Jersey Unreported Judgments

Companies - an appeal from an order of the Master of 17th January, 2019.

[2019]JRC202

Royal Court

(Samedi)

9 October 2019

Before     :

T. J. Le Cocq, Esq., Deputy Bailiff, and Jurats Crill and Christensen

 

Advocate S. C. Thomas for the Plaintiff.

Advocate S. J. Alexander for the First and Second Defendants

judgment

the deputy bailiff:

1.        This is an appeal from an order of the Master of 17^th January, 2019, CMC and Anor v Foster and Ors [2019] JRC 004A contained in his judgment of that date ("the Master's Judgment").  It is brought by RBC Trust Company (International) Limited ("the Second Defendant") and The Regent Trust Company Limited ("the Third Defendant"). 

2.        The order made by the Master deals with the method of identifying documentation which should be disclosed by the Plaintiffs to the Defendants in this case.  It is not the first time that this issue has come before this Court.  For reasons set out in a judgment of 8^th November, 2017, (CMC Holdings Limited -v- Forster and others [2017] JRC 188), the Master made certain orders with regard to discovery in these proceedings.  Those order were appealed to this Court and the judgment of this Court on that appeal is to be found at CMC v Forster and Ors [2018] JRC 078 ("the Royal Court Judgment"). 

3.        The background in this matter has been referred to at some length in the various judgments of the Court including those referenced above.  It is not therefore necessary to set out full details of the background but the summary of the case set out in Royal Court Judgment is in the following terms:- 

"The nature of the case

10. Whilst it is not necessary to go into the full details of the Plaintiffs' claim and the nature of the answer filed, it is necessary to gain some understanding in order to put the orders for discovery made by the Master in context.

11. In general terms, the nature of the case can be explained by quoting the summary of claims set out in the Plaintiffs' Order of Justice.  It is in the following terms:-

"1.        The Plaintiffs are long-established Kenyan companies.  They import vehicles from overseas vehicle manufacturers and supply them to the East African market.  The Second Plaintiff is a wholly owned subsidiary of the First Plaintiff.

2.         The Plaintiffs seek relief in respect of the Defendants' participation in a secret scheme ("the Scheme") which operated from 1977 to 2011.  Under the Scheme, funds properly due to the Plaintiffs were diverted at the instruction of certain directors of the Plaintiffs, in breach of fiduciary duty and in breach of trust.  The directors responsible included the First Defendant.

3.         Those directors were dishonestly assisted by the Second and Third Defendants who were at all material times fiduciary and corporate services providers in Jersey.  In the alternative, the Second and Third Defendants are vicariously liable for the dishonest assistance rendered by their employees and agents in the directors' breaches of duty. 

4.         The Scheme was funded by secret commissions paid by vehicle manufacturers that supplied vehicles to the Second Plaintiff.  They were paid directly to bank accounts in Jersey operated by entities unconnected with either of the Plaintiffs and without the knowledge or authorisation of the Plaintiffs.  Funds paid into the Scheme were transferred between those entities, invested, and over time substantially distributed to a small group of people, including the First Defendant and other of the Plaintiffs' directors who were privy to the Scheme.

5.         The secret commissions paid into the Scheme and their proceeds were the result of breaches of fiduciary duty and breaches of trust by directors of the Plaintiffs, including the First Defendant.  The Plaintiffs seek orders that the First Defendant account to the Plaintiffs for all sums that were paid into the Scheme as a consequence of his breaches of fiduciary duty and breaches of trust.  The Plaintiffs also seek an order that he account to the Plaintiffs for his profit from the Scheme still in hand.

6.         The Plaintiffs also seek orders for the Second and Third Defendants to account to the Plaintiffs for all sums paid into the Scheme on the ground of their dishonest assistance in these breaches of fiduciary duty and / or breaches of trust, wherein the alternative on the basis that they are vicariously liable for the dishonest assistance provided by their agents and employees."

12.      Accordingly insofar as it related to the Second and Third Defendants, the claim against them is predicated upon there being a scheme, the funding of which was provided by secret commissions paid by suppliers of motor vehicles to the Plaintiffs at the request of directors of the Plaintiffs.  The secret commissions were paid into offshore companies and structures operated, so it is alleged, by the Second and Third Defendants.  It is alleged that the payments were made by the directors of the Plaintiffs in breach of their fiduciary duty and that the Second and Third Defendants dishonestly assisted the directors in the Scheme.  The monies held in the Scheme from the secret commissions were ultimately provided for the personal use of a group of directors of the Plaintiffs." 

4.        On the earlier occasion this Court overturned the decision of the Master and at paragraphs 54 et seq of the Royal Court Judgment said this:-

"54. However, it seems to us that in the main this appeal turns upon one point, namely whether or not the Master, in saying that "what is at the heart of this case is whether or not the alleged Scheme was approved by the Plaintiffs, or whether it was a secret Scheme.  Whilst the Scheme is said to have operated over many years, the key issue is who knew about it and authorised it", was correct.  If that were the determinative issue in the case then we can see justification for the Master limiting discovery in the way that he has done. 

