in respect of the action 94/254 and action 94/6. Secondly "to utilise the discovery documents for the purpose of instituting and prosecuting action No. 97 Civ 8835 in the Court of the United States of America, Southern District of New York". It is worth noting that that summons refers to the institution of the action about which I shall say more in a moment.
The first summons of Cantrade seeks an order to permit use of the discovery documents for the purposes of Cantrades conduct of action No. 98/01. That is to say the case of Tiarks and Tigon Ltd -v- Cantrade and Touche Ross which started by Order of Justice of 15 December 1997.
The second summons of Cantrade is as follows:
"1.THAT the implied undertaking given by Cantrade Private Bank Switzerland (CI) Ltd ("Cantrade") in relation to documents disclosed by the parties in actions 94/6 and 94/254 be varied to permit use for the purposes of the conduct of Cantrade’s defence of criminal proceedings brought against Cantrade and others by Her Majestys Attorney General due for trial on 16 February 1998. I pause here to say that in fact, of course, that trial has already started and Cantrade has pleaded guilty to a number of infractions.
2.THAT no party shall be entitled to make use in action No. 97 Civ 8835 in the United States District Court for the Southern District of New York (the "New York proceedings") of any documents disclosed on discovery by any other party in respect of actions 94/6 and 94/254 until the Court’s determination of Cantrades proposed motion to dismiss the complaint or any amended complaint in the New York proceedings on grounds that the issues, or the substantial issues in the New York proceedings have since September 1994, been the subject of proceedings instituted in Jersey by the Plaintiffs, and that the resolution of those issues is the responsibility of the Royal Court of Jersey at the Plaintiffs own choice; with liberty to apply for further direction if, following the determination of the proposed motion, the New York proceedings are not dismissed in their entirety.
3THAT the Court (having considered any explanation that the Plaintiffs and the Fourth Third Party may put forward) make such order as it thinks fit in relation to the Plaintiffs and the Fourth Third Party having already made use of documents disclosed to them on discovery by Cantrade in actions 94/6 and 94/254 in breach of the implied undertaking as to confidentiality for the purposes of commencing and/or prosecuting the New York proceedings without Cantrades prior consent or the prior leave of the Court".
Advocate Journeaux for Touche Ross opposed the Plaintiffs summons but supported the use of the discovery documents in the criminal proceedings and the Touche Ross action in as much as he did not object to those orders being made. He submitted that it would be premature to decide on the issue of breach of the implied undertakings if the forum conveniens failed, even though, in his submission, it was a very serious breach and therefore a contempt of court until the Plaintiffs had filed an affidavit as to what exactly had been revealed to their New York Lawyers.
The main dispute centres around whether the Royal Court should follow the White Books Order 24 Rule 14A, that rule was inserted by the British Government as a compromise following the case of the Home Office -v- Harman, [1983] AC 280. There is some doubt whether that insertion ought not to have been effected by primary legalisation rather than by rule. Rule 14A reads as follows:
"Use of documents (Order 24, Rule 14A.)
Any undertaking, whether expressed or implied, not to use a document for any purposes other than those of the proceedings in which it is disclosed shall cease to apply to such document after it has been read to or by the Court, or referred to, in open Court, unless the Court for special reasons has otherwise ordered on the application of a party or of the person to whom the document belongs.
The basic rule - and I take the following statements of the law from a text book by Mathews and Malek on Discovery (1992) set out at paragraph 12. 01:
"Any party on whom a list of documents is served or to whom documents are produced on discovery or pursuant of an order of the Court" - and that supports my view earlier that an Anton Pillar is such an order of the Court -impliedly undertakes to the Court that he will not use them or any information arising from them for collateral or ulterior purpose without the leave of the Court and consent of the party providing such discovery."
The reason for that rule is quite clear. It is set out in the same work at paragraph 20.04:
"The primary rationale for the imposition of the implied undertaking is the protection of privacy. Discovery is an invasion of the right of the individual to keep his own documents to himself, it is a matter of public interest to safe guard that right." At the bottom of the same paragraph: "The interests of proper administration of justice require that there should be no disincentive to full and frank discovery. The documents therefore must not be used for any collateral or ulterior purpose or improper use, even their use in another action based on the same facts and with the same parties would fall foul of the implied undertaking, see Riddick -v- Thames Board Mills (1977) QB 881."
The Royal Court has regard to the White Book where the rules may be said to correspond, mutatis mutandis, to our own. In the Harman case, the House of Lords by a majority held that the undertaking did not end once the documents had been read out in Court, Miss Harman applied to the European Court of Human Rights contending that the rulings were contrary to the right of freedom of expression enshrined in the European Convention of Human Rights. The application was compromised by the Government giving an undertaking that resulted in Rule 14A.
