Jersey Unreported Judgments

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Cite as: [1998] UR 6

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13 January 1998

 

J M Collins Esq QC, President,

R D Harman Esq QC, and

R C Southwell Esq QC

 

Between: David Dixon; Jane Richardson; and Reeb Investments LimitedPlaintiffs

And: Jefferson Seal LimitedDefendant

 

Advocate M St J O’Connell for the first and second Plaintiffs

Advocate N M Santos Costa for the third Plaintiff

Advocate A D Hoy for the Defendant

 

JUDGMENT

THE PRESIDENT: The Appellants, Jefferson Seale, are themselves a relatively small firm of stockbrokers carrying on business in Jersey, although now forming part of a larger group as will appear later. They were instrumental in the placing of at least £13.1 million of their clients’ money into a bond issued by a Canadian insurance company, Confederation Life Insurance Company, in the years 1993 and 1994. This proved to be a disastrous investment in that in August 1994 the company was put under statutory control and then later put into liquidation. This has led to a wealth of claims against the Appellants for damages for negligence of which some have been settled but in relation to which we are told that there are some 40 claims still remaining to be tried.

The management of these actions has been undertaken by the learned Deputy Bailiff who, in late 1996, ordered the trial of two groups of actions to take place in 1997. The first group included a number of private investors and in particular included the three Respondents to this appeal, Mr Dixon, Miss Richardson and Reeb Investments, the alter ego of Mrs Beer. The second group comprised claims by a number of trust companies and the like and were and are to be separately considered in the light of the potential expertise in investment matters which may be alleged against them. The trial of the first group of actions was fixed for June 1997 and resulted in a finding in favour of these three Respondents after a hearing running from 24 June to 17 July 1997. Mr Dixon recovered a sum of just under £200,000, Miss Richardson a sum of just under £90,000, and Reeb Investments of a sum just over £90,000. Each of those three Respondents gave evidence and the Appellants called three witnesses, the principal one being Mr Brian Beadle, their Eurobond Manager. In addition, of course, both the Appellants and the Respondents called expert evidence.

In my view resistance to the claim by the Third Respondent became unarguable once Mr Beadle had volunteered and confirmed, on being asked to do so, evidence that Mrs Beer wanted "something as stable, as secure as the bank deposits" in which she had previously lodged her funds. On any view, bonds issued by a Canadian insurance company which were subordinated to the policyholders who were also in effect the shareholders, it being a mutual company, could never have satisfied such a criterion. In the case of Mr Dixon, the case was run that he was a sophisticated investor and not only was it asserted that he was guilty of contributory negligence but also it was alleged that he was to blame for Miss Richardsons investment, so that the Appellants joined him as a Third Party to her claim, making detailed allegations as to his responsibility to which I refer later. The allegation of contributory negligence against Mr Dixon was persisted in until the final speech of Advocate Hoy and although the Third Party proceedings were never formally abandoned, the tacit understanding must have been that they could no longer survive once the allegations of contributory negligence had been withdrawn.

The judgment of the Deputy Bailiff and the Jurats was given on 30 July 1997 and having reviewed the evidence and reached certain conclusions with regard to that evidence, their final conclusions were expressed thus:

There later followed an application on behalf of the three Respondents for costs and in that application they sought indemnity costs. This came before the Deputy Bailiff sitting alone as the rules provide on 26 September 1997, and he delivered a reasoned judgment and having heard argument made a distinction between the First and Second Respondents and the Third Respondent in that in the case of the First and Second Respondents he awarded costs on a taxed scale basis, whereas in the case of the Third Respondent he ordered costs on an indemnity basis to be taxed.

In the meanwhile, the Appellants had indicated an intention to appeal against the judgment on liability and this resulted in a consent order made by the Bailiff sitting as a Single Judge of this Court on 19 August 1997 by which an abridged timetable was set for the hearing of those appeals. The notice of appeal was to be served by 1 September 1997 provision also being made for any cross-appeal or respondents’ notice. The Appellants case was to be delivered by 24 November and the Respondents case within one month and in any event no later than 24 December 1997. These orders constituted an abridgement of the normal procedure of this Court. The appeal was to be listed for hearing in the now current sitting of this Court. These requirements were satisfied by all parties and the appeal was listed for three days commencing yesterday, 12 January 1998. Understandably, the parties whose cases were to be heard in September 1997 were content to consent to an adjournment of those cases being the trustee cases so that the parties to those actions would have the benefit of any relevant observations of the Court of Appeal in these current appeals.