55. Whilst the Scheme as pleaded by the Plaintiffs is not admitted by the Second and Third Defendants, it appears to be common ground that some form of Scheme existed given the assertion to that effect by the First Defendant in his answer.  Is the existence of some form of Scheme, whether in the form as pleaded by the Plaintiffs or accepted by the First Defendant sufficient to limit discovery insofar as it might disclose, absent limitation, documentation relating to the details of that Scheme?  We can see, looking at the picture overall, that the Master could legitimately form the view that he did.  However, we are less confident in holding that that must be the case. 

56. There is no doubt that the statement referred to above identifies one of the central issues to the case.  That does not mean, however, that other issues are not equally important.  Furthermore, to express the central issue in those terms, appears to presuppose that a scheme in the form as pleaded by the Plaintiffs existed.  That is, on the face of the pleadings, not of course a position that is accepted by the Second and Third Defendants. 

57. In our view, with some reluctance, we think that the case against the Second and Third Defendants must, in the light of the non-admittance contained in the pleadings, be proved in all of its elements to the appropriate standard by the Plaintiffs.

...

61. Accordingly, whilst we fully understand and sympathise with the Master's desire to limit what was otherwise a very substantial exercise in discovery, we do not feel able to uphold his order. 

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.

64. We do not fault the Plaintiffs for seeking to limit discovery.  We do not, however, agree that a 10% dip sampling approach meets the justice of the case.  In that sense, and for that reason, we overturn the order of the Master.  That being said, we also note the fact that the limitation was not originally opposed before the Master by the Second and Third Defendants.  This appeal in effect represents a change of position and we think that the costs before the Master in connection with this matter and of this appeal should be costs in the cause."

5.        The matter returned before the Master for further consideration on the basis of the Plaintiffs' application seeking an order that:-

"The Plaintiffs be given leave to undertake a limited search for discoverable documents, limited to a sampling of the documents contained in the storerooms of the Plaintiffs ...".

6.        Following further clarification, it was clear that what the Plaintiffs proposed was in essence an identical order to that which this Court had overturned in the Royal Court Judgment.  They did so on the basis that there had been a change of circumstances occasioned by the advent of new evidence. 

7.        It goes without saying that unless there are highly persuasive reasons such as those anticipated in the Royal Court Judgment at paragraph 63 quoted above, or something that radically alters what might be the appropriate ambit of discovery, then the decision made by this Court in the Royal Court Judgment must remain unaltered. 

8.        This approach appears to have been accepted by the Master and recognised in his letter to the parties of 14^th August, 2018, in which he states:-

"If the [second application] is essentially asking me to reconsider the same order I am concerned that the [Royal Court Judgment] prevents me from doing so, in particular by reference to paragraph 61 and 62... If on the other hand what is sought is a different limitation on what discovery should be carried out, at present I do not understand what the [second application] is asking for ... It is not therefore clear what limitation is sought by the Plaintiffs by [the second application].  I expect this to be set out in any further affidavit ...".

9.        The Master made a further order on the 17^th January, 2019, in effect acceding to the Plaintiffs' application to:-

"... be given leave to undertake a limited search for discoverable documents, limited to a sampling of the documents contained in the storerooms of the Plaintiffs, as described in the affidavit of Sally Patricia Mukabana dated 26^th May 2017."

10.      In his order the Master ordered, at paragraph 1, that:-

"Subject to paragraph 2 of this order the Plaintiffs are not required to carry out any further searches for discoverable documents contained in the storerooms as described in the first affidavit of Sally Mukabana dated 26^th May 2017." 

11.      Paragraph 2 of the Master's order related to the requirement that the third parties provide each other and the Plaintiffs and the Defendants with their discovery verified by affidavit within a specific period. 

12.      It may be seen, therefore, that in essence the Master's order was almost identical to the order that had been appealed to this Court and overturned on the earlier occasion.  We must, accordingly, look to the Master's judgment to ascertain his reasons for taking what might be considered an unusual course. 

The Master's judgment

13.      The Master's judgment is lengthy, running to some 111 paragraphs.  He sets out the background and then lists a number of affidavits, at paragraph 7 of the Master's judgment, which were produced by the Plaintiffs "subsequent to the hearing of the appeal before the Royal Court".  These comprise four affidavits sworn by Advocate Sheedy who acts for the Plaintiffs and, amongst other things, an affidavit sworn by the First Defendant of 23^rd July, 2018. 

14.      In the Master's judgment he characterises the application to limit discovery in paragraph 14 of his judgment in the following terms:-

"Since the Royal Court's judgment there had been a clear change of circumstances, in particular in terms of the first defendant's evidence, which was now available, and which was not available before the Royal Court.  If I accepted the first defendant's evidence, which Advocate Thomas contended I should, there was no reason to believe that there would be anything concerning the alleged scheme in the plaintiffs' warehouses.  According to Advocate Thomas, the first defendant was unmoveable in his conclusion that there was nothing in the warehouses and was able to articulate the reasons why."  

15.      The Master's judgment then sets out the submissions made to him as to why the First Defendant's evidence, on which he had been cross-examined before the Master, should be accepted.  He then went on to characterise the detail given in the second affidavit of Advocate Sheedy (dated 13^th July 2018) as to the detail and process of disclosing documents and the nature of the searches of the storerooms.  We will not set out that part of the Master's judgment which recites in extenso parts of that affidavit. 