Mr Sinel submitted that this Court should follow that rule as the Island was a party to the Convention, and to that end he cited an extract from the maiden speech of the Lord Chief Justice in the House of Lords on the 3 July 1996. His Lordship said this inter alia:
"But the convention" - he is referring to the Human Rights Convention -"is not part of our domestic law. The courts have no power to enforce convention rights directly. If domestic legalisation plainly conflicts with the enforcement of the convention then the Courts apply the domestic legislation. That is a principle which your Lordships’ House, sitting judicially has unambiguously laid down and it is a rule which the courts have loyally observed despite ingenious and persistent invitations by counsel to depart from it.
The second extract is as follows:
"Secondly, if the common law is uncertain, unclear, or incomplete, the Courts have to make a choice; they cannot abdicate their power of decision. In declaring what the law is, they will rule, wherever possible, in a manner which conforms with the convention and does not conflict with it. Any other course would be futile, since a rule laid down in defiance of convention would be likely to prove short lived.
The third extract is as follows:
"Fourthly, where the Courts have a discretion to exercise - that is they can act in one way or another - one or more of which violates the convention, and another of which does not, they seek to act in a way which does not violate the convention. That again is usually common sense and requires no elaboration. However, it is not an invariable rule and your Lordships House, sitting judicially, gave an important judgment only yesterday in which the convention right to privacy was held to be obliged to give way to the greater interests of justice"
If we had felt that it would be proper for the Superior Number of the Royal Court under its rule-making powers to bring in a provision in our rules similar to Rule 14A we would have found the words of the Lord Chief Justice very persuasive. As it is, we think that any such change would be a matter of substantive law and not merely procedural, accordingly we prefer to be guided by the decision in the House of Lords. The Cook Wallace Tomes report has been read in open Court on two occasions, that is in the proceedings commencing on the 7 October 1997, and the action started on the 1 December 1997, without anyone apparently recalling the orders of the 7 February 1997. That report has been sent to the Plaintiffs New York lawyer and it follows, in our opinion, that there has been a breach of the implied undertaking both by the Plaintiffs and their Counsel. How serious that breach was we shall mention later, but clearly Advocate Sinel would have been aware of the words in the Courts judgement of the 10 August 1994 where it said, and I quote:
"The Plaintiffs will need the leave of the Court to use any of the documents which they have obtained pursuant to the Anton Pillar order for proceedings in other jurisdictions." And a little later on: " The Plaintiffs would ignore that position at their peril."
Since we have declined to follow Rule 14A still less do we attach importance to the rule in the United States which apparently frees all discovered documents without hindrance, nor are we prepared to give ex post facto orders to condone a breach in the undertaking. The argument that we should wait until the outcome of the United States proceedings - that is the forum non conveniens application does not therefore call for a decision today. We decline to make an order authorising the use of the discovered documents in the United States actions. In any event Advocate Sinels affidavit does not particularise them as we believe ought to have been done.
As regards the use of the discovery documents for disclosure to the investors, the same qualifications with regard to the need for a detailed affidavit applies because, as Mr Journeaux said, the Court ought not to give a blanket power to the Plaintiffs, Mr Wilson admitted that Cantrades attitude had changed after the 18 December 1997, if the documents were to be released, as sought by the plaintiffs, there would be no control over the use to which they might be put. The Court in its judgement of the 18 December 1997 had already described some of the actions of the Plaintiffs as, and I quote:
"Thoroughly misleading and indeed bordering on the mischievous."
The Plaintiffs had opposed Cantrades application to use the Viscount as a conduit which Mr Wilson said showed a lack of good faith. In short, he said they could not be trusted with the documents. Under the circumstances we declined to make the second order sought by the Plaintiffs.
It seems to us reasonable that Cantrade should be able to use such documents as it may need to prepare its case of mitigation in the criminal proceedings. Likewise it should be able to use the documents disclosed in actions 94/6 and 94/254 in the Tiarks and Tigon action. It seems proper also to make the second order requested in Cantrades second summons.
It now remains for us to consider how serious was the breach of implied undertaking. In this connection we note the findings of the Royal Court in its judgment of the 10 August 1994, not dissented from by the Court of Appeal, that Mayo and Troy instructed a private enquiry agent direct to carry out observations on the offices of Anagram, and to accompany the team executing the Anton Pillar order, after which, what is usually called ‘the bug’, was found secreted in Anagrams offices.
The Court of appeal found that the enquiry agent had placed the bug there. It follows that the Plaintiffs had been prepared to act on their own and not always through their lawyers. On the other hand in his affidavit for use in the New York proceedings, Mr Sinel made two observations which we think to put it at its lowest were unfortunate, the first observation is contained in paragraph 1, this is what Mr Sinel says:
"I submit this affidavit in respect of the particulars required by this Courts civil RICO statement, to confirm to this Court that very substantial numbers of documents exist which support the allegations of the RICO complaint which I have read and to explain why these documents have not yet been made available to New York counsel for the Plaintiffs herein."
The second matter which Cantrade complains about in that affidavit is contained in paragraph 4 and it is in fact the penultimate sentence:
"I have examined the documents produced in the Jersey proceedings and can state that they have considerable probative value with respect to the material issues in the proceeding in the Southern District of New York" Moreover, exhibits A & B to the New York action appear to be based on some of the discovered documents.
