Jersey Unreported Judgments

Shares - application by the plaintiffs for the return of shares or payment of value of shares.

[2015]JRC182

Royal Court

(Samedi)

4 September 2015

Before     :		Advocate Matthew John Thompson, Master of the Royal Court
Between	Jennifer Tracy Davey (née Tredant)		First Plaintiff
	Gay Teresa Chawke (née Tredant)		Second Plaintiff
And	Trevor Douglas Tredant		Defendant

Mr P. W. Syvret for the First and Second Plaintiffs.

Advocate C. Hall for the Defendant.

CONTENTS OF THE JUDGMENT

		Paras
1.	Introduction	1
2.	Background	2-8
3.	The Law	9-14
4.	The parties' contentions	15-22
5.	Decision	23-36

judgment

the master

Introduction

1.        This judgment represents my detailed written reasons for refusing the defendant's application to join as third parties individuals who were partners in Crill Canavan or Collas Crill between September 1998 and 30^th June, 2014.  Although different individuals were partners at various times, for ease of reference I will refer to the individuals as "the third party" and to the proposed claim as "the third party claim". 

Background

2.        The background to the present application arose out of proceedings commenced by the plaintiffs against the defendant by summons dated 29^th October, 2014.  The plaintiffs are the sisters of the defendant.  The action related to gifts made by their mother Evelyn May Tredant ("Mrs Tredant") and required the defendant to make 'rapport à la masse' of all gifts made to the defendant by Mrs Tredant during her lifetime which constitute an 'avancement de succession'. 

3.        The matter was placed on the pending list and then adjourned until 1^st May, 2015. 

4.        On 9^th June, 2015, the plaintiffs filed particulars of claim.  From the particulars of claim it was clear that the gifts the plaintiffs sought to recover were shares in Miramar Hotel Limited.  By an answer filed, the defendant admitted that Mrs Tredant transferred 500 shares to him, 500 shares to his wife and 53 shares to their son.  However, it was disputed that the transfer of shares was an avancement de succession.  The defendant contended that the transfer of shares was a bona fide reward for services performed by him, his wife and son and therefore was a gift by way of remuneration. 

5.        It was also disputed, in the alternative, that any shares transferred to the defendant's wife and son were not an avancement de succession even if the transfer of shares to the defendant was found to be a gift. 

6.        The defendant also reserved the right to 'rester sur les avances', if any shares transferred were found to be a gift to him. 

7.        The third party claim was set out at paragraphs 7 to 9 of the answer and third party claim filed by the defendant as follows:-

7.        Without prejudice to the above, if, contrary to the Defendant's pleaded case, the Court should find that the Defendant is liable to compensate the Plaintiffs or rapport à la masse, the Defendant avers Messrs Collas Crill (being the relevant partners at the time of the respective breaches of duty) (all hereinafter referred to as the "Third Parties") as the law firm acting for the Deceased when she made her Wills in December 2003 and in May 2012 and the transfers referred to in paragraph 4.1 hereof November 2010, are liable to indemnify the Defendant for any compensation paid to the Plaintiffs.

8.        The Third Parties owed a duty of care to the Defendant under the principle set out in White and another v Jones and others [1995] UKHL 5 and breached such duty by failing to give adequate and accurate advice to the Deceased about the prospect of the Plaintiffs making a claim on her estate and/or against the Defendant, which would defeat the Deceased's attempt to protect the livelihood of the Defendant and the Other Transferees. The Third Parties failed to advise inter alia on légitime; avances de succession; mechanisms of corporate control such as the shareholdings needed to pass or block ordinary or special resolutions; how to protect the Defendant's position by recording for example that the extra shares given to him could be stated to have come from the disposable third of her estate; and/or to advise that the transfer of shares was remunerative in nature and should be recorded as such.

9.        The Defendant seeks the Third Parties to be made a party to these proceedings in accordance with Rule 6/10 of the Royal Court Rules 2004 in that the Defendant claims an indemnity or contribution and/or a relief or remedy connected with this action which is substantially the same as the relief claimed by the Plaintiff."

8.        This claim only arises if the defendant's primary defences fail.  It is therefore an alternative claim in negligence.  The issue I therefore had to consider was whether this third party claim should be heard at the same time as the claim brought by the plaintiffs against the defendant. 

The Law

9.        The power to join an individual as a third party by a defendant is found in Rule 6/10(1) of the Royal Court Rules 2004, as amended, ("the Rules").  Rule 6/10(1) states as follows:-

"(1)     If a defendant in an answer to an action which has been placed on the pending list -

(a)       claims against a person not already a party to the action any contribution or indemnity;

(b)       claims against such a person any relief or remedy relating to or connected with the original subject-matter of the action and substantially the same as some relief or remedy claimed by the plaintiff; or

(c)       requires that any question or issue relating to or connected with the original subject-matter of the action should be determined not only as between the plaintiff and the defendant, but also as between either or both of them and a person not already a party to the action,

the Court may, after hearing the parties, make an order that such person be convened as a third party."