16.      The Master, at paragraphs 31 et seq of his judgment characterises submissions before him to the effect that whether any scheme was in breach of duty owed by the Second and Third Defendants was a matter for trial and did not have to be established conclusively from the documents in the warehouses.  The question of dishonesty was a question of inference by reference to normally acceptable standards of honest conduct.  There was nothing, so it was argued before the Master, inherently wrong or inappropriate in presenting a case at trial based on inviting the Court to draw inferences of dishonesty. 

17.      We pause at this point to reflect that we have some difficulty with the thrust of those submissions.  It is true that it is for the Plaintiffs to establish their case and it is equally true that the Court may infer dishonesty and/or determine a breach of duty on the facts as presented before it.  It is equally true, therefore, that the Plaintiffs do not have to establish their case by reliance solely on the documentation that has been disclosed by them or in the proceedings generally. 

18.      However, those arguments do not to our mind dispose of the question of the obligation to make sufficient discovery.  One of the purposes of discovery is so that the Court can be satisfied that it has all of the potentially relevant information before it, whether or not it supports the Plaintiffs' claim,  so that it can make an adjudication on a full appreciation of the evidence.  Documents that may show the form of the scheme, how it operated in practice, and who was aware of it will be relevant to the Court.  It would of course, not be open to a Plaintiff (and we do not for a moment suggest that this is the Plaintiffs' approach in the instant case) to simply say we have decided that we have enough information to prosecute our claims and therefore we are not going to look for anything more.  That would, potentially, be highly disadvantageous to any Defendant who may be denied access to documents that were exculpatory or, at the very least, gave a different complexion as to what may or may not have been known by relevant people from time to time.  As we have said we do not think that this is the Plaintiffs' approach but this seems to us to illustrate the potential flaw in the Plaintiffs' submission as characterised in the Master's judgment on these points. 

19.      At paragraph 35 et seq of the Master's judgment he went on to further reflect some of the arguments put before him by the Plaintiffs and those put forward on behalf of the Second and Third Defendants.  The Master's judgment is in the following terms:-

"35.    In terms of the extent of the searches carried out the affidavit of Advocate Sheedy sworn on 12^th December, 2017, (which was not before the Royal Court) now meant that I was much more informed of the extent of the searches carried out in the warehouses (see in particular the table at paragraph 27), and by way of electronic discovery in addition to the Phase 1 discovery.

36.      Significant resources had been spent on the discovery exercise resulting in over £1.4 million having been spent.  This justified the court taking a pragmatic approach based on the likelihood of what would be discovered in the warehouses.

37.      Advocate Alexander for the second and third defendants firstly contended by reference to paragraph 63 that the Royal Court had ruled that a 10% dip sampling process would not meet the justice of the case.  Yet no different approach had been put forward and therefore the application by the plaintiffs was an abuse of process because it was a rerun of their previous application.  The affidavits of Sally Mukabana were before the court on the previous occasion.  The affidavit of Advocate Sheedy sworn on 12^th December, 2017, could also have been placed before the court.

38.      In relation to the first defendant's evidence this was central to the plaintiffs' application.  Advocate Alexander contended that I should treat the first defendant's evidence with caution because the first defendant had confirmed that he had no responsibility for the warehouses and no knowledge of what documents were in the warehouses.  His awareness therefore of material in the warehouses was only based on how he understood the Scheme was structured by Mr Jack Benzimra. 

39.      In respect of the first defendant's own evidence, Advocate Alexander suggested that the affidavit of the first defendant was wholly unreliable and there were several contradictions:-

(i)        a memo had been found in a warehouse which referred expressly to payments to a Mr Ludin, and therefore the Scheme;

(ii)       the first defendant did not know what arrangements had been put in place with Land Rover or Leyland two of the suppliers who had paid commissions (see the second and third defendants' own records at exhibit KMF3);     

(iii)      he had to clarify his evidence in respect of payments being received from New Holland;

(iv)      He resiled from his position that there was only paperwork in the CEO's office and accepted that there were other documents;

(v)       he did not understand the test of relevance; and

(vi)      he had no understanding about where pre-invoice documentation might be located."

20.      In the Master's judgment, in the paragraphs dealing with his decision, after reference to paragraph 58 of the Royal Court judgment, the Master says this:-

"48.    In relation to this summary, there have been two significant developments material to the plaintiffs' present application.