It was against this background that the Appellants sprang a surprise on 31 December 1997 by indicating that they were seeking to withdraw their appeals against the First and Second Respondents and that the appeal against the Third Respondent was or was to be withdrawn on agreed terms, either agreed by then or to be agreed. This took place against the background already referred to above of compliance by the First and Second Respondents with the order of the Bailiff with regard to the lodging of their case and against the background of the adjournment of the trustee cases which otherwise would have been heard in September.

It is conceded by Mr Hoy that leave for such withdrawal is required by virtue of the interaction of Article 12 of the Court of Appeal (Jersey) Law 1961 and Rule 6/24 of the Royal Court Rules 1961. This volte face of 31 December 1997 has not been satisfactorily explained to us. We were told that the appeal had been withdrawn for ‘commercial reasons’. For my part I do not find this to be a satisfactory explanation and I am satisfied, having had the opportunity of reading the three volumes of transcript and the experts’ reports and documentation for the purpose of hearing the substantive appeal, that the appeals were doomed to failure in each case. Withdrawal for "commercial reasons" can, in my view, only be made sense of as a sanitised description for the recognition of a hopeless appeal. On a smaller scale there had been a similar pattern when the Appellants sought a stay in respect of the amounts awarded under the judgments. This caused expense to the Respondents in preparation for the hearing of their application. And then, when the matter came before the Court on 4 October 1997, low and behold the Appellants withdrew their applications. The Court marked its displeasure on that occasion by ordering a penal rate of interest.

We were told by Mr Hoy, on behalf of the Appellants, that negotiations had been taking place for settlement of the appeals and it is my conclusion that the only reasonable explanation was that these Appellants, advised as they are by highly skilled legal advisers, were using the appeals process as a means of bringing about an advantageous settlement of the judgments obtained by the Respondents, whether as to costs or otherwise. Having regard to the adjournment of the trustee cases and to the obtaining of the order of the Bailiff of 19 August 1997, and to the compliance with that order, I am satisfied that the use of the appeal procedure was both unreasonable and an abuse of the process of the Court.

Two issues are before this Court for determination, both of which relate to costs. The first arises from the Appellants application to withdraw and relates to the costs of the appeal. The second which was raised in the appeal by a cross-appeal on behalf of the First and Second Respondents related to the costs of the hearing and, indeed, of the action.

In the first case, the Respondents seek an order for indemnity costs against the Appellants who resisted the application in relation to the appeal, claiming that the proper order was to be for costs on a taxed scale basis.

The Respondents rely on the decision of this Court in Dick -v- Dick (née Naranjo) (6 April 1990) Jersey Unreported CofA. In the judgment of the Court allowing indemnity costs Sir Godfray Le Quesne said this:

That therefore was a case where there was the withdrawal of proceedings in the Court below and indemnity costs had been granted and were held to have been correctly granted.

Reliance was further placed on a decision of the Court of Appeal in Guernsey in Main -v- Laughton [1995] 20 Guernsey Law Journal 62 in which case the Court applied a test as to whether an order for indemnity costs was appropriate and took into account inter alia the tactical advantages which the Defendants insurers had been seeking to make and indeed had made by raising an argument on appeal based on a prescriptive defence which was withdrawn at the last moment. It was not disputed that this Court has jurisdiction to make an order for indemnity costs on withdrawal of an appeal and having regard both to the authorities and to the conclusions which I have drawn as to the conduct of the Respondents as already expressed I have no hesitation in determining for my part that the Respondents are entitled to costs on an indemnity basis arising out of the institution, maintenance and withdrawal of this appeal.

The difference between costs on an indemnity basis and costs on a taxed scale basis is likely to be substantial and the Court was shown a copy of the scale applied in the former instance which allows a maximum of £120 per hour for the advocates costs on appearing in court on the taxed scale basis. As against this, we have been told that on current practice in taxation of indemnity costs the Judicial Greffier recognises a maximum at present of £220 per hour. This, as I understand it, is a maximum which itself lies in his discretion. The likelihood is therefore that in relation to the costs of the trial the Respondents would be substantially out of pocket if their costs were to be on a taxed scale basis and indeed that this would result in a substantial erosion of the damages which they have recovered. This would of course be well known to the Appellants and their advisers at all stages of the proceedings and it is to be noted that, whereas the First and Second Respondents are private individuals, the Appellants are owned by Cater Allen which is itself owned, we were told, by Abbey National. The Appellants have virtually limitless funds with which to carry out a war of attrition against the claimants if they wish to do so and many of those claimants will no doubt be in the same position or worse as these Respondents, so far as the capacity to finance litigation is concerned.