10.      In Foley & Foley (née McLaughlan) v Hamon & Ors [1985-6] JLR N3b, Fauvel, Deputy Judicial Greffier stated "the purpose of Rule 6/10(1) was to prevent a multiplicity of actions and enable the court to resolve the dispute between all the parties in a single suit, thereby avoiding the possibility of different results and separate proceedings.  To allow the joinder would not cause delay and, although the plaintiffs alleged that they were losing business by the restrictions on the use of the premises, they would not be prejudiced or embarrassed in the claim against the defendants to any marked extent."

11.      In Cummins v Howlands (Furniture) Ltd & Anor [2014] JRC 242, I also considered the basis on which a defendant could join a third party albeit Foley v Hamon was not referred to me.  Nevertheless, I reached the same conclusion and at paragraph 11 stated as follows:-

"11.  I was also referred to paragraph 16/2/5 of the 1999 Supreme Court Practice ("the White Book") which provides as follows:-

"Discretionary power to grant leave - The court has under r.2 a general discretion in all cases whether or not to allow a third party notice to issue.  The practice is that if a prima facie case is made out which would bring the matter within any paragraph of rule 1(1) leave will be granted to issue the notice.  And the court will not, in granting leave, consider the merits of the claim but will leave these matters and objections by the plaintiff to be dealt with upon the application for directions under r.4.

The procedure will not be allowed where the result will be to embarrass or delay the plaintiff, nor where the question at issue cannot be completely disposed of in the action.  Unless the prejudice to the plaintiff is obviously great, when issue of a summons will be ordered these matters will be considered on the application for directions under r.4, not on the application for leave to issue.""

12.      I also stated at paragraph 13 as follows:-

"Ordinarily I agree with the third party that where a prima facie case is shown on a pleading then leave ought to be granted and that evidence is not required.  The sort of case I have in mind is one where a plaintiff has issued proceedings against the defendant, an answer is filed within the relevant time limit permitted by the Rules and at that time or shortly thereafter the defendant seeks to issue a third party notice.  At that stage the entire case of all the parties is set out in pleadings only and no discovery or exchange of witness statements has taken place.  The whole matter is at an early stage."

13.      On the facts of Cummins v Howlands, I refused to allow the first third party in that claim to join the plaintiff as a second third party because without affidavit evidence I was not satisfied there was a prima facie case. 

14.      Neither Advocate Hall nor Mr Syvret disputed that I had a discretion by reference to the above cases. 

The parties' contentions

15.      Advocate Hall contended for the defendant as follows:-

(i)        The evidence of the third party is relevant to the issue between the plaintiffs and the defendant.  This was because a Ms De Sousa, an employee of the third party, may have given some advice to Mrs Tredant about the transfer of shares from Mrs Tredant to the defendant.  In particular the defendant relies on an affidavit sworn by Ms De Sousa dated 21^st May, 2014, provided to the executor dative of Mrs Tredant estate which affidavit it is said was asked to consider whether the shares in Miramar Hotel Limited were validly transferred.  The position of the third party, through Mourant Ozannes in a letter dated 17^th August, 2015, is that Ms De Sousa's affidavit was not a full account of all advice provided to Mrs Tredant by the third party.  In particular, it is suggested that the affidavit did not address all the advice provided by Ms De Sousa to Mrs Tredant in respect of 'avances de succession' or the potential claim for 'rapport à la masse'.  The letter went on to summarise what Ms Da Sousa's evidence would be if the third party were joined to the present proceedings. 

(ii)       Mourant Ozannes in their letter of 17^th August, 2015, also refused to provide copies of the third party's file because the defendant's request for copies of the file was characterised as a request for pre-action discovery in the context of threatened proceedings for alleged negligence. 

(iii)      It was on the basis of Ms De Sousa's affidavit and Mourant Ozanne's letter that the evidence of the third party was said to be clearly relevant as to whether or not the transfer of shares were a gift or whether it was a reward for services provided by the defendant.  Joinder would allow for discovery to take place and for oral evidence to be given at trial from the third party. 

(iv)      Joinder would not cause any undue delay and overall was in the interests of justice to resolve all issues between the parties. 

(v)       Joining the third party would also increase the chances of an overall resolution of the dispute because all interested parties could then attend any settlement discussions including any mediation. 