49.      Firstly, the second and third defendants are now required to make their case clear in respect of monies paid in and out of the entities they administered (see paragraphs 74-76 of my last judgment set out above).  This is because although the second and third defendants put the plaintiffs to proof of monies paid in and out of the Scheme, in their amended answer at paragraphs 42 and 47 the second and third defendants had pleaded that they "were aware of the fact and quantum of all payments into and out of COI Panama COI Liberia".  This requirement on the part of the second and third defendants to clarify how far they now dispute the plaintiffs' figures based on their own records is material to what documents should be looked for in the warehouses.  At present the second and third defendants admit they were aware of the fact and quantum of payments in and out of the entities they administered, but do not admit the amounts pleaded by the plaintiffs.  The second and third defendants also do not admit the allegations as to where monies came from or to whom monies were paid.  In the near future they will have to make their case clear in relation to monies paid into and out of the entities they administered.  I should add in that regard that exhibited to the plaintiff's further affidavit of discovery dated 10th September, 2018, sworn by Katherine Margaret Ferbrache (exhibit KMF3) were examples of documents from the second and third defendants' own discovery showing on their face receipts of 'commissions' from various vehicle manufacturers.  Unless the plaintiffs have miscalculated figures pleaded in their order of justice, in my view the issue of the plaintiffs having to prove payment of monies to and from Jersey is unlikely to be at the heart of this dispute and therefore does not justify further searches in the warehouses.

50.      Secondly, there is new evidence filed, in particular that of the first defendant.  In relation to the evidence of the first defendant, this was not available either for the hearing in 2017 before me or before the Royal Court.  This evidence is highly material both in relation to commissions being generated by over invoicing and the Scheme being a secret and in breach of duty.

51.      The first defendant's affidavit sets out his evidence as to which suppliers paid commissions to accounts in Jersey, how commissions were paid, who arranged for the payment of commissions, to what degree these were calculated, the extent of any relationship between the suppliers invoices and commissions paid and that it would be impossible to reconcile suppliers invoices with commissions paid to Jersey.  The affidavit further explains that:

(i) the practice of suppliers paying commission to Jersey was not documented in Kenya;

(ii) records about the payments by suppliers were never kept;

(iii) all the documents about the Scheme were kept in the CEO's office;

(iv) he was told by Mr Jack Benzimra never to mention payments to anyone;

(v) payments to and from accounts in Jersey were off the books; and

(vi) documents about payments out of the Scheme were on a one on one basis between the Chief Executive and any recipient.

52.      In respect of his oral evidence, the first defendant at the outset of his cross-examination was candid that he was unaware of what was in the warehouses or how many documents were located there.  However, he was clear why documents about the Scheme would not be in the warehouses; he was quite confident and remained so that there were no relevant documents in the warehouses and to look through them was 'a waste of time'.  In my view, the cross-examination did not lead the first defendant to amend or alter his conclusion in relation to documents of conversations with suppliers or with recipients of monies based in Kenya under the Scheme.  The fact that there were isolated documents on personnel files (not kept in warehouses) did not affect his evidence."

21.      The First Defendant had been cross-examined on his affidavit and the Master in effect viewed his evidence in his affidavit as unshaken by that cross-examination.  He recorded the fact however that the First Defendant had admitted in cross-examination that he was unaware of what was in the warehouses or how many documents were located there. 

22.      In characterising his view of the evidence the Master says, at paragraph 60 of the Master's judgment:-

"In respect of his affidavit I also agree with Advocate Thomas that it is appropriate to evaluate the first defendant's evidence in light of the fact that the affidavit might not be said to be in the first defendant's interests because the plaintiffs are pursuing the first defendant. This adds more rather than less weight to the first defendant's evidence."

23.      At paragraph 63 of the Master's judgment he concludes, on the evidential picture:-

"63.    The evidential picture that has now emerged is as follows:-

(i) The relationship between the plaintiffs and the suppliers apart from two emails ending the Scheme was not documented;

(ii) The limited documentation about payments out of the scheme apart from the Ludin memo came from files at head office which have been reviewed;

(iii) All the invoices ordering vehicles and related shipping documents have been disclosed - these documents do not show any commission arrangements on their face;

(iv) There is unlikely to be an evidential issue about what sums were paid into the companies administered by the second and third defendants and what sums were paid out."

24.      And, at paragraph 65, he goes on to say:-

"65.    I therefore agree with Advocate Thomas that whether or not directors acted in breach of duty is now a matter for witness evidence and cross-examination at trial.  The most likely sources of documentary evidence about any knowledge of the Scheme have been looked for in a manner that I regard as reasonable, namely disclosure of board minutes, personnel files and available email accounts.  The ambit of the plaintiffs' approach also puts the remarks of the first defendant that reviewing further documents in the warehouses would be a waste of time in a wider context.  The obvious sources for documentation showing knowledge of the Scheme have been reviewed and disclosed.  While it is a matter for trial, I also agree with Advocate Thomas that there is nothing inappropriate in inviting the trial court to draw inferences that the directors did not know of the Scheme because the obvious sources of documents make no reference to it."

25.      Lastly, at paragraph 76 the Master says:-

"76.    I appreciate my conclusion means that in large part I have confirmed the order I previously made.  However, I have ordered a further affidavit to be filed.  In addition, when the matter was before the Royal Court the full extent of the exercise carried out in respect of Phase 1 discovery electronic discovery and the review of the warehouses was not addressed in the evidence then filed.  While perhaps some of the evidence could have been provided, the full picture now before me addresses the concerns raised previously before the Royal Court.  The Royal Court also did not have the benefit of the affidavit of the first defendant tested on cross-examination; the pleadings of the second and third defendants are also required to be modified as noted above.  These differences in my view permit me to reach my present conclusions."

