Before : |
M. J. Thompson, Esq., Commissioner, sitting alone |
Between |
Dr Gail Cochrane (On her own account and as sole shareholder of Orb A.R.L.) |
Representor |
And |
(1) Harbour Fund II LP |
Respondents |
|
(2) The Viscount of the Royal Court of Jersey |
|
IN THE MATTER OF THE DÉSASTRE OF DR GAIL COCHRANE
AND IN THE MATTER OF THE DÉSASTRE OF ORB A.R.L.
AND IN THE MATTER OF ARTICLE 7 OF THE BANKRUPTCY (DÉSASTRE) (JERSEY) LAW 1990
Advocate J. D. Garrood for the Representor.
Advocate E. B. Drummond for the First Respondent.
Advocate O. J. Passmore for the Second Respondent.
judgment
the Commissioner:
1. This judgment contains my reasons for granting a stay of the Representor's application to recall her désastre and that of Orb A.R.L ("Orb"). The stay I ordered was until the expiry of twenty-eight days after final resolution of an application by Harbour Fund II LP ("Harbour") to the English High Court for declaration as to the status of the English High Court's judgment in Serious Fraud Office and Others v Litigation Capital and Others [2021] EWHC 1272 (Comm) ("the English Judgment"). I explain later in this judgment the relevance of the English Judgment to the Representor's application.
2. On 21 November 2023, the Representor issued a Representation seeking declarations that the orders for désastre made against her and Orb on 24 November 2016 be recalled, together with consequential orders.
3. The original applications for declarations of désastre were made on the application of Harbour in reliance on (1), a funding agreement governed by English law dated 10 July 2013 made between Harbour and various entities including Orb, ("the Harbour Funding Agreement") and (2), a contract of guarantee made between Harbour and the Representor whereby she guaranteed the obligations of Orb under the Harbour Funding Agreement ("the Harbour Guarantee").
4. As part of the application to recall her désastre and that of Orb, the Representor argued that the Harbour Funding Agreement was unenforceable by operation of Section 58AA of the UK Courts and Legal Services Act 1990 and The Damages-Based Agreements Regulations (SI 2013/609). In particular, the Representor relied on the decision of R (On the Application of Paccar Inc v Competition Appeal Tribunal) [2023] 1 WLR 2594, where the UK Supreme Court determined that a litigation funding agreement was unlawful and unenforceable on the basis that it was a damages based agreement which failed to comply with Section 58AA. It is the Representor's case that the Harbour Funding Agreement was caught by what was referred to in the documentation before me as the "Paccar" judgment.
5. More detailed background leading to the Royal Court granting the declarations of désastre against the Representor and Orb was set out in the Royal Court's judgment reported at Harbour v Orb [2017] JRC 007, which in turn referred to an earlier judgment, Representation of Harbour II LP [2016] JRC 171. It is not necessary for the purposes of this judgment to set out the background leading to the désastre orders being made, save to note that the background is complex. This complexity has been confirmed by subsequent judgments of the Royal Court dealing with applications for the Royal Court to issue letters of requests -“ see Representation of Viscount re Cochrane and Orb ARL [2017] JRC 025, and an application by the Viscount seeking authority to enter into settlement arrangements -“ see Viscount v Smith v Cochrane and Orb ARL [2020] JRC 043. In this latter case, the Court described the background of this matter as being "overwhelmingly complex".
6. This matter first came before me on 6 February 2024 when I made various orders requiring the Representor to give notice of the Representation to the persons identified on the list of creditors, including Harbour. I further gave directions for the filing of evidence and for the fixing of a date. I also convened the Viscount for reasons set out in a judgment reported at [2024] JRC 043.
7. The matter came back to me on 25 June 2024 when the Representor, the Viscount and Harbour appeared. On 18 June, I had been presented with a summons by Harbour seeking a stay of the désastre which had been issued on 18 June 2024.
8. On 24 June, I therefore issued the following directions:
"2. the First Respondent (Harbour) shall file further evidence about the proceedings it intends to bring, including a copy of the intended proceedings and any opinion on the merits, the latter for the court only, by 5 pm on 2 August 2024;
3. the Second Respondent (the Viscount) shall, by 5 pm on 9 August 2024, provide a summary of the general position as known to the Second Respondent in respect of assets vested in the Viscount under the désastre order made in 2016, together with the Second Respondent's current position in respect of all claims made before it;
4. the Representor shall file evidence in reply by 5 pm on 10 September 2024."