(vi)      To the extent that joinder of the third party lead to complications, in terms of whether or not the third party owed the defendant a duty of care, this issue could be left over until after determination of the claim between the plaintiffs and the defendant, following discovery and exchange of witness statements. 

16.      Mr Syvret in response started by reference to the intended effect of Rule 6/10 which was designed to avoid multiplicity of actions.  For Rule 6/10 to apply however, the defendant had to bring himself within one of the three sub-paragraphs. 

17.      Mr Syvret however contended that the third party claim was a claim in negligence and therefore was different from the plaintiffs' claim against the defendant.  It was only an alternative claim.  The third party was not therefore being asked to return an asset to the estate of Mrs Tredant.  Rather the claim was a different type of claim which added significantly to the complexity of the proceedings. 

18.      The issue of whether or not the third party owed the defendant a duty of care was not straightforward.  Although the defendant's pleading referred to White v Jones [1995] 2 AC 207, White v Jones related to the issue of a firm of lawyers owing a duty of care to intended beneficiaries of a Will where solicitors had failed to take the appropriate steps to give effect to the revised testamentary intentions of a testator.  White v Jones was a controversial decision and it was by no means clear that the principle would be extended as a matter of Jersey law to a failure to advise on lifetime gifts and whether these could be brought back into the estate of a deceased person. 

19.      Even if the law of negligence could be extended in the manner proposed, the Royal Court, if an amendment were allowed, would have to consider whether any such duty had been breached and what losses flowed from such a breach.  The losses claimed were not necessarily the same as a simple return of assets or their value required for the plaintiffs' claim.  This was because the Court would have to assess what steps the testator would have taken, if she had been advised correctly, (assuming for the purposes of the present application that she was not so advised).  All these matters would add significantly to the delay and expense of determination of the issue between the plaintiffs and the defendant. 

20.      Furthermore, the fact that the defendant wanted the third party to take part in the settlement discussions or attend at mediation was not a basis to invoke Rule 6/10. 

21.      Mr Syvret also complained that the third party claim was lacking in detail.  In particular there were no dates identified as to when the advice had been given.  This lack of detail was likely to delay an early resolution of the plaintiffs' claim. 

22.      The fact that the defendant wanted evidence from the third party could be dealt with by way of a subpoena both requiring the third party to produce documents and requiring Ms De Sousa to attend at trial to be questioned. 

23.      Splitting the trial in the manner envisaged also produced complications.  It would not be easy for a trial judge to determine how far Ms De Sousa could be questioned in respect of the advice she had given if joinder was allowed.  By contrast whether advice was negligent or not was irrelevant to the plaintiffs' claim. 

24.      He finally stated that depending on the outcome of the plaintiffs' claim against the defendant, it might be that the plaintiffs would consider an action against the third party.  The defendant's application was therefore premature. 

Decision

25.      The starting point for my decision was to analyse the nature of the defendant's claim against the third party.  Firstly, I reached the view that the defendant's proposed claim against the third party is not one that is frivolous or vexatious and which obviously ought to be struck out.  Having said that, I agree with Mr Syvret that the third party claim is lacking in particularity, about when any advice was given in particular given that Ms De Sousa has sworn an affidavit and having regard to relevant parts of the letter from Mourant Ozannes dated 17^th August, 2015, to which I have referred.  The third party claim is one therefore capable of being brought against the third party, even if it might require some more particularity than is presently contained in the draft third party claim. 

26.      However, it is not a claim that is necessary to resolve the claim between the plaintiffs and the defendant.  As noted in Cummins v Howlands, a third party claim is not allowed where the question can be completely disposed of in the action.  In my judgment the claim between the plaintiffs and the defendant does not require the alternative claim against the third party to be resolved in order for the Royal Court to adjudicate upon the plaintiffs' claim. 

27.      The issue in the plaintiffs' claim is straightforward namely were the transfers of shares gifts, as the plaintiffs allege, or were they a reward for services provided by the defendant and his immediate family, as the defendant contends.  The only relevance of the third party claim is that one employee may have evidence to give and the third party may hold documentary evidence.  However, this evidence can be dealt with by the issue of a subpoena and also by the executor of Mrs Tredant's estate asking for copies of the third party's files. 

28.      The resolution of the claim in negligence is not necessary to resolve the plaintiffs' claim.  The claim does not therefore fall within Rule 6/10(a) because the defendant is not seeking a contribution from the third party in respect of the defendant's liability (if established) to the plaintiffs.  The third party could never have been pursued by the plaintiff to contribute to Mrs Tredant's estate. 

29.      Secondly, I do not consider that the third party claim falls within Rule 6/10(b).  The relief sought against the third party does not relate to the original subject matter of the action.  The original subject matter of the action is shares and whether or not these shares should form part of Mrs Tredant's estate.  The claim against the third party in essence a claim for damages for negligence for failing to advise.  As I have noted above it is also only an alternative claim which does not require adjudication in order for the Royal Court to adjudicate upon the plaintiffs' claim. 

