Jersey Unreported Judgments

Companies - reasons - application by the plaintiff dismissed to impose injunctions upon the first defendant - costs judgment.

[2014]JRC147

Royal Court

(Samedi)

25 July 2014

Before     :

J. A. Clyde-Smith, Esq., Commissioner, and Jurats Morgan and Nicolle.

 

Advocate J. S. Dickinson for the Plaintiff.

Advocate M. T. Jowitt for the Defendants.

Advocate S. A. Franckel for the Parties Cited.

judgment

the commissioner:

1.        On 17^th April, 2014, the Court dismissed an application by the plaintiff ("Richard") to impose interim injunctions upon the first defendant ("Robert").  The Commissioner reserved his decision in relation to costs.  We now set out our reasons for dismissing the application and give the Commissioner's decision in relation to costs. 

2.        Proceedings were issued by Richard by way of Order of Justice on 14^th February, 2014, seeking amongst other relief a declaration that he beneficially owns 50% of the shares in the second defendant Longton Holdings Limited ("Longton"), a Jersey registered company, or 50% of its underlying asset, namely a valuable long-term lease in a commercial property in London ("the London property").  It would appear that currently the shares in Longton are held by the parties cited for the benefit of Robert. 

3.        The background to these proceedings is a jewellery business run by Richard and Robert and before her retirement, their mother, Mrs Lucie Campbell ("the mother") who is aged 77.  The business comprises inter alia a retail and wholesale jewellery business operating from the London property under the day-to-day control of Richard and a jewellery manufacturing business in Thailand under the day-to-day control of Robert; Richard and the mother residing in England and Robert in Thailand. 

4.        The London property was purchased in 2002 with the assistance of a loan from the mother and other funds, but we believe because of the offshore status of Robert, advice was received that it should not be acquired through the business but separately through an offshore structure to be established by Robert.  The funds loaned by the mother together with the other funds were routed via Robert to Longton and on the 27^th July, 2007, made subject to a loan agreement between Longton and Robert.  Interest on the loan was therefore paid by Longton to Robert.  

5.        More recently relations between Richard and Robert have broken down and they are in dispute as to how the assets of the business should be divided between them.  In particular Robert has declined to confirm that Richard has a 50% interest in Longton.  Additionally, the mother whose financial affairs we were told are managed by Richard and an employee of the London business through a power of attorney, herself issued proceedings in 2013 against Richard and Robert in relation to her interest in the business and for the repayment of the loan, which on her pleaded case was due by Richard and Robert jointly. 

6.        In the Jersey proceedings, no interlocutory relief was sought by Richard in reliance on undertakings given by Robert -

(i)        Not to transfer, dispose or otherwise deal with the shares or his beneficial interest in the shares in Longton. 

(ii)       Not to dispose of or seek to transfer to any third party any monies paid to him to date or ongoing by way of interest in relation to the loan owed by Longton. 

Both undertakings were subject to a fourteen day notice period of withdrawal. 

7.        Robert accepted a judgment against him in the English proceedings brought by the mother in relation to the loans, interest and sums held by Robert on trust for the mother in the total sum of £1,010,920 which he had 28 days from 11^th April, 2014, to pay.  On the 1^st April, 2014, he gave fourteen days' notice in relation to the second undertaking of his intention to use the sum of £469,268.49p, representing some of the interest received by Robert from Longton and paid into an account in his name with Barclays Bank in Jersey, in partial settlement of the sums due to the mother.  

8.        Richard then applied to this Court for interim injunctions:-

(i)        Restraining Robert from removing from the Island of Jersey or in any way disposing of or dealing with or diminishing the value of his assets which are in the Island of Jersey. 

(ii)       Restraining him on a world-wide basis from disposing of or in any way diminishing the value of any interest payments made to him by Longton and retained by him. 

(iii)      Requiring him to disclose all of his assets in the Island of Jersey and the location of any interest paid to him by Longton and held outside the Island of Jersey. 

9.        The application by Richard for the interim injunctions was based principally upon Robert's pleaded case in the English proceedings brought by the mother that he alone was liable to repay the loan to the mother and that by using the Barclays account, in which Richard claims a proprietary interest, he was dissipating assets to his sole advantage and to the detriment of Richard.  Richard had further complaints in relation to the conduct of Robert, claiming that:-

(i)        He had been evasive about the nature of his position in relation to Richard's claims regarding Longton. 

(ii)       He had refused to say how the interest paid to him by Longton had been treated and to account for the same. 

(iii)      He had in the mother's proceedings adopted contrary positions in relation to the loan made by the mother. 

(iv)      He had been involved in significant transactions in relation to the business that had not been disclosed to Richard until after the event. 

10.      The Court agreed with Advocate Jowitt's submissions on behalf of Robert that the application for interim injunctions was misconceived.  Advocate Jowitt relied on Richard's own pleaded case in the Jersey proceedings, and specifically on paragraph 50 of the Order of Justice which is in the following terms:-

"50      In the premises it is averred that:

(a)   Robert holds 50% of the capital of the Longton loan and/or any subsequent loan entered into between Robert and Longton on a constructive trust (which term includes for the purposes of this Order of Justice an implied or resulting trust, as does the term "constructive trustee") for Richard. 

