[2003]JRC094
royal court
(Samedi Division)
16th June 2003
Before: |
M.C. St. J. Birt, Deputy Bailiff, and Jurats de Veulle, and Le Ruez. |
Between |
Izodia plc |
Representor |
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And |
Lynch Talbot Limited |
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And |
ORB a.r.l. |
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And |
Mitre Property Management Limited |
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And |
Gerald M. Smith. |
Respondents |
Representation by the Representor alleging that Respondents are in breach of an Order of Royal Court, for disclosure of certain information, documentation, and the production of an affidavit, and are consequently in contempt of Court.
Advocate R.G.S. Fielding for the Representor.
Advocate P.D. James for the first, second and fourth Respondents.
The Third Respondent did not appear and was not represented.
judgment
the deputy bailiff:
1. The Court is sitting today to consider a representation by the Plaintiff that the four Defendants are in contempt of court by failing to comply with certain disclosure orders made by the Court on 25th April, 2003. The background can be shortly stated: By Order of Justice dated 17th January, 2003, Izodia plc, an English company, brought proceedings against Lynch Talbot Limited, as First Defendant, ORB a.r.l., as Second Defendant, Mitre Property Management Limited, as Third Defendant, and Dr Gerald Smith, as Fourth Defendant in respect of monies paid out of Izodia's bank account. The basis of the claim is as follows. Izodia, as we have said, is a public limited company, incorporated in England and Wales; Orb is a Jersey company, which owned 29.9% of Izodia; Lynch Talbot is also a Jersey company and together with Mitre, an English company, was a member of the Orb group; Dr Smith is a resident of Jersey and was and remains a director of Orb and Lynch Talbot; he was a director previously of Mitre.
2. It is alleged that, on advice from Dr Smith, Izodia opened an account with Royal Bank of Scotland International ("RBSI") in Jersey on about 1st August, 2002 and transferred £27.25 million to that account on 2nd August. On 5th August, that money was transferred to an account of Lynch Talbot with RBSI. Izodia claims that the transfer was made without authority. Subsequently, between 5th August and 27th September £2.7 million was paid back to Izodia's account but the remaining £24.5 million was paid out of Lynch Talbot's account to or for the benefit of Orb, or various members of the Orb group. Claims have therefore been brought by Izodia against Lynch Talbot, Orb and Dr Smith on various grounds seeking repayment of the monies or damages instead. It is also alleged that between October and November 2002 certain personnel in the employment of the Orb Group transferred some £7.83 million from Izodia's bank account with the Bank of Scotland in Reading to an account of Mitre. Claims are brought in respect of this payment against Lynch Talbot, Orb, Mitre and Dr. Smith seeking repayment and/or damages.
3. On 5th February, 2003, Izodia issued a summons seeking various disclosure orders against the defendants. Because that summons is at the heart of the various orders which have been made we think we must set out the relevant part. It all falls within paragraph 2 and read as follows:
"2. Disclosure of Information by the Defendants
1. Each Defendant shall within 24 hours of service hereof upon him
(a) furnish to the Plaintiff's Advocate copies of all documents including statements, vouchers, receipts, letters of instruction, records and certificates in its possession or under its control or which such Defendant or any person within its control holds in electronic form and can print out (hereinafter together called "Documents") which relate to the transfer or other disposal and retention from time to time of:
(i) the monies transferred on 5th August 2002 to the First Defendant from Royal Bank of Scotland International account number 50293799 in the name of Izodia plc;
(ii) the monies transferred between 23rd October 2002 and 15th November 2002 to the Third Defendant from Bank of Scotland account number 389440 in the name of Izodia plc; and
(iii) any interest or other profit deriving from the monies referred at (i) and (ii) above and any assets into which the said monies or the said interest or profit have been converted and which such Defendant holds or controls wherever in the world they may be and whether in such defendant's own name or not and whether solely or jointly owned.
The monies referred to at 1(a)(i) (ii) & (iii) above are hereafter together called "the Relevant Funds".
(b) furnish to the Plaintiff's Advocate (to the extent that disclosure is not made under (a) above) (1) copies of all bank statements in respect of the bank accounts described below for the period since 5 August 2002 and (2) copies of all documents evidencing the nature, purpose or payee of or person authorising all transfers in excess of £10,000 from the bank accounts described below since 5 August 2002, being any bank account which received any part of the Relevant Funds (a "Primary Account") and any bank account which received a transfer in excess of £10,000 from a Primary Account or a Secondary Account after 5 August 2002 (a "Secondary Account").