9. In a file and parties judgment issued on the same day, I stated the following at paragraph 3:
"3. For this court to determine whether it should exercise any discretion vested in it, it needs to see the application and counsel's opinion in support of it. In respect of the latter, in the first instance that opinion should be provided to the court only, because Dr Cochrane is potentially an adverse party to those proceedings in England. However, Dr Cochrane is free in her evidence in reply to advance her own opinion on the merits of the proceedings, which she is entitled to see. I wish to also make it clear that the court also needs to be addressed on its jurisdiction to grant any stay of the recall proceedings when the stay application comes to be determined."
10. The application by Harbour was supported by an affidavit of Adam Zoubir, an English barrister and partner at the law firm of Harcus Parker Limited, English Solicitors to Harbour. Mr Zoubir, in his affidavit at paragraphs 16 to 19, summarised the proceedings in England that led to the English Judgment as follows:
"16. In 2017, Harbour advanced a claim in the English Proceedings (which had been commenced by the SFO) to establish its proprietary rights under the Funding Agreement to various assets that had been the subject of, or related to, the Orb Litigation. Harbour was one of a number of parties to the English Proceedings (the total number exceeded 40).
17. In September 2019, certain of the parties to the English proceedings , namely Harbour, the SFO, Stewarts Law, The Viscount of the Royal Court of Jersey (qua Orb) (the "Viscount"), the Enforcement Receivers and the Joint Liquidators (together, the "Settlement Parties") entered into a settlement agreement, pursuant to which they agreed to share the fruits of the English Proceedings to the extent that they succeeded at the Directed Trial.
18. The Directed Trial commenced on 19 January 2021. Shortly thereafter, on 27 January 2021, Dr Cochrane, Dr Smith and a group of related parties entered into a settlement with the Settlement Parties, (the "LCL Settlement Agreement"), provided undertakings to the Court to assist the Settlement Parties (recorded in an order made on 4 February 2021) and discontinued their claims taking no further part in the Directed Trial.1 (pages 370 - 462).
19. On 16 May 2021, the Directed Trial Judgment was handed down. It runs to 218 pages and covers a multitude of issues, some of which are not relevant for the purposes of the Stay Application. At paragraph 3 of the judgment, the judge describes this matter as a "dispute of labyrinthine complexity". However, it should be noted that the claims advanced by Harbour and the other Settlement Parties succeeded in all material respects."
11. He then summarised the findings of Foxton J in the English Judgment, noting that the claims advanced by Harbour and the other settlement parties succeeded in all material respects. He therefore noted that the judge made the following findings:
"1 The shares of Orb were found to be the realisable property of Dr Smith and are therefore subject to the SFO's Confiscation Order; and
2 More generally, the judge found that Dr Cochrane held the shares in the Non-Arena Companies (including Orb), for Dr Smith, as his nominee."
12. He further drew my attention to paragraph 606(iii) of the English Judgment which stated as follows:
"Dr Cochrane has on a number of occasions proclaimed that she is a "busy GP with two young daughters and no real business experience", with minimal knowledge of Dr Smith's business activities. Dr Smith has himself accepted that Dr Cochrane lacked "any independent experience of the world of business, the world of property deals". The vast network of companies which she apparently owns, and the complex web of dealings in which those companies have engaged, strongly support the suggestion that her involvement is nothing more than as a cipher, and that Dr Smith - with his extensive track-record of complex, contrived and dishonest business dealings - is "calling the shots"."
13. He also explained the following at paragraph 20.3 of his first affidavit:
"20.3 Separately, Foxton J found that 50% of Bodega (the company which owns Steephill) were held by their legal owner (Dr Cochrane) on the terms of the Harbour Trust in respect of which Foxton J subsequently, on 14 December 2022, appointed receivers on the application of Harbour and others and removed the Orb Claimants as trustees (in a further significant judgment on this case handed down on 30 November 2022). The remaining 50% is vested in the Viscount as administrator of Dr Cochrane's désastre."
