Jersey Unreported Judgments

Application by the Respondent for its costs and by the Representor for an order that the Respondent answer the further questions.

[2005]JRC004A

Royal Court

(Samedi)

13 January 2005

Advocate A. P. Begg, Esq., for the Representor.

Advocate R. Hodges, Esq., a Director, on behalf of the Respondent.

On 18^th March, 2004, the Court ordered the Respondent to file with the Court, by close of business on 23^rd March, 2004, the annual accounts of Alliance Aviation Limited, from its incorporation to date, with copies to the Representor. 

These accounts were produced and on 21^st April, 2004, the Respondent asked the Court for its costs in relation to the production of the accounts.  Also on 21^st April, 2004, the Representor was given leave by the Court to ask for further details, by way of questions, which in due course were answered 

In the light of those answers the representor asked further questions, which the Respondent refused to answer. 

judgment

the deputy bailiff:

1.        This is a hearing to deal with two matters.  The first is as to whether Chilterns should answer some supplementary questions.  The background is that Chilterns administered a company called "Alliance Aviation Limited".  Sovereign is now the trustee and is the ultimate owner of that company and has requested information about the financial affairs of the company during the period it was administered by Chilterns and in particular the period from September, 1991 to June 2003. 

2.        This first point relates to supplementary questions and the position is exactly as I described it at the last hearing in April, namely that Chilterns, as administrator, owe a duty to the company to give it all assistance in establishing exactly what happened during the period of administration. 

3.        The fact that the request is made by the shareholder of the company does not, in my opinion, materially affect things.  However, Chilterns are entitled to be paid for that, and that was what I said last time.  Accordingly, Chilterns must answer these supplementary questions and they have agreed that they will, provided adequate arrangements are made for their payment; and in particular, given the non-resident status of the trustee, they are entitled to be satisfied that funds are secure in the Island to meet those fees.  That was the position which I described earlier and which had been reached and therefore nothing further needs to be said on that matter. 

4.        The other issue before me is the question of costs.  This representation was originally instituted in the early part of 2004.  There was a hearing before Commissioner Hamon in March, a hearing before me in April, and now this present hearing.  In addition I have been referred to various pieces of correspondence between the parties. 

5.        Mr Hodges, on behalf of Chilterns, asserts that this representation was unnecessary, and should not have been brought; they were willing to provide the information in any event, therefore, Chilterns should be entitled to their costs against the trustee, Sovereign. 

6.        On the other side Advocate Begg says that they were faced with an inability to extract the necessary information from Chilterns; they therefore had no alternative but to bring the proceedings and Chilterns should pay Sovereign's costs in relation to the representation. 

7.        I have been taken through the correspondence in order to try to ascertain which of these versions is correct.  In other words, was the representation necessary, or was it the case that it should not have been brought because it was not necessary?  The matter appears to have started on 8^th December, 2003, when Sovereign wrote to Chilterns making it clear that although they had received the records of Alliance from CI Law Trustees, who were the successor administrators to Chilterns, there were still gaps in their information and, in particular, there was little or no information concerning the business of the company for the period from September 1991 to June 2003.  They therefore asked Chilterns, both as administrators and as the providers of the former directors of the company, for information by way of questions as to what the company was doing during this period and, in particular, what had happened to the sum of £2 million. 

8.        Chilterns replied in due course on 9^th December, saying that, before they considered the extent to which they could assist in the work, they would like to have an assurance that their time charges and disbursements would be met.  It seems clear that that must have been given because there is then a fax from Chilterns to Sovereign, dated 30^th December, 2003, saying:-

"Thank you for confirming that you will meet our reasonable time charges and disbursements incurred in providing you with the information that you seek."

They also asked for £2,000 in advance. 

9.        On 7^th January, Sovereign replied confirming that they would meet the copying and time charges, but decided that it would be cheaper and would mean that they would not pay unnecessarily for time spent by the staff of Chilterns, if somebody from Sovereign came to Jersey and inspected the various files at the offices of Chilterns. 

10.      On 12^th January, 2004, Chilterns replied saying that they would be prepared to allow a Mr Cunningham to come and view the files and to give him access to the Minute Book and the bank files although they did not think this would be much help because they had already forwarded them on to the new administrator of the company, C.I. Law Trustees Limited. 

11.      Subsequently, a letter of authority was produced by Alliance Aviation Limited addressed to Chilterns confirming that the named people there could have access to all books, files, records and other materials in Chilterns' archives belonging or relating to Alliance. 

12.      On 14^th January, 2004, Sovereign wrote saying it was not so much the Minute Book and the bank files, previously sent to C.I. Law Trustees that they were interested in, but the other information in the archives that had earlier been referred to and they therefore wanted access to that material. 

13.      This brought about a response from Chilterns on the 19^th January, saying:-

"Unfortunately, we are not in a position to give you access to our correspondence files relating to the above company.  Should you wish to have sight of these then please file an appropriate representation setting out the orders that you seek."

In other words they were saying that they would not provide that information without an Order of the Court. 

14.      There was a further reply of 20^th January, from Sovereign saying:-

"All we are asking you to do is account to us for the activities of the company during the period in which you acted as directors and to answer the specific questions set out in our letter of the 8^th December, 2003.  We have indicated that we will pay your reasonable costs for time spent and copying charges in supplying the documents we are interested in.  However, if we need to seek a court order for you to account to us in the manner indicated, having given you ample opportunity to supply this information voluntarily, we will be forced to seek an order that you pay the costs of such application.  It is regrettable that you are forcing us to take this step, but your reluctance to co-operate only serves to raise concerns that you have something to hide."