Submissions before us

26.      The Second and Third Defendants' case in this appeal involved amongst other things a full attack on the credibility of the First Defendant's affidavit which, as can be seen from the above, was highly significant in the Master's decision.  The background to the preparation of the affidavit, so the Second and Third Defendants contend, was not known to the Master before the affidavit was put before him nor was it further explained by counsel in submissions to him. 

27.      The background came to be better known by a further affidavit (with exhibits) sworn by Advocate Sheedy on the 1^st March 2019. 

28.      The exhibits and the affidavit disclose that after two unsuccessful attempts in May and September 2017 to solicit the First Defendant's assistance in locating documents the First Defendant ceased to be represented by Jersey legal advisers by reason of unpaid fees.  He is, so it is understood, currently unrepresented.  On the 17^th January, 2018, the First Defendant wrote to persons involved in the ownership of the Plaintiffs confirming that he was unrepresented, was 'pushing 84' and was unable to meet legal fees.  There then followed a redacted segment of the letter finishing with the words 'Your thoughts on this request would be appreciated'. 

29.      Because of the redaction the nature of the request is not revealed. 

30.      There then followed a series of without prejudice communications between Advocate Sheedy and the First Defendant the contents of which have been redacted on the basis of without prejudice privilege.  During the course of a subsequent meeting between the First Defendant, Advocates Thomas and Sheedy and Sally Mukabana (of the Plaintiffs) information was obtained from the First Defendant on matters pertaining to his involvement with the Plaintiffs and details of the alleged scheme.  The meeting apparently lasted for some 4½ hours. 

31.      On the 13^th April, 2018, Advocate Sheedy wrote to the First Defendant in the following terms:-

"Can I remind you that you have agreed that the contents of our communications and conversations are protected by 'without prejudice' privilege and must not be revealed to anyone, including Mourant Ozannes, even if they are very insistent."

32.      The First Defendant's response to Advocate Sheedy on the 14^th April, 2018, confirmed that:-

"It is certainly not in my interest to jeopardize, in anyway, the recent progress I felt we made in moving this case forward.  The document we jointly signed at the meeting is fully understood and will honour my set obligations therein."

33.      On the 17^th April, 2018, Advocate Sheedy wrote to the First Defendant saying:-

"Tell Mourant Ozannes you are not at liberty to discuss our meeting."

34.      The First Defendant responded to Advocate Sheedy on the 24^th April stating:-

"I wrote last week requesting for a telephone conversation to fabricate an answer to RBC's lawyers on their inquiry as regards my meeting with CMC..."

35.      Advocate Sheedy wrote back to the First Defendant:-

"I note that in your email you refer to 'fabricating' a response to RBC.  No doubt this was a light hearted comment written in jest and we have taken it in that vein.  Nevertheless I should make it clear that we would not encourage you to send any communication to RBC which is anything less than the truth."

36.      There are other communications between the First Defendant and Advocate Sheedy.  On the 9^th May, 2018, the First Defendant confirms:-

"I was hoping by this week I will have heard from yourself as a result of our meeting almost a month ago.  As you should imagine, I am presently totally exposed and at your mercy."

37.      There was subsequent communication which we do not think it necessary to detail.  Suffice to say that it does appear that the Plaintiffs' legal advisers had a significant hand in the preparation of the First Defendant's affidavit in as much as it was presented by the First Defendant in draft on the 14^th June, 2018, and Advocate Sheedy was invited to 'have a look and advise if in general order'.  Advocate Sheedy raised a number of queries.  Later that month Advocates Thomas and Sheedy met with the First Defendant.  The meeting was, so it appears from the record firstly to record Mr Forster's answers to questions arising from the contents of his draft affidavit in the form of a proof of evidence and, secondly, in good faith to explore a potential settlement of the Jersey proceedings as between the parties to the meeting. 

38.      Following that meeting on the 29^th June, Advocate Sheedy sent a draft affidavit prepared by Baker & Partners and asked the First Defendant:-

"Can you please review the attached draft affidavit?  The focus of this affidavit concerns the documentation of the scheme in Kenya."

39.      The position, therefore, appears to be, so the Second and Third Defendants contend, that the First Defendant's affidavit was the result of substantial input by Baker & Partners, the Plaintiff's legal adviser, derived in part during the course of the meetings with the First Defendant at a time when the First Defendant, who was in his own terms at the Plaintiffs' mercy, discussing the possibility of a settlement.  

40.      This, so the Second and Third Defendants submit, undermines the credibility of the First Defendant's affidavit and would clearly have given the Master significant concern in relying upon it.  After the First Defendant had been cross-examined he appears to have chased the Plaintiffs' legal advisers for further progress and complained that they had gone silent.  In an email of the 6^th December, 2018, Advocate Sheedy wrote to him in the following terms:-

"Given that RBC are very keen to suggest that we have in some way "rewarded" you for giving evidence, we are keen for the Court to reach a conclusion about what is or is not in the CMC warehouses before we continue our without prejudice discussions with you.  We don't want to do anything which might be taken as undermining your evidence."

