Before : |
R. J. MacRae, Esq., Deputy Bailiff, sitting alone. |
IN THE MATTER OF THE REPRESENTATION OF NASSER IBRAHIM ABDALLAH
AND IN THE MATTER OF GREYHOUND ELECTROMECHANICAL LIMITED ("THE COMPANY")
AND IN THE MATTER OF ARTICLE 155 OF THE COMPANIES (JERSEY) LAW 1991
Advocate S. C. Thomas for the Representor.
Advocate S. A. Hurry for Mr Mirza.
judgment
the deputy bailiff:
1. I sat on 15th February 2022 in order to consider whether or not the Representor's ("Mr Abdullah") application that Mr Mirza pay the costs of the representation be listed for determination now, or at the end of the winding up of the Company.
2. The background of this matter is set out in the Court's judgment dated 5th October 2021 Representation of Abdallah [2021] JRC 249 ("the October judgment") where the Court ordered that the Company be wound up on the just and equitable basis and a liquidator be appointed.
3. In respect of orders ancillary to the relief granted on that date, further argument was heard on 17th December 2021 and the consequential orders were, where necessary, addressed in the judgment dated 24th December 2021 Representation of Abdallah [2021] JRC 325 ("the December judgment").
4. Paragraph 15 of that judgment set out the principles relevant to the Court's discretion to order costs against a non-party and, at paragraphs 16 to 20, the Court considered the competing arguments as to whether or not this may be a case to make such an order against Mr Mirza. At paragraph 20 of the Court's judgment, I found that Mr Mirza should be convened to the proceedings for directions only in the first instance for the Court to determine whether or not it was appropriate to deal with this application now or at the end of the liquidation process. The Court concluded:
"It is only at the end of the process of liquidation that the Court will know whether or not the Joint Liquidators have been able to identify and recover assets to the benefit of the Company and its shareholders and what opinion, having regard to the contents of any report that they produce, they have formed about the conduct of Mr Mirza up to and subsequent to the Transaction. My provisional view is that these considerations may be relevant to the incidence of costs although I have not yet heard argument from Mr Mirza or full argument from counsel for the Representor on that point."
5. Both parties have agreed in their written submissions that the Court correctly identified the relevant principles pursuant to which the Court may order costs against a non-party in the December judgment. Such an order is exceptional and not a run of the mill order for the Court to consider, let alone make.
6. Mr Abdallah argues that the Court is in a position to determine this issue now and does not need to await the outcome of the liquidation in order to assess whether Mr Mirza procured the Company's defence to these proceedings in his own interests rather than those of the Company. In Leeds -v- Admatch [2014] JRC 167, the Royal Court stated, following a previous judgment of the Court of Appeal, that in exercising its discretion to make a third party costs order against a director "the Court should determine what lay behind his or her involvement". It is argued so that the "involvement" is in the proceedings in respect of which costs are sought, not the underlying events giving rise to those proceedings.
7. It is said on behalf of Mr Abdallah that following Leeds -v- Admatch "the real issue is whether [Mr Mirza] has promoted the defence of these proceedings for his own benefit" rather than in the interests of the Company. It is said that the Court may determine this now by reference to the material filed in these proceedings and by hearing arguments from counsel, and that it is not necessary to have the liquidators final report, if any, to hand or to know what findings the liquidator made and what claims, if any, they wish to pursue. Mr Abdallah also points to paragraph 21(v) of the judgment in Leeds -v- Admatch where there is reference to the question of costs; "Ordinarily, a non-party will not be made liable for costs if those costs would in any event have been incurred even without the non-party's involvement in the proceedings." In this case it is said (and on any view is correct) that substantial costs were occasioned by reason of Mr Mirza's unfounded allegations that Mr Abdallah was aware of the Transaction in 2013 and given further information about it in 2015 and at a meeting in Doha in 2016. We rejected Mr Mirza's evidence in relation to the meeting in Doha which we described as a "charade" (paragraph 92 of the October judgment), found Mr Mirza to be an "evasive" witness (paragraph 76 of the October judgment) and were unimpressed with many aspects of his evidence.