30.      The third party claim also does not fall within Rule 6/10(c).  It is not necessary for the third party claim to be determined in order to determine the claim between the plaintiffs and the defendant for the reasons I have already given. 

31.      In addition the third party claim, as Mr Syvret contended, would not be straightforward.  The Royal Court, if the third party claim were allowed, would be required to adjudicate upon whether or not a duty of care is owed by the third party to the defendant.  As Mr Syvret rightly observed this would involve an extension of the principle in White v Jones (see for example Hayden-Taylor v Canopius Underwriting Ltd & Ors [2014] JRC 221 & 174-178).  Joinder might also lead to the plaintiffs pleading an alternative claim against the third party which would add further to the complexities. 

32.      I also accept the submission that even if a duty of care is established, the Royal Court would have to decide where or not a duty of care had been breached.  This would extend the scope of a trial because Ms De Sousa would not only be answering questions about whether or not the shares were transferred by way of a gift or for services rendered insofar as she was able to do so, but she would also be answering questions about the advice that she gave.  If the Royal Court was only adjudicating on the plaintiffs' claim, but the third party had been joined, the defendant's approach would cause complexities in that the Royal Court would have to consider to what extent cross-examination of Ms De Sousa should be permitted in circumstances when the third party at that stage was not represented in Court.  This could produce unfairness as well as complexity. 

33.      Even if a duty of care and a breach of that duty of care is established, the Royal Court would also have to consider relevant evidence of what losses might flow from such a breach.  The defendant would have to show that Mrs Tredant would have acted differently had correct advice been given.  This issue is relevant to the amount of loss that the defendant, if otherwise successful in its assertions against the third party, might recover from the third party.  This contrasts with the consequence of the plaintiffs proving their claim.  If the plaintiffs were successful, either the asset is returned or its value is accounted for or the defendant elects to 'rester sur les avances'.  These alternatives are less complex than assessing any loss suffered as part of the third party claim. 

34.      All of these matters mean that the third party claim is one that adds complexity to the proceedings brought by the plaintiffs.  Consistent with remarks of Deputy Judicial Greffier, Fauvel in the Foley case, I consider that to allow the third party claim would cause both delay and prejudice to a marked extent.  The plaintiffs' claim at present turns on one single issue and on the factual and oral evidence that the parties together with any of the witnesses that they call will give, including Ms De Sousa, if called.  The legal principles of the plaintiffs' claim are well known and are not unduly complex.  I also consider that the plaintiffs' claim is unlikely to take significant amount of Court time and is likely to be resolved by a hearing of between one to two days.  The relief sought namely the return of shares or payment of the value of those shares at the time they were transferred is also not particularly complicated, even if expert evidence as to the value if the shares are required, compared to the third party claim and assessing damages. 

35.      By contrast adding a third party claim leads to the complications I have set out above.  There is also a fallacy in seeking to join a third party and yet accepting that the trial of a third party claim could take place at a later date to avoid the complications identified.  What I consider was really behind the third party claim was a desire for discovery of the third party's files.  However that can be dealt with by a sub-poena, and does not require the third party to be joined. 

36.      I also do not consider it appropriate to join the third party on the basis that this would encourage the third party to take part in any form of settlement discussions or mediation.  This is firstly not a basis set in Rule 6/10 which justifies joinder of a third party.  Secondly, it is inappropriate to join an organisation as a third party for the reason of encouraging them to settle.  While the Court can encourage all parties to resolve their differences, that does not mean it is appropriate for the Court to join a third party to proceedings, if a ground cannot be made out to do so. 

37.      Finally, it is right to observe that the third party claim may not arise at all if the defendant's primary arguments are successful.  Alternatively, it may be the plaintiffs who assert a claim.  The involvement of the third party is therefore also premature and appears to depend on the outcome of the present action. 

38.      I therefore reached the conclusion that the issue between the plaintiffs and the defendant did not require the third party to be joined and the defendant has not established a basis that requires joinder to occur.  In addition, to allow joinder would add significantly to the complexity of the proceedings when the issues raised are not necessary for adjudication of the plaintiffs' claim against the defendant. 

39.      I therefore refused the defendant's application. 

Authorities

Royal court Rules 2004.

Foley & Foley (née McLaughlan) v Hamon & Ors [1985-6] JLR N3b.

Cummins v Howlands (Furniture) Ltd & Anor [2014] JRC 242.

White v Jones [1995] 2 AC 207.

Hayden-Taylor v Canopius Underwriting Ltd & Ors [2014] JRC 221.