41.      This paragraph illustrates to us that the Plaintiffs' legal advisers recognised that the credibility of the First Defendant's affidavit was potentially undermined should it be realised that there had been discussions between them.  It does appear from the documentation that we have reviewed that whatever was intended by the Plaintiffs' legal advisers, the First Defendant drew a connection between his cooperation in providing information relating to the discovery issues and the prospects of achieving a settlement with the Plaintiffs. 

42.      The Master did not during the course of the hearing permit cross-examination of the First Defendant on the manner in which the affidavit was procured.  As the Second and Third Defendants indicate,  the fact that the First Defendant had not been to the warehouses and was unaware of what documentation was stored there was wholly absent from his affidavit which, but for the Second and Third Defendants' application to cross-examine, would have been a matter wholly unknown to the Master. 

43.      It is accordingly the Second and Third Defendants' case that the First Defendant's affidavit is unreliable.  They also point to inconsistencies and inaccuracies in it.  These are summarised in the Second and Third Defendants' skeleton argument:-

(a)       The First Defendant's affidavit refers to documents from a subset of the manufacturers alleged to have been involved in the Scheme and does not refer to other manufacturers;

(b)       The First Defendant expressly admits he does not know where documents relating to the alleged arrangement with Land Rover and Leyland might be in relation to the Scheme.  These are important contributors.

(c)       The First Defendant's affidavit identifies email communication purportedly sent by him to Nissho Iwai and/or Land Rover terminating the over-invoicing arrangements which have not been disclosed by the Plaintiffs or the First Defendants.

(d)       The First Defendant's statements relating to what documents might exist in connection with 'new commissions' are contradicted by claims in the Order of Justice.

(e)       To the best of the First Defendant's recollection all of the documents that were in Kenya which were relevant to the Scheme were left in a thin file in the CEO's office.  This was false.

(f)        The First Defendant was also wrong when he suggested that the Scheme was not referred to in anyone else's personnel records.

44.      The extracts put before us in connection with the cross-examination of the First Defendant indicate that he had limited knowledge of what documentation was kept in what files. 

45.      In summary, the Second and Third Defendants contend that little, if any, weight should be placed on the affidavit of the First Defendant as he clearly simply did not know what was and what might have been in the warehouse nor elsewhere.  He was aware of documents that he created and he possessed but not of documents that might have existed elsewhere.  He is, so is argued by the Second and Third Defendants, in no better position to say what might be in the warehouses than are the Plaintiffs themselves. 

46.      The Second and Third Defendants also argue that a number of documents have been disclosed within the proceedings by the Plaintiffs which include documents found amongst the warehouse documents. 

47.      We do not think it necessary for the purposes of our judgment to go into the detail of what has been found by the discovery exercise thus far.  A single example will assist.  An undated memorandum sent by one F O Ludin to Jack Benzimra (Third Party Cited) makes express reference to:-

(a)       discussions that took place between Mr Ludin and Mr Benzimra about 'the need to improve the offshore remunerations of our directors and expatriate staff';

(b)       the restrictions of the 'exchange control regulations' which impact upon remittance that expatriate staff can make;

(c)       the fact that 'money is paid to Mr Lay and myself in the UK';

(d)       an invitation by Mr Ludin to 'seriously consider adequately compensating us for the drastic drop in our earning power..... by a realistic adjustment in our offshore payments retrospectively from January 1985'.

(e)       the statement that 'you might like to know that the lowest paid expatriate in Leyland Albion in terms of offshore benefits receives more than £10,000 per annum and I can assure you that, on average, an expatriate will not these days consider coming to Tanzania unless he is offered a lot more than that'; and

(f)        the suggestion that 'directors' offshore remunerations are on an appropriately higher level than the expatriates' to compensate them for the responsibilities of their office'.

48.      That memorandum was to be found amongst the warehouse documents. 

49.      It is not apparent, so the Second and Third Defendants also argue, why the Master considered that the requirement that they plead their case as to the payments in and out constituted a significant development which touched upon the merits of the second application. 

50.      We do not set out extensively all of the submissions made by the Second and Third Defendants but we have taken them into account in reaching our determination in this matter. 

51.      We keep in mind, of course, Royal Court Practice Direction RC17/07 which, at paragraph 10, provides:-

"In giving discovery, a party is required to make a reasonable search for documents.  What is meant by reasonable is determined having regard to:-

(a)       the overriding objectives;

(b)       the number of documents involved;

(c)       the nature and complexity of the proceedings;

(d)       the ease of retrieval of any particular document;

(e)       the significance of any documents which might be located during the search;

(f)        the likely expense of carrying out any search."

52.      The Practice Direction goes on at paragraph 11 to say:-

"The factors set out in paragraph 10 will also be taken into account in deciding whether or not to limit discovery."

53.      The Plaintiffs point out that approximately £1.4 million has already been expended in these proceedings and that in seeking, as the Second and Third Defendants do, general discovery this will occasion a substantial delay when there are elderly parties involved in the proceedings. 

54.      The Plaintiffs question what more might be achieved by any further steps relating to discovery and point out that we should pay a high regard to the Master's judgment who is, as the Plaintiffs rightly say, well placed to understand the case and the issues. 

