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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> MacFirbhsigh and Ching -v- CI Trustees and Others [2016] JRC 002A (06 January 2016) URL: http://www.bailii.org/je/cases/UR/2016/2016_002A.html Cite as: [2016] JRC 002A, [2016] JRC 2A |
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Before : |
David Hunt, Esq., Q. C. Commissioner, sitting alone. |
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Between |
(1) Niall Iain MacFirbhisigh (as Curator of Barry Lionel Ching) (2) Barbara Mary Marvell Ching |
Plaintiffs |
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And |
(1) CI Trustees and Executors Limited (2) Steven Gidley (3) Gary Killmister (4) Kevin Manning |
Defendants |
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Advocate J. Garood for the Plaintiffs.
Advocate G. A. H. Baxter for the First and Third Defendants.
Mr Gidley appeared on his own behalf.
judgment
the commissioner:
1. On 6th November, 2015, the Court distributed its draft judgment in this case to the parties and their advocates in accordance with Practice Direction RC10/01. The effect of the draft judgment was that all of the Plaintiffs' claims against all of the three remaining Defendants, namely (adopting the abbreviations in the judgment) CITE, Mr Gidley and Mr Killmister, were dismissed. As we recorded in the draft judgment, the Plaintiffs' claims against Mr Manning had been discontinued on the second day of the trial.
2. The Court's email of 6th November, 2015, invited the parties to agree the appropriate order as to costs to reflect the decision, and the findings, in the draft judgment. In response Mr Gidley, in an email sent just before midnight on 12th November, 2015, made an offer in relation to his costs, which was open for acceptance by the Plaintiffs until 4:30pm the following day; the Plaintiffs declined Mr Gidley's offer. In response to Advocate Baxter's indication that CITE and Mr Killmister would be seeking indemnity costs, Advocate Garrood for the Plaintiffs emailed on Monday 16th November that his clients would agree to an order that they pay the costs of the action on the standard basis, to be taxed if not agreed. He expressly joined issue with any claim for indemnity costs.
3. The Court handed down its judgment ("the main judgment") on Tuesday 17th November, 2015. After retiring to allow the Jurats to be released, I heard the parties in relation to matters of costs. In the light of the correspondence to which I have just referred, the only issue between Advocate Baxter and Advocate Garrood was whether the Plaintiffs should have to pay the costs of CITE and Mr Killmister on the standard or the indemnity basis. Since Mr Gidley's costs offer had lapsed, he sensibly confined himself to endorsing Advocate Baxter's approach without making any additional submissions of his own.
4. In his helpful written submissions Advocate Baxter clarified that he was seeking indemnity costs from the Plaintiffs jointly and severally on three alternative bases, namely (in order of preference):-
(i) generally;
(ii) since at least November 2014; or
(iii) in respect of the following matters:-
(a) the claim in respect of Granville;
(b) the issue of joint and several liability;
(c) the claim for loss in value to the Digger shares caused by CITE's actions discouraging investors; and
(d) claims maintained in the alternative case that the trust was valid.
Understandably, the main thrust of Advocate Baxter's oral submissions, and of Advocate Garrood's response, was directed to the first alternative.
5. Although there was a substantial degree of agreement between Advocate Baxter and Advocate Garrood as to the relevant legal principles, that agreement was not complete. Accordingly I start with the relevant law.
6. Part 12 of the Royal Court Rules 2004 read as follows:-
7. In terms of Jersey authority, Advocate Baxter relied principally on the decisions of Commissioner Page in Watkins v Egglishaw [2002] JLR 1 and Pell Frischmann Engineering Limited v Bow Valley Iran Limited [2007] JLR 479. He referred in particular to the headnote in the Pell Frischmann case, which reads:-
8. Advocate Garrood, on the other hand, relied on the decision of the Court of Appeal in C v. P-S [2010] JLR 645 for the proposition that mere unreasonableness would not suffice for an order for indemnity costs and that the test was one of culpability or abuse of process. I do not accept that proposition. As the Court of Appeal said in terms in C v. P-S itself (at para.12):-
9. In the more recent case of Federal Republic of Brazil v. Durant International Corporation [2013] (1) JLR 103 (to which neither party referred) Commissioner Page summarised the position in Jersey as follows (at para.21):-
That approach reflects Advocate Baxter's submissions and is the approach which I propose to adopt.
