Jersey Unreported Judgments

Trust - appeal against the decision of the Master

[2023]JRC152

Royal Court

(Samedi)

22 August 2023

Before     :

R. J. MacRae, Esq., Deputy Bailiff

 

Advocate P. C. Sinel for the Plaintiffs.

Advocate D. Evans for the First and Sixth Third Parties.

The other parties were not represented on the appeal.

judgment

the deputy bailiff:

1.        The First and Sixth Third Parties, by Notice of Appeal and grounds dated 18 January 2023, appeal the judgment of the Master dated 13 January 2023 Patel v JTC Trust Company Limited and Ors [2023] JRC 009 in respect of an application made by the Plaintiffs for permission to amend their Order of Justice, which was heard by the Master on 1 November 2022. 

2.        The Defendant and the other Third Parties did not participate in the appeal.

3.        The background to this case is set out at paragraph 2 to 16 inclusive of the judgment given by the Master on 11 April 2022 (Patel v JTC Trust Company Limited and Ors [2022] JRC 089), which itself was a judgment on aspects of the pleadings in this case.

4.        The First and Sixth Third Parties say that the Master fell into error in permitting the Plaintiffs to amend their Order of Justice so as to add certain claims against them. 

Test on appeal

5.        This is well established.  The hearing is de novo with the Royal Court having unfettered discretion to make such orders as it sees fit, but the Royal Court ought to have due regard to the decision of the Master and his reasoning - see Café de Lecq v Rossborough (Insurance) Brokers Limited [2011] JLR 31.  I note that in the recent appeal to the Royal Court in Cook v Clapham [2022] JRC 210, Commissioner Bailhache held at paragraph 28:

"In my judgment...I am entitled to approach the matter de novo if I wish to do so, and to exercise a discretion unfettered by the exercise of discretion by the Greffier, while at the same time giving that decision due weight."

Amendments to plead fraud / dishonesty

6.        The law on amendments is well established.  Birt, Deputy Bailiff, as he then was, in Cunningham v Cunningham [2008] JLR 227 held:

(i)        Leave to amend should generally be given provided there is no prejudice to the other side which cannot be compensated for by costs;

(ii)       More stringent considerations apply where leave to amend is sought late in the proceedings; and

(iii)      Amendments will not be permitted if they infringe the rules of pleading, or introduce a claim so hopeless it will be liable to be struck out.

7.        It has always been the case that special additional considerations apply to amendments to plead fraud / dishonesty.  In summary:

(i)        Any pleading of fraud must set out the facts, matters and circumstances relied upon to show that the party charged with such conduct was actuated by a fraudulent intention.  Full and precise particulars are required - Makarenko v CIS Emerging Growth Limited [2001] JLR 348;

(ii)       Fraud must be distinctly alleged and sufficiently pleaded.  Fraud will not be sufficiently particularised where the facts pleaded are consistent with innocence - Brakspear v Nedgroup Trust (Jersey) Limited [2018] JRC 121 at paragraph 59, and see Lord Millett in Three Rivers v Bank of England [2003] 2 AC 1 at paragraph 184.  Lord Millett also said:

"This means that a plaintiff who alleges dishonesty must plead the facts, matters and circumstances relied on to show that the defendant was dishonest and not merely negligent, and that the facts, matters and circumstances which are consistent with negligence do not do so."

At paragraph 186, Lord Millett said:

"It is not open to the Court to infer dishonesty from facts which have not been pleaded, or from facts which have been pleaded but are consistent with honesty.  There must be some fact which tilts the balance and justifies an inference of dishonesty and this fact must be both pleaded and proved."

(iii)      Fraud is not to be pleaded lightly - a party making such a plea should ensure that allegations are set out with full particularity.  The Law Society Code of Conduct makes it clear that an advocate may not draft a statement of case containing an allegation of fraud 'unless the member has clear instructions to allege fraud and has reasonably credible material which establishes an arguable case of fraud'. 