14. He then went on to explain the order that the judge made following the English Judgment. In relation to Harbour, the following orders were made:
"4. The interests in the following assets are held by their legal owners on the terms of the Harbour Trust and are to be applied and apportioned between the beneficiaries, namely Harbour, Orb arl, and Messrs Thomas and Taylor, in accordance with those terms (save as set out below) -
a. The shares in the Arena Companies (as set out in Schedule 2 to this order);
b. Such future distributions as may be paid or payable to the shareholders of the Arena Companies;
c. The traceable proceeds of the IOM Settlement Cash, but in particular -
i. An equitable interest of 100% in Flat 24 Hamilton House;
ii. An equitable interest in 50% of the shares in Bodega;
iii. An equitable interest of 100% in Flat 2 Hamilton House;
iv. An equitable interest of 15% in Flat 22 Hamilton House;
v. An equitable interest of 20.26% in the headlease / leasehold of Hamilton House and Flats 1, 10, and 14 Hamilton House (for Flats 10 and 14 Hamilton House, taking effect by way of a first ranking charge arising by way of subrogation to discharged security);
vi. An equitable interest of 16.62% in Flats 11, 21 and 23 Hamilton House;
vii. An equitable interest of 10% in Flat 17 Hamilton House
d. The traceable proceeds of the £23,921,641.59 paid to Candey LLP which derived from the $43.5m Qatar Settlement Payment, but in particular -
i. An equitable interest of 90% in Flat 12 Hamilton House (reflecting the balance of the purchase price);
ii. An equitable interest of 88.05% in Montagu Square (reflecting the balance of the purchase price); subject to such claims as remain available to Mr Pelz following the findings in the Trial Judgment as set out below at paragraph [23] (for the avoidance of doubt, this qualification applies only to the assets listed at items 2.d.i and ii above).
5. Any share of the proceeds under the Harbour Trust which is attributable to Orb and Messes Thomas and Taylor shall be adjusted as follows -
a. The entitlement of Orb and Messrs Thomas and Taylor (after payment out of the prior items in the waterfall under the Harbour Trust) shall first be determined without any adjustments, based on the following percentages - 62.5% to Orb, 18.75% to Mr Thomas and 18.75% to Mr Taylor;
b. Thereafter -
i. Mr Thomas is required to give credit in the sum of £1,010,097.75 and his entitlement shall be reduced accordingly;
ii. Mr Taylor is required to give credit in the sum of £1,546,998 and his entitlement shall be reduced accordingly.
c. For the avoidance of doubt, no payment shall be made in respect of the adjusted shares until after the amounts secured by the Stewarts lien set out in paragraph [8] have been fully satisfied."
15. In relation to assets held by the Viscount, the following orders were made:
"14. The Jersey Properties, namely -
a. 1 Moedwill Cottage (Les Vaux Cottage), Les Grand Vaux, St Saviour, Jersey JE2 7NA;
b. 2 Moedwill Cottage (Les Vaux Cottage), Les Grand Vaux, St Saviour, Jersey JE2 7NA;
c. Montrose, Les Grand Vaux, St Saviour, Jersey JE2 7NA; and
d. Antoinette Gardens, 49 Langtry Gardens, St Saviour's Hill, St Saviour, Jersey, JE2 7AG,
are vested in the Viscount of the Royal Court of Jersey, in her capacity as the administrator of the en désastre (bankruptcy) proceedings of Dr Cochrane, free from adverse proprietary rights, save in respect of the unchallenged life interest in Antoinette Gardens, which is unaffected by this order.
15. The equitable interest in the 50% of the shares in Bodega vest in the Viscount of the Royal Court of Jersey in her capacity as administrator of the en désastre of Dr Cochrane, free from adverse proprietary rights."
16. It is also appropriate to refer to paragraph 16 which stated the following:
"16. With the exception of the shares in Bodega, Dr Gerald Martin Smith holds 100% of the equitable interest in the shares of each of the Non Arena Companies (as set out in Schedule 2 to this order)."
17. Schedule 2 contained a list of the Arena Companies and the Non Arena Companies. The Non Arena Companies included Steephill Management Limited and Orb A.R.L.
18. The effect of these complex orders was that Harbour was, under the English Judgment, entitled to recover monies due to it out of the assets listed in paragraph 4 of the order referred to above.
19. Monies due to Orb belonged to Dr Smith and therefore were subject to seizure by the Serious Fraud Office.
20. The above background led to Mr Drummond making the following submissions.
21. Ever since Foxton J granted the English Judgment, Dr Smith and the Representor and others had been trying to frustrate the English Judgment.
22. He also emphasised that Dr Smith had been convicted for fraud for a third time on 19 July 2024. While this conviction was unrelated to the present application, his ongoing dishonesty was relevant to Dr Cochrane's involvement as being "nothing more than a cipher" as observed by Foxton J referred to at paragraph 12 above.
23. Notwithstanding the English Judgment, in January 2024, Dr Cochrane applied to the English High Court seeking to amend the order set out at paragraph 16 above in relation to Orb. By this application, she sought an order that Orb be removed from the list of Non Arena Companies. Foxton J, by an order dated 22 January 2024, refused this application on the basis that it was totally without merit, and he re-emphasised his findings in the English Judgment in respect of Orb. This application was said to be illustrative of the Representor not accepting the findings of the English Judgment in relation to Orb.