10. Advocate Baxter also relied by way of further guidance on the decision of Mr Stephen Jourdan QC in Richmond Pharmacology Limited v Chester Overseas Limited [2014] EWHC 3418 (Ch). Mr Jourdan said (at para.4):-
11. Advocate Garrood submitted that I should treat the Richmond decision with caution, on the basis that it reflected the costs regime under the English Civil Procedure Rules ("the CPR") and not the different provisions of the Royal Court Rules. It is correct that the Royal Court Rules do not contain any express reference to the concept of proportionality which is a feature of the CPR. But, as Advocate Baxter pointed out by reference to para.3 of the Richmond Pharmacology decision, the CPR themselves do not contain any guidance as to the basis on which the court should direct assessment on the indemnity, rather than the standard, basis. In those circumstances I see no reason why I should not have regard to the matters listed in para.4 of the Richmond Pharmacology decision.
12. Advocate Baxter identified at para.11 of his written submissions the following factors in support of CITE's and Mr Killmister's claim for indemnity costs, namely:-
"(a) Advancing and aggressively pursuing without basis serious and wide-ranging allegations involving dishonesty or impropriety over an extended period of time, maintaining the allegations, without apology, to strike-out for the most part but to the end in respect of the dishonest assistance claim .
(b) A motive purely to exert commercial pressure on the Defendants was made clear by the scatter gun approach to pleading; resorting to advancing a constantly changing case in order to justify the allegations made, only then to suffer an overwhelming defeat; and the release of Mr Manning on the first day of the trial.
(c) The late introduction, fluctuating and defective nature of the allegations of dishonesty, including having to amend the pleading during the trial despite numerous attempts to plead the case beforehand.
(d) The failure to assess the potential quantum of the claims at an earlier stage...
(e) The Plaintiffs either knew or should have known that the merits of their claim, in particular against Mr Killmister, were not good at least from the date of the Master's judgment on prescription delivered on 22 January 2015...
(f) Despite being forced to abandon most of their claims of impropriety and in the knowledge that there was no answer to the prescription problem, the Plaintiffs unreasonably refused to consider any settlement which did not involve a payment to them, including specifically a 'drop hands' as mooted in November 2014...
(g) Maintaining claims to trial only to concede them without argument...
(h) General conduct including:
(i) Badly drafted pleadings, which needed to be reworked up to four times and even at trial.
(ii) Repeatedly breaching Court orders (the Defendants were forced to issue no less than five summonses for directions during these proceedings, including two seeking unless orders).
(iii) Despite the strike out of allegations of conspiracy and impropriety, the Plaintiffs themselves and through their counsel repeatedly seeking to imply the same as the claim continued...
(iv) 'The intensity with which the allegations were pursued, with wilful blindness' by the Plaintiff.
(v) The practical burdens entailed in the defendants' having to defend a case of this nature in a foreign jurisdiction and in the individual witnesses defending their personal reputations years after the events in question."
In addition, Advocate Baxter confirmed during his oral submissions that he also relied on the Court's comments at paras.77 to 79 of the main judgment about the form and content of the Plaintiffs' witness statements.
13. I address the factors relied on by Advocate Baxter under the following heads:-
(i) allegations of dishonesty or impropriety;
(ii) badly drafted pleadings;
(iii) motive to exert commercial pressure on the Defendants;
(iv) no proper assessment of the Plaintiffs' claims;
(v) the Plaintiffs' unreasonable refusal to consider settlement; and
(vi) the Plaintiffs' witness statements.