55.      The Plaintiffs remind us that the Royal Court Judgment did not think that limiting discovery in this case was inappropriate and indeed suggested to the contrary.  The Court had not dictated how the matter should proceed and therefore the Master's approach was entirely appropriate.  

56.      The Master had particular regard, so the Plaintiffs argue, to Advocate Sheedy's affidavit which had better informed him in connection with the nature of the searches carried out.  Indeed as a result of all that has been submitted to us we are now ourselves better informed. 

57.      We were referred to Advocate Sheedy's second affidavit of discovery (dated the 12^th December, 2017).  In essence the methodology applied as set out in that affidavit is as follows:-

(a)       The Plaintiffs commenced their search for discoverable documents following receipt of the Defendants' answers in October 2016.  We immediately interject here that it is surprising to us that a consideration and search for discoverable documents only started after receipt of the answer.  For a case of this nature it might have been anticipated that the search would have commenced rather earlier.

(b)       Mr Sheedy visited Nairobi in November 2016 and identified a number of categories of discoverable documents but also noted that the Plaintiffs had a 'very substantial historic archive of hard copy material the contents of which could not, at that stage, clearly be discounted as irrelevant'.

(c)       Over the ensuing months extensive searches were conducted at the Plaintiffs' premises which revealed some eight warehouses described in the affidavits referred to in the Master's judgment and indeed in the Royal Court Judgment.

(d)       It was determined that it would be impossible to remove the entirety of the hard copy archive and because of the requirement for expertise in dealing with large volumes of documentation it was determined that a team of UK lawyers with suitable experience would be engaged to work in Nairobi.

(e)       The Plaintiffs' legal advisers devised a process and a group of trained and instructed individuals went through the documentation to determine whether they were 'responsive'.  Anything that was responsive was taken out for review and discovery.  Of the remaining documents, those which were not responsive, there then was a 10% dip sampling process which, if it disclosed that a document that had hitherto thought to be non-responsive was in fact responsive then other documents in close proximity to it would also be subject to scrutiny.

58.      We were also taken through the nature of the documentation that was deemed to be responsive and that which was deemed not to be responsive. 

59.      As we understand the process of discovery was divided into Phase 1 and 2.  The first phase dealt with documentation outside of the warehouses which was all considered for discovery purposes and disclosed where appropriate.  The warehouses were dealt with in the way set out above but the dip sampling methodology was only adopted after all of the documents in room 1 zone 2, room 7 and room 8 were reviewed in their entirety.  We were informed that because of the volume of the documents in the other rooms dip sampling was necessary.  It was therefore put to us that what was subject to dip sampling was 10% of the 'run' and not the entirety of the documents.  This, it was urged upon us, should mean that few, if any at all, documents that were relevant to the case would have been omitted from the discovery process. 

60.      With regard to the evidence of the First Defendant it was submitted to us that the Master was aware of the arguments that the First Defendant had an ulterior motive to provide the evidence that he did and we were specifically referred, amongst other documents, to a note of the meeting with the First Defendant of the 18^th June, 2018, which identified that there were two sequential meetings.  One was to deal with matters arising out of the draft of the First Defendant's affidavit and the second was to proceed on a without prejudice basis, as we have indicated above, to explore a potential settlement.  We were specifically referred to the penultimate line of the note which had been countersigned by the First Defendant and Advocates Sheedy and Thomas to the effect that:-

"The parties acknowledged that a settlement of the Jersey proceedings is in no way conditional upon the evidence that Mr Forster may give in the first meeting."

61.      Of the memo from Mr Ludin, the Plaintiffs submit that this shows the effectiveness of the dip sampling method but asks what the likelihood is of a 'stash of memos' being found that need to be discovered. 

62.      It was pointed out to us that the Master had assessed the evidence of the First Defendant in cross-examination and that we should therefore be slow to overturn the findings of the Master in that regard. 

63.      To that end we note that the cross-examination took place by video link which, whilst almost certainly necessary in the circumstances, is not always the best way of hearing live evidence which might be highly contentious.  Secondly, the Master did not have before him the full detail that we have before us of the exchanges between the Plaintiffs' legal advisers and the First Defendant prior to the evidence being given.  Thirdly, the Master had for understandable reasons limited the scope of the cross-examination of the First Defendant.  This in effect had prevented the First Defendant from having the veracity of his affidavit explored by reference to its drafting and motivation. 

64.      As to the argument that the Ludin memorandum is evidence of the 10% dip sampling effectiveness, we are not sure that we can with confidence take it that way.  The fact is that if dip sampling 10% of the remaining documentation disclosed the Ludin memo which, prima facie, may be of some significance, then all that illustrates as far as we can determine is that it is possible that some documentation of relevance exists in the documents not submitted to the full discovery exercise.  A further document or many documents might be disclosed if the sampling extended beyond 10%.  We do not, of course, mean to suggest that such a point is determinative of the matter before us, but what it illustrates is that there may be documents of relevance in the body of documentation generally not subject to the full discovery exercise. 