(b)   Robert holds 50% of any interest payments (net of any payments that have been made by Robert to [the mother] by way of reduction of any sums owed to her by way of capital or interest in respect of the sums lent by her to Robert or Richard in connection with Longton and/or the London Property) on a constructive trust for Richard."

11.      Paragraph 50(b) makes it clear that Richard's claim is net of the loan by the mother to either Robert or Richard in connection with Longton.  Richard therefore makes no claim over the interest received by Robert from Longton if used to repay the mother. 

12.      There was some attempt in correspondence by Richard's legal advisors to distinguish paragraph 50(b) because of the word "have" but we agree that this was a false distinction.  Richard's positive case is that he has no claim to monies paid out of the account for the purpose of repaying the loan to the mother.  It was not in issue that it was going to be used by Robert for that purpose.  There can, therefore, be no question of dissipation.  It is clear that the monies in the Barclays account were to be used to pay a liability which has been expressly recognised and given credit for in Richard's own pleadings.  If the loan by the mother was solely to Robert, then Richard has by his pleaded case agreed that he has no claim to funds used to repay it and if the loan was made jointly to Richard and Robert, then repayment of it is as much a benefit to Richard as to Robert and is neither a misappropriation nor dissipation of the monies. 

13.      As to the other complaints of Richard, Advocate Jowitt made the following points all of which we accepted:-

(i)        If there had been any real concern about dissipation of Robert's assets, then Richard would have applied for interim injunctions at the outset.  He has until now been content upon the undertakings given. 

(ii)       Disclosure as to how the interest received by Robert was dealt with by him will be made in the usual way upon discovery; in essence, Richard was attempting to get discovery ahead of time. 

(iii)      The London property was worth, we were told, £16M vacant and £22M let and there was therefore more than sufficient in terms of assets to cover any orders that the Court might make out of Robert's half share (assuming Richard is successful) relating to the use by Robert of the Barclays account to repay the mother. 

14.      For these reasons, the Court dismissed the application for the interim injunctions and the amendments to the Order of Justice sought as part of that application. 

Costs

15.      Following the dismissal of the application, Advocate Jowitt made an application for costs before the Commissioner alone.  He sought indemnity costs for the following reasons:-

(i)        The application by Richard for the interim injunctions was initially made ex parte and no disclosure was made in relation to his own pleaded case at paragraph 50(b), which is the one point that goes to the heart of the matter. 

(ii)       On receipt of Advocate Jowitt's skeleton argument pointing out the effect of paragraph 50(b) of the Order of Justice, Richard responded by seeking to amend paragraph 50(b) substituting "and" for "or" in the third line, so that it read "....lent by her to Robert and Richard....". It was inappropriate to conduct litigation in such a way. 

(iii)      The application was utterly misconceived on the basis of Richard's own pleading as agreed by the Court. 

16.      In all, Advocate Jowitt said that Robert had been put to the cost of defending the application unreasonably.  He referred me to the Court of Appeal decision in Leeds v Weston [2012] JCA 088 where Jones, JA said this at paragraph 7:-

"In making an award of indemnity costs on the ground of unreasonableness, the court is seeking 'to achieve a fairer result for the party in whose favour it is made than would be the case if he were only able to recover costs on the standard basis; in the end, it is a question of what would be fair and reasonable in all the circumstances.' (Pell Frischmann Engineering Limited v. Bow Valley Iran Limited and Others [2007] JLR 479, paragraph 25, cited with approval in C v P-S at paragraph 7)."

17.      Advocate Franckel, for the first and second parties cited, allied himself with the position of Advocate Jowitt, seeking indemnity costs on their behalf. 

18.      Advocate Dickinson for Richard accepted that Richard should pay Robert's costs and those of the parties cited on the standard basis. He resisted an order for indemnity costs for the following reasons:-

(i)        When notice was given on 1^st April, 2014, Robert unreasonably refused an extension of time for the application to be made. 

(ii)       Having read the papers, the Bailiff ordered an inter partes hearing and therefore there is no note of a meeting with the Bailiff. 

(iii)      The last minute proposed amendment to paragraph 50(b) was an adjustment which had only been appreciated by Richard's advisers at the last minute. 

19.      In general, Advocate Dickinson argued that none of the points put forward by Advocate Jowitt took Robert over the necessary hurdle to justify indemnity costs. 

20.      In my view, indemnity costs are appropriate here.  There is no reference in either Richard's affidavit in support of the application or in the skeleton argument to paragraph 50(b) of the Order of Justice and to the fact that it is Richard's own pleaded case that he makes no claim over monies paid to the mother.  The application was wholly misconceived.  Robert and the parties cited have therefore been put to the cost, in the case of Robert of defending the application and in the case of the parties cited, in attending the hearing.  In my view, that is conduct which is sufficiently unreasonable to justify an order for indemnity costs and such an order is fair and reasonable in these circumstances.  

Authorities

Leeds v Weston [2012] JCA 088.