14. As we recorded at paras 72 to 74 of the main judgment, these proceedings were commenced by an Order of Justice in early November 2009. Two years later the Order of Justice was substantially amended; the amended Order of Justice ran to some 399 paragraphs and some 90 pages including schedules. At the same time Mr Gidley and Mr Killmister were joined as the then Fifth and Sixth Defendants. On 16th May, 2013, the then First to Fourth Defendants, together with Mr Killmister, applied to strike out the claims against Mr Killmister. At the hearing on 17th September Carey Olsen (who had taken over the conduct of the Plaintiffs' case) indicated that they were going to look at all the allegations afresh with a view to re-pleading the Plaintiffs' case in its entirety, so Master Thompson gave the Plaintiffs time to gather information from their former lawyers and to reformulate their pleaded claims. The summons to strike out and the Plaintiffs' summons to re-amend the Order of Justice were eventually heard on 5th February, 2014.
15. The effect of Master Thompson's judgment was to allow the Plaintiffs to start again. Towards the end of his lengthy judgment, however, Master Thompson said as follows (at para.76):-
16. Master Thompson struck out all the allegations of dishonesty (apart from the allegation of dishonest assistance in respect of the AIG bond) on the ground that there was no basis for them. It follows that such allegations (appearing, as they did, in the Plaintiffs' second attempt to reformulate their claim) ought never to have been made.
17. Advocate Garrood submitted that going back into the history of the case risked the Plaintiffs being, in effect, punished twice; having been ordered to pay the costs of the strike out summons on an indemnity basis, they were now being asked to pay indemnity costs again by reason of the same matters. In my view this contention is misconceived. There is no suggestion that the Defendants are going to recover their costs more than once. All that Advocate Baxter was seeking to do was to rely upon the fact that the Plaintiffs' allegations of dishonesty were struck out as one of the factors which took this case "out of the norm". In my judgment Advocate Baxter was entitled so to do.
18. Unfortunately, however, that was not the end of this particular problem. On 11th April, 2011, Mr MacFirbhisigh had sworn his second statement. The Plaintiffs served this statement in February 2015 for the purposes of the hearing in July. This statement included, even after it had been redacted, the allegations which we have recorded in para.84 of our main judgment. In the light of what Master Thompson had said in para 76 of his judgment, none of the allegations recorded at para 84 ought to have featured in any statement served by the Plaintiffs for the purposes of the hearing. If the Plaintiffs chose to serve Mr MacFirbhisigh's second statement (rather than taking the more appropriate course of preparing a fresh statement limited to the issues still in dispute), it was incumbent on them to redact anything which contravened the letter, or the spirit, of para.76 of Master Thompson's judgment. By allowing the allegations recorded at para.84 to remain in Mr MacFirbhisigh's second statement, the Plaintiffs did not act reasonably; indeed, the inclusion of those allegations amounted, in my judgment, to an abuse of process. The fact that the eventual consequence of including these allegations was that the Plaintiffs were hoist with their own petard cannot affect that conclusion.
19. When it came to his cross-examination of Mr Killmister, Advocate Garrood returned to the same theme, as we recorded at paras.102(1), (2) and (4) of our main judgment. By way of explanation and justification Advocate Garrood submitted that Master Thompson had not sought in para.76 of his judgement to limit the Plaintiffs' cross-examination of Mr Killmister; that was "not his job". Master Thompson's decision was limited to the pleadings. In one sense that submission is correct; all that Master Thompson was being asked to do in February 2014 was to strike out parts of the Plaintiffs' proposed reformulated Order of Justice. But the reason for Master Thompson's decision both to strike out the offending allegations and to order that there should be no reference to such allegations in the pleading was, as I have already said, that there was no basis for such allegations. If there was no basis for making such allegations in the pleadings, there was no basis for making them in cross-examination of Mr Killmister either. The Plaintiffs' approach meant that the Defendants, and Mr Killmister in particular, had to defend themselves against allegations of professional misconduct that should not have been raised in the first place, let alone pursued after February 2014, as we said in para.370 of the main judgment.