8.        Finally, in relation to an application to amend to plead fraud, the Royal Court observed in Hervé v H & H Jersey Growers [1994] JLR Note 5a:

"There is no rule of practice by which amendments alleging fraud are treated differently from other amendments and, in all cases, the objective of the court should be to allow the real matter in controversy between the parties to be litigated. However, a party seeking to introduce an allegation of fraud for the first time by amendment will only be allowed to do so in exceptional circumstances and at an early stage and the court will require an explanation of why the allegation was not made from the outset."

9.        In this case, the First and Sixth Third Parties argue, and I accept, that these pleading principles apply in full to the misrepresentation amendments, the dol amendments, the dishonest assistance amendments and the conspiracy amendments in this case.  I will come to the mistake amendments separately.  It is said with some force that the Master did not properly direct himself regarding the need to satisfy the high test for pleading allegations in fraud when considering, for example, the claims in dol, although he accepted that per Sir Philip Bailhache, Bailiff, in Steelux Holdings Limited v Edmonstone [2005] JLR 152 at paragraph 10 that "the underlying principle of fraud, which we say embraces both dol and fraude, is bad faith..."

10.      The test for pleading dol is the same as the high hurdle for pleading fraud.  In Hore v Valmobida [2022] JRC 202 at paragraph 138, the Court said:

"It was contended by the Plaintiffs and the Court accepted, that the test for a finding of fraudulent misrepresentation was the same as that for dol, i.e. knowingly making false representations."

11.      The Master omitted to consider the evidential threshold for pleading fraud when considering various of the proposed amendments in the judgment under appeal.  Various additional criticisms are made of the differences and inconsistencies between the Master's judgment in July 2022 (Patel v JTC Trust Company Limited and Ors [2022] JRC 150), when he refused amendments alleging inter alia fraud, dol, mistake and misrepresentation, but reached different conclusions on, the First and Sixth Third Parties argue, much the same evidence in January 2023. 

12.      There is merit in this complaint but there is little purpose in me analysing the differences between the lengthy July 2022 judgment from the Master and the equally lengthy January 2023 judgment or, indeed, noting where the Master correctly and where the Master incorrectly directed himself as to the appropriate test.  This is a hearing de novo and it is for me to evaluate the allegations made and determine whether or not the new pleadings are adequately supported by facts, matters and circumstances that are distinctly and sufficiently pleaded and where the allegations are consistent with fraud and not consistent with other explanations in accordance with the more detailed principles as set out above.

13.      Another criticism made was that on more than one occasion the Master admitted a plea for which no permission had been sought.  For example, the Master altered a claim in fraudulent misrepresentation at paragraph 40 of the Amended Order of Justice to add a plea of negligent or innocent misrepresentation when he had not been asked to do so by any of the parties, including the Plaintiffs.  He did so without the parties having had the opportunity to make any submissions.  Complaint is made about this amendment which would, if maintained, require consequential amendments being made to the other particulars pleaded in relation to misrepresentation.  Accordingly, this amendment is disallowed.

14.      At paragraph 105 of the July judgment, the Master said:

"It is well known that it is not for the Court to draft the claim.  All the Court can do is set out when a current draft is not sufficiently clear..."

15.      The Master later departed from this principle and at the rear of his January 2023 judgment is a schedule of suggested amendments, most of which are only adding a few words here or there to various paragraphs of the Amended Order of Justice.  However, one involves a substantial change to the effect that a paragraph is amended at the instigation of the Master so as to read 'There is therefore a material and not a fanciful chance that the Plaintiffs would benefit from the Trusts.  They will accordingly therefore claim damage, equitable compensation and / or damages for those lost chances'.  Furthermore, paragraph 125 of the judgment says the following:

"125. In relation to Advocate Speck's objection that the plaintiff should set out what the defendant should have done and why that [sic] was done was not good enough, in my judgment there is some force to this request, but it goes too far. What I consider the plaintiffs should plead within paragraph 63 is what the defendant failed to consider. This is partly touched upon in paragraph 49.1.10. However, I consider the plaintiffs are entitled to make the following complaints:

(i) That the defendant failed to consider as a matter of discretion that the trust assets should be divided equally between each of the three branches of Mr Patel's family i.e. his three children; the failure to consider whether an equal division should have taken place is different from the plaintiffs possessing a legal right to an equal share of trust assets. The former can be alleged; the latter cannot for the reasons set out above.

