[2008]JRC096
royal court
(Samedi Division)
16th June 2008
Before : |
F. C. Hamon, Esq., O.B.E., Commissioner, and Jurats de Veulle, and Newcombe. |
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Between |
Richard Taylor |
Plaintiff |
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And |
Ian James ffrench |
Defendant |
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Advocate S. A. Franckel for the Plaintiff.
The Defendant did not appear and was not represented.
judgment
the COMMISSIONER:
1. When this case was set down for hearing, the Bailiff's Judicial Secretary said that notice of the hearing must be given to the defendant, Mr Ian James ffrench. That was done and the address of the notice was "Le Sol", L'Etacq, St Ouen, where Mr ffrench has always insisted that he lives. Crill Canvavan ceased to act for the defendant in early February 2008 and the defendant has written to Advocate Franckel to say that he is virtually bankrupt and that he has had and is set to have "major surgery". No letter of confirmation from his medical adviser was sent to the Court and he has not complied with any directions made by the Court on 26th February 2008 for the filing of documentation. There was at some stage of the proceedings allegations from Crill Canavan that Mr Richard Taylor, the plaintiff (who was, as we heard from his evidence, the best friend and business associate of Mr Mitchell for some thirty-five years) had not taken out probate in Jersey. The point (which is not a strong one) has in any event been rectified and Mr Richard Taylor (the alternate executor named in the will) was duly appointed having taken the usual oath on 3rd June 2008. The will was, of course, proved on the same day.
2. The dispute between the parties revolves around an alleged agreement on the division of the Proceeds of sale in certain shares. In his Answer and Counterclaim dated 9th October 2007, following the serving of the Order of Justice on 14th June 2007, it is alleged by the defendant that the shares were held on trust "created for an illegal purpose" (to hide assets from the IRS) but it was the defendant who suggested, implemented and administered the scheme from its inception. Even if the case had areas of illegality (which the plaintiff strongly denies) the House of Lords, in Tinsley v Milligan [1994] 1 AC 340 held (by a majority) that (whether the plaintiff founds his claim on a legal or equitable title) the plaintiff is entitled to recover, if he is not forced to plead or rely on the illegality, even if it emerges that the title on which he relies was acquired in the process of carrying out an illegal transaction.
3. The plaintiff in this particular case has pleaded and is relying on a bare trust relationship and does not need to rely on any illegal purpose argument to make his claim.
The background
4. The defendant arranged for the incorporation of a company called Matterhorn International S.A. (which we shall hereafter call "Matterhorn") and that company held shares in Epoch Bioscience Inc (which we shall hereafter call "EBIO") for both himself and as nominee of the late Mr Mitchell. Matterhorn was a BVI company to be used to manage investments.
5. Matterhorn purchased 445,620 shares in EBIO and held them as nominee for Mr Mitchell and the defendant. Sadly, Mr Mitchell was diagnosed with lung cancer in January 2003. Mr Taylor told us that during Mr Mitchell's short but debilitating illness (he died on 17th July 2004), he tried with Mr Taylor to put his affairs in apple-pie order. At one stage, Mr ffrench stated that there was an agreement between him and Mr Mitchell that the defendant "would be remunerated for his services at his rates applicable from time to time and that these charges and any disbursements would be levied against Matterhorn". Mr Taylor, who swore a detailed affidavit, told us that he continually held detailed discussions with his friend and business colleague, Mr Mitchell. At no time was the fee element discussed and the fees were only brought to his attention after Mr Mitchell had passed away. Mr Taylor told us (both in affidavit and oral evidence) that he had always understood that the defendant would receive a share of the profits in the investments that he had recommended. Apparently, all of the investments that were recommended suffered losses and therefore no profits accrued to the defendant. The plaintiff told us that while Mr Mitchell was gravely ill, he requested a complete account from the defendant and was told that there was "around $40,000 in outstanding fees due". He could not trouble Mr Mitchell and agreed to pay that sum. In his affidavit, Mr Taylor says this:-
"16. I do not think that Mitchell ever envisaged or agreed to ffrench being paid outstanding fees in the event that the investments did not make any money or any agreement that ffrench's rendering of fee notes would be 'delayed'. Rather, my understanding was that the arrangement between them was a profit sharing agreement.
17. I now exhibit a copy of the memorandum in which I reply to ffrench, also dated 25th August 2004 as RTT/2. In relation to his points above I state the following:
"Your legal cost of $40,000 should be deducted from this loan amount. I have no records of any outstanding fees due to you. However, if you feel there are specific fees owed to you as the result of your efforts please let me know the amount".
18. As regards the $40,000 in legal fees this was not deducted from ffrench's personal loan. Rather, he now includes this claim in his counterclaim for fees, but I note that at paragraph 19 g of his Counterclaim it is stated to be £43,050 and not $40,000. I have never seen any documentary evidence to confirm that these legal fees were actually paid by ffrench, or that the sums claimed by ffrench are accurate.