24. In addition to the Representor's application being tactical, Advocate Drummond also observed that the issues that the Representor wanted to determine in Jersey had also been raised before the English Court by another associate of Dr Smith. Advocate Drummond therefore referred me to correspondence between a Mr Thomas, and Harcus Parker for Harbour. In this correspondence, Mr Thomas raised essentially the same arguments as those being raised by the Representor in her application to recall her désastre and that of Orb.
25. Furthermore, Harbour had now issued an application before the English Court. The details of this were set out in the second affidavit of Mr Zoubir, together with a short affidavit from Victoria Ramos, an employee of Bedell Cristin, which exhibited a final copy of the English application filed on 31 October 2024 before the English Court. Harbour therefore contended that England was the natural jurisdiction for determination of arguments connected to the English Judgment and the potential impact of the Paccar decision. This was because the arguments related in large part to the validity and enforceability of existing findings made in the English Judgment.
26. In summary, what was sought by Harbour was set out in the twentieth witness statement of Mr Zoubir filed with the English Court as follows:
"5.1 An order or declaration to the effect that Dr Cochrane is not permitted to seek to challenge the outcome of the Directed Trial (to include the Court's findings in relation to the ownership of Orb, and its conclusions concerning Harbour's entitlements based on its Investment Agreement), by reason of her signing the LCL Settlement Agreement (addressed further below);
5.2 An order or declaration to the effect that any attempt now made (whether by Dr Cochrane, Mr Thomas or anyone else) to raise arguments challenging Harbour's entitlements as found in the Directed Trial, or otherwise seeking to disturb the outcome of the Directed Trial, is an abuse of process or otherwise barred by doctrines of estoppel or similar principles, or is time barred; and/or;
5.3 An order or declaration rejecting any argument to the effect that the Harbour IA is unenforceable by reason of the decision of the Supreme Court in R (on the application of PACCAR Inc and others (Appellants) v Competition Appeal Tribunal and others (Respondents) [2023] UKSC 28 (the "PACCAR Decision"), or in the alternative that it is only unenforceable in part."
27. The arguments were expanded upon in more detail in Mr Zoubir's second affidavit at paragraph 22.
28. In relation to these arguments, Advocate Drummond drew to my attention the fact that the English Court might take the view that the English Judgment was no longer susceptible of challenge, subject to any application for permission to appeal out of time being made by either Mr Thomas or the Representor.
29. By the time the matter came before me, a directions hearing was likely to be listed in January 2025 and Harbour's position was that a final hearing was expected to take place in the second quarter of 2025.
30. In relation to the position in Jersey, Advocate Drummond, in his written skeleton, firstly set out the general principles applicable on a recall application. In particular, he emphasised that the position was to be assessed at the time of the recall application, and if an order was made the effect was prospective only.
31. Advocate Drummond then referred to what property of the Representor was vested in the Viscount at the time of the recall application. Harbour's position was the total value of the Representor's assets was £220,952.78 by reference to paragraph 2.4 of the second affidavit of Advocate Harris as Viscount, sworn on 23 August 2024.
32. He also noted that the Viscount's first affidavit at paragraph 4.4, noted that a number of assets, including 50% of the shares in Bodega, were vested in the Viscount pursuant to the saisie and therefore did not currently vest in the Viscount as administrator of the désastres.
33. As to who were creditors of the Representor, this had not yet been determined by the Viscount and would not happen until the asset position had become clear.
34. He also observed that on the recall application, there was an issue as to how the Royal Court should assess claims that had not yet been adjudicated. This led him to submit that if a merits test applied at all, the burden of proof lay on the Representor, and it was not sufficient for the Representor simply to list claims as having no value.
35. The only issue at this stage, whether there was an issue, concerned the claim by Harbour. If Harbour was successful in its English application, then, on any view, the applications to recall the declarations of désastre would then fail.
36. In relation to jurisdiction to grant a stay, Harbour's position was that there was no doubt that the Royal Court had an inherent jurisdiction to do so.
37. Furthermore, by analogy, if the Royal Court had the power to stay désastre proceedings as noted in Blue Horizon [1994/102], then the Court must have power to stay a recall application which was a lesser act than staying désastre proceedings completely.
38. In relation to granting a stay, the relevant legal principles were considered in Adeem v Al-Huamaidhi [2022] JRC 038 at paragraphs 69 and 70.
39. It was Harbour's case that because the application in England raised similar or related issues between the same or related parties, a stay to allow a resolution of those issues would better serve the interests of justice, in particular where the foreign proceedings would have a significant effect on the future of the Jersey proceedings.
