Jersey Unreported Judgments

[2007]JRC131

royal court

(Samedi Division)

4^th July 2007

Before     :

Sir Philip Bailhache, Kt. Bailiff, and Jurats Tibbo and Liddiard.

 

Advocate J. M. P. Gleeson for the Plaintiffs.

Advocate L. J. L. Buckley for the Defendant.

judgment

the bailiff:

Introduction

1.        On 26th March 2003 Xavier Cabau Ybanez and Carolina Torres Mompo his wife ("the plaintiffs") instituted proceedings by order of justice against BBVA Privanza Bank (Jersey) Limited ("the defendant").  On 15th December 2006 the Master issued a circular giving notice, pursuant to Rule 6/25(2) and Rule 6/26(13) of the Royal Court Rules 2004 that the Court proposed to dismiss a number of actions including the action instituted by the plaintiffs.  The plaintiffs issued a summons with a view to keeping the action alive.  The summons was heard by the Master on 20th February 2007.  On 5th April 2007 he gave his decision dismissing the summons and striking out the action.  The plaintiffs appeal against that decision. 

2.        The facts were summarised by the Master in his judgment in the following way -

"The plaintiffs (who say they were inexperienced investors) were induced in August 1998 to invest two sums of money, namely $6.3 million and approximately £1.78 million, with the defendants.  These sums were invested in shares in the defendant's parent company.  The value of those shares ("the BBVA shares") fell and the plaintiffs were induced to enter into an agreement with the defendant to invest in an investment portfolio under the discretionary management of the defendant.  The funds for this arrangement were provided by way of a facility given by the defendant on the security of the BBVA shares.  The BBVA shares were sold and the proceeds invested into two telephone companies.  The value of the security fell significantly and, in June 2002, the defendant exercised its power of sale and the facility was terminated. 

The plaintiffs claim that they were induced to enter into the various arrangements as a result of misrepresentation on the part of the defendant.  They claim rescission of the agreements which gave effect to the arrangements on the grounds of misrepresentation, dol or erreur.  Alternatively, damages are claimed for negligence or breach of implied terms of the agreements which resulted in the defendant mismanaging the portfolio and ultimately liquidating the security at a substantial loss.  The plaintiffs also claim that the defendant did not give appropriate advice generally in relation to all these matters.

The defendant joins issue with the contentions of the plaintiffs.  It says that the first plaintiff was a sophisticated investor who made his own investment decisions against the advice of the defendant.  Such decisions included a high-risk investment strategy, an aggressive investment approach and investment restricted to a limited number of shareholdings.  The defendant also raises questions as to the source of the funds provided by the plaintiffs and the legal and beneficial ownership of those funds.

The Order of Justice was issued in April 2003 and the action was placed on the pending list with an agreement that an Answer be filed by 31st July in that year.  The Answer was eventually filed on 29th August 2003.  Security for costs in the sum of £85,000 was agreed between the parties in December 2003.  In January 2004, the plaintiffs provided further and better particulars to the defendants.  In March 2004, the plaintiff was granted leave to file an amended Order of Justice.  An amended Answer was filed in June/July 2004 with a Reply from the plaintiffs on 9th August of that year.  In September, the plaintiffs provided further and better particulars.  In March 2005, directions were given by consent for discovery and interrogatories and a further sum by way of security for costs was also agreed between the parties.  In January 2006, again by consent, the plaintiffs were granted leave to file a re-amended Order of Justice and in June, again by consent, the defendants were granted leave to file a re-amended Answer.  The plaintiff filed a re-amended Reply in August 2006.  There has been no further procedural activity until the issue by me of the Circular referred to below".

3.        It is accepted by both counsel that the Court must exercise its discretion de novo, while paying, of course, due regard to the decision of the Master. 

4.        Save in one respect, Mr Gleeson for the plaintiffs accepted that the Master had applied the correct legal principles, namely those set out succinctly in Garfield-Bennett v Phillips 2002/214, 6th November 2002 unreported.  In summary, before an action can be dismissed for want of prosecution, the Court must be satisfied that (i) there has been inordinate delay, (ii) the delay is inexcusable and (iii) such delay gives rise to a substantial risk that it is not possible to have a fair trial of the issues or is likely to cause or has caused serious prejudice to the defendant.  The reservation expressed by counsel for the plaintiffs was that the Master erred in relying upon a passage in Citco Jersey Limited v Bank of Ireland (Jersey) Limited [2005] JRC 097 as authority for disregarding the general principle that, save in exceptional circumstances, an action will not be struck out for want of prosecution before the end of the relevant limitation period.  Counsel for the plaintiffs further contended that the Master had erred in all respects in applying those legal principles to the facts. 

