Jersey Unreported Judgments

Companies - application for leave to appeal.

[2020]JCA146

Court of Appeal

30 July 2020

Before     :

J. W. McNeill, QC., sitting as a Single Judge.

 

Advocate N. M. C. Santos-Costa for the Representors.

Advocate D. M. Cadin for the First Respondent.

judgment

mcneill ja:

1.        There is before me, sitting as a single judge of the Court of Appeal, an application at the instance of the Representors (the "Applicants") seeking leave to appeal a judgment of the Royal Court Chernukhin & Anor v Deripaska & Anor [2020] JRC 121 (MacRae, DB) dated 24 June 2020.  The Applicants sought leave to appeal from the Royal Court, but that was refused by the learned Deputy Bailiff in a judgment dated 22 July 2020.  In that judgment the Deputy Bailiff noted the test for an application for leave to appeal as set out in Crociani v Crociani [2014] (1) JLR 426 and indicated that, applying that test to the present case, a grant of leave of appeal would be declined. 

2.        The Applicants presented me with a detailed application for leave to appeal and a skeleton argument together with supporting documents and authorities.  The First Respondent (the "Respondent") opposed the application through a letter from Bedell Cristin dated 21 July 2020, again with supporting papers and authorities; and the Applicants responded. 

3.        The Application and Response were made prior to the issuing of the judgment refusing leave as the time for making an application for leave to appeal was due to expire on 22 July. 

The Issue

4.        Part of the judgment of 24 June 2020 related to an application dated 24 January 2020 by the Applicants in respect of security for costs (the "Security Application").  The judgment of 24 June 2020 and relevant Act of Court refused that application and the Applicants wish to argue that the relevant parts of the Judgment and the Act of Court should be set aside, that security for costs should be granted and that there should be ancillary orders.  

5.        The determination by the Royal Court was an interlocutory decision and therefore requires the leave of the Royal Court or of a single judge of the Court of Appeal, in accordance with Article 13(1)(e) of the Court of Appeal (Jersey) Law 1961.  As indicated, leave has now been refused by the Royal Court. 

The Test

6.        As set out by this court in Crociani v Crociani, at 440-441, the conditions to be satisfied before leave will be granted are:

(a)       that the appeal has a real prospect of success;

(b)       that a question of general principle falls to be decided for the first time; or

(c)       that there is an important question of law upon which further argument and a decision of the Court of Appeal would be to the public advantage. 

7.        As this court also indicated in Crociani, at 441, interference with an exercise of discretion by the Royal Court will only be made if:

(a)       the Royal Court has misdirected itself as to appropriate principles;

(b)       the Royal Court has taken into account irrelevant matters or failed to take into account relevant matters; or

(c)       the decision was plainly wrong. 

8.        As Lord Reed JSC indicated in Foxworth Investments Limited v Henderson [2014] UKSC 41, at paragraphs 62 and 67:

"62. ..... The adverb "plainly" does not refer to the degree of confidence felt by the appellate court that it would not have reached the same conclusion as the trial judge.  It does not matter, with whatever degree of certainty, that the appellate court considers that it would have reached a different conclusion.  What matters is whether the decision under appeal is one that no reasonable judge could have reached."

9.        Whilst dealing there with interference with a finding of fact, the approach of Lord Reed to the concept of something being "plainly wrong" is just as applicable to the discretionary exercise: cf Jaiswal v Jaiswal [2007] JLR 305, at 330-331 (Beloff JA). 

10.      To return to Lord Reed in Foxworth at paragraph 67, a finding is open to interference where the Court of Appeal is satisfied that the decision cannot reasonably be explained or justified. 

The Proposed Grounds of Appeal

11.      Under the first ground of appeal the Applicants wish to argue that the learned Deputy Bailiff fell into error through his characterisation of the Respondent's claim as akin to an enquiry in damages under a cross-undertaking when an injunction has been discharged. 