40. To the extent it was argued that a stay was only granted in rare and compelling cases, which was touched upon in the Adeem decision at paragraphs 71 to 74, Advocate Drummond's position was that the test was whether a stay was in the interests of justice. However, if the threshold required rare and compelling circumstances, they were still met in this case for the following reasons:-
(i) All the points requiring resolution were points of English law and procedure;
(ii) the points of English law raised were not straightforward and would require expert evidence on English law if the matter were to be heard in Jersey. This would inevitably make any hearing longer than any hearing in England if, in particular, it was heard by Foxton J as appeared likely;
(iii) there was a risk of duplication if a stay was not granted;
(iv) The funding agreement was also governed by English law and it was therefore more straightforward to have the English Court determine that, rather than the Royal Court relying on English law expert evidence;
(v) the issues were going to be determined in England in any event; and
(vi) there was no prejudice to the Representor to have the issues determined in England.
41. In relation to the suggestion by the Representor that the support of other creditors to Harbour's application had been solicited, or that they were acting for a collateral purpose, there was no evidence to support such an assertion. To the extent that the Representor disputed that certain entities were creditors, Advocate Drummond contrasted her assessment with that of the Viscount.
42. Advocate Drummond was also critical of the Representor for trying to rely on the decision of the Supreme Court in the Paccar case. He described it as a windfall for the Representor but contended that the arguments now being raised could have been raised in the English proceedings leading to the English Judgment. Again, this was a matter for the English Court to determine.
43. Advocate Garrood for the Representor firstly accepted that it was a matter for another day as to how the balance sheet test should be applied.
44. He contended that there was no power to stay the Representation on the basis of any statutory power, on forum grounds, on case management grounds, or because there was a test case pending or to permit settlement under a mediation process.
45. He therefore described the central issues as being:
(i) Whether as a matter of Jersey law in November 2016, Harbour was a creditor of the Representor and Orb; and
(ii) Whether, had the Court known (as Harbour knew) that the Harbour Funding Agreement was unenforceable, the declarations of désastre would not have been made.
46. The Jersey Court was best placed and the right place to determine whether or not its previous decision was correct, or whether or not Harbour was not a creditor and had never been a creditor.
47. This was not a case of subverting the English Judgment but rather determining whether Harbour had ever been a creditor.
48. In relation to why in her third affidavit the Representor said that she owned 100% of the shares in Orb, this was because she was the registered shareholder. In her fourth affidavit she accepted, at paragraph 25, that Dr Smith owned 100% of the equitable interest in the Non Arena Companies including Orb. However, her position was that the English Judgment did not determine who owned the assets of the Non Arena Companies.
49. The critical issue was that if the Harbour Funding Agreement was illegal, then this would be material to the recall application. Advocate Garrood accepted that if the agreement was not illegal, then the recall application would fall away.
50. To the extent that it was argued that matters could have been pleaded in the English Proceedings, this was a matter that could be determined in Jersey. In the funding agreement at Clause 3.2(d) Harbour warranted that the obligations that it was assuming under the funding agreement were "legal, valid, binding and enforceable". The reason why this issue needed to be determined in Jersey was because Harbour had chosen to come to Jersey. The Representor's position was that Harbour always knew that the Harbour Funding Agreement was unenforceable and so had either misled the Jersey Court or at least were in breach of covenant.
51. Advocate Garrood was also critical of the delay in Harbour issuing proceedings. He described the justification advanced that proceedings could not be issued until correspondence from Mr Thomas had been replied to as curious.
52. There was also no need to go back to Foxton J; Harbour could simply have applied for a declaration about the agreement that they had signed. All that was necessary was a construction of the agreement entered into; it was not necessary to go back to the trial judge. The issue was however now one that was before the Jersey Court and so a stay was not necessary.
53. The LCL settlement agreement, referred to at paragraph 17 of the first affidavit of Mr Zoubir (see paragraph 10 above), was also entered into on the basis of mistake, which was something that Dr Cochrane was entitled to argue. Any provision in the LCL settlement agreement referred to at paragraph 18 of the first affidavit of Mr Zoubir which prevented the Representor from challenging Harbour's standing as a creditor, was capable of being struck down as unenforceable because it denied the Representor a legal remedy.
54. To the extent that Harbour were relying on any limitation points in England, Advocate Garrood contended that a limitation question did not arise because the Harbour Funding Agreement was never enforceable.
55. To the extent that Harbour were arguing that part of the agreement could still be enforceable rather than the whole agreement, the Jersey Court was also capable of dealing with that argument.
