Jersey Unreported Judgments

Discovery, Costs and other applications

[2022]JRC253

Royal Court

(Samedi)

16 November 2022

Before     :

Advocate Matthew John Thompson, Master of the Royal Court.

 

Advocate R. O. B. Gardner for the Plaintiff.

Advocate S. A. Hurry for the First Defendant.

Advocate J. J. McCormick for the Second to Fourth Defendants.

CONTENTS

		Paras
1.	Introduction	1-2
2.	Background	3-12
3.	An application to delay specific discovery	13-26
4.	The second to fourth defendant's application for specific discovery.	27-33
5.	Costs.	34-36

judgment

the MASTER:

Introduction

1.        This judgment contains my reasons in respect of various applications that came before me on 7^th November 2022 concerning requests for information and discovery.  This judgment also contains my reasons in respect of the costs of these applications and other applications that had been resolved apart from questions of costs.

2.        In summary the applications I had to consider were as follows: -

(i)        Applications by the first defendant and the second to fourth defendants for the third tranche of security for costs to be increased; the amount was agreed by the time of the hearing and so I only had to deal with the time to make payment and the costs of this application;

(ii)       Applications for requests for information made by the first defendant;

(iii)      An application by the first defendant to vary the timetable by which it had to bring an application for specific discovery;

(iv)      An application for specific discovery brought by the second to fourth defendants; and

(v)       Costs.

Background

3.        I am familiar with this matter having previously issued judgments on 6^th July 2020 Alpen Partners Limited v Al-Amiri and Ors [2020] JRC 132 and on 19^th October 2021 Alpen Partners Limited v Al-Amir [2021] JRC 254.  In the latter judgment I set out the background to this matter at paragraphs 4 to 10 which I adopt for this judgment.

4.        By the time matters came before me for determination, the nature of the plaintiff's claims had changed because all aspects of the claims originally made by the plaintiff in relation to a property known as the Tring Property had been withdrawn completely.  This was reflected in agreed amendments made to the order of justice contained in the plaintiff's re-amended order of justice dated 29^th July 2022.  The claims that remain concern one property only, known as the Gardeners property.

5.        The loss and damage claimed is that as a result of alleged breaches of duty by the directors the Gardeners Property was acquired at a price significantly in excess of its true market value.  The plaintiff therefore claims as compensation the difference between the true market value of the price of Gardeners Property and the price paid by the Fund or alternatively, the purchase price of £6million (less the sale price achieved by the Fund) on the basis that the Property was not a suitable investment for the Fund.  The plaintiff also seeks to recover fees paid to the first defendant plus interest on a compound basis by reference to earnings the plaintiff would have achieved had it not made the investment.

6.         Subsequent to the plaintiff filing a re-amended order of justice the first defendant has filed a re-amended answer.  The relevant paragraphs for the purposes of issues I had to determine are as follows: -

"22.     Unfortunately, the Fund was virtually still born following these two initial purchases as Mr Walia and Mr Karuvelil were not able to bring any further investors to the Fund largely due to the sub-prime collapse in 2008-09. It is averred that although the Plaintiff has now abandoned its claim with regard to the Pitstone Proposal (Tring) in the Re-Amended Order of Justice dated 29 July 2022 that the purchase and disposal of that Property is still relevant to questions of loss and mitigation of loss in the remaining claim in respect of the Gardeners property.

65.      It is averred that the refusal to accept combined offers of purchase of both the Gardeners and Tring properties and/or restricting the ability of the Plaintiff from accepting offers of less than $25m is still relevant to the Plaintiff's failure to mitigate its loss in respect of the Gardeners Property and is unaffected by the decision of the Plaintiff to abandon its claim in regard of the Tring property in its Re-Amended Order of Justice dated 29 July 2022.

66. It is further averred that the Plaintiff has failed to mitigate its loss by:

a. Falling to sell the Gardeners Property at a price which reflected the true market value and development potential of the site:

b. Failing to market the Gardeners Property sufficiently and/or failing to negotiate a price which reflected the development value of the site whether by obtaining a higher sale price or negotiating an overage clause or otherwise; and

c. Failing to sell the Gardeners Property timeously thereby failing to mitigate the interest payments that it seeks in its Re-Amended Order of Justice dated 29 July 2022."