2. The documentation to be supplied under paragraph 1 of this Order shall be verified by an Affidavit to be filed with the Court and sent to the Plaintiff's Advocate within five days of service hereof.
3. The said Affidavit shall disclose and explain to the best of the Defendant's belief:
(a) the current whereabouts of all and any of the Relevant Funds including full particulars of the name, address, account number, sort code and all other details of the party by which and for whose benefit the Relevant Funds and every part thereof are now held;
(b) full particulars of all transfers or other disposals of the Relevant Funds made from time to time by any of the Defendants including monies transferred from accounts in the name of the Plaintiff to accounts in the name of any of the Defendants and monies transferred from accounts in the name of any of the Defendants to others including each case:
(i) the date of the transfer
(ii) the name of the recipient and details of the account of the recipient into which the funds were paid
(iii) whether the recipient holds the funds on its own behalf or for others and if so who
(iv) who authorised and who effected the transfer."
4. Various discussions appear to have taken place between the parties about these matters following the launch of the proceedings but we have not heard detailed evidence about them. In due course a hearing was fixed for 8th April at which the summons was to be heard. But that was adjourned on the basis of an agreement reached between the parties that the defendant would make voluntary disclosure by reference to the summons. That agreement was reached between Advocate Fielding, on behalf of Izodia and Advocate James of Crill Canavan on behalf of the four defendants and was reduced to writing in a letter dated 10th April, 2003, the relevant part of which reads as follows:
"By consent, the Royal Court ordered that my client company's applications for disclosure be stayed upon terms agreed between Counsel.
I write to record the terms which were agreed between us. Those terms are as follows.
1. Your client defendants will make immediate verbal disclosure of all information required by the application against the defendants, and which is set out in paragraph 3(a) and 3(b) of the Prayer to the Order of Justice/Summons.
2. All documentation required under paragraphs 1,2 and 3 of the application, including the Affidavit referred to in paragraphs 2 and 3 thereof, shall be supplied to my client's legal advisers, Jones Day Gouldens, within 5 working days of today's date."
5. Izodia asserted that the agreement was not complied with. Accordingly, it brought a representation seeking an order from the Court in the terms of the summons. This order was granted on 25th April at an inter partes hearing when, after hearing the advocates of all parties, the Royal Court ordered inter alia as follows:
"Upon hearing the advocates for the parties the Court ordered:
(i) that the Respondents will make immediate verbal disclosure of all information required by the application against the Respondents and which is set out in sub-paragraphs 3(a) and 3(b) of paragraph 2 of the prayer to the Summons.
(ii) all documentation required under sub-paragraphs 1, 2 and 3 of paragraph 2 of the said Summons, including the Affidavit referred to at sub-paragraphs 2 and 3 thereof, shall be supplied to the Representor's legal advisers, Jones Day Gouldens, within 5 working days of the date hereof. "
6. On 30th April Izodia presented a representation alleging contempt of court on the basis that the defendants had not made the verbal disclosure required by paragraph (i) of the order.
7. The matter came before the Court on 2nd May when it became clear that oral evidence would need to be heard because the breach was not fully admitted. The adjourned hearing was originally fixed for 13th May but that hearing was in turn adjourned until today because Mr Christopher Mills, a director of Izodia, was away on business in the United States.
8. We will turn now to deal with our finding in relation to the alleged breaches of the Court order. We have heard evidence today from Mr Christopher Mills, from Mr Craig Shuttleworth, a partner in Jones Day Gouldens, English solicitors to Izodia and from Dr. Smith.
9. Mr James represented all defendants until recently but following the sale of Orb's interest in Mitre he no longer represents Mitre, although he remains the advocate of record. He has therefore today only appeared on behalf of Lynch Talbot, Orb and Dr. Smith and we will accordingly deal with Mitre separately.
10. Lynch Talbot and Orb, through Advocate James and through Dr. Smith, admit being in breach of paragraph (ii) of the order of 25th April in that they have not provided any of the written disclosure referred to therein. They also admit to partial failure to comply with paragraph (i) of the order which required immediate verbal disclosure, by reason of their failure to disclose any information about the transfer of £7.83 million from Izodia to Mitre. However, they assert through Dr Smith that they have made adequate verbal disclosure about the remaining matters and that this was done on 8th April.