8. The need for oral evidence was solely a consequence of the assertions made by Mr Mirza as to Mr Abdallah's knowledge and prolonged the hearing substantially. Mr Abdallah says that two hearings in total lasted two and a half days and should and would have been in fact compressed into a single one day hearing had the Company, via Mr Mirza, merely contested the representation on the grounds that the relief sought was disproportionate having regard to evidence as to the Company's assets at the date of the Transaction.
9. Mr Abdallah says that if the Company's concerns had been limited to the propriety of the Transaction having regard to the financial position of the Company at the time, then the Court could have resolved such issues in a much narrower compass and it cannot have been in the Company's interests to pursue the line of defence advocated by Mr Mirza, the sole director at the relevant time.
10. Mr Mirza says that this is not an exceptional case where a costs order against a non-party is warranted (this is a matter for the substantive determination of this application not a directions hearing) and that it would be inappropriate to make a costs order against him in circumstances where the Court has already determined that the Company is entitled to have its costs of resisting the representation as an expense of the winding up in its most recent judgment - see paragraph 19 of the December judgment. Mr Mirza says that it is not possible for Mr Abdallah to succeed in showing that he procured the defence of the representation by the Company for his own benefit rather than in the Company's best interests and that there had been no express finding by the Court to the effect that Mr Mirza had caused the Company to defend the proceedings in order to prevent a proper investigation of his own conduct.
11. It is argued that it is not appropriate for Mr Abdallah to ask the Court to determine these issues now when the Court had not made findings to this effect in the representation proceedings and such matters were still being investigated in the course of the liquidation/winding up of the Company. Accordingly, it was submitted that any application for costs against Mr Mirza should be postponed until conclusion of the winding up of the Company. At that time, the Court will know the views of the liquidator; which claims if any will be bought against whom and what might be recovered; will have an indication as to the location and quantum of assets which might be recovered, and will know to what extent the views of other shareholders have been established.
12. I have not found this an easy decision. However, this is an application made by Mr Abdallah and the absence of the findings of the liquidator will, if likely to prejudice any party, only prejudice him in his application as the Court will proceed on the footing that the financial position of the Company was as described in the valuation evidence summarised at paragraph 77 to 86 of the December judgment. It was accepted by Mr Mirza's advocate that in any event findings made by the liquidator would not be binding on the parties or the Court. Generally, costs applications should be resolved, if possible, swiftly and accordingly I agree that this matter should be determined now and order that Mr Abdallah must file a skeleton argument within four weeks of today; Mr Mirza respond within two weeks of Mr Abdallah's skeleton being filed and exchanged and that this matter be listed on the first open date after eight weeks, with a time estimate of one day. If Mr Mirza wishes to file further affidavit or other evidence, then he may make a written application to me, copied to Mr Abdallah, if the matter cannot be resolved by consent between the parties.
13. When the matter returns, I shall be grateful for the assistance of the parties in producing further authorities on the circumstances in which costs may be ordered against a non-party, particularly a director of the company. I note in particular the authorities referred to at paragraph 36 (Taylor -v- Pace Developments [1991] BCC 406) and paragraph 37 (Metalloy Supplies Limited -v- MA (UK) Limited [1997] 1 All ER 418) of Leeds -v- Admatch. It appears from those authorities that the Court's discretion to make a costs order against a non-party director may not be as restricted as suggested by paragraph 22 of the decision in Leeds -v- Admatch and may extend to circumstances where it has not been proved that the director was promoting litigation for his own financial benefit, but is liable in costs as the Company's defence was "not bona fide" or was advanced in bad faith. The Court will wish to understand whether it is possible or appropriate to visit a costs order on a non-party director in circumstances where the applicant for the costs order is unable to show that the director was defending the proceedings for his own benefit but, nonetheless, his conduct had the effect of substantially lengthening the proceedings by advancing arguments and matters of fact which were found to be without merit and substantially increased the costs of the hearing.
Authorities
Companies (Jersey) Law 1991.
Representation of Abdallah [2021] JRC 249.
Representation of Abdallah [2021] JRC 325.
Leeds -v- Admatch [2014] JRC 167.
Taylor -v- Pace Developments [1991] BCC 406.
Metalloy Supplies Limited -v- MA (UK) Limited [1997] 1 All ER 418.