Jersey Unreported Judgments

Unless Order.

[2023]JRC053

Royal Court

(Samedi)

27 February 2023

Before     :

Advocate David Michael Cadin, Master of the Royal Court.

 

Advocate E. B. Davies for the Plaintiff.

Advocate D. S. Steenson for the First Defendant.

Advocate A. Kistler for the Second to Fifth Defendants

judgment

the master

Introduction

1.        This is my decision in relation to an application by the Plaintiff for an unless order against the First Defendant, Mr Almakhawi, requiring him to provide a list of documents within 2 weeks failing which his Answer shall be struck out and judgment entered for the Plaintiff against the First Defendant.

Background to the Proceedings

2.        The Plaintiff alleges that the First Defendant guaranteed substantial loans that it, the Plaintiff, made to a business in which the First Defendant had an interest.  The borrower defaulted on the loans and the Plaintiff brought proceedings in Dubai.  Following various appeals, the Plaintiff obtained judgment against the First Defendant and others in July 2019 for approximately USD 57.5 million plus interest, making a total judgment sum of approximately USD 94.5 million (the "Dubai Judgment").

3.        The Plaintiff further alleges that during the course of those proceedings and afterwards, the First Defendant took steps to dispose of his assets including transferring them into the Violet Trust and the Redington Trust. 

4.        The Plaintiff instituted the current proceedings in Jersey in November 2021 against the First Defendant, and against the Second to Fifth Defendants, namely the trustees of the Violet Trust and the Redington Trust and their respective underlying companies.  In the proceedings, the Plaintiff seeks a judgment in respect of the monies due under the Dubai Judgment, and to set aside transfers into and out of the Violet Trust and the Redington Trust. 

5.        The First Defendant filed an Answer in March 2022 alleging, amongst other things, that:

(i)        the Dubai Judgment was obtained in breach of natural justice and/or a breach of his human rights and/or that enforcement of that judgment would be contrary to public policy;

(ii)       the transfers into and out of the trusts were made for legitimate estate planning reasons and were not intended to defeat creditors. 

6.        The Second to Fifth Defendants filed an Answer effectively putting the Plaintiff to proof of its claims.

7.        Master Thompson gave Directions on 6 October 2022 in relation to discovery and the exchange of witness statements.  He was evidently aware when he made that Order that there might be issues with compliance as the First Defendant had failed to engage with the other parties contrary to the terms of PD 17/08.  Master Thompson therefore made an express provision excusing a party from giving discovery to any party in default and provided liberty to apply including "for an unless order against any Party who fails to provide discovery in accordance with this Act of Court."

8.        The First Defendant has failed to provide discovery in accordance with Master Thompson's Order.  He has also failed to apply for an extension of time in which to comply or to provide any written explanation as to why he has not complied with the directions. 

9.        Advocate Steenson was instructed on behalf of the First Defendant in September 2022.  The correspondence exhibited to the Plaintiff's affidavit in support of the application illustrates that Advocate Steenson has repeatedly been without instructions (in particular in September 2022, October 2022 and January 2023).  I further note that in relation to the hearing before me, Advocate Steenson failed to submit any skeleton argument or to provide any written explanation for his client's default. 

10.      The Plaintiff submits that this pattern of non-engagement by the First Defendant is redolent of his conduct in relation to parallel proceedings in New York in which he has failed to provide discovery or to answer interrogatories. 

11.      It is, however, in stark contrast to his conduct in relation to parallel English proceedings brought by the Plaintiff which are listed for trial at the end of February 2023.  In those proceedings, the First Defendant has actively engaged, filed witness statements, instructed experts, and participated in the pre-trial proceedings. 

The Applicable Law

12.      The law in relation to unless orders is well established and conveniently summarised in the decision of Master Thompson in Newman v Lima [2018] JRC155 (subsequently approved by Le Cocq, Bailiff, in Huda v Minister for Health and Social Services [2021] JRC196 and Commissioner Clyde-Smith in Sheyko v Consolidated Minerals Ltd [2021] JRC267).

13.      As set out in paragraph 43 of Master Thompson's judgment in Newman, in exercising its powers under Rule 6/26(12) of the Royal Court Rules 2004, the Court is required to ask two questions in the light of "the orders that have not been complied with and the effect of such non-compliance on the progress of the litigation either to a trial or to a settlement", namely:

(i)        how serious and how significant is the "failure to comply with any rule, practice direction or court order"; and

(ii)       why did the default occur.

