[2011]JRC028
royal court
(Samedi Division)
27th January 2011
Before : |
W. J. Bailhache, Q.C., Deputy Bailiff, sitting alone. |
Between |
Viken Securities Limited |
Plaintiffs |
|
Springbirne Investments Inc. Felipe Securities Limited Veena Mirchandani Soniya Mirchandani Asha Shivdasani Sajnee Sadarangani |
|
And |
New World Trustees (Jersey) Limited |
Respondent |
Advocate W. Grace for the Plaintiffs.
Advocate N. M. Sanders for the Respondent.
judgment
the deputy bailiff:
Introduction
1. This is an application brought ex parte by the plaintiffs, on notice to the defendant. The application seeks to invoke the Norwich Pharmacal jurisdiction of the Court in connection with wrongdoing which the plaintiffs claim that they have suffered, and in which the defendant is mixed up. The plaintiffs claim to have made investments of which it is said at least $US18 million is outstanding, through a BVI company called Tiberius Investments & Capital Limited ("Tiberius"), administered in Jersey by the defendant, a Jersey regulated trust company.
2. On 14th January I signed an Order of Justice restraining the defendant from disclosing the existence of this application or its contents or supporting documents, other than for the purposes of seeking legal advice, to any person outside the defendant's group of companies, whether in Jersey or Switzerland, until further order of the Court, or with the written consent of the plaintiffs' advocates. I indicated that the Norwich Pharmacal application should be brought upon notice to the defendant.
3. The application for the Norwich Pharmacal orders was made on 25th January. It was in part resisted by the defendant both as to principle and as to the scope of the relevant orders. I now give reasons for the decision which I have reached.
4. In short summary, the plaintiffs' claim for Norwich Pharmacal relief is asserted upon the basis that they made substantial investments through Tiberius, which company has given them incomplete responses, refusals and broken promises in relation to the management of those investments. The plaintiffs claim that there has been a failure to provide a full and proper account in relation to those investments. It is claimed that there is evidence that the most recent redemption from an ultimate underlying investment fund has not in fact been distributed to the plaintiffs in any fair way, or at all, and no adequate explanation has been given. Although the defendant company provides directors for Tiberius, it is asserted that in practice Tiberius is under the effective control, directly or indirectly, of a Mr. Dadlani, who it is said was the principal point of contact between the plaintiffs and Tiberius. Mr. Dadlani has apparently virtually cut off all contact with the plaintiffs, who are keen to ascertain the true position of their investments, so that they can take appropriate action if necessary to secure their funds.
5. The legal principles which I apply to this application are those set out at paragraphs 14 - 28 inclusive of the Royal Court's judgment in New Media Holding Company LLC-v-Capita Fiduciary Group Limited [2010] JLR 272.
6. I am quite satisfied that the plaintiff has shown a good arguable case that it is the victim of wrongdoing. On the material put before me, I consider the threshold, which is a fairly low threshold, is comfortably passed. Similarly, it seems to me to be quite clear that there is a good arguable case that the defendant was mixed up in the wrongdoing. I say this because there is no dispute that the defendant was in fact providing directors of the company which it is alleged has committed some of the wrongdoing. The question for me therefore is whether, as a matter of discretion, I consider it to be in the interest of justice to order the defendant to make disclosure of the documents which are sought.
The rival contentions
7. The case for the exercise of discretion was put by Advocate Grace in this way:-
(i) The Court of Appeal had remarked in Durant International Corporation-v-Attorney General [2006] JLR 112 that for some time the policy of the legislature and of the executive agencies exercising statutory powers was to ensure that the commercial facilities available in Jersey should not be used to launder money or mask criminal activities here or anywhere else. These remarks were picked up by the Court of Appeal in Macdoel Investments Limited and Others-v-Federal Republic of Brazil [2007] JLR 201 where the Court of Appeal added this:-
"Although these remarks were made in the context of an action that concerned the provision of assistance by the authorities in Jersey to foreign prosecutors, they have relevance in the sphere of civil litigation, where the courts are conscious that Jersey's reputation as a major financial centre might suffer if it were not willing to assist victims of wrongdoing to obtain redress."