56. Advocate Garrood also emphasised that the Representor did not have legal representation in the English proceedings, although Harbour had conceded she had standing to bring arguments. In Jersey, by contrast, she had the benefit of legal aid.
57. The arguments being advanced by Mr Thomas were not the same, albeit they overlapped.
58. In relation to timing, Advocate Garrood's position was that the matter could be argued in Jersey more quickly than in England.
59. In relation to the relevant legal principles, he contended that the Court did not have jurisdiction to grant a stay. In the alternative, if there was a power to stay on case management, then that power should not be exercised.
60. In relation to the other creditors who supported Harbour, Advocate Garrood questioned their interests and motivations in supporting a stay because it was not in their interests for Harbour to be included as a creditor. If the désastre were recalled, they could bring their claims in short order.
61. Finally, he emphasised the prejudice that his client had suffered due to being bankrupt for nine years. His client was not trying to delay matters and had no interest in doing so.
62. Advocate Drummond in reply firstly submitted that, in considering whether or not to order a stay, if the Court felt it had to determine at this stage the applicable test to recall a désastre, the test to be applied was at the date of the application not whether the order should have been made in 2016. The Representor had already tried to challenge the granting of a désastre by an application out of time to the Court of Appeal which failed. Advocate Drummond accepted that applying the recall test, the Representor was entitled to say that nothing was due because nothing had ever been due. This concession still did not mean that the Court was looking at whether or not the order made in 2016 was right.
63. The Representor was not an Orb claimant. Those claimants were Orb itself, Mr Taylor and Mr Thomas.
64. There was no evidence to show that Harbour knew that the funding agreement was unenforceable. Harbour's position was that they advanced £5,000,000 to fund litigation and, if successful, they expected to get their money back together with an appropriate return. That was the essence of the agreement reached.
65. It was not clear how any contracting out argument was being deployed. In any event, the English Court was best placed to determine that. This argument could also have been raised before the English Court leading to the English Judgment. This was why the English Court was best placed to consider such assertions.
66. The application before the English Court would deal with both procedural failings but also the underlying policy argument about the enforceability of an English law agreement.
67. The question of severance was not dealt with in the Paccar judgment. This meant that the issue had to be determined as a matter of English law and again pointed towards the English Court.
68. Advocate Drummond also re-emphasised the findings at paragraph 606 of the English Judgment, that the Representor was a cipher for Dr Smith and therefore the resistance to a stay was Dr Smith trying to circumvent the effect of the English Judgment.
69. In relation to the timing of any appeal, for hearings of more than one day which were interlocutory in nature, as this was, could be heard from the end of January onwards according to the English Commercial Court website.
70. Harbour was clearly successful at the trial leading to the English Judgment. To the extent this was being challenged, this was also a matter for the English High Court.
71. Advocate Drummond accepted there was an issue on how claims were to be reviewed if the recall application was pursued by the Representor, but this issue only followed on from the English Court reviewing whether or not Harbour was a creditor and concluding that it was not.
72. In relation to the question of legal representation, Mr Thomas, Dr Smith and the Representor were acting in concert. The arguments raised by Mr Thomas in the letter before action sent by Marriott Harrison on his behalf dated 11 July 2024 were the same arguments being advanced by Dr Cochrane. The Representor was also entitled to attend the hearing and could seek pro bono advice.
73. The first question for me to consider is whether I possess jurisdiction to stay the désastre proceedings.
74. Firstly, I agree with the written submissions of Advocate Drummond that the Royal Court in the Blue Horizon litigation accepted that it had power to stay désastre proceedings under its inherent jurisdiction. In the unreported judgment dated 18 May 1994 (Blue Horizon 1994/102), the Royal Court considered that it had jurisdiction to grant a stay pending appeal because there appeared to be a right of appeal to the Court of Appeal.
75. In a further reported judgment dated 19 May 1994, the Royal Court noted that a stay could mean either (i) a stay of any further steps with the Viscount pending appeal or (ii) the raising of the désastre completely pending appeal. While the Royal Court refused appeal, there was no question in that decision that the Court had jurisdiction to grant a stay.
76. In the same decision, the Royal Court referred to earlier authorities where a désastre had been obtained ex parte but was then stayed pending an inter partes argument.
77. Dessain and Wilkins Jersey Insolvency and Asset Tracking 5th Edition, page 283 at paragraph 5.22.1 also concludes that it is possible to stay a désastre either pending appeal or for other reasons, but that a Court would be unlikely to ever grant a general stay which would have the effect of raising a declaration of désastre.
