Jersey Unreported Judgments

ROYAL COURT

(Samedi Division)

17 February 1999

(Reasons handed down on 24 March 1999)

Before:Sir Philip Bailhache, Bailiff, sitting as a Single Judge

BetweenArthur Anderson IncRepresentor

AndThe Royal Bank Of Scotland International LimitedFirst Respondent

Royal Bank Of Canada (Jersey) LimitedSecond Respondent

Standard Chartered Bank (CI) LimitedThird Respondent

Loana Investments Limited Fourth Respondent

Pennine Trustees Limited Fifth Respondent

First Island Trustees LimitedSixth Respondent

Abacus Financial Services LimitedSeventh Respondent

Abacus Nominees LimitedEighth Respondent

Alouski LimitedNinth Respondent

Moore Stephens International LimitedTenth Respondent

Moore Stephens (a firm consisting of the Twelfth and Thirteenth Respondents and

Stephen Milson, Dermot Boylan, Simon Young, David Tugman and George ShawEleventh Respondent

James BowmanTwelfth Respondent

Clive BartonThirteenth Respondent

Application by the Representor for an Order that Kleinwort Benson (Jersey)

Limited be joined as Fourteenth Respondent of these proceedings

Advocate P C Sinel for the Representor

Advocate J P Speck for Kleinwort Benson (Jersey) Limited

(Who appeared forthwith)

On 17 February 1999 I heard and determined a summons issued by Arthur Anderson Inc. in the following terms:

The proceedings have been instituted by Arthur Anderson Inc., which had been appointed by the Supreme Court of British Columbia in Bankruptcy as interim receiver of James Blair Down, Trevor Graeme Street and Fraser Barkley Barnes. On 21 January 1999 the Court recognised that appointment and made a number of injunctive and other orders directed to the First to Thirteenth Respondents in the action.

Mr Speck, who appeared for Kleinwort Benson (Jersey) Limited (to which I shall refer as "Kleinwort Benson"), made a number of complaints about improper service and failure to provide papers, but none of that is material to the order which I made. Having made the order Mr Sinel, acting for Arthur Anderson Inc., requested that I give reasons for my decision in the event that he was instructed to seek leave to appeal to the Court of Appeal. Having been so instructed, I now proceed to give those reasons.

Mr Speck did not oppose the making of the orders set out in paragraphs 1 to 3 of the summons, but argued that they should be subject to Arthur Anderson Inc. giving the usual undertaking in damages and fortifying that undertaking and the undertaking in costs already given by payment of an appropriate sum of money into court or into the hands of Messrs. Philip Sinel and Co. He submitted that this would be the usual practice. He drew attention to the fact that one of the parties which was subject to the orders made on the 21 January 1999 was a Jersey company, Evelyn Holdings Limited, which was now acknowledged to have nothing to do with the enquiries of Arthur Anderson Inc. and which had been confused with another company of the same name incorporated elsewhere. This underlined, in his submission, the desirability of obtaining and enforcing an undertaking in damages where a draconian remedy was sought from the Court. He contended that a five figure sum should be paid in.

Mr Sinel submitted in reply that this was a case involving serious fraud where Arthur Anderson Inc. was trying to unravel a difficult and tangled web. An undertaking in costs had been given in Canada, as in Jersey, but had not been required to be fortified. Mr Sinel gave me a number of reasons why an undertaking in damages should not be required; the most compelling appeared to me to be the following.

In response Mr Speck told me that an undertaking in damages had been required in at least one other jurisdiction, viz. British Virgin Islands. He contended that there was some doubt as to who was funding Arthur Anderson Inc. and that there was thought to be some sought of defence club representing those who had been defrauded.

On balance it seemed to me that an undertaking in damages, which was the usual requirement in cases where significant interlocutory relief was obtained, ought to be furnished. Furthermore that undertaking and the undertaking in costs ought to be fortified by the payment of a reasonable sum into the hands of the plaintiff’s legal advisors. A considerable amount of work would be required to comply with the Court’s order. Even if Arthur Anderson Inc. was acting under the supervision of the Canadian court, the practicality of the situation was that the interim receiver was being funded either by monies obtained from the bankrupts’ estates or by a committee of creditors of some kind. In either event, balancing the interests of the creditors with those of innocent third parties, there seemed to me no reason why the undertakings should not be fortified. I therefore ordered, as a condition of Kleinwort Bensons compliance with the orders contained in the Courts Act of 21 January 1999, that an undertaking in damages be furnished in favour of Kleinwort Benson by Arthur Anderson Inc. and £1,000 be paid into the hands of Philip Sinel and Company within seven days.

Authorities

Allen -v- Jambo Holdings [1980] 2 All ER 502