65.      In conclusion, essentially the Master made an order which was effectively in the same terms as the order overturned in the Royal Courts' Judgment.  The reasons for overturning that order remain the same as set out in the Royal Courts' Judgment unless there is a material change in circumstances along the lines foreshadowed in the Royal Courts' Judgment or some other development that is unforeseen.  The Master placed very substantial reliance on additional affidavit evidence provided to him and, in particular, the evidence of the First Defendant both in the First Defendant's affidavit and in cross-examination. 

66.      Had the Master had before him the full details of the genesis of the First Defendant's affidavit we suspect that he would not have been as confident in the evidence of the First Defendant as he was in this regard.  We do not have full confidence in that evidence ourselves essentially because:-

(i)        On its surface it is incomplete - for example it does not refer to the basis of the First Defendant's understanding of how the filing in connection with what is described as the Scheme was carried out;

(ii)       The First Defendant avowedly has no direct knowledge of the warehouses, what they contained or might contain, had never visited them, and had never been informed or notified of their contents;

(iii)      The First Defendant could provide no clear, or indeed any real, explanation as to how the Ludin memo - which appears to refer to something very similar to the alleged Scheme - could be in the warehouses which, on the First Defendant's affidavit should have contained no such documents;

(iv)      The affidavit was clearly prepared to some measure at least in conjunction with the Plaintiffs' legal advisers.

(v)       The suggestion that the affidavit was not necessarily in the First Defendant's interests is difficult to justify against the background of what appears to be settlement negotiations between the Plaintiffs and the First Defendant.

(vi)      There was the possibility at least that the First Defendant's affidavit was tainted as a result of a conflict between his desire to achieve a settlement because of the pressure that he was under both financial and otherwise and his knowledge of what the Plaintiffs were seeking to establish through the affidavit.

(vii)     Any such conflict could not be explored, even had the material been available to explore it because of the restrictions placed on the ambit of cross-examination.

67.      In making this assessment we accept that the Plaintiffs and their legal advisers would have been confronted by a difficult position in that the First Defendant was no longer legally represented and therefore was not professionally helped in preparing an affidavit.  We fully understand that as a result the Plaintiffs' legal advisers concluded that it would be helpful to the First Defendant if they were to involve themselves in the preparation of an affidavit to a greater extent that might otherwise have been the case.  Unfortunately, against a back drop of settlement negotiations with a man who was clearly under considerable pressure, we cannot be satisfied that the end product was either complete or reliable.  To the extent that it was unclear, that involvement should have been clarified. 

68.      In summary on this aspect, however, we do not think that the First Defendant's affidavit was sufficiently reliable to be viewed as a material change in the circumstances between the Royal Court Judgment and the hearing before the Master.  Similarly, it is not clear to us why the Master viewed the provision of further pleadings by the Second and Third Defendants as a relevant change of circumstances.  The same points to a very large extent remain in issue that were referred to in the Royal Court Judgment. 

69.      We do not doubt Advocate Thomas' assertion that the Plaintiffs' team have undertaken an 'intelligent approach' to dip sampling. 

70.      However, we are also not satisfied that the Master was right in determining what the First Defendant meant where he wrote in his affidavit that the warehouse stores would not contain any 'directly relevant' documents.  We think that the First Defendant gave too limited a meaning to that expression which again undermined the force of his affidavit. 

71.      The existence of the Ludin memo to us illustrates that potentially relevant material is available within the un-reviewed documentation and our concern with regard to the 10% dip sampling method remains as set out in the Royal Courts' Judgment.  In short we do not think that there was a material change in circumstances. 

72.      Accordingly we overturn the order and judgment of the Master in this regard. 

73.      That leaves us with the standard position with regard to discovery but also with the conviction that this is a matter which should be amenable to some limit placed on discovery. 

74.      We must, of course, ensure a fair trial and that justice is done between the parties.  That does not, however, mean that there should be no limitation placed on disclosure, rather there is a balance to be struck.  All we are saying, as we did in the Royal Court Judgment, is that a 10% dip sampling method does not in our view strike that balance adequately. 

75.      Once again we are not urged to adopt any different approach and we are given in the nature of the appeal before us a binary choice between upholding the Master's judgment or, as we have done, overturning it. 

76.      We hesitate to send the matter back to the Master not because we in any sense in the light of the indications that we have given in this judgment, doubt his abilities to make appropriate orders but because it seems inevitable, as the last two appeals have demonstrated, that any order made limiting discovery will be the subject of a challenge before this court. 

77.      In the circumstances unless the parties agree that a further application with regard to discovery should be dealt with before the Master, we propose that the issue of discovery and its ambit should be dealt with by this court.  At the moment it seems to us that the sampling method may be the only way of appropriately limiting discovery but in our view it would need to be higher than the 10% dip sampling method. 

78.      We will, however, leave the question of further discovery to be made before us by summons in the normal way.  Should the Plaintiffs apply to limit discovery we would expect the Second and Third Defendants to make constructive proposals with regard to the limitation of discovery if that is at all feasible. 

Costs

79.      As we have overturned the decision of the Master we also overturn the order that he made for costs and order that costs are in the cause. 

Authorities

CMC and Anor v Foster and Ors [2019] JRC 004A

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

CMC v Forster and Ors [2018] JRC 078