Inordinate delay

5.        We consider first therefore whether there has been inordinate delay.  Both counsel acknowledge that there has been a wholesale change of culture in the last seven years.  The genesis of that change can be traced to a decision of the Court of Appeal In re Esteem [2000] JLR N-41, July 27th 2000 unreported where Southwell JA stated -

"From now on it has to be appreciated by all who are involved in civil proceedings in the Royal Court that their objective has to be to progress those proceedings to trial in accordance with an agreed or ordered timetable, at a reasonable level of cost, and within a reasonably short time".

6.        That was followed by a Circular Letter issued by the Master on 31st October 2003 where he stated -

"In recent years, the Royal Court has adopted a more active approach to case management with a view to achieving a more efficient, timely and cost-effective method of disposing of civil actions.

In furtherance of these objectives, the Bailiff has indicated the wish of the Royal Court to ensure that existing actions progress as quickly as is reasonably practicable.  Furthermore, in relation to new actions it is the expressed wish of the Royal Court that all parties and their advisers should seek to have actions disposed of within twelve months of their commencement wherever that is possible.  The Judicial Greffier and the Master have therefore been instructed to implement appropriate means to achieve these objectives".

7.        Counsel for the plaintiffs submitted that the imperative of bringing proceedings to a conclusion within twelve months wherever that was possible did not apply in this case because the action was instituted before the issue of the Circular Letter.  That may be so, but there is nonetheless an imperative "to ensure that existing actions progress as quickly as is reasonably practicable".  On the basis that proceedings should generally be concluded within twelve months, one would expect that even a case involving complex issues should be brought to a conclusion within 24 months.  A delay exceeding 24 months is likely to be inordinate. When the delay exceeds 36 months it will only be in wholly exceptional cases involving highly complex issues of law or fact or other difficult circumstances that the delay will not be regarded as inordinate.  Earlier decisions where long delays were regarded as acceptable have now to be viewed against the Court of Appeal's imperative to bring proceedings to trial "within a reasonable time". As this Court stated in Citco Jersey Limited v Bank of Ireland (Jersey) Limited at paragraph 15 "Where a plaintiff finds time slipping away because of practical or other difficulties, his remedy is to comply with [Rule 6/26] and to make an application for directions or to seek a stay".

8.        Mr Gleeson submitted that the delay attributable to the plaintiff in this case was 12½ months.  Mr Buckley for the defendant submitted that the delay attributable to the plaintiff was significantly longer.  The Master determined not to look at discrete periods but to view the matter in the round.  We think that that was the right approach.  The proceedings were instituted in March 2003.  Four years later, not only had the pleadings not been completed, but the plaintiffs were seeking, for the third time, to amend the order of justice.  Even in the context of a complex commercial dispute, and we do not accept that this is such a dispute, such delay is inordinate. 

Inexcusable delay

9.        Counsel for the plaintiffs contended that, even if the delay were inordinate, it was not inexcusable.  A number of excuses were advanced before the Master. It was said that the first plaintiff had suffered a heart attack and that there were language difficulties which inhibited communications between the plaintiffs and their legal advisers in Jersey.  The Master was critical of the fact that no direct evidence of these matters was placed before him.  He had only the affidavit of Advocate Dickinson, who was also counsel for the plaintiffs, contrary to the strictures of the Court of Appeal in previous cases.  Before this Court those matters were remedied and we admitted the fourth affidavit sworn by the first plaintiff.  In that affidavit the first plaintiff deposed to his limited knowledge of English and to the fact that communication could only be achieved through an English speaking Spanish lawyer.  He also explained that he had suffered a heart attack in June 2004.  He had not been hospitalised, but had received treatment and was told to take a few weeks' rest.  The first plaintiff also deposed to certain cash flow problems which had been experienced as a result of various business difficulties. 