12.      Under the second ground of appeal it would be argued that the learned Deputy Bailiff erred in law in relying upon dicta in certain English authority and thereby misdirected himself as to applicable principles.  As a result, it would be argued, the Deputy Bailiff failed to take into account relevant matters as a result of which it would have been appropriate to order security in the circumstances.  It was submitted that this was the first occasion on which the Royal Court had considered whether there was a blanket principle that a respondent to interim relief could not be ordered to give security when subsequently seeking damages from the applicant and is, thus, a question of general principle falling to be decided for the first time by the Court of Appeal and, further, an important question of law upon which further argument and a decision of the Court of Appeal would be to public advantage. 

13.      Under the third ground of appeal the Applicants wished to argue that the learned Deputy Bailiff should not have taken into account the findings of another court about evidence given by the First Applicant.  Erroneous findings had been made on issues in dispute in pleadings without full argument having been heard. 

14.      Under the fourth ground of appeal the Applicants wished to take issue with the views of the learned Deputy Bailiff as to the quantum of security which would have been awarded had he not found against the Applicants. 

Background

15.      In his judgment of 24 June 2020 the learned Deputy Bailiff sets out in considerable detail the background to the litigation in respect of which an order for security for costs was sought by the Applicants.  Pared down to its essentials, however, the Applicants had instituted proceedings in Jersey by way of Representation seeking leave of the Court, ex parte, to enforce certain arbitral awards over the shares of a company which had been domiciled in Jersey.  As was indicated by the then Deputy Bailiff at a hearing in June 2019 and reiterated by the learned Deputy Bailiff in his judgment of 24 June 2020, there is a concern that the proceedings should have been brought by way of Order of Justice, the Practice Direction in relation to freezing orders followed, and an undertaking in damages given as well as the usual undertakings in relation to costs: see paragraph 29.  The First Respondent duly satisfied the Arbitral Awards and the Representation proceedings were disposed of by order of the Royal Court on 19 November 2019.  That determination and the hearing which led to it involved certain complexities arising out of the concern of the Viscount as to potential risks to her and her office.  These are not of direct relevance to the present matters.  However, at about that time, and notwithstanding the discharge of the orders made upon the basis of the Representation, the First Respondent claimed to be troubled by what had been said to the Royal Court on 28 June 2019.  Because of those concerns the Bailiff, in the order made on 19 November 2019, ordered that a transcript be made of the hearing on 28 June 2019.  The order also provided that "within 21 days of the provision of the transcript the Respondent shall file full particulars of all alleged breaches of full and frank disclosure on the part of the Representors in relation to the said hearing, together with all evidence in support thereof;" and that "there shall be a directions hearing before the Bailiff on the first available date within 14 days of the said particulars being filed, time estimate of one hour."

16.      Directions were duly agreed, and by 6 January 2020 Particulars of Claim had been filed by the Respondent.  By way of the Particulars of Claim, the Respondent seeks damages whilst accepting that the claims are pleaded as breaches of duty to the Court and not as breaches of duty to him. 

The Issue

17.      The issue before the learned Deputy Bailiff, therefore, was whether, as the Applicants submitted, the Respondent was bringing a new action against them or whether, as the Respondent contended, the then current proceedings were purely consequential upon the Representation in a situation where there ought to have been an undertaking in damages or, if not, whether there had been a wrongful invocation of the court's process which ought to be visited with damages. 