(ii) In the alternative the defendant as trustee failed to consider whether there should be equal treatment between Gaurang and the first plaintiff;

(iii) In the further alternative the defendant as trustee failed to consider as a matter of discretion whether it was right to conclude that the plaintiffs should not receive any benefit from the trust assets;

(iv) The defendant as trustee further failed to consider whether the first plaintiff should receive any benefit and whether it was a proper exercise of discretion for trust assets to be split between Vimal on the one hand and Gaurang on the other only; and

(v) The trustee further failed to ensure that either Mr Patel or Vimal gave effect to the matters set out in the Letter of Assurance or to exercise their discretion to provide the benefits referred to in the Letter of Assurance out of trust assets."

16.      This, in my view, is going too far.  The Plaintiffs were not unrepresented.  All parties appear to be advised by highly skilled teams of lawyers.  The Court should not enter the fray and help a party to plead its case.  It is not necessary, and it is also inappropriate as it gives these pleaded paragraphs, if they are adopted, a kind of judicial imprimatur.  The marked up pleadings suggest that paragraph 63 should be replaced with the sub-paragraphs at 123 of the judgment (presumably this was later re-numbered 125).

17.      Having made these introductory remarks and touched on the principles that I have kept in mind when considering the amendments, I now consider each in turn.

The misrepresentation amendments

18.      These are found at paragraphs 19 to 41 inclusive of the draft Amended Order of Justice.  I have directed myself in accordance with all relevant principles and allow these amendments.  The high hurdle for pleading fraudulent misrepresentation is met.  The amendments are sufficiently comprehensive to allow the First and Sixth Third Parties, and other affected parties, to know what case they have to meet.

The mistake amendments

19.      It is clear from the Plaintiffs' skeleton argument dated 26 October 2022, prepared for the hearing on 1 November 2022 (paragraph 18), that the claim in mistake related only to the claim for rescission against the Defendant.  It does not purport to be a claim against the First and Sixth Third Parties.  Further, the Master held at paragraph 108 of the July 2022 judgment:

"The only necessary party to this aspect of the claim is the Defendant.  This is because the Defendant is the other party to the contract, and it is the First Plaintiff who seeks to set aside that contract.  Accordingly, it is not necessary to join Mr Patel, Vimal and Gaurang to this claim as they are not parties to the deed of disclaimer or indemnity.  This conclusion does not mean that they might not be referred to in the particulars relied upon as to why the First Plaintiff said she was mistaken, but no relief is required against them in order to set aside the deeds of disclaimer and / or indemnity.  This conclusion can be tested this way.  If the only relief was sought [sic] was the setting aside of the disclaimers and indemnity, only the Defendant is a necessary party to that application."

20.      In the judgment under appeal the Master reached a different conclusion at paragraphs 75 to 78 inclusive to the effect that the First and Sixth Third Parties were necessary parties to the claims in mistake.  That was not what he said in July 2022 nor was that what was contended for by the Plaintiffs.  It was not necessary for the Master to revisit his earlier decision on the mistake amendment in circumstances where no party had invited him to do so.   In my view his reasoning in July 2022 was correct and paragraph 44 needs to be amended to make clear that the claim in mistake is against the Defendant only.

The dol amendments

21.      Although the misrepresentation pleading covers in excess of eleven pages and is detailed as to what it is said the various parties did and said and why it was alleged to be untrue, the dol allegation is one paragraph (numbered 55 in the draft) in length and says, as amended by the Master:

"The Plaintiffs were actively misled by each of Mr Patel and Vimal in the matter set out in and under section E hereof above.  They were also passively misled by each of Mr Patel and Vimal in that no action was taken by any of them to correct the Inducing Representations and the Implied Value Representation."