I trust that by the giving of appropriate further directions the Deputy Bailiff can and will if necessary take steps to ensure that the same issues are not re-litigated over and over again in the many remaining actions. This aside, it may well be that in due course sufficient sets of circumstances will have been established to enable applications for summary judgment to be brought before the Court in the case of certain classes of plaintiffs. In saying this, I do not of course overlook the importance of an ascertainment of the nature of the instructions given by the client or of his or her situation as known to the Appellants. In no circumstances must this litigation be permitted to stretch over many years.

I turn now to the Respondents appeal against the judgment of the Deputy Bailiff in awarding costs on a taxed scale basis in place of the indemnity costs for which they applied. The First and Second Respondents, via their advocate Mr O’Connell, have submitted the following:-

1.that the learned Deputy Bailiff was plainly wrong in his application of the appropriate test to the facts;

2.that in the circumstances of this case it would be unfair to penalise the Respondents having regard to the way in which the litigation has been conducted;

3.that it is open to this Court to send out a signal of disapproval of the Appellants’ conduct, this being of particular significance having regard to the future conduct of litigation arising out of the failure of the bond.

In this respect our attention has been drawn to a number of different factors which, it has been submitted, indicated an intention on the part of the Appellants to harass and cause expense to the Respondents and the First and Second Respondents in particular. These can be placed under a number of headings. First it is contended that there was an exceptional number of interlocutory applications. We were taken through a list of those applications by Mr Hoy on behalf of the Appellants. While many of the applications were, in my view, unexceptionable, I consider that there are clear grounds for inferring that the Appellants pursued a deliberate policy of attempting to evade their responsibility to make full discovery which led to the need to make repeated applications for specific discovery. This reached a climax in this Court on the eve of the trial when this Court rejected an appeal by the Appellants against an order for specific discovery. In doing so the President of the Court stated as follows:

He further stated:-

Those final words were prophetic, as can be seen by a study of bundle 9A in general and of the correspondence between the Appellants and the London Stock Exchange in particular. In this connection I refer to a letter of 12 September 1996, which reads as follows. (It is a letter from the London Stock Exchange Head of Market Regulation to the Compliance Officer of Jefferson Seal):-

The contents of bundle 9A were disclosed on the eve of trial pursuant to the Order of this Court and even then matters did not stop there. It was necessary for the Respondents to apply at the start of the trial for discovery of further documents which had been referred to by the documents contained in 9A itself and those documents (now contained in bundle 9B) were produced some two days into the trial.

Secondly reference was made to the joinder of Mr Dixon as a Third Party to Miss Richardson’s claim. This was, in my view, no more than a mischievous attempt to embarrass the Respondents. I read the following from the re-amended Answer to Miss Richardson’s claim, and I read from paragraph 20:

These allegations were made against a 64-year-old working fruit farmer in relation to the purchase of bonds by his common law wife. Mr Dixon, as the evidence revealed at the time, was a man who was still working in his strawberry fields who had no involvement in the financial services industry. Furthermore, it was made against the background that the Appellant’s ignorance of his personal experience and indeed requirements appears to have been such that the two experts reports obtained by them spoke only of generalities and did not condescend to the particulars of the position of the Respondents in question. When this was pointed out in correspondence by their advocate a letter which was dignified before us by being described as a "supplemental report" was written in these terms and I read from a letter from Mr Sholl of 16 June 1997 and there is a similar letter from Mr Cobb dated two days earlier:

Not merely did this leave the Respondents none the wiser as to the case which they had to meet on the experts’ reports but it is also a clear indication that the Appellants had no such information as to Mr Dixons personal circumstances as to justify the launching of such Third Party proceedings as I have quoted from. I conclude that the institution of those proceedings was an abuse of the process of the Court. The fact that the allegations were absurd does not detract from this conclusion.

Thirdly, it is contended that the Appellants case at the trial was conducted in such a manner as to leave the Respondents in ignorance of the case which they were to meet.