7.        I will deal with each of the applications in turn.

Requests for Information

8.        In relation to the requests for information, the outstanding requests by the time the matter came before me were requests 8, 9(k) and 10 as follows: -

"8. The Claim for loss in respect of the Tring Property has been abandoned in the Re- Amended Order of Justice. If the property has been sold please state:

a. The name of the purchaser

b. The purchase price that was agreed

9. With respect to the Tring property if it has been sold please provide full details of how the Property was sold. In this respect please:

k. indicate any offers that were made for the purchase of the property including the name of the party making the offer and the amount of the offer;

10. On the basis that the Plaintiff and the Limited Partners were aware that the Tring property had been acquired for its potential development value please, indicate if any overage agreement was made/ is being made with the purchaser and, if not, why no overage agreement was sought. If so, please provide a copy of any overage agreement or other agreement made or proposed to be made with the Purchaser to provide a deferred payment or payments in connection with the Tring property."

9.        The first defendant's position was that the sale price of the Tring Property, how the sale price came to be agreed, the terms of the sale, and any overage agreement were all relevant to loss. Advocate Hurry accepted that the particular paragraphs which they related to were paragraphs 22 and 65.

10.      I do not agree notwithstanding the re-amended order of justice at paragraph 22 that the terms of the sale of the Tring Property are relevant to loss.  The justification for this was set out in the first defendant's skeleton argument where it was suggested the information memorandum issued for the Fund was to achieve high returns and therefore the Fund carried a high degree of risk.  Any investments made therefore contemplated that some land acquired by the Fund would enhance in value and therefore realise a profit whereas other land might not.

11.      The fault with this argument is that, assuming in the first defendant's favour that the Fund's terms contemplated high returns and was therefore a high risk investment, the fact that an investment is high risk and therefore investors might suffer losses does not prevent investors from alleging that certain investments were made in breach of duty and seeking to recover losses made in breach of duty.  The present proceedings are not a claim for mis-selling of unsuitable investments; rather they are claims for breaches of duty.  No authority was cited to me for the proposition that because an investment is high risk means that profits that might have been made can be set off against losses suffered due to directors acting in breach of their responsibilities.  In this case therefore the fact that the plaintiff has now withdrawn its claim in respect of the Tring Property and assuming in the first defendant's favour that the Tring Property sale ultimately made a profit does not prevent the plaintiff from claiming losses in respect of an investment and related costs that it alleges should never have been made.  The sale price for the Tring Property and whether any overage arises in relation to that sale is therefore irrelevant to the matters that remain in dispute between the parties and the claim for losses in respect of the Gardener's Property said to have been acquired on the basis of a breach of duty.

12.      The only request I did allow in part was request 9k that the first defendant was entitled to know whether there were any offers made to acquire both the Gardeners and Tring Property together which might be relevant to loss or a duty to mitigate loss.  This was an issue expressly raised by paragraph 65 of the re-amended answer.  I therefore allowed request 9k on this narrow basis only.

An application to delay specific discovery

13.      In an Act of Court dated 6^th October 2021 I ordered the parties to produce discovery in accordance with their discovery protocols.  For the plaintiff, their discovery protocol was set out in a letter dated 5^th August 2021 from Bedell Cristin which I agreed was the approach that should be adopted subject to certain modifications as set out in paragraph 2 of the Act of Court of 6^th October 2021.  Paragraph 2.c. stated as follows: -

"c. Mr Koshy Karuvelil shall be included as a search term and all emails to/ from/cc'd/bcc'd his known email accounts to be searched for..."

14.      Paragraphs 3 and 4 of the same Act of Court contained the following: -

"3. the discovery provided by the Plaintiff and the First Third Party shall extend to any offers or indications of interest in relation to the Properties or either of them and any documents relevant to the First Third Party's view of what the Properties or either of them were or might have been worth at any time during the period to be searched.

4. In light of paragraph 3 of this order, the Limited Partners are not required to give general discovery..."

15.      My reasons for this decision were set out in a judgment dated 19^th October 2021.  In  paragraphs 26 to 28 I explained the following in relation to the scope of the searches the plaintiff was to carry out: -

"26.    While I agreed with Advocate Gardner that it is a matter for any expert as to what weight the expert might place on any such offers or views expressed, what the key persons acting for the general partner were thinking about the value of the properties throughout their involvement meant that the discovery threshold was met to enable searches to be required for a wider period than the plaintiff argued for. The defendants' arguments therefore justified looking beyond one offer made in 2013.

27.      I also made it clear that the plaintiff was to look for any documents in the accounts to be searched relating to any offers or expressions of interest or anything concerning the general partner's view of the properties' worth. This point is relevant because, if the general partner's position was to make speculative investments as the defendants suggested, and key individuals dealing with or for the general partner appreciated that the investments in the properties were of a speculative nature, such evidence might be relevant to the plaintiff's claim and the defence of that claim. I also accepted that such documents would also be relevant to any discretion the court might exercise in relation to the claims for compound interest.