10.      We have given careful consideration to all these matters but, like the Master, we do not consider that they excuse the inordinate delay which has taken place.

Prejudice

11.      We turn to the question of whether the inordinate and inexcusable delay has prejudiced the defendant. 

12.      The Master found that there was a substantial risk that it would not be possible to have a fair trial, and, in addition, that the delay was such as to be likely to cause or to have caused a serious prejudice to the defendant. 

13.      Counsel for the plaintiffs conceded that this was a case where the oral evidence of live witnesses would be key.  Allegations of fraudulent misconduct had been made against certain employees of the defendant.  There was disputed evidence as to whether certain meetings had taken place, and what had been said at meetings between the first plaintiff and employees of the defendant.  Counsel also conceded that a number of key witnesses were no longer in the employment of the Bank; some had retired and some had taken up other employment.  Counsel contended however that detailed proofs of evidence had been taken from each of these witnesses.  The absence of certain records was, it was submitted, the result of the failure of the defendant to observe codes of practice laid down by the Jersey Financial Services Commission.

14.      Counsel for the defendant submitted that the order of justice identified ten individuals against whom various allegations were made by the plaintiffs.  Of those ten individuals, three had retired and two had left the employment of the BBVA Bank.  Of the remaining five individuals, only one was still employed in Jersey.  The other four remained in the employment of BBVA Bank and were located in the USA, London and Spain. Counsel submitted that employees who had left the employment of BBVA, or who had retired, were less likely to show goodwill to the defendant as the years went by.  Furthermore, the delay would have affected the memories of events which took place between seven and nine years ago. 

15.      Our conclusions in relation to prejudice are these.  The events in question took place between 1998 and 2000.  The proceedings were instituted in March 2003, close to the end of the limitation period in so far as the allegations were based upon negligence.  It was incumbent upon the plaintiffs to pursue their claim diligently and with expedition.  They failed to do so.  That duty was even greater in view of the fact that serious allegations of fraud were being made against certain employees. Now, four years after the proceedings were instituted, the witnesses for the defendant have scattered to various parts of the globe.  Counsel for the plaintiff asserted that there was no causal link between the scattering of the witnesses and the delay.  The scattering of the witnesses was caused by the decision of BBVA Bank to close the Jersey operations of the defendant in March 2005, and not by the delay in progressing the proceedings.  We think that this argument is mere sophistry.  The scattering of the witnesses was indeed partly caused by the decision to close the defendant's operations in Jersey.  But any inordinate delay is almost bound to have consequential effects.  People die, or retire, or move on.  One of the witnesses against whom allegations were made, Mr Francis Torrell, suffered a major heart attack in March 2007.  Another, Mr Alberto Ramirez-Escudero, left the defendant's employ in May 2001 and retired in or about 2004. Businesses close, or site themselves elsewhere, or merge or re-form.  The passage of years brings change.  If this action had been brought to trial even within two years, the defendant's operations in Jersey would have been still in existence.  In our judgment the Master was right to find that the difficulties for the defendant when marshalling its witnesses, and the inevitable effect upon the memories of those witnesses by the additional passage of time, were seriously prejudicial to the defendant, and caused a substantial risk that it would not be possible to have a fair trial. 

16.      We turn to the question of whether the Master was right to dismiss the action, notwithstanding that the limitation period for actions in contract had not, and indeed has not, expired.  In Garfield- Bennett v Phillips, the Court adopted the principles laid down by the House of Lords in Birkett v James [1978] AC 291 subject to minor alterations.  At paragraph 11(vi) the Court stated -

"Save in exceptional circumstances, an action will not be struck out for want of prosecution before the expiry of the relevant limitation period".

17.      Birt, Deputy Bailiff, added a postscript to that judgment in the following terms -

"This case was argued and decided on the basis that the principles laid down in Birkett v James are applicable in Jersey.  However it seems to us that it may at least be open to argument as to whether these principles should continue to hold sway.  For example:-

(i)        The case is no longer authoritative in England since the Woolf reforms have been introduced.

(ii)       Even before then, there was a body of opinion that Birkett v James was too lenient towards plaintiffs by generally prohibiting dismissal before expiry of the limitation period (see for example the comments of Kerr L J and other members of the Court of Appeal in Westminster City Council v Clifford Culpin [1987] 137 NLJ 736, referred to by Lord Griffiths in Department of Transport v Chris Smaller Limited [1989] 1All ER 897 at 901).