The fact that the notification of the abandonment of the appeal came so late has resulted in a careful study of the transcripts by this Court and for my part I am left with the clear impression that the defence was ill-co-ordinated and conducted in such a way that the Respondents - and I include here the Third Respondent’s Advocate - were left at times in a confused state as to the nature of the case which they were meeting. It was, by way of example, put to Mr Dixon out of the blue and with no basis on the pleadings that he had given instructions to Mr Beadle that he required a 10% return on his investments. A letter was put to him which it was suggested supported the allegation. It clearly did not and was seen not to have done so by the Deputy Bailiff. Then, finally, when Mr Beadle was asked questions in cross-examination which clearly showed up that the proposition, as well as not having been pleaded was ridiculous, the case changed and the 10% was said to relate only to certain monies which had been on deposit (I refer here to the transcript at Volume 1 pp.60-63 and 303). There was some similar cause of complaint on behalf of Mrs Beer where a meeting was suddenly put forward without any basis in the pleadings, at which she was said to have been given advice.

I take this opportunity of saying that it is very much to be hoped that if, in future cases, suggestions are made or evidence is sought to be led as to such highly material matters which are not pleaded the Appellants, or indeed any other party responsible for that situation, should be required to seek leave to amend the pleadings, so that the exact nature of the case can be known assuming of course that leave is given.

Fourthly, reliance is placed on the fact that it would appear from the transcript that the Appellants in general in the preparation of a document and Mr Beadle in particular did not give a full and honest account of the quantity of the Confederation Bonds which they had obtained on behalf of their clients. A schedule was produced giving the appearance of supporting the contention that some £10,000,000 of Bonds had been so obtained. This was potentially misleading in that the document only related to those Bonds which were within the Appellants custody such Bonds being bearer bonds. whereas further enquiry revealed that the total figure was at least £13.1 million. I say at least £13.1 million because we were told that even now documents have not been produced in order to support that figure. While this could no doubt go to credit, and I believe that it did in the light of the judgment of the learned Deputy Bailiff and the Jurats, I do not find of itself that this is a determining factor leading to a decision as to the nature of the costs order which is to be made, nor do I consider that the Appellants reluctance to admit Mr Beadles expertise on the pleadings and thereafter until the trial was a determining factor. They merely form part of the general picture.

I turn now to my view of the approach to be taken by the Court to the Respondents cross-appeal. It is to be borne in mind, of course, that the Respondents application to this Court for indemnity costs is by way of appeal against the exercise of a discretion by the Deputy Bailiff.

Well established principles govern the extent to which appellate courts in this Island as well as in England will be prepared to interfere with the exercise of a judicial discretion.

They are best summarised in this jurisdiction by the decision of this Court in Rahman -v- Chase Bank (1984) JJ 127 CofA at pp.133/134:

I have very much in mind the fact that the Deputy Bailiff was in a strong position to exercise his discretion with full knowledge of the facts, having of course been the trial judge, and were it not for two matters I would, for my part, have not have been persuaded that it was appropriate to interfere with the exercise of his discretion.

The first of those matters is the conduct of the Appellants since the trial and indeed, more significantly, since the order for costs was made by the Deputy Bailiff. These relate to the stay to which I have referred and to the abandonment of the appeal. Both of these matters took place after the Deputy Bailiffs decision as to costs, that decision having been made on 26 September, the withdrawal of the application for a stay having been on 4 October and the withdrawal of the appeal, as already noted, on 31 December 1997.

These constituted, in my view, a change in circumstances since the date when the Deputy Bailiff reached his conclusion on costs and change of circumstances of a very material character. In my judgment the conduct in relation in particular to the withdrawal of the appeal does not stand on its own. The conduct, both in relation to the stay and in relation to withdrawal of the appeal, in my judgment form part of a consistent pattern with the matters urged before the learned Deputy Bailiff and place them in an entirely different context.

The second of those matters is that the learned Deputy Bailiff, in granting leave to appeal, expressed a consciousness of the paucity of authority in the Island as to the circumstances to be taken into account in the exercise of this particular discretion. In this regard, the Deputy Bailiff based the exercise of his discretion on the decision of the then Bailiff, Sir Frank Ereaut, in Jones - v - Jones (No. 2) (1985-1986) JLR 40, who said this:

Sir Frank then went on to quote from the decision of the Court of Appeal in England in Preston -v- Preston [1982] 1 All ER 41. In that case Brandon LJ stated that it appeared to him to be necessary before taxation was to be granted on a more generous basis than what was then known as party and party basis for there to be "some special or unusual feature" in thecase. Ormrod LJ at p.50 said that "some particular reason for departing from normal practice" should be shown before common fund costs which are the precursor in England to indemnity costs would be ordered. Hollings J, the third member of the Court agreed with both judgments.