11. On Friday 13th June Dr Smith swore an affidavit to the effect that in his individual capacity he had no information or documents of the nature referred to in the order. Any information which he had was acquired by him as a director of Orb and/or Lynch Talbot. The Court finds that this is no response to the order. The order provides that Dr Smith must swear an affidavit speaking to his knowledge as to the current whereabouts of the relevant funds paid away from Izodia's account and as to subsequent transfers and the current whereabouts of these monies. He must disclose such information as he has, regardless of whether he acquired it in his personal capacity, or as a director of Orb, or Lynch Talbot, or indeed in any other capacity. He must disclose the information which he as a person knows. We find therefore that he too is in breach of the order in relation to all the written information required and in relation to the verbal information concerning the Mitre transaction.
12. That leaves simply the alleged failure to provide verbal disclosure in relation to the main transaction, re the £24.5 million: Dr. Smith asserts that at a meeting in London on 8th April, which lead to the adjournment of the hearing fixed for that day on the basis of the agreement recorded in the letter of 10th April, he made certain verbal disclosures to Mr Mills who informed him that these were sufficient. Dr Smith was therefore of the opinion that he and the companies had complied with the requirement for verbal disclosure in relation to the main transaction.
13. Mr Mills, on the other hand, gave evidence to the effect that this was definitely not the case and that, on the contrary, he had made it clear to Dr Smith that the partial verbal disclosure made by Dr Smith at the meeting on 8th April was insufficient. He was supported in this by Mr Shuttleworth, although Mr Shuttleworth accepted that he was not present at all of the discussions between Mr Mills and Dr Smith.
14. The Court has had the opportunity of seeing and hearing the witnesses and it has no hesitation in accepting the evidence of Mr Mills and Mr Shuttleworth. It is satisfied to the criminal standard of proof that their evidence is correct. Mr James further argued that, if only partial and inadequate verbal disclosure had been made by Dr Smith on 8th April, one would have expected this to have been reflected in the letter, which was not signed by Advocate Fielding until 10th April and by Advocate James until 15th April. However, we do not find this point persuasive. On the contrary, why would the letter of agreement have required verbal disclosure if it had already been made? Furthermore, why would an order for verbal disclosure in similar terms have been made by the Royal Court on 25th April, after hearing the advocates for all parties, if adequate verbal disclosure had already been made on the 8th April?
15. We are satisfied that although Dr Smith did make some verbal disclosure on 8th April about where the £24.5 million had gone, it was made clear to him that this was insufficient and that further verbal disclosure was required both in relation to that matter and in relation to the Mitre monies.
16. We find therefore that Lynch Talbot, Orb and Dr Smith are in breach of both paragraphs (i) and (ii) of the order of 25th April. They have made inadequate verbal disclosure concerning the £24.5 million payment to Lynch Talbot as required by paragraph (i); they have made no verbal disclosure concerning the £7.83 million payment to Mitre as required by paragraph (ii); and they have made no written disclosure of the documentation required by paragraph (ii) of the order in relation to either of these payments.
17. In practice we do not think that our finding on the failure to make full verbal disclosure adds to the case. The real gravamen of this case is that the defendants have not made the written disclosure required by paragraph (ii) of the order.
18. The reason that Dr Smith gave for this failure was that throughout this period Orb has been attempting to sell the Thistle Hotels with a view to providing funds for the repayment of the sums transferred from Izodia to the Orb group. Izodia, it is said, through its lawyers had been actively involved in these negotiations which offer the best if not only hope of Izodia being repaid. Dr Smith told us that he was of the view that, if there was a settlement of this matter generally, the proceedings would be dropped by Izodia and therefore the orders for disclosure would fall away. He expected that this would be the situation following the sale of the Thistle Hotels. That is why its orders were not complied with.
19. We have to say we are not impressed with that reason. This order was made at an inter partes hearing and it is clear that the discussions about Thistle had started prior to then. There were no qualifications to the order. Dr Smith does not suggest that anyone at Izodia represented to him that the defendants did not have to comply with the order requiring written disclosure pending the outcome of the discussions. The defendants do not appear to have taken legal advice on whether they had to comply with the order in the meantime.