(iii)      Jersey has not of course adopted the Woolf reforms.  Nevertheless the whole approach towards the progress of litigation has changed in recent times.  The Court of Appeal made it absolutely clear in The Esteem Settlement [2000] JLR N41 that times had changed and that it now had to be appreciated by all who are involved in civil proceedings that their objective has to be to progress the proceedings to trial in accordance with an agreed or ordered timetable at a reasonable level of cost and within a reasonably short time.

(iv)      It must be open to question as to whether the principles in Birkett v James are consistent with those objectives.  In particular it might be argued that, particularly in cases where there is a long limitation period such as ten years, it is wrong to say that the case cannot be struck out for want of prosecution during that period.  Arguably, where a plaintiff has delayed inordinately so that the proceedings are struck out, it should be an abuse of process for that person to recommence the very same action albeit that, if he had not commenced the original action in the first place, he could still have brought an action within the limitation period.  It is one thing to be slow in bringing an action but nevertheless bring it within a limitation period laid down by law;  it is another to start an action at an earlier stage and then so disregard the requirement to progress matters expeditiously as to lead the Court to strike out the action.  Why should it not be an abuse of process to try and start again in such circumstances?

(v)       Rule 6/21 of the Royal Court Rules has recently been amended to encourage case management by the Royal Court.  It provides that the Court may dismiss proceedings where a plaintiff does not issue a summons for directions within the timetable laid down by the Rule.  It would seem illogical for the Court to have power under Rule 6/21 to dismiss an action for a failure to issue a summons for directions within the time specified by the Rules (even within any limitation period) but be unable to dismiss because of a general delay in progressing the action unless the limitation period had expired.  The amendment to Rule 6/21 may therefore demand a re-think on Birkett v James.

(vi)      Arguably it is open to the Royal Court to hold that the principles in cases of dismissal for want of prosecution may have to be changed in the light of the developments mentioned above.  It would certainly seem to be open to the Court of Appeal.  So far as counsel's researches show, no case on dismissal for want of prosecution has reached the Court of Appeal, so that it has not had an opportunity of considering whether the Royal Court has been right hitherto in following the Birkett v James principles.

However, all that is for another day".

18.      In Bourne v Axford & Others [2003] JRC 114A, the Court stated at paragraph 5 -

"Birkett v James is no longer an important authority in England following the procedural changes in the management of civil litigation brought about by the Woolf reforms. Its star is probably waning in this jurisdiction too as indeed Birt, Deputy Bailiff, indicated in Garfield-Bennet v Phillips. It is unnecessary, however, to consider whether Birkett v James should survive the more modest reforms instituted in Jersey by recent amendment to the Royal Court Rules 1992".

19.      In Citco Jersey Limited & Another v Bank of Ireland (Jersey) Limited, the Court endorsed a decision of the Master that inordinate and inexcusable delay was capable of amounting to an abuse of the process of the Court irrespective of any question of prejudice.  The Court stated -

"We think that the Master was amply justified in reaching the conclusion that serious prejudice would be caused to the Defendant if the action proceeded to trial.  That conclusion is of course sufficient to dispose of the Appeal.  But we think it is none the less desirable, in deference to the arguments ably addressed to us by both Counsel, to deal with the alternative upon which the Master decided to dismiss the action, namely abuse of process.  Much water has passed under the bridge since Birkett v James was decided in 1978.  The change in England came about as a result of the Woolf report and subsequent changes to Rules of the Supreme Court.  In Jersey the catalyst for change was a judgment of the Court of Appeal in re Esteem when Southwell JA stated

'From now on it has to be appreciated by all who are involved in civil proceedings in the Royal Court that their objective has to be to progress those proceedings to trial in accordance with an agreed or ordered timetable, at a reasonable level of cost, and within a reasonably short time'.

