Jersey Unreported Judgments

Companies - reasons for issuing certain directions.

[2018]JRC110

Royal Court

(Samedi)

27 June 2018

Advocate S. C. Thomas and Advocate J. M. Sheedy for the Plaintiffs.

The First Defendant did not appear.

Advocate J. P. Speck for the Second and Third Defendants.

Advocate N. M. G. A Pearmain for Mr Kiereini.

Advocate D. S. Steenson for Mr Njonjo.

Advocate J. S. Dickinson for the estate of Prahlad Jani.

judgment

the MASTER:

1.        This judgment represents my detailed reasons for issuing certain directions in relation to the above dispute.

2.        This judgment follows on from the judgment of the Deputy Bailiff reported at CMC-v-Forster and Ors [2018] JRC 078 in the present matter setting aside my order of 25^th September, 2017 seeking to limit discovery.  At paragraph 53 the Deputy Bailiff stated as follows:-

"53.    In the light of the information that was both before the Master and is before us, that the challenges that arise within the discovery exercise take this case out of the norm.  To us it may well call for both an iterative and imaginative approach to the discovery exercise such as that it ensures, so far as is possible, any relevant material is identified and disclosed without requiring any party to undertake an unnecessarily expensive exercise, which would be unlikely to reveal any further documentation of a discoverable nature."

3.        It is also appropriate to refer to paragraphs 62 and 63 of the said judgment as follows:-

"62.    We are not intending to suggest that some appropriate limitation as to discovery process is not possible in this case.  In fact, we feel it should be and is desirable.  It may be, for example, that review of documentation can be limited in some way, perhaps to those where payments are known and set out in schedule 2 to the Order of Justice.  It may be that this is not possible.  Perhaps service records could be excluded or sampled.  We are not in a position to say because we were not addressed about any alternative.  We were asked to uphold the order of the Master or to overturn it in favour of a full discovery exercise. 

63.      Without a greater understanding, we are unable to offer any suggestions as to what may be possible, and we are left, we think, with no alternative but to overturn the order of the Master and to find that the normal discovery exercise should take place.  We wish to be clear that all we are doing at this point is expressing the view that a 10% dip sampling process will not, in our view, suffice to meet the justice of this case as it is currently pleaded.  However, were those parameters to alter, in other words were the pleadings to change or some other method limiting the discovery process to be identified, then we do not mean anything in this judgment to suggest that it would be inappropriate to explore and order discovery in accordance with those limitations."

4.        It is also pertinent to refer to the judgment of the Bailiff in the present matter dated 2^nd May, 2018, reported at CMC Holdings-v-Forster & Ors [2018] JRC 081, in which the Bailiff dismissed an appeal by Mr Kiereini and Mr Njonjo refusing their respective applications to strike out, or for reverse summary judgment on, the third party claims brought against them by the second and third defendants.

5.        This judgment is material because Mr Kiereini wishes to appeal the Bailiff's decision.  As the decision was an interlocutory one, Mr Kiereini needs either the leave of the Bailiff or, failing that, leave from a single judge of the Court of Appeal in order to pursue his notice of appeal.  A date fix appointment for Mr Kiereini's application for leave to appeal took place on 14^th June, 2018, and a hearing before the Bailiff has been listed for 4^th July, 2018.  The application by Mr Keireini seeking leave to appeal led the third parties present to suggest that no directions should be made against them while Mr Kiereini's application was pending.

6.        As far as the plaintiffs were concerned, their summons asked the court to give such further directions in respect of the plaintiffs' discovery as the court thought appropriate, and sought leave to re-plead their case by reference to observations made in an earlier judgment by me in this matter reported at CMC Holdings-v-Forster and Others [2017] JRC 190.  Certain amendments were produced to address the concerns I had previously raised.

7.        The second and third defendants were critical of the approach taken by the plaintiffs in relation to the application before me to limit documents, and indicated that a proper application should be formulated.  The second and third defendants submitted that the application should set out how the plaintiffs' suggested discovery should be limited, and should be supported by evidence.  It was not for the court to direct the plaintiffs how to meet their discovery obligations.  The second and third defendants also criticised the plaintiffs' discovery generally and indicated that in light of the judgment of the Deputy Bailiff, the plaintiffs should effectively start again and produce their discovery afresh.  The second and third defendants also considered that the plaintiffs should clarify their case in relation to whether or not they made overpayments to those car manufacturers alleged to have made payments to the offshore entities to which the second and third defendants provided certain services as accepted in their answer.

8.        In deciding what orders to make, I start by reference to the overriding objective and the fact that this litigation commenced two years ago.  Yet, there are still pleadings issues that might have to be resolved and discovery is far from being completed.  The overriding objective requires me in particular to actively manage cases (per Rule 1/6(5)) of the Royal Court Rules 2004, as amended), which includes an obligation in Rule 1/6(6)(g) to fix timetables or otherwise control the progress of the case. 

9.        In referring to the overriding objective, I was conscious of the fact that this is a complex case covering payments made over many years, and which involves serious allegations.  Those allegations, as summarised in paragraph 28 of my judgment reported at CMC & Ors v Forster & Anor [2017] JRC 141, include an allegation that the directors "deliberately withheld" from the plaintiffs knowledge and details of the scheme.

10.      However, notwithstanding the complexity and serious nature of the allegations being made, I was not prepared to accede to the request not to make any orders to progress the case.  In particular, as both the plaintiffs and the second and third defendants were ready to exchange lists of documents other than in respect of the plaintiffs' material in the storehouses, I firstly directed that the exchange of all other material should take place.