By letter of the 27 November 1997, Mr Sinel asked Cantrade for its consent to use the disclosed documents, yet the New York action had already been started. Nevertheless the affidavit of the Plaintiffs New York lawyer, Mr Liebowitz, supports the main contention of Mr Sinel that any breach of the undertaking is unintentional. Mr Liebowitz desposes, inter alia, as follows: I read from paragraph 3:
"My firm was most emphatically advised at the outset and repeatedly thereafter, by Advocate Philip C Sinel of the Jersey Bar, who represents plaintiffs in the Jersey actions and by plaintiffs themselves, that documents produced in discovery in the Jersey actions could not be used by us in connection with the New York action until such time as they became available under the Jersey rule, or pursuant to discovery requests in the New York action".
The second passage which the Court wishes to cite is the last two sentences in paragraph 9 of the affidavit:
"I wish to emphasize that Advocate Sinel, whom I did not know prior to his inquiries on behalf of his clients about retaining New York counsel, has been persistently adamant about enforcing the Jersey discovery strictures in all facets of his relationships with me and others in my law firm. If our use of the Coke-Wallis report was a violation of Jersey law, or if any ruling of this Court, such violation was assuredly not wilful, intentional, nor contemptuous".
Mr Sinel has deposed in his affidavit of the 23 February 1998, as follows:
"The Defendant, Cantrade, is requesting the Court to take a hostile view of the actions of the Plaintiffs in relation to the implied undertaking given in relation to discovery documents and the Acte of the Court of 7 February 1997. I must say at once that there has been no contumelious default by any of the Plaintiffs or their advisers. Considerable care has been taken to comply with Court Orders, and to ensure their compliance by persons connected with the Plaintiffs. This is particularly so in relation to the matters which give rise to Cantrades allegations to contempt of court."
He told us further that he had taken advice about the matter, and we accept that, of course, but it seems to us that he was mistaken in his opinion as to the effect, (if any ) in this jurisdiction of Order 24, Rule 14A, and he acted accordingly.
We accept that in a complicated case, such as these two certainly are, unintended errors can occur, nevertheless, the Plaintiffs and Mr Sinel were well aware of the views of the Court of Appeal on the unauthorised use of discovered documents. The question raised before us of the adoption by the Royal Court of Order 24 Rule 14A was not before the Court of Appeal when it lifted the Mareva injunction.
We were invited to, and I quote: "Make such order as it thinks fit" in relation to the breach by the Plaintiffs. The decision not to ask the Court for leave was a further example of, and I quote: "the cavalier approach" adopted by the Plaintiffs after obtaining the interim orders on the 24 December 1993, as mentioned by the Royal Court in its judgment of the 10 August 1994.
Finally, Advocate Sinel apologised in respect of the breaches in the last paragraph of his affidavit as follows:
"Finally, the Plaintiffs have done what they have done and they have been open in what they have done and their reasons for doing what they have done. If the Plaintiffs have fallen into error, that is because they have made an error, not because they intended any breach of any express or implied order of this Court. If the Court in due course concludes that they have made an error then I am instructed to offer the Plaintiffs’ sincere apologies to all concerned."
Since, as we have said, the introduction of Order 24, Rule 14A other than by primary legislation has been criticised in England it was imprudent of Mr Sinel, to say the least, to assume that this Court would implement the provisions of Convention of Human Rights without the provisions having been incorporated into our rules of procedure in the proper manner. To put it colloquially, in our opinion Mr Sinel, I quote "jumped the gun" and for that he can be fairly criticised as well as his clients..
Accordingly we summarise our decisions as follows:
Authorities
Bass (G.H.) & Co -v- Royal Bank of Scotland Plc [1989] JLR N3
Matthews & Malek on Discovery, pages 252 to 266
Ibid.: Third Supplement : pp 78 - 81
Enhorning -v- Nordic Link Limited. (24 January 1997) Jersey Unreported
Guiness PLC -v- Market and Acquisition Consultants Limited [1987/88] JLR 104
Jyske Bank (Gibraltar) Limited -v- Spjeldnaes and Recolte Investments Limited [1993] JLR 99
Bibby Bulk Carriers Limited -v-Cansulex Limited and Others [1989] QB 155
Prudential Assurance Co.Ltd -v- Fountain Page Ltd [1991] 1 WLR 756
Milano Assicurazioni SpA -v- Walbrook Insurance Co Ltd [1994] 1 WLR 977
Bank of Crete SA -v- Koskotas and Others (No.2.) [1992] 1 WLR 919
Church of Scientology of California -v- Department of Health and Social Security [1979] 1 WLR 723
Sybron Corporation and Another -v- Barclays Bank PLC [1985] Ch.299
Mayo Associates SA -v- Cantrade Private Bank Switzerland (CI) Limited (16 January 1995 ) Jersey Unreported
Miller -v- Scorey [1996] 3 All ER.18
Crest Homes PLC -v- Marks [1987] 1AC 829
Home Office -v- Harman [1983] AC 280