28.      However, I also accepted at this stage it was not necessary to search for documents held by the limited partners only. The key relationship was the general partner and its actions. This conclusion was not to say that a more focused application might not be made once general discovery had occurred, but at this stage it was the knowledge of the general partner and those at the heart of its operations (apart from the defendants) that was key rather than any particular views of the limited partners which were not passed on to the general partner. I also was able to reach this conclusion because the email accounts used by the custodians to be searched would capture any communications they received, whether they were acting for the general partner or dealing with a limited partner because the email accounts used were the same. To that extent the searches to be carried out by the plaintiff will therefore capture some documents received by the limited partners or one of them which were passed to the general partner or received by individuals whose accounts had to be searched. However, that was as far as I was prepared to go. Any further application is a matter for specific discovery once general discovery has occurred. To that extent the door was not completely closed to further applications in respect of discovery from the limited partners on a more focused or precise basis. The present request for general discovery was too broad and disproportionate given what I required from the general partner."

16.      The search terms to be used by the plaintiff were set out in a schedule to their letter of 5^th August 2021 and included the words "Koshy" and "Karuvelil" as separate search terms.

17.      Advocate Hurry's position was that his clients wanted more time to formulate a specific discovery request.  The background to his request was exchanges of correspondence relating to issues raised by the first defendant's e-discovery provider which appeared to give rise to issues about the extent of the searches carried out by the plaintiff because there were discrepancies in the number of documents that the first defendant's e-discovery provider was able to identify.  By way of example only the plaintiff's e-discovery provider appears to have applied searches using the words "Koshy" and "Karuvelil" as long as they appeared within three words of each other. This did not reflect the e-discovery protocol.

18.      The first defendant's e-discovery provider was also concerned about whether the e-discovery protocol, the plaintiff was ordered to apply had been followed.

19.      He also drew my attention to paragraph 8 of the affidavit of Mr Karl Cameron an English Solicitor representing the first defendant which referred to a response from Bedell Cristin in a letter dated 27^th October 2022 stating that certain missing emails did not form part of the discovery review and instead had been culled prior to human review stage as they failed to meet the requirements of the agreed discovery protocol.  Given that these emails were from Mr Karuvelil the first defendant did not understand how this conclusion had been reached.

20.      The documents uploaded by the plaintiff to the e-discovery platform being used by the parties (relativity) also contained blank documents described as being from a placeholder.  It was not clear whether these documents were privileged documents or irrelevant documents.  There was therefore a discrepancy between documents listed in Part 1 Schedule 1 of the plaintiff's list of documents and what had been uploaded to relativity by the plaintiff.

21.      In respect of lateness Advocate Hurry stated that while discovery had been produced in February and March 2022, the matter was then stayed until the end of June 2022.

22.      What his client ultimately was looking for was a conversation between the e-discovery providers to try to understand what had been uploaded to relativity by reference to the plaintiff's documents and what was meant by placeholders and why there appeared to be discrepancies between what the plaintiff said that they had produced in terms of numbers and what the first defendant could identify.  The first defendant also wanted its e-discovery provider to be satisfied that the e-discovery protocol had been applied according to its terms.  The second to fourth defendants agreed with the first defendant's concerns.

23.      While Advocate Hurry suggested I could make certain orders requiring the plaintiff to take further steps in relation to its discovery in respect of the issues of concern, this was an approach I did not accept because this was not a specific discovery application.  However I did understand why the first defendant was concerned and agreed with Advocate Hurry it would be appropriate and an efficient way to proceed for the e-discovery providers to meet directly to sort through all outstanding issues from an e-discovery perspective.

24.      Advocate Hurry wanted 28 days to formulate any other issues for the e-discovery providers to consider; I only allowed him 14 days because until discovery was completed the timetable for the provision of witness statements of fact and possibly expert evidence was at jeopardy and ultimately if matters were not dealt with promptly the trial dates might have to be vacated. 28 days was therefore too long at this stage of the proceedings.

25.      While the plaintiff through Advocate Gardner felt that his clients had met their discovery obligations, he did not dissent from the e-discovery providers meeting directly to try to resolve the queries raised.  He also accepted that following a meeting between the e-discovery providers a timetable could then be set for a specific discovery application dealing with any differences and any other applications that the defendants might bring as a consequence.  I made orders to reflect this position.