11.      My reasons for doing so were partly to progress the case further, and partly because an analysis of this material might assist in relation to how to address the issue of discovery in the plaintiffs' storehouses.  An analysis had been carried out by the plaintiffs in their order of justice as to what payments had been made by car manufacturers to the offshore entities.  However, no analysis had been carried out as to what payments had been made by the plaintiffs for vehicles purchased from the car manufacturers, and whether any invoices raised by the car manufacturers included an over-invoicing element which was then paid into the offshore structure (thus effectively removing monies from the plaintiffs for the benefit of individuals), or whether the payments made were simply secret commissions.  In a recent email dated 25^th April, 2018 to Advocate Sheedy on behalf of the plaintiffs  (which email  is exhibited to the second affidavit of Katherine Margaret Ferbrache), the first defendant described the over-invoicing as a sum added to the FOB price of the vehicles and products purchased by the plaintiffs from the car manufacturers.  What I consider is required from the plaintiffs ultimately is an analysis of whether the monies that were paid to the offshore entities ultimately came from an over-invoicing scheme, or whether the payments made by the car manufacturers to the offshore entities were a form of secret commission separate to the price paid by the plaintiffs for any particular vehicles.  I also noted in the application for service out by Advocate Sheedy, that he had exhibited an affidavit of Mr William Lay sworn in 2012 which suggested that the first defendant had described some form of over-invoicing scheme.  Clarity in how any scheme operated matters so that the defendants and the third parties know the case they have to meet and what is being alleged against them.

12.      Once analysis has been carried out of what payments the plaintiffs made for vehicles, consideration can then be given as to whether each invoice for every vehicle purchased is required or whether some form of limitation on such an exercise is appropriate.  The focus of such a decision would appear to be on the documents contained in Store No.2 of the plaintiffs' storehouses referred to in the affidavits filed on behalf of the plaintiffs described at paragraph 32 of the Deputy Bailiff's judgment.

13.      In relation to the third parties, I ordered them to provide some discovery to progress the case, notwithstanding that there was a possibility of leave to appeal being granted to Mr Kiereini and thereafter the claims against the third parties being struck out.  However, firstly, I did not regard this as likely because the appeal was against an interlocutory decision where generally leave to appeal is not granted.  Secondly, the time period I allowed for the third parties to provide discovery will in any event allow sufficient time for any application for leave to appeal to be determined and the discovery obligations of the third parties to still be met.  If leave to appeal is granted the third parties were given liberty to apply expressly to set aside this part of the orders I made.  They are of course also free to ask any higher court for a stay of the orders I have made pending any appeal.  Thirdly, I limited the discovery required from the third parties to documents relevant to the issues in the case not already disclosed by the plaintiffs and/or the second and third defendants.  This did not constitute a decision that the plaintiffs had a direct obligation to provide discovery to the third parties.  Rather my decision was based on taking a pragmatic and proportionate approach, and directing that the third parties only had to provide documents not already provided to them by other parties.  Notwithstanding this, I expressly recognised the reservation of Advocate Speck for the second and third defendants to enquire of the third parties, in due course, and assuming they were still parties to the litigation, whether they had received particular documents disclosed to them by the plaintiffs and/or the second and third defendants had already been in their possession, custody or control prior to such disclosure, because such information could be pertinent to one or more issues in the case.

14.      As far as the pleadings were concerned I decided, consistent with the approach taken when refusing to strike out the third party pleadings as endorsed by the Bailiff in his latest judgment that any amendments to pleadings should await conclusion of the discovery process.

15.      During the course of the hearing I also explored expressly with Advocate Steenson what discovery I expected the third parties to provide.  While it is for Advocate Steenson to advise his client, in general terms what appeared to me to be pertinent were documents either relating to any director's knowledge of any scheme, or how any scheme operated.  The third parties' discovery should therefore not just relate to whether or not a particular third party had been unjustly enriched because that third party had received monies out of the alleged scheme; the third parties' discovery obligations also extended to what knowledge any particular director had of any scheme and how far they were party to any decisions being made about any scheme.  This followed on from my decision in respect of Mr Njonjo's appeal and the summary of the claim against the third parties convened by the second and third defendants as recorded in that judgment at paragraph 28.

16.      The other direction I issued was that in summary if there were any challenges to the discovery I had ordered be provided, I wanted any such challenge heard at the same hearing reserved for any applications to limit discovery.  This was so that there was one hearing regarding discovery issues.

17.      Finally, following determination of discovery issues I indicated I would then deal with any pleading issues and the filing of witness evidence, whether factual or expert.  I therefore did not make any orders in relation to the second and third defendants' request for further information, partly because I still had the same concerns about the requests expressed in my judgment CMC Holdings Ltd-v-Forster and Others [2017] JRC 188, and partly because, for the reasons set out above, further analysis is required as to the nature of the alleged scheme and whether or not there were overpayments made by the plaintiffs or whether the scheme involved secret commissions.  Any requests should await this analysis.

Authorities

CMC-v-Forster and Ors [2018] JRC 078. 

CMC Holdings-v-Forster & Ors [2018] JRC 081. 

CMC Holdings-v-Forster and Others [2017] JRC 190. 

Royal Court Rules 2004. 

CMC & Ors v Forster & Anor [2017] JRC 141. 

CMC Holdings Ltd-v-Forster and Others [2017] JRC 188.