78. In my judgment, staying proceedings pending an appeal, or pending an inter partes challenge to an order made on an ex parte basis, is at its lowest no different from staying a recall application until determination of whether or not an entity claiming to be a creditor is in fact a creditor. I also consider that such a power extends to staying the Jersey proceedings in favour of an application to the English Court.
79. The question of the power of the Court under its inherent jurisdiction to stay Jersey proceedings in favour of proceedings in another jurisdiction was recently explored in Adeem v Al-Humaidhi [2022] JRC 038. The remarks in the Adeem decision were obiter because the Court had concluded that the application to serve the first defendant in that decision should be set aside because the Royal Court concluded that the Court in Kuwait was clearly the forum with which the action had the most real and substantial connection.
80. However, the Royal Court also had before it an alternative application that even if the Royal Court had jurisdiction and that Jersey was the appropriate forum, the proceedings should be stayed until determination of civil proceedings in Kuwait which would decide issues raised by the plaintiff's claim in Jersey.
81. This led the Royal Court to state the following, obiter, at paragraph 69:
"69. It is accepted that the Royal Court has, pursuant in its inherent jurisdiction, the power to make such an order. As the Court of Appeal said in Finance and Economics Committee -v- Bastion Offshore Trust [1994] JLR 370 at 382 -
"Practitioners in these courts and in the courts of Guernsey are familiar with the maxims "La cour est toute puissante" and "The court is master of its own procedure." The better known a proposition is, the harder it is to find authority for it and so it turns out if one seeks judicial statements of these two maxims (though in Guernsey the Court of Appeal relied on the second maxim in Cherub Invs. Ltd. v. Channel Islands Aero Club (Guernsey) Ltd.). Both maxims are expressions of the inherent jurisdiction of the court. So far as English law is concerned, the inherent jurisdiction of the court has been said to be -“
"a virile and viable doctrine, and has been defined as being the reserve or fund of powers, a residual source of powers, which the court may draw upon as necessary whenever it is just or equitable to do so, in particular to ensure the observance of the due process of law, to prevent improper vexation or oppression, to do justice between the parties and to secure a fair trial between them." (37 Halsbury's Laws of England, 4th ed ., para. 14, at 23).
Reference is there made to a lecture on the topic, Jacob, The Inherent 30 Jurisdiction of the Court, 23 Current Legal Problems, 23 (1970). The definition quoted above first appeared in that erudite and authoritative lecture and it has been approved judicially in Canada and New Zealand.
One feature of the inherent jurisdiction is that it can exist alongside an identical or similar rule of court. The court does not lose its power because a rule is made (though there may be many cases where the court will have no need to look outside the text of the rule).""
82. Adeem (represented by Advocate Drummond) opposed the application for a stay and contended that the power only arose in rare and compelling circumstances citing an extract from the Rules of the Supreme Court at paragraph 71.
83. The Royal Court in Adeem noted that it did not need to reach a conclusion because even if rare and compelling circumstances was the test, that the case before it was one where a stay would be appropriate in any event.
84. What was clear for the purposes of the application before me is that the Royal Court has inherent jurisdiction to grant a stay.
85. Like Deputy Bailiff MacRae, I do not need to determine whether that jurisdiction arises, as Advocate Drummond now contends, where there are parallel proceedings in another jurisdiction raising similar or related issues, or whether the threshold is a higher one requiring rare and compelling circumstances. For reasons I set out later in this judgment, I was satisfied that such circumstances existed if the higher threshold is required.
86. I reached this conclusion for the following reasons.
87. Firstly, the Paccar decision is an English law judgment. Whether it applies to the Harbour Funding Agreement is therefore a question of English Law and not one that is straightforward or is easy to follow. In addition, as counsel accepted, the Paccar judgment did not consider the application of the blue pencil test if the Harbour Funding Agreement otherwise fell foul of the Paccar decision. I therefore concluded that the English Court was best placed to determine whether the Harbour Funding Agreement was caught by Paccar and, if it was, whether it could be saved as contended for by Harbour. The alternative of determining these questions before the Royal Court would have required expert evidence which would add a layer of complexity and cost. While I accepted that the blue pencil test is one known to this Court, the context of applying it in relation to the Paccar decision adds a further layer of complexity which the English Court will be much better placed to deal with than this Court.
88. Secondly, there are procedural arguments that Harbour wishes to raise about whether or not the issues now being raised by the Representor should or could have been raised in the proceedings leading to the English Judgment. Given the complexity of the English Judgment and the proceedings leading to it, the English Court, in particular the trial judge, Foxton J, who I understand is to preside over Harbour's application, is far better placed to conclude whether the arguments now raised should have been raised previously.
