Jersey Unreported Judgments

Interim payment decision - reasons for varying a stay of enforcement of an interim costs award

[2024]JRC003

Royal Court

(Samedi)

6 January 2024

Advocate M. L. A. Pallot for the Plaintiffs.

Mr Kevin Doyle, Director, for the Defendant.

judgment

the COMMISSIONER:

Introduction

1.        This judgment contains the reasons for my decision in respect of an application by the Defendant that I stay enforcement of the interim payment awarded by my judgment dated 23 November 2023 reported at Hard Rock Limited and Anor v HRCKY Limited [2023] JRC 236 ("the Interim Payment Judgment").  I also refer where relevant to the substantive judgment in this matter reported at Hard Rock Limited and Anor v HRCKY Limited [2023] JRC 169 ("the Substantive Judgment").

2.        At paragraph 39 of the Interim Payment Judgment, I stayed enforcement of the interim payment I assessed until fourteen days after any notice of appeal filed by the Defendant.  I further noted that if any application was made to extend the stay either by the Defendant or by Mr Doyle, enforcement was stayed until determination of that application. 

3.        By an email dated 30 November 2023, Mr Doyle sought a stay.  In support of his application, he filed an affidavit sworn on 30 November 2023.  He also relied on three exhibits containing:

(i)        His Notice of Appeal;

(ii)       HRCKY's amended losses and loans as at November 2023; and

(iii)      An updated loan schedule.

4.        On 6 December 2023, Advocate Pallot, for the Plaintiffs, filed written submissions opposing the application for an extension of time. 

5.        In his twenty-third affidavit, Mr Doyle, in section 2, explained that he was seeking legal advice on the merits of an appeal.  This led him to state the following:

"Being very concerned regarding the legal firm's lack of proper evaluation before issuing a note on the merits of an appeal I drafted and filed a Notice of Appeal to meet the deadline of 16th November. Consequently I am committed to providing detailed written contentions and to personally present the appeal to the Court unless I can acquire the services of a reliable advocate and obtain sufficient funding to pay them."

6.        In part 3 of his affidavit, Mr Doyle stated the following:

"During the entire ten year term of this case, I have been unable to devote time to other projects in order to generate income.  Between 2013-17 we sold our investment assets in order to fund the case and to exist.  In 2015 Butterfield Bank forced the sale of our home after calling in my personal guarantee which had supported loans for HRCKY and ITL.  This virtually wiped out our remaining assets, but the impact of Butterfield's decision stretched further as my wife and Keith were also named as co-owners of our home which resulted in their having to sign the sealed consent order which was then published by offshore alert, with the result that it badly effected Keith's standing with banks and obviously my standing with local banks was in shreds."

7.        Paragraph d of the same section complained about the Plaintiffs dragging out the case "with the same intent of keeping the evidence regarding their loss-making restaurants from the Court".  Paragraphs f, g and h of his affidavit contained the following:

"f.        Since 2021 funds borrowed from both HFL and 'B' have increased by over $1.4 million and the current exposure to these lenders is currently in the region of $9.2m excluding interest.  Of note is that such records of losses and loans were last provided in the Borrelli Third Addendum Report of April 2021 where it lists total loans to fund legal fees at $1,478,003 and this amount has increased to $2,912,853 (including app. $200,000 for living expenses, which requires correction).  Funds borrowed from HFL have increased from $513,361 in 2021 to $1,454,599 in November 2023 and funds borrowed from 'B' have increased from $614,250 in 2021 to $1,152,115 in November 2023.

g.        The tendency with HFL and 'B' is to meet loan requirements by splitting the amount lent on a 50:50 basis of which examples are best highlighted in HFL's document titled '2023.11.06 - HFL KD loan (2022) updated loan schedule' (Exhibit #3) which includes an amount of $120,180 dated 11 April 2023 representing 50% of the total up-front exorbitant cost of $240,360 which Kroll demanded had to be paid otherwise Mr Borrelli would not attend at Trial.  There are other amounts in the HFL loan Schedule such as a series of payments each of $7,000 which represent 50% of monthly loans given to me in order to meet living requirements.  Some such loan amounts have been added into other recorded transfers relating to legal fees and I intend to construct a report to separate these amounts.  Unfortunately lender 'B' does not retain his records at the same level of detail as provided by HFL so I will also construct a separate record of his loans relating to legal fees and living expenses.

h.        In order to save cost and minimise borrowings, I have acted as LIP seven times largely with the assistance of my son Keith Doyle who has undertaken research and has written the majority of skeleton arguments and the opening and closing arguments."

8.        Finally in part 4, Mr Doyle confirmed it was not possible for him to pay the Plaintiffs' interim costs by borrowing funds from HFL or B.

9.        Exhibit 2 relied on by Mr Doyle was an updated summary of a schedule of consequential damages attached to the amended third addendum report of Mr Borelli, which referred to various property sales and rent paid, as well as describing various loans taken out by Mr Doyle to fund litigation. 

10.     Exhibit 3 was a loan schedule from Harbour Finance which set out advances made by Harbour Finance Limited to Mr Doyle for Loan 3.  The total of sums advanced in 2023 was just over US$200,000. 

11.     The Plaintiffs were critical of Mr Doyle's affidavit for not setting out full details of Mr Doyle's assets and liabilities.  They observed that regular payments had been made to Mr Doyle in 2023 from Harbour Finance and also that further funding had been received from Lender B, but there was no separate record of these loans even though Mr Doyle had stated in paragraph 3g of his twenty-third affidavit that he would provide one.