14.      Having answered those two questions, the Court is then required to consider what, if anything, it should do (as set out in paragraphs 47 to 48 of Newman):

"47. In my judgment in this jurisdiction, the discretion is a more general one. This discretion still requires me to consider whether the case can be dealt with justly and at proportionate cost and any relevant factors listed in Rule1/6. However, I consider that I am also required to look at the case as a whole and the nature of the proceedings in particular, what is in issue where some form of strike out of a claim is contemplated. In cases involving a failure to issue a summons for directions (albeit pre-dating the overriding objective), the Royal Court has noted that the most severe sanction of striking out a plaintiff's claim should not be applied if there are other sanctions which could be applied which would enable justice to be done between the parties - see for example Viera v Kordas [2014] JRC 042 at paragraph 19 and Mayhew v Bois Bois [2016] JRC 024 at paragraphs 8 and 9. Whether the failure is to issue a summons for directions required by the Rules or a failure to comply with a particular order, I consider that the same approach should be taken to imposition of sanction which has the effect of striking out a claim or counterclaim or an answer, thus depriving a party of their day in Court.

48. I also consider it may be possible to make orders which fall short of striking out the entire claim. Depending on the breach it may be possible to limit the sanction to striking out part of a case or that if a particular step is not complied with part of the case will be struck out or evidence may not be adduced on a particular issue. There is also the sanction of costs."

Application to the Facts

15.      In this case, the First Defendant failed to comply at all with an order requiring him to produce a list of documents verified by affidavit and consequently, to provide inspection of the documents listed. That headline failure is compounded by the First Defendant's failures:

(i)        to comply with Practice Direction RC17/08 before the 6 October 2022 hearing;

(ii)       to apply for an extension of time in which to provide discovery (notwithstanding the provisions of Practice Direction RC17/05, paragraphs 18 to 24);

(iii)      to engage with the Court properly on this application for an unless order (in terms of filing a skeleton argument and/or any written document explaining his default); and

(iv)      in fact, to have even started the process of providing discovery in this jurisdiction (Advocate Steenson candidly stating in submissions that the process had not started and that he had no idea as what type of documents might be involved or where they might be held).

16.      In terms of seriousness and significance, as Master Thompson has previously noted (in Powell v Chambers [2018] JRC 169 at paragraphs 69 to 70):

"69...Firstly, discovery is a serious obligation. Documentation in most cases forms a key part of the evidence before a trial Court. It is often the material by which the Court tests oral evidence or assertions or submissions be made by one party or the other.

70. Secondly, documentation is necessary because it allows parties to prepare their witness statements and their evidence to address any evidence raised in documentary form. Without documents any party is not in a position to address any evidence arising from the documents or appropriate obtain expert evidence on the issue raised by the relevant document or documents."

17.      Unlike many cases where a party's failure to provide discovery deprives the Court and the other parties of their documents, in this case, the First Defendant has given discovery in "parallel" proceedings in England. In answer to a question from the Court, Advocate Davies for the Plaintiff stated that:

(i)        the proceedings in England are in similar terms to the proceedings in Jersey and concern both the Dubai Judgment and certain alienations of property albeit that the transactions impugned are not the same as those referred to in the proceedings before me; 

(ii)       the arguments raised by the First Defendant in relation to the Dubai Judgment in England are similar to those raised by him in his Answer in Jersey; and

(iii)      the orders for discovery in the English proceedings have been made on the basis of a list of issues and are therefore narrower than the orders that have been made in Jersey.

18.      I think it likely that some, but not all, of the documents which would fall to be disclosed in these proceedings in relation to the Dubai Judgment will have been disclosed in the English proceedings. Accordingly, far from being unaware of the case which it has to meet on that aspect of the claim, the Plaintiff has seen some of the documents relevant to the issues before this Court and has a mechanism available to it (albeit an expensive and inconvenient one) whereby it could seek to use documents disclosed in the English proceedings for the purposes of the Jersey proceedings.

19.      Whilst this may theoretically lessen the impact of the First Defendant's failure to provide discovery on one aspect of the proceedings, it does not remove it entirely nor does it address at all the First Defendant's failure to provide discovery in relation to the other aspect of this claim, namely the impugned transactions.  

20.      In my view, the First Defendant's failure to provide discovery is both serious and significant.

21.      Despite his appearance before me, Advocate Steenson was unable to provide any explanation, cogent or otherwise, as to why the default had occurred on the part of the First Defendant.

22.      The Plaintiff's claim is for a considerable sum of money (in excess of USD95m) and for orders setting aside transactions made to, or by, the Second and Third Defendants (who are regulated by the Jersey Financial Services Commission).  The order sought by the Plaintiff in its summons is "an extremely serious order" (echoing the comments of Le Cocq, B, in Huda v Minister for Health and Social Services at paragraph 53) and "an order of last resort.  It is not made unless there is a history of failure to comply with other orders.  It is the party's last chance to put his case in order." (Alhamrani v Alhamrani [2008] JRC187A at paragraph 84).