The Decision Below

18.      After extensive citation from the decision of the Court of Appeal in C T Bowring & Co (Insurance) Limited v Corsi and Partners Limited [1994] BCC 713 and a reference to GFN SA and Others v Liquidators of Bancredit Cayman Limited [2009] UKPC 39, the learned Deputy Bailiff stated:

"77.     I have decided that Mr. Deripaska cannot properly be described as a "plaintiff" for the purpose of Royal Court Rule 4/1.  These proceedings arose out of the Representor's Representation and in the Particulars of Claim Mr. Deripaska seeks and only seeks damages arising from the alleged breach of duties owed by the Representors to the Royal Court arising from the Representors' alleged failure to make full and frank disclosure.  I found the judgment of Dillon LJ in C T Bowring v Corsi compelling.  This is a case where there is no separate cause of action for damages; they could only be sought by application in the action in which the injunction was granted.  This is akin to an enquiry in damages under a cross-undertaking when an injunction has been discharged.  There ought to have been a cross-undertaking in damages given in this case and the injunctive orders have in fact been discharged owing to the payment made.  Dillon LJ specifically envisaged this sort of situation where proceedings have been terminated "for any reason" and the enquiry as to damages is brought "at a time when there is no longer any outstanding claim by the plaintiff". 

Discussion

19.      Whilst the learned Deputy Bailiff referred only to a short portion of the decision of the Privy Council in GFN SA and chose to rely on the judgment of Dillon LJ in C T Bowring, I consider it important to consider further passages from GFN SA. 

20.      In GFN SA, although the principal reasoned judgment was given by Lord Scott, with whom the remaining members of the Privy Council agreed in respect of the dismissal of the appeal, certain reservations of the remainder were expressed through the speech of Lord Neuberger at paragraphs 29-34.  They agreed that each of the applications in question constituted an "action, suit, or other legal proceeding" within the meaning of Section 74 of the Companies Law (2004 Revision) of the Cayman Islands and, in any event, that the court had an inherent jurisdiction to order security for costs, as a discretionary exercise to be carried out in a manner according with the settled practice of the court as circumscribed or extended by primary or secondary legislation.  But Lord Neuberger continued:

"31.     ..... I also accept that it is the settled practice of the court not to order security for costs against a defendant in relation to any steps which are reasonably necessary to enable him to resist a claim brought against him.  Additionally, I agree that, at least in general, a discreet order for security will not be made in relation to what is in substance an interlocutory application.  It further seems to me that it must be right, at least as a general rule, that, when deciding whether a particular application is an "action, suit, or other proceeding" or an "action or other proceedings", the court must look at the substance of the application as opposed to its strict form.

32.      In my judgment, viewed in the light of these principles, the applications in the present case were originating applications falling within the expressions I have just quoted.  They brought before the court issues which were not previously before the court, and which would not otherwise have been before the court; and, although brought in the context of a winding up ordered by, and under the ultimate supervision of, the court, these applications were essentially free standing.  The applications arose because of Bancredit Cayman Limited's insolvency and because of a dispute as to whether that company was genuinely indebted to the appellants (as they claimed and the liquidators denied) or to other claimants (as the liquidators claimed and the appellants denied).  The winding up proceedings merely provided the forensic framework in which the applications were made, or the procedural launch pad from which the applications were issued. .....

33.   .....

34.      For my part, I would prefer to leave entirely open questions such as whether and if so when it is possible or appropriate to order security for costs against a defendant who brings a counterclaim or defends by way of set-off, whether and if so when security can be ordered in the context of a committal application, or in connection with an application to set aside a compromise of an action, and whether the decision of the Court of Appeal in C T Bowring & Co (Insurance) Limited v Corsi and Partners Limited [1994] 2 Lloyd's Rep 567 was correct. ......". 

21.      It will therefore be seen that, whilst preferring to reserve judgment on certain wider issues which had been considered in C T Bowring, the Judicial Committee were unanimous in the general principles to be applied, in the need to look at the substance as opposed to the form of the application and whether the part of the process in question was free-standing.  In addition, as far as Lord Scott was concerned, his hesitation in respect of the decision in C T Bowring was in respect of the suggestion that the nature of an application for an enquiry as to damages might prevent the court from entertaining a plaintiff's security for costs application: see paragraph 26. 