Since re Esteem there have been changes in the Royal Court Rules designed to give the Court a greater authority to manage litigation and a number of cases have been decided in which the Court has emphasised the importance of bringing litigation to a conclusion within a reasonable time and a reasonable cost to the parties.  On 31st October 2003, the Master sent a circular letter to all members of the legal profession stating that:

'The Bailiff has indicated the wish of the Royal Court to ensure that existing actions progress as quickly as is reasonably practicable.  Furthermore, in relation to new actions, it is the express wish of the Royal Court that all parties and their advisers should seek to have actions disposed of within twelve months of their commencement, wherever that is possible'."

At paragraph 14 the Court continued -

"In our judgment the admitted inordinate and inexcusable delay in this case did amount to an abuse of the process of the Court and the Master was right so to find.  We reject the submission of Counsel for the Plaintiffs that mere delay can, by itself, never amount to an abuse of process.  While that might have been arguable prior to the decision in re Esteem in 2000, it is no longer a tenable argument.  Of course, not every case involving an inordinate and inexcusable delay will give rise to an abuse of process; much will depend upon the circumstances of each case".

20.      The passages cited in paragraph 19 above led the Master to conclude at paragraph 28 of his judgment -

"In coming to my decision I consider that I am bound by the statements mentioned above in the Citco case.  Although the claims in negligence in this action are clearly now time-barred the other aspects of the claim are not and therefore the principles mentioned must be taken into consideration.  I consider that the "wholesale change of culture" to which the learned Bailiff has referred is such as to justify my striking out this action even though the relevant limitation periods have not expired".

21.      The plaintiffs' notice of appeal contained the following grounds -

"The Master erred in principle in concluding that it was appropriate for him to rely upon the judgment of the Bailiff in the case Citco Jersey Limited and Bowden v Bank of Ireland (Jersey) Limited [2005] JRC 097 as a basis for disregarding the general principle that, save in exceptional cases, an action will not be struck out for want of prosecution before the expiry of a relevant limitation period - in this case limitations periods relating to certain of the claims made have not yet expired".

22.      In oral argument counsel for the plaintiffs chose not to argue the point.  However, the ground of appeal was not expressly withdrawn and we think that we should deal with it in the interests of future clarity. 

23.      The postscript of Birt, Deputy Bailiff, in Garfield-Bennett v Phillips sets out succinctly why the rule in Birkett v James might be thought no longer to be apt for application before the Jersey Courts.  We think that it is time for the rule to be given a respectful burial.  In our judgment it is plainly inconsistent and indeed irreconcilable with the reforms which were inspired by the judgment of the Court of Appeal in re Esteem, and which have continued through changes to the Royal Court Rules, new practice directions and various decisions of this Court since 2000. 

24.      We are conscious that in McGorrin v Pascoe 7th June 2002 unreported, the Court of Appeal declined to give the Rule in Birkett v James the coup de grâce and stated at paragraph 46 -

"Finally, Mr Michel relied on the contention that this was a breach of trust case, for which there was no relevant limitation period, and that if the actions were dismissed, new actions could be started.  We accept that in the majority of cases, if the limitation period has not yet expired, the courts will not strike out an action for want of prosecution.  But we conclude that this is a clear case for the dismissal of the two actions.  If there is any attempt to start a new action, then in accordance with the guidance given by the English Court of Appeal in Arbuthnot Latham [1998] 1 WLR 1426, whether or not a second action is allowed to proceed or should itself be struck out, will be a matter for the discretion of the Court which will proceed on the assumption that if the party has had one action struck out, some special reason has to be identified to justify a second action being allowed to proceed".

25.      McGorrin v Pascoe was decided, however, before Garfield-Bennett and, more importantly, before changes to the Royal Court Rules required parties to take out a summons for directions after the time limited for the filing of pleadings has expired (Rule 6/26), and empowered the Court to dismiss an action of its own motion three years after being set down on the hearing list (Rule 6/25).  In our judgment, the fact that the relevant limitation period has not expired should no longer be regarded as a ground for not dismissing an action for want of prosecution. 

26.      We conclude that this appeal from the decision of the Master must be dismissed.

Authorities

Garfield-Bennett v Phillips 2002/214.

Citco Jersey Limited v Bank of Ireland (Jersey) Limited [2005] JRC 097.

In re Esteem [2000] JLR N-41.

Birkett v James [1978] AC 291.

Bourne v Axford & Others [2003] JRC 114A.

McGorrin v Pascoe 2002/113.