Mr O’Connell has rightly conceded before us that the general requirement as so expressed has not changed since 1982. However, he relies on two authorities which were drawn to the attention of both advocates by the Court before these sittings began.

I consider that these further authorities provide powerful additional guidelines as to the manner in which as a matter of principle the exercise of the discretion in question is to be approached. These circumstances will still, as will be obvious, be special or unusual and thus in my judgment there is no inconsistency with the decisions in Preston -v- Preston or Jones -v- Jones.

The first of the two authorities relied on is Cepheus Shipping Corporation -v- Guardian Royal Exchange Assurance PLC [1995] 1 Lloyds Reports 647, judgment of Mance J sitting in the Commercial Court. The learned Judge said this:

The learned Judge then referred to another decision in Berkeley Administration -v- McClelland [1990] FSR 565, and then went on to quote from a decision of Mr Justice Chadwick in Marie Claire Album SA -v- Hartstone Hosiery Ltd [1993] FSR 692 where he said "that the Court set its face against ordering indemnity costs

The learned Judge then, on the following page, referred to the specific facts of the case and concluded that the case before him "involved at the least a highly opportunist and tactically motivated approach to litigation which was unreasonable, and which this Court should strongly discourage". Further, in relation to the facts of that particular case, he stated as follows:

The second authority is that of Munkenbeck & Marshall -v- McAlpine [1995] Construction LR 30, in which the Court of Appeal, on an interlocutory appeal as to costs, approved the judgment of Millett J (as he then was) in MacMillan -v- Bishopsgate which I have quoted above by way of quotation from the judgment of Mance J.

Looking at the history of this litigation as a whole, I conclude that that history from the discovery stage through trial and up to the abandonment of the appeal is such, when taken as a whole, as to satisfy me that this was such an unusual case as makes it appropriate for an order for indemnity costs to be made in favour of the First and Second Respondents. In those circumstances, in my view, the First and Second Respondents’ cross-appeal succeeds.

HARMAN, J A: I agree

SOUTHWELL, J A: I also agree, but there is one point which I wish to add to the judgment which has been delivered by the President and which in my view supports the conclusion that has been reached that the exercise of the discretion by the Deputy Bailiff can properly be set aside and that this Court is entitled to substitute its own exercise of the discretion. As the President has noted, the Deputy Bailiff, in his Judgment of 26 September 1997 distinguished between the case of Reeb Investments where he awarded indemnity costs and those of Mr Dixon and Ms Richardson where he only awarded taxed costs. Having regard to the many matters which the President has referred to, most of which but not all apply equally to the three cases in the same way, in my judgment it was not appropriate to make that distinction between the cases but they should have been treated in the same way. Accordingly, in my judgment, it is appropriate for this Court to award indemnity costs to Mr Dixon and Miss Richardson.

Authorities

(on terms of withdrawal of appeal)

Court of Appeal (Jersey) Law, 1961: Article 16

Royal Court Rules, 1961: Rule 6/24

Main -v- Laughton [1995] 20 Guernsey Law Journal 62

Dick -v- Dick (née Naranjo) (6 April 1990) Jersey Unreported CofA

(on Appeal against Royal Court

Costs Order of 26 September 1997)

Jones -v- Jones (No. 2) (1985-1986) JLR 40

Main -v- Laughton [1995] 20 Guernsey Law Journal 62

Cepheus Shipping Corporation -v- Guardian Royal Exchange Assurance PLC [1995] 1 Lloyds Reports 647

Munkenbeck & Marshall -v- McAlpine [1995] Construction LR 30.

Rahman -v- Chase Bank (1984) JJ 127 CofA

RSC (1997 Ed’n): Vol 1, Part 1: 59/1/59

Eagil Trust Co Ltd -v- Pigott-Brown & Anor. [1985] 3 All ER 119

G -v- G [1985] 1 WLR 647; [1985] 2 All ER 225 HL

MacMillan Inc. -v- Bishopsgate Investment Trust (10 December, 1993) Unreported Judgment of the Chancery Division of the High Court of England

Preston -v- Preston [1982] 1 All ER 41