22.      The essence of the decision of the Court of Appeal in C T Bowring was that there was a rule of practice that a defendant could not be compelled to give security for costs: see pages 720 and 724-725.  It was recognised, however, that the whole litigation between parties could be appraised to see if the defendant had done something to justify being treated as a plaintiff, for example in making a territorial claim of his own: see page 728.  These passages are among those quoted by the learned Deputy Bailiff. 

23.      The Applicants accept that the ambit for the Court of Appeal to interfere with an exercise of discretion is limited and I now turn to the three criteria set out in Crociani. 

24.      The first is as to whether the Royal Court misdirected itself as to the principles governing the exercise of the discretion.  Plainly, it did not.  The principle, or settled practice, as set in paragraph 31 of GFN SA, is that the court will not order security for costs against a defendant in relation to any steps which are reasonably necessary to enable him to resist a claim brought against him.  These steps may include requesting the court to deal with all issues before the court arising out of the initial claim.  Accordingly the court must appraise the substance of the application in question in order to see whether it brings before the court issues which were not previously before the court, which would not otherwise have been before the court and which can properly be characterised as free-standing: see GFN SA at paragraph 32.  This principle the learned Deputy Bailiff followed and proceeded to apply.  This position, then, takes us to the second criterion. 

25.      In considering whether the Royal Court took into account matters which it ought not to have done or failed to take into account matters which it ought to have done, I turn to paragraph 77 where the learned Deputy Bailiff expressed his decision and reasoning.  In his view, the Particulars of Claim arose out of the Representation and related to an alleged failure to make full and frank disclosure as part of the Representors.  It followed that the present was a case where there was no separate cause of action for damages and the application could be made only in the action in which the injunction was granted. 

26.      The Applicants laid great store in seeking to argue that the learned Deputy Bailiff fell into error in characterising the position as akin to an enquiry in damages under a cross-undertaking when an injunction had been discharged.  That view, however, was expressed by the learned Deputy Bailiff only by way of analogy.  In reaching his view, the learned Deputy Bailiff, as I have said, had carried out the exercise envisaged by the majority in GFN SA.  He had carried out an appraisal of the substance of the Respondent's position, identified that the claims arose arose directly from the actions of the Applicants as Representors, and that such claims could only be made in the action in which the injunction had been granted.  This last point is ineluctable: singular as are the Respondent's claims, claims based on the actions of the other party to a litigation and her or his duty to the court in that litigation manifestly could not be brought in free-standing litigation at the instance of the claimant.  These, therefore, were the critical relevant considerations and they were duly taken into account.  

27.      Finally, it cannot be maintained that the decision was plainly wrong if one adopts the approach of Lord Reed in Foxworth.  The learned Deputy Bailiff has given reasons for his decision.  Those reasons are cogent and specifically related to the approach outlined by Lord Neuberger in GFN SA. 

28.      Turning, therefore, to the test for granting leave, for the reasons which I have just given the appeal does not have any real prospect of success.  Separately, the issues are factual as to whether the circumstances are of the nature to justify an exception to the general principle.  It follows that a question of general principle does not arise in this matter. 

29.      Similarly, there is no question of law on which it would be to the public advantage to have a decision of the Court of Appeal.  Not only does each exception to the general principle turn on its own particular facts, the circumstances here - whether an order for costs should be made in respect of a claim for damages in some way related to an alleged breach of duty to the court - is so singular that the third test is not made out. 

Conclusion

30.      For all these reasons, I refuse the application for leave.  

Authorities

Chernukhin & Anor v Deripaska & Anor [2020] JRC 121

Crociani v Crociani [2014] (1) JLR 426

Court of Appeal (Jersey) Law 1961

Foxworth Investments Limited v Henderson [2014] UKSC 41

Jaiswal v Jaiswal [2007] JLR 305

C T Bowring & Co (Insurance) Limited v Corsi and Partners Limited [1994] BCC 713

GFN SA and Others v Liquidators of Bancredit Cayman Limited [2009] UKPC 39

Companies Law (2004 Revision) of the Cayman Islands