19. On 3rd January 2005, over six months after the death of Mitchell, I received from ffrench a series of annual fee notes dating back to 1994 for fees due to him from Mitchell. I now exhibit these fee notes and the letter to me from ffrench enclosing them as RTT/3. This was the very first time that ffrench ever mentioned these bills to me or to my knowledge, to Mr Mitchell's wife, Deborah. I also do not believe that he ever mentioned them to Mr Mitchell, prior to his death. I believe this because I think it is impossible that an outstanding bill of $450,000 would have slipped Mitchell's attention during the 18 months of his illness. He knew that he was dying and we were spending a large portion of our time organizing his affairs prior to his death. If he had known that such a large sum or indeed anything near that amount, was outstanding it is simply unbelievable that he would not have brought this to my attention.
20. I have never received any documentary verification to support the amounts claimed, either in relation to the time costs, or the disbursements said to have been paid.
I note that the bills dated 2000 onwards have been charged at $400 per hour for the time of the 'Principal'. I also note that the 'Secretarial' fees are also charged at $150 per hour, which I assume is also ffrench's time".
6. We have considered the evidence most carefully (and Advocate Franckel has provided us with two bundles of detailed information) but we cannot but agree that the arrangement between Mr Mitchell and the defendant was that after 31st March 1995 no further fee notes would be submitted as the arrangement was to become a profit sharing arrangement. Naturally, the issue between the parties is whether an agreement existed between the late Mr Mitchell and the defendant for the deferred payment of fees from 1996 onwards. We can see no evidence for such an agreement. It does seem to us to be rather invidious that the amount of the fees charged only came to light well after Mr Mitchell's death and this despite the many attempts to clarify the situation by both Mr Mitchell and the plaintiff. The fee notes submitted by the defendant were from March 1994 to October 2004 and totalled $449,948. Between 23rd December 2004 and 2nd February 2005, the defendant wired $125,000 from Eldon, which company was personally owned by the defendant. On 5th March 2005, he wired a further $158,942.00 to the estate but has retained the sum (which he claims to be due) of $449,948 in respect of the fee notes rendered.
7. [Mrs Mitchell only received the proceeds of the sale (less the sum by way of 'fees') on 13th March 2005. No consent of the estate was requested. The amount of $449,948 was merely deducted].
8. It is pertinent to cite the Judgment (in part) of a Master of the High Court delivered on Tuesday 10th July 2007. This was an application concerned solely as to what should happen about the cost of an application to set aside a default judgment which was entered by Mr Taylor against Mr ffrench.
9. As part of his Judgment, Taylor v French (10th July 2007) Ch D, Master Moncaster said this:-
"The defendant claims his costs of setting aside the judgment on the basis that it was not a regular judgment. Having failed in that contention, it does not seem to me that there is any ground on which I could possibly make an order for costs in his favour. It seems to me that he was unhelpful throughout. One can have no particular sympathy for him. The claimants waited a long time before signing judgment in default, having given his Jersey solicitors ample opportunity to take steps to prevent that course from happening, and they did nothing about it. They had sent after the service on Waysmeet Cottage a set of the documents to Mr French by email, and he had deliberately not opened the attachments of the email and sent them straight to Jersey, no doubt to avoid any risk of having been held to have accepted service by opening the attachments. And he has, it seems to me it is fair to say, been determined to avoid service, so long as was possible, of any proceedings. Therefore I feel no regret in coming to the decision I have done.
Having come to that decision, there is then the issue of today's hearing. As that hearing has been entirely about how the general costs were to be borne, and as the claimant has succeeded on that issue and the defendant has lost, then this does seem to me to be a case where the ordinary rule of costs following the event should apply and the claimants are entitled to the costs of today's hearing".
10. The defendant next applied to strike out the Order of Justice on 5th September 2007. This application was refused by Master Wheeler and following this refusal, the Answer and Counterclaim and the Reply and Answer to the Counterclaim were filed. In his Answer to the Counterclaim (inter alia) the plaintiff says this:-
"The entitlement to the sum of $449,948 is denied on the basis of the matters set out in the Reply herein. That sum was wrongfully retained by the defendant and is not therefore held by the plaintiff. The defendant appears to seek to make a double claim purporting to retain the sum of $449,948 held by him purportedly in satisfaction of sums due and further in addition seeks that sum by way of this Counterclaim. The defendant's entitlement to do so is denied."
11. We agree. We dismiss the Counterclaim and we give judgment for the plaintiff in the sum claimed of $449,948. We also order an account and such sums as are due to the plaintiff shall be made after the taking of such account. This sum must be verified by the Master.
12. On the question of the costs of this hearing, Advocate Franckel raised seven points:-
(i) The trust relationship.
(ii) The reliance placed on the defendant by the deceased.
(iii) The unsavoury conduct of the defendant.
(iv) The repeated (and often deliberate) delays.
(v) The comment made by the Master of the High Court.
(vi) The way that the defendant failed to act upon the clear direction of the Master of the Royal Court.
(vii) His failure to attend (or even to get anyone to attend) the hearing before us.
13. I have no doubt but that indemnity costs are in order (I have had particular regard to the decision in Parujan v Atlantic Western Trustees Limited [2003] JLR N23). I order that the interest be compounded from 7th October 2004 to date and thereafter to the date of payment.
Authorities
Tinsley v Milligan [1994] 1 AC 340.
Taylor v French (10th July 2007) Ch D.
Parujan v Atlantic Western Trustees Limited [2003] JLR N23.