89. The English Court is also far better placed to determine whether the arguments the Representor wishes to raise are tactical given the observations previously made about the Representor referred to at paragraph 12 above.
90. The procedural issues raised will also require expert evidence given the complexity of this dispute, even though this Court may have applied similar principles.
91. The decision of the English Court will take less Court time to determine than an equivalent application in Jersey because of the need for expert evidence which would lead to a longer hearing in this jurisdiction.
92. It also appears that Harbour's application can be heard in relatively short order in England because it is not a trial but a procedural application. While I understand that the length of time the Representor has been subject to the désastre regime is of concern to her, hearing Harbour's application in England will not delay matters unnecessarily or unfairly and it may be heard more quickly which is to the Representor's benefit. Harbour's application has to be determined in either England or Jersey before the Representor's recall application can progress. In that regard, the concession of Advocate Garrood that if Harbour were successful (which was rightly made), this would bring an end to the recall application, means that the issue for me was where that argument should be determined. The prejudice of the désastre remaining in place on the evidence before me was not altered by where the argument should take place.
93. In so far as questions of limitation arise, given that the Harbour Funding Agreement is an English law agreement, the English Court is also best placed to determine whether the claims it wishes to bring are out of time as a matter of English law. It would be unattractive for this Court by contrast to become involved in difficult questions of whether this Court should apply English limitation rules or its own limitation rules (which are different to England) which adds a layer of complexity to what is already a complex case.
94. The matters raised by the Representor are also going to be determined in England in any event. In my judgment, Mr Thomas is essentially raising the same arguments as those raised by the Representor. The fact that the Representor is not represented, in my judgment, does not prevent a stay being granted because the same arguments will be advanced by Mr Thomas. The Representor also has standing to appear before the English Court as Harbour conceded. She has also not filed any evidence indicating that she does not have access to any form of representation before the English Court.
95. Finally, it is a waste of court time and resources for two Courts to be determining the same issue especially when one is far more suited to do so. In addition, such a situation gives rise to the risk of potentially inconsistent decisions.
96. For all these reasons, I was satisfied it was appropriate to grant a stay even based on a threshold of rare and compelling circumstances.
97. In reaching my conclusion, it was not relevant to the exercise of discretion that determination by the English Court in favour of Harbour would bring an end to the recall application because determination by the Royal Court of Harbour's standing, if made in its favour, would lead to the same result. It is therefore the much greater familiarity of the English Court with what happened and what led to the English Judgment and the issues of English law leading to the Paccar judgment which led me to conclude that the threshold was met to grant a stay.
98. In relation to the question that Harbour had delayed bringing their application, I was not persuaded by the arguments of Advocate Garrood on this question. There are rules in England which require pre-action correspondence to be answered and dealt with before proceedings can be issued. Those rules are more complex than exist in this jurisdiction. Given my conclusion that the arguments that Mr Thomas wishes to advance were essentially the same as those raised by the Representor, and Harbour had to respond to Mr Thomas' letter before action, I do not consider that the time taken by Harbour to issue proceedings leads to the exercise of discretion tipping in favour of the Representor. Fundamentally, Harbour were directed by me to prepare an application and issue the same which they have done and the matter is now before the English Court which, for the reasons already referred to, appears to be able to be dealt with by the English Court within an appropriate timeframe.
99. In relation to Advocate Garrood's criticisms of the support of some of the creditors for Harbour, I did not regard the existence of such support as carrying any real weight in relation to whether or not to grant a stay. It was the factors set out above that led to my decision to order a stay rather than the position of other creditors.
100. Finally, it is right to record that in relation to how this Court might approach any recall application, depending on the outcome of the current application brought by Harbour in England, is a matter for another day.
Authorities
Serious Fraud Office and Others v Litigation Capital and Others [2021] EWHC 1272 (Comm).
Courts and Legal Services Act 1990.
The Damages-Based Agreements Regulations (SI 2013/609).
R (On the Application of Paccar Inc v Competition Appeal Tribunal) [2023] 1 WLR 2594.
Representation of Harbour II LP [2016] JRC 171.
Representation of Viscount re Cochrane and Orb ARL [2017] JRC 025.
Viscount v Smith v Cochrane and Orb ARL [2020] JRC 043.
Blue Horizon [1994/102].
Adeem v Al-Huamaidhi [2022] JRC 038.
Dessain and Wilkins Jersey Insolvency and Asset Tracking 5th Edition.