20. This is a case which involves serious accusations concerning large sums of money. The orders for disclosure were necessary in order to assist Izodia in tracing its funds. The orders were unambiguous. In our judgment Dr Smith, Lynch Talbot and Orb showed a cavalier disregard of their obligations to comply with the order of this Court and the matter cannot be overlooked by a warning as Mr James has submitted. In our judgment a financial penalty is necessary to mark the seriousness of the breach by failing to comply with the order of 25th April and that must be a penalty which brings home to the defendants the seriousness of what they have done. We therefore fine Lynch Talbot and Orb £10,000 each.
21. As to Dr Smith, we note that he received advice that in his personal capacity he did not need to disclose any information he had acquired as a director of Orb or Lynch Talbot notwithstanding that he had knowledge of such information with the result that he filed an affidavit saying that he had no information or documents which were relevant. We have made clear that that advice was wholly erroneous but as the affidavit was only filed late on Friday afternoon it seems clear to us that that was not the reason for delaying until then. We so reason to treat Dr Smith more leniently than the companies. He is clearly an important figure in relation to the companies and we therefore fine him £10,000 as well.
22. That leaves Mitre. We were informed by Dr Smith that, since the transaction relating to the Thistle Hotels about two weeks ago, Mitre is no longer part of the Orb group and he is no longer a director of Mitre so he will be unable to get information from Mitre. However the order exists against Mitre; the change in the shareholding in Mitre and in the constitution of its board does not alter its obligations. It remains liable to comply with the order of the Court. It is therefore equally in contempt of Court and has been summoned today to answer for its contempt. It has chosen not to appear or to be represented. In the circumstances we impose a fine of £10,000 on Mitre as well. We do however say that as this discussion has been made in Mitre's absence we will listen to any application which it may wish to bring as to why we should revoke or amend our decision, provided that any such application is made within fourteen days of service upon Mitre of today's order and of this judgment.
23. We turn now to consider the future. Mr James conceded that the defendants would now have to comply with the order and Dr Smith did not dissent from this. He said, however, that it would take twenty eight days to comply, despite having agreed to a period of five days in the letter of 10th April and the Court having also fixed a period of five days at the inter partes hearing on 25th April with no objection being taken at the time. He told us further that, following the discussion on 8th April, to which we have referred, he had instructed his colleague Mr Jones to begin work immediately in order to try and gather the necessary written material. However, he said that not much had been done because the time of the key personnel in the Orb group had been taken up entirely in the Thistle transaction and this had been all time consuming and complex and only completed some two weeks ago.
24. We have to say that the defendants are testing the patience of the Court. In particular, we note that, despite the imminence of this hearing, no work has been done in the last two weeks since the Thistle transaction was completed and when one might have expected the defendants to have attempted belatedly to comply with the order of 25th April. Nothing was said until today and it appears that nothing has yet been done apart from the small initial steps we have referred to earlier.
25. However, we do accept, as Mr James submitted, that the urgency which perhaps existed at the beginning of the year is not quite as extreme at this time and we also accept that Izodia could have pressed ahead more swiftly had it wished to do so, although it has clearly relied upon the defendants complying with the various agreements and orders which have been made, which they have singularly failed to do. However, as any further failure to comply with the order is likely to be met with much more serious consequences than have been imposed on this occasion, we think it important that the defendants are given adequate time. But we do not think it is necessary to give them twenty eight days in the light of the facts as we have described.
26. Accordingly we discharge paragraphs (i) and (ii) of the order of 25th April and we make a new order in the same terms as paragraph (ii) but with the instruction that such order is to be complied with by Orb, Lynch Talbot and Dr Smith by close of business on Monday 30th June, 2003. That gives them two weeks from today and includes two weekends.
27. As to Mitre, we will hear Mr Fielding if necessary but we are minded to say that because it is not here today it should comply with the order within fifteen days of being served with this new order and today's judgment. We will hear counsel on other matters but it seems to us that we must consider questions of time to pay, any default sentence in respect of Dr Smith and questions of service on Mitre.
(Discussion with counsel followed)
28. We order all three defendants to pay within seven days and that applies to Dr Smith as well and for the sake of good order we impose one month's imprisonment in default of payment by Dr Smith.
(Discussion with counsel on costs followed)
29. In all the circumstances I will order costs on the standard basis against the defendants jointly and severally.
Authorities
Paul -v- Paul (7th September 1999) Jersey Unreported; [1999/151]