23.      The First Defendant failed to provide his list of documents by 31 January 2023 and that default has been brought before me on 23 February 2023, less than one month later.  Advocate Steenson did not submit that this was one single failure which did not amount to a sufficient "history of failure to comply with other orders" such as might justify the imposition of an unless order.  He was right not to do so. By his conduct to date, the First Defendant has shown scant regard for the Court, its Practice Directions or its Orders. 

24.      Accordingly, I have no hesitation in making an unless order. 

25.      Advocate Steenson's submissions in relation to the terms of any unless order focussed on the period to be allowed for compliance as opposed to the ultimate sanction.  He submitted that 4 weeks should be sufficient, possibly on the basis that the First Defendant has already undertaken part of the discovery exercise in England and as part of that process, may have isolated the relevant document universe.  In the circumstances of this case, I do not think that it would be disproportionate to give the First Defendant a further 4 weeks in which to provide a list of documents verified by affidavit. 

26.      As to the sanction to be applied for non-compliance, I note the comments of the Court of Appeal in B v M-R [2007] JRC 139 in the context of a failure to issue a summons for directions under RCR 6/26:

"26...For example, if the plaintiff is only in default by one month when the matter comes before the Court, we think it highly unlikely that the Court would dismiss the action even if satisfied that there was no excuse for the failure to issue a summons.  The remedy of dismissal would simply be disproportionate for the breach involved. An award of costs against the plaintiff (or his advocates) coupled with the giving of directions to progress the matter would in many cases be a much fairer outcome."

27.      However, imposing a sanction after the event for a party's one-off failure to comply with a procedural requirement is not the same as imposing an unless order, in advance, where there has been a history of non-compliance. An unless order gives a party in default a clear opportunity to discharge his litigation obligations in the knowledge of the sanction that is likely to be applied in the event he refuses or fails so to do. In the event that the party subject to the order fails to comply, they will have breached yet another order of the Court.

28.      I further note the comments of the Court of Appeal in Alhamrani v Alhamrani [2008] JRC187A at paragraph 84 quoting the observations of Ward J in Hytec Information Systems Limited v Coventry City Council [1997] 1 WLR 1666 at 1674-675:

         "(3) This sanction is a necessary forensic weapon which the broader interests of the administration of justice require to be deployed unless the most compelling reason is advanced to exempt his failure.

         (4) It seems axiomatic that if a party intentionally or deliberately (if the synonym is preferred) flouts the order then he can expect no mercy."

29.      Having indicated an intention to defend and filed an Answer, the First Defendant has thereafter singularly failed to engage in these proceedings.  These are inconsistent and incompatible positions.  He cannot maintain such a stance without his conduct ultimately undermining the Court process and defeating the Overriding Objective.  If he wishes to defend the proceedings, he must engage with them, and the obligations imposed on him.  Conversely, if he does not wish to defend the proceedings, his Answer should be struck out and judgment entered against him. 

30.      I have considered whether any lesser, or alternative, sanction might be appropriate (such as prohibiting from him defending all or part of the claim unless and until he remedies his default).  In my view it would not:

(i)        it would leave this Court in a state of uncertainty as to whether the First Defendant will, or will not, at any stage remedy his default and would undermine management of the case;

(ii)       it would place the Second and Third Defendants, and the separately constituted Royal Court from whom they have sought directions, with significant challenges given what would be the wholly uncertain procedural position of the First Defendant in this litigation and the possibility that that might change, at any stage, without warning; and 

(iii)      in the absence of any cogent explanation for his default, the First Defendant's conduct appears to have been deliberate and, in those circumstances, he should expect no mercy from the Court.

31.      Accordingly, I make an order in the terms sought save that the period for compliance is four weeks as opposed to the two requested by the summons. 

32.      In terms of costs, I order that the First Defendant pay the costs of and incidental to this application on an indemnity basis given that:

(i)        this application was necessary and arises out of the First Defendant's default and his failure to engage with the Plaintiff, and indeed the Court;

(ii)       no application was made before expiry of the deadline for any extension of time; and

(iii)      no explanation for the default was provided to the Court whether in writing or at all.

Authorities

Newman v Lima [2018] JRC 155.

Huda v Minister for Health and Social Services [2021] JRC 196.

Sheyko v Consolidated Minerals Ltd [2021] JRC 267.

Royal Court Rules 2004.

Practice Directions RC17/08 & RC 17/05.

Powell v Chambers [2018] JRC 169.

Hytec Information Systems Limited v Coventry City Council [1997] 1 WLR 1666.

Alhamrani v Alhamrani [2008] JRC 187A.

B v M-R [2007] JRC 139.