26.      In relation to the issues that came before me I wish to stress generally that it is preferable for e-discovery providers to talk directly to each other rather than corresponding through lawyers in relation to understanding how the discovery protocol has been applied.  If such discussions cannot lead to agreement, only then is it appropriate for a court application to be made to challenge that a party has not provided discovery in compliance with a protocol it says it has followed.

The second to fourth defendants' application for specific discovery

27.      In relation to this application, what was sought was set out at paragraph 3 of the second to fourth defendants' amended summons as follows: -

"3. THAT the Plaintiffs provide further and/or specific discovery of all documents in relation to any interactions between the General Partner/key individuals for the BPC Plaintiffs and the Limited Partners in relation to the Fund (as set out in Carey Olsen's letter to Bedell Cristin dated 22 September 2022) within 28 days..."

28.      A detailed affidavit was filed by Christopher John Leetiat Tan sworn on 5^th October 2022 for the second to fourth defendants.

29.      In relation to this affidavit, it is right to observe that in a number of the paragraphs Mr Tan identified either individual documents or categories of documents that the plaintiff had failed to produce.  Yet the summons only sought the relief set out above.  While I accept that an analysis of individual specific documents or certain categories said to be missing may justify a more general request, the summons should have also identified the specific individual documents or categories sought as well as what other documents were sought as a consequence.

30.      Ultimately, what became clear during submission that what was at the heart of the second to fourth defendants' application was that, in relation to communications between the general partner and the limited partners the discovery protocol had only involved searching for emails in the possession of the general partner.  However, on 27^th October 2022 Bedell Cristin had informed both sets of defendants that communications were by phone or by WhatsApp not by email.  Advocate McCormick therefore complained that relevant documents had not been searched for because the discovery protocol was limited to emails only.

31.      Despite this concern, he fairly accepted that to require a search of all relevant documents held by limited partners might not be proportionate both as a task and given what was at stake; he felt however that the plaintiff should revisit the searches they had carried out and look for WhatsApp messages and any file notes of any calls with limited partners or any of their representatives.

32.      Advocate Gardner fairly accepted and was right to do so that there was an issue about whether further searches should be carried out in relation to WhatsApp messages.  In relation to this issue, he raised whether the general partner was in control of devices used to send such messages.  I referred him in that regard to the decision of the Royal Court and the Court of Appeal in Sheyko v Consolidated Minerals Limited reported at [2021] JRC 267 and [2022] JCA 018.

33.      He otherwise raised whether to require such searches was proportionate.  He said that the issue of how long it took for a sale to occur after his client became involved in January 2016, went to the question of compound interest rather than simple interest.  However, I concluded that such a claim could be significant.  If the plaintiff is right in respect of its primary loss namely that the Gardeners Property should never ever been acquired, the capital loss appears to be between £4.7 and £5 million.  Simple interest on this sum at 2% over base if one works on an award of damages of £5 million is at least £100,000 per year; the claim for simple interest is therefore between £500,000 and £600,000 to date.  Compound interest based on rates of return that are achievable might well double this figure.  I do not therefore regard it being disproportionate to search for file notes or WhatsApp messages given the other detailed search terms that had already been identified.

Costs

34.      In relation to the application for security for costs, the defendants had sought to agree an increased figure before issuing a summons but had not received any response to their request.  It was only on 27^th October 2022 that any substantive response was received.  Thereafter the request to increase security was compromised.  I therefore ordered that the defendants should recover their costs up to 27^th October 2022 with costs thereafter being in the cause.  I also gave the plaintiff 21 days to provide the security which figure no party challenged.

35.      In relation to the first defendant's request for information and for an extension of time to bring a specific discovery application the overall result standing back was something of a draw.  I had only granted one request for information in part, but I did grant in effect an extension of time for the defendants to bring a further extension of time by virtue of the directions I issued.  The appropriate costs order was therefore costs in the cause.

36.      In relation to the second to fourth defendants' application for discovery, while I required the plaintiff to carry out certain searches, the affidavit sought far more material than that identified in the summons and the relief I granted was much more specific in nature.  While therefore the second to fourth defendants had been successful, it was not appropriate for them to recover the entirety of their costs at this stage.  I therefore allowed them to recover 50% of their costs on the standard basis with the balance being in the cause.  Again, I concluded that this best reflected the overall outcome of this particular application.

Authorities

Authorities

Alpen Partners Limited v Al-Amiri and Ors [2020] JRC 132. 

Alpen Partners Limited v Al-Amir [2021] JRC 254. 

Sheyko v Consolidated Minerals Limited [2021] JRC 267

Sheyko v Consolidated Minerals Limited [2022] JCA 018