12.     The Plaintiffs also argued that the stay served no purpose because Mr Doyle had now made it clear, as set out at paragraph 5 above, that Mr Doyle was going to pursue the appeal.  This meant the stay served no purpose because there was no evidence of impecuniosity which might prevent the appeal being pursued.  Rather, Mr Doyle's decision to draft the Notice of Appeal himself appeared to have been based on his view of the reliability of counsel.  Whether or not an appeal was to be pursued therefore did not, it was contended, depend on whether or not Mr Doyle was able to obtain funding.  It was not legitimate to extend the stay in such circumstances.

13.     The Plaintiffs also maintained their position that the prospects on appeal were fanciful at best.

14.     In relation to these arguments, I was still not satisfied that I had received full explanation of Mr Doyle's position as requested in the Interim Payment Judgment.  While Mr Doyle states that the effect of the case was virtually to wipe out his remaining assets, that is not the same thing as a full affidavit.  The detailed schedule of loans at exhibit 3 also begs a number of questions as to how these funds were spent.  Nor has Mr Doyle explained the detail of what funds were borrowed from Lender B.  It is also not clear why the loans from Harbour Finance were being used to meet living requirements.

15.     I also accepted the Plaintiffs' criticism that whatever his financial position, Mr Doyle will pursue the appeal to the Court himself.  It is not quite clear what he means by a "reliable advocate" referred to in the extract at paragraph 5 above.  I therefore agree with the Plaintiffs that while Mr Doyle's position may be difficult at present, it does not appear to be such that the appeal will be stifled. 

16.     Accordingly, I lifted the stay to allow the Plaintiffs to enforce the interim payment. 

17.     My decision to lift the stay was however subject to one qualification namely that the Plaintiffs were not permitted to take any steps to either subject HRCKY or Mr Doyle to any form of insolvency regime.  This was because placing HRCKY into some form of liquidation or bankrupting Mr Doyle might have the effect of preventing HRCKY and Mr Doyle from pursuing the appeal.  This could have the effect of stifling the appeal that HRCKY and Mr Doyle wish to pursue.  The balance of advantage in maintaining the stay to prevent any form of insolvency lay with HRCKY and Mr Doyle, rather than the Plaintiffs.  The Plaintiffs are therefore free to enforce the interim payment to attempt to seize any assets they are able to do so of HRCKY or Mr Doyle but not to attempt to subject HRCKY or Mr Doyle to any form of insolvency regime.

18.     In relation to the merits of the appeal, I was not persuaded by these grounds for the following reasons:

(i)        In relation to the one business / two business argument, the fact that two licences were granted does not alter the conclusions reached at paragraphs 233 to 241 of the Substantive Judgment.

(ii)       In relation to damages sought not being pleaded, notwithstanding this, the Court in the Substantive Judgment dealt with the question of loss at paragraphs 346 to 353, including agreeing with HRCKY's expert, Mr Borelli, that the correct approach to take was basis 4 set out in Table 25 of his amended third addendum.  This also addresses ground 3 of the appeal.

(iii)      In relation to the Marable written projections, Mr Goodwin's reservations about Mr Marable's projections were taken into account in the Court's decision (see paragraph 190 of the Substantive Judgment).

(iv)     Likewise, the question of Mr Marable's dishonesty in relation to the oral representations recognised that Mr Doyle did say that Mr Marable was dishonest in withholding information about the profitability of the corporate cafes (see paragraph 263 of the Substantive Judgment).

(v)      In relation to the 2006 Strategic Report, the findings at paragraph 310 of the Substantive Judgment were relevant to whether or not Mr Doyle and HRCKY would have entered into the franchise agreement.  In my view, this was a conclusion that the Court at first instance, having seen all the witnesses, was entitled to reach.  The fact that Mr Doyle did not, on his evidence, read the Strategic Report until 2012 otherwise does not matter because the Court ruled that the proceedings were within time.  The Court's findings at paragraph 310 of the Substantive Judgment do not affect this conclusion. 

(vi)     In relation to the UFOC, the Notice of Appeal did not deal with the Court's findings at paragraphs 55 and 56.

(vii)     In relation to cause of losses, I was not persuaded that Mr Doyle's Notice of Appeal met the threshold to persuade the Court of Appeal to interfere with the Substantive Judgment. 

(viii)    In relation to Ground 9 of the Notice of Appeal on the questions of law raised, Mr Doyle has merged two different principles.  The issue of the effect of long-term relational contracts was set out in the context of the application of an implied term of good faith to such contracts.  However, that principle applies once such a contract has been agreed.  The notion of dol par reticence in arises prior to the formation of a contract.  The Substantive Judgment concluded that such a notion should not apply to any Jersey contract, but if the Court's judgment was wrong on that conclusion, it should certainly not apply to commercial contracts (see paragraph 118).  The Franchise Agreement was clearly such a contract.

19.     While ultimately the question of whether these grounds are sufficient to persuade the Court of Appeal to reach a different conclusion to the Substantive Judgment is a matter for the appeal, in my judgment the grounds of appeal have a limited prospect of success which was also a factor I took into account in limiting the stay to prevent insolvency proceedings being taken by the Plaintiffs, but otherwise allowing the Plaintiffs to enforce the benefit of the interim payment award.

Authorities

Hard Rock Limited and Anor v HRCKY Limited [2023] JRC 236. 

Hard Rock Limited and Anor v HRCKY Limited [2023] JRC 169.