Advocate Grace said that the plaintiffs had made investments in this case on an informal basis in the first instance and accordingly their relationship with Tiberius has been uncertain. However they are more than mere creditors; they are people who have made loans to a company managed in Jersey for investment purposes. Some have converted their loans into shares which carry very few rights. The thrust of his submission was that the plaintiffs had made various investments through Jersey, and needed the Court's protection. This was particularly so because Tiberius was not registered with the JFSC as a regulated entity.
(ii) The financial information provided by Tiberius was unclear, and even the directors of the defendant in Geneva did not understand it. Where the figures which had been provided do not reconcile with other sums which are shown in different documents, one is in the classic type of situation envisaged in Macdoel where the courts should assist victims of wrongdoing to obtain redress as part of the protection of Jersey's reputation as a major financial centre.
(iii) It was particularly relevant that the defendant was a regulated entity. It has, as Advocate Grace put it, a duty to step up to the mark.
(iv) The plaintiffs had insufficient information to apply for a Mareva injunction at the moment, but with the information provided if these orders were made might be able to take steps to prevent funds being moved from this jurisdiction to frustrate the plaintiffs' claims.
8. Advocate Sanders, for the defendant, said that this was in effect pre-action discovery. He said that if the defendant had not provided administration services, then this information of Tiberius could not have been obtained at this stage. In addition he added that the plaintiffs were aware of the identity of potential defendants and nature of the claim. He had other comments to raise over the scope of the putative order if in principle it were right to make such an order, but he contended that insofar as the substance was concerned, it was inappropriate to make the Norwich Pharmacal orders requested.
The exercise of discretion
9. I comment first upon the assertion that the dicta in the Court of Appeal in Durant International and Macdoel should be so interpreted as to water down the principle that a Norwich Pharmacal order is not one to be made lightly. If I may respectfully say so, the Court of Appeal was in my judgement absolutely correct in reflecting that the legislature has passed legislation, and the executive agencies have exercised statutory powers so as to ensure that the commercial facilities available in the Island should not be used to launder money or mask criminal activities here or anywhere else. It is also clear that where there is suspected criminality, even in a civil case, it is more likely that the courts will exercise the Norwich Pharmacal jurisdiction, and of course the factual circumstances which underlay the civil action in Macdoel were very closely linked to the circumstances in the criminal litigation of Durant International. By contrast with those cases, the present case does not exhibit, at least at present, any indications of obvious criminality. In the absence of criminality, the public policy factors are more evenly balanced. There is, of course, a need to assure protection to investors. There is equally a need properly to protect the confidentiality which financial services' businesses owe to their clients. In my judgment the dicta of the Court of Appeal to which I have referred do not lead one to a conclusion that simply because there has been an allegation of financial loss involving a regulated financial service provider, it follows that the Court should be assiduous to exercise the extraordinary jurisdiction available under Norwich Pharmacal principles. I apply the principles set out in New Media.
10. Secondly, I do not think that the only way of obtaining information available to these plaintiffs is through a Norwich Pharmacal order. It seems to me to be reasonably clear from the information which has been supplied that it is possible to identify potential causes of action against potential defendants, and on the information available to me it seems to me to be likely that an acceptable pleading could be put together which would survive any interlocutory attacks and result in appropriate discovery orders being made in the course of that litigation. The defendant in the present proceedings contends that there are some sixty files of documents which would have to be reviewed, and however informal the investment arrangements might have been in the early stages, it seems to be likely that the putative plaintiffs already have a considerable amount of paperwork available to them to assist them in pleading their case. Indeed, Advocate Grace confirmed in his submissions that his clients had received information over the past years pursuant to Clause 12 of the management agreement, although he asserted his clients had no full understanding of what the position was. In my judgment, therefore, it cannot be said that it is necessary to make the Norwich Pharmacal order. This does not preclude the making of an order, as far as Jersey law is concerned, but it is a factor that goes into the matrix of reasons which underlie the exercise of discretion.