22.      The Master says in paragraph 87 of his judgment that the claim in dol that he has permitted is "strictly limited to the claims based on this misrepresentation" and "does not allow the Plaintiffs to make allegations of fraud generally by in effect treating dol as replacement for the word fraud.  I rejected the claims in fraud in the July judgment, which has not been appealed."  Whether the Master was correct as a matter of law in attempting to limit the application of the meaning of 'dol' as he purported to do, his ruling demonstrates that the first sentence of paragraph 55 is otiose as it adds nothing to the plea in misrepresentation.  As to the final sentence of paragraph 55, which refers to Mr Patel and Vimal passively misleading the Plaintiffs, what this means is somewhat mysterious and falls foul of the requirement to specifically plead what is relied on in fraud and / or dol.  Furthermore, when we drill down to what is said in relation to "Inducing Representations", that consists of positive alleged representations by Mr Patel and Vimal on a repeated basis (see paragraphs 29 and 31 of the draft pleading) so there would appear to be no room for passively misleading, and the "Implied Value Representation" was made by the Defendant (paragraph 34) and it was the Defendant (paragraph 40.7) who knew or "absent reckless indifference" would have known that the First Plaintiff was concerned to understand the value of the Trusts.  In what circumstances the alleged passive misleading arose is a matter of speculation.  Accordingly this amendment is disallowed.

23.      It may be that the second sentence of paragraph 55 has already been disallowed as a consequence of what the Master said at paragraph 96 of his judgment, but it remains in the marked up copy of the pleading, as amended, which was provided to me and uploaded to the electronic hearing bundle. 

The dishonest assistance amendments

24.      I have read the Master's reasons for permitting this amendment and in the circumstances, having agreed that the misrepresentation amendments can be made, I agree that the particulars of dishonest assistance at paragraph 51 may be pleaded.

The conspiracy amendments

25.      The particulars of dishonest assistance which I have allowed re-plead / cross-refer as supporting material, including extensive sections of the pleading; the alleged misrepresentations, the alleged falsity of the "Inducing Misrepresentations" and "Implied Trust Value representation", the invalidity of the disclaimers and indemnity executed by the Plaintiffs and their exclusion from the Trusts.  The plea of conspiracy is plainly a dishonest conspiracy (paragraph 107 of the January 2023 judgment).  However, how it is alleged that the First and Sixth Third Parties are said to have 'combined to use unlawful means' is not particularised in any way nor is the overarching conspiracy at paragraph 42 particularised.  Accordingly this amendment is rejected.

Next steps

26.      I invite the parties to provide a clean and marked up copy of the Amended Order of Justice in its finalised form within fourteen days of this judgment being finalised. 

27.      Although the parties are at liberty to argue the point, in my view the costs of and incidental to the appeal should be reserved to the trial judge.

28.      As noted above, in Hervé v Jersey Growers the Court said 'A party seeking to introduce an allegation of fraud for the first time by amendment will only be allowed to do so in exceptional circumstances and at an early stage and the Court will require an explanation of why the allegation was not made from the outset'.  This principle must now be to the fore in this case.  When the Master said at paragraph 136 of his July 2022 judgment that he did not "regard either the application before him or one based on his judgment, if promptly made, as being late" the position has now changed.  Any further applications to amend the pleadings (save any amendments directly consequent upon this decision) will be regarded as late and likely to meet considerable judicial resistance. 

Authorities

Patel v JTC Trust Company Limited and Ors [2023] JRC 009. 

Patel v JTC Trust Company Limited and Ors [2022] JRC 089. 

Café de Lecq v Rossborough (Insurance) Brokers Limited [2011] JLR 31. 

Cook v Clapham [2022] JRC 210. 

Cunningham v Cunningham [2009] JLR 227. 

Makarenko v CIS Emerging Growth Limited [2001] JLR 348. 

Brakspear v Nedgroup Trust (Jersey) Limited [2018] JRC 121. 

Three Rivers v Bank of England [2003] 2 AC 1. 

Hervé v H & H Jersey Growers [1994] JLR Note 5a. 

Steelux Holdings Limited v Edmonstone [2005] JLR 152. 

Hore v Valmobida [2022] JRC 202. 

Patel v JTC Trust Company Limited and Ors [2022] JRC 150