I would add that there seems to be no evidence that they were in fact seeking to hide anything. 

15.      The next step is that Advocate Begg became involved and he then wrote saying he was going to bring a representation.  It is right to say, however, that he only gave Chilterns one day's notice of his intention to do so.  He wrote on 29^th January, 2004, demanding that they provide the information and documents requested in the letter from Sovereign of the 8^th December, 2003, but saying that he proposed to present the representation on 30^th January.  It might be thought that that was rather short notice. 

16.      However, I am quite satisfied from the evidence produced to me that Sovereign were perfectly entitled to bring the representation.  The difficulty seems to have arisen in relation to the correspondence files.  In my opinion it was quite wrong for Chilterns to refuse to allow access to those correspondence files; correspondence files written by an administrator whilst administering a company are just as much part of the company records - in the sense that the company is entitled to have access to them - as are other documents.  The files technically, no doubt, may belong to the administrator, but the company is undoubtedly entitled to have access to them. 

17.      It had been made clear that the company was willing to pay for time spent in getting at those files.  Furthermore, it is clear that an administrator is under a duty, even after the end of the administration, to answer questions which might help the new directors or new administrators, provided it is recompensed for time spent in doing so. 

18.      I am in no doubt, from the information contained in the correspondence, that Sovereign were entitled to bring this representation.  There can, therefore, be no question of Chilterns being entitled to their costs in respect of the representation.  On the contrary, prima facie, one starts from the position that Sovereign is entitled to its costs against Chilterns for the need to bring this representation, which should not have been necessary. 

19.      However, the matter does not end there, because a hearing was fixed for March and about two days before that Chilterns sent an open e-mail to Sovereign putting forward their case but concluding with an open offer, which I will read:-

"1)       We will deliver all banking files and minute files and any other company files to your legal advisor in Jersey tomorrow - who will undertake to provide us with a complete copy within 5 working days.

2)        You will have, say, 28 days to review and revert with reasonable questions.

3)        As a gesture of goodwill, we will use reasonable endeavours to answer those questions during that period without charge - and otherwise will use best endeavours (as will Sovereign) to agree a costs basis.

4)        If at the end of the 28 day period, you still require further information then we shall be happy to assist on the basis that you pay our reasonable costs - being those set out in Tanya's letter of the 30^th December, 2003.

5)        We will seek no compensation for our time and costs to date; neither will you."

That offer was never taken up by Sovereign. 

20.      In my judgment that belated offer from Chilterns is a fair replica of what in fact has now been agreed between the parties under my direction, namely that Chilterns will answer all questions, do its best to provide the information and documents about the period of administration provided that its reasonable costs for doing so are paid.  In my judgment criticism can be made of Sovereign for not having taken that offer on board but instead decided to go on regardless. 

21.      There was then a hearing before Commissioner Hamon, at which time Chilterns was ordered to produce the accounts, although these had apparently - it is said - been supplied previously.  There was then a hearing in April before me.  This arose out of an application by Chilterns for their costs, but the main purpose of the hearing was to clarify the way forward in the way I have described, namely the provision of information and documents against payment of fees and provision of adequate security for fees. 

22.      Since then there have been skirmishes between the parties.  After perusing the accounts Sovereign sent a list of questions raising matters which they could not establish from the accounts.  There was a rather futile debate between the parties as to whether there had been a one month deadline for Sovereign to raise these queries, but be that as it may, Chilterns did agree to provide the information although Advocate Begg took the view that had not provided it fast enough and so sought to bring the matter back to Court, although, shortly before the date fix, the information was provided. 

23.      Sovereign then had to pursue other matters and as a result they came up with further questions which they sent to Chilterns on 22^nd November, 2004.  On 30^th December, Chiltern said they would reply to those if ordered to do so by the Court.  Hence this hearing both to decide that matter and this question of costs. 

24.      I have to decide where justice lies in relation to costs as a whole.  I have already ruled that Sovereign was entitled to bring the representation.  I have further ruled that Sovereign acted unreasonably in not pursuing the offer of 16^th March, 2004.  If that had been accepted, it may well be that much of the proceedings would not have been necessary. 

25.      Nevertheless, the proceedings have gone on and time has been spent.  I think criticism can be laid against both parties as to the manner in which matters have progressed since then.  Chilterns really should not have taken the one month point; in my opinion it is absolutely clear that it had a continuing obligation to help if their fees are met.  As against that Advocate Begg seems to have been somewhat trigger happy in taking matters back to Court. 

26.      All in all I have to take a broad view.  I do not think it would be right to order that the costs of a particular hearing are paid by one party and the costs of another hearing by another.  I am certainly of the view that Chilterns must pay a substantial percentage of the costs because ultimately these proceedings arose because of their failure to produce the information voluntarily. 

27.      As against that I think the matter could have been dealt with by agreement if Sovereign had responded positively to the offer in March and I think that some costs since then have been incurred unnecessary. 

28.      Taking matters in the round I think the right order is to order Chilterns to pay two-thirds of the costs of Sovereign, on the standard basis and I so order.  I hope this matter is now concluded. 

No Authorities