11. The defendant objected that the purpose of the present application was to obtain pre-action discovery. Having looked carefully at the material which has been put before me, I consider that this is a fair objection, and as the Court said in New Media, at paragraph 27:-
"If therefore the Royal Court were to be satisfied that the primary purpose of the Norwich Pharmacal application was to obtain pre-action discovery, it seems to us that it would be very unlikely that the discretion of the Court would be exercised in favour of the applicant."
12. In summary, I consider that the plaintiffs have sufficient information to be aware of the putative defendants to claims which they might wish to bring; are sufficiently aware of the nature of what those claims might be; and in reality are bringing this application as a convenient mechanism for pre-action discovery which would strengthen their hand procedurally. Indeed, in my judgment, to grant the orders sought would perhaps give them an unfair advantage in the proceedings. It was not contended before me that it was necessary that the orders should be made in order to enable tracing actions to be taken elsewhere. It was suggested that Mareva relief might be sought, but it is not clear how the production of the documents now requested would substantially help in that respect. In any event, it appears to me that the Mareva relief would be more directed at ensuring there are assets to satisfy any judgment obtained rather than the seizing of assets in which any proprietary interest was claimed.
13. For these reasons, it does not seem to me to be in the interests of justice that a Norwich Pharmacal order be issued as requested by the plaintiffs in this case.
14. I wish to add this, however, in the light of the assertion that because the defendant is regulated by the Jersey Financial Services Commission, the plaintiffs are entitled to information from them accordingly. For my part, I do not think that the fact that one has a regulated entity as a defendant is generally relevant to the issue of whether or not Norwich Pharmacal relief is granted. If that were a relevant factor, one has to have regard to the probability that in the majority of cases involving litigation against a company registered or managed in Jersey, application would be made for Norwich Pharmacal relief against a financial services' provider. This would be very undesirable and amount to obtaining pre-action discovery in one class of cases but not others, without any good cause. Secondly, to contend that the financial services' provider is mixed up in the wrongdoing because it provides directors or administrative services to the putative defendant in the main proceedings would theoretically expose all directors to Norwich Pharmacal applications for no other reason than that they were directors. I do not say that there will never be circumstances when it is appropriate to go against directors on a Norwich Pharmacal application, but the starting point is that the Court should have before it the parties who are directly concerned by the alleged wrongdoing. In my judgment there would need to be some unusual circumstances that made it appropriate that the directors of a putative defendant be subject in advance to Norwich Pharmacal relief, and there are certainly no such circumstances here.
15. In addition, in this case, Advocate Sanders complained of the adverse impact of the gagging order which the court imposed on the application for the Norwich Pharmacal relief. The result was that Tiberius could not communicate with its own lawyers or other advisers, because that communication would take place through its directors who were subject to the gagging order by virtue of being directors of the defendant financial services' administrator. In my judgment this is an additional inconvenience, and whilst not being a decisive factor, is an additional reason against the making of a Norwich Pharmacal order against the directors of putative defendant companies.
16. One can see that the situs of administration of companies which are not Jersey companies is always liable to be moved at relatively short notice. Nothing in this judgment is intended to suggest that it would be impossible to bring proceedings against Tiberius citing the local financial services' administrator as a party for the purposes of obtaining an order requiring the maintenance of the relevant documents within this jurisdiction. At that point, the fact that the administrator is a regulated entity would indeed be of some comfort to the plaintiffs, because it would be extremely surprising if such an entity were to disregard an interim order of that kind made by the Royal Court.
17. As I have concluded that the plaintiffs have not established in principle that Norwich Pharmacal relief should be granted, it would be otiose to consider the detailed objections to the proposed orders.
Authorities
New Media Holding Company LLC-v-Capita Fiduciary Group Limited [2010] JLR 272.
Durant International Corporation-v-Attorney General [2006] JLR 112.
Macdoel Investments Limited and Others-v-Federal Republic of Brazil [2007] JLR 201.