20. Lastly, as we recorded at paras.102(4) and 103 of the main judgment, the Plaintiffs' final written submissions also made various allegations of dishonesty or impropriety against Mr Killmister, although Mr Pallot conceded in his final oral submissions that he could not pursue them.
21. Even in relation to the one allegation of dishonesty that Master Thompson did allow to go to trial, namely the allegation of dishonest assistance in relation to the AIG bond, the Plaintiffs' conduct of the proceedings left much to be desired. As we said in paras.301 and 302 of the main judgment, the substitute Order of Justice was inadequately pleaded in this regard and required yet further amendment during Advocate Garrood's opening. But since the substitute Order of Justice had been approved by Master Thompson, I do not consider that the Plaintiffs' conduct in this regard can properly be categorised as unreasonable.
22. With the exception, therefore, of the matter of the pleading of the dishonest assistance claim, I uphold Advocate Baxter's submissions under this head.
23. Advocate Garrood frankly accepted that the case had been badly pleaded by the Plaintiffs. Whilst I accept that it is not unusual for pleadings to undergo some limited amendment prior to trial, the substitute Order of Justice by reference to which the trial was conducted represented the Plaintiffs' fourth attempt to formulate their case. Even then it required further amendment in relation to the dishonest assistance claim. In my view this state of affairs clearly takes this case outside the norm.
24. I accept that the Plaintiffs were probably hoping that the proceedings would exert some form of commercial pressure on the Defendants to settle their claim. That, however, is hardly unusual in any form of commercial litigation and I do not see how it could be categorised as unreasonable. This factor does not, therefore, assist the Defendants.
25. There are various aspects to this complaint, which I take in no particular order. I recognise the very real danger that the perfect vision of hindsight could distort this type of exercise but in the circumstances of the present case the position is sufficiently clear to obviate this danger.
26. In relation to quantum Advocate Baxter pointed out that the original amount claimed in the Amended Order of Justice was £2,427,552.07. In the substitute Order of Justice filed in February 2014 the claim was for £2,265,993.97. By the time that the case started in July 2015 the figure claimed had reduced to £993,565.11 and by the conclusion of Advocate Garrood's opening the claim had reduced further to £743,565.11.
27. The reduction from £2,265,993.97 to £993,565.11 was largely the result of the claim in respect of the Digger shares falling from the £1,233,000 pleaded in the Substitute Order of Justice to the £411,898 calculated by Dr Fitzgerald (see para.273 of the main judgment), the claim in respect of the AIG bond falling from the £353,493 pleaded in the Substitute Order of Justice to £162,500.31 and the claim in respect of Granville falling from the £500,000 pleaded in the Substitute Order of Justice to £250,000. The reduction from £993,566.11 to £743,565.11 flowed from Advocate Garrood's abandoning at the conclusion of his opening the Granville claim in its entirety.
28. The reduction in the claim in respect of the AIG bond was due, in part at least, to recoveries made by Mr MacFirbhisigh. In those circumstances Advocate Baxter concentrated, correctly in my view, on the reduction in the Digger claim and the abandonment of the claim in respect of Granville.
29. As we explained at para.273 of the main judgment, the Digger claim as pleaded involved the proposition that had it not been for the establishment of the Trust on the advice of Mr Gidley and Mr Killmister, the Chings would have sold their entire Digger shareholding at Can$2.80 a share between April and June 2006. It seems to me that if the Plaintiffs had given informed and dispassionate consideration to this aspect of their claim, they would have realised that it was simply unarguable. First, up until the appointment of Mr Manning on 5th June, 2006, the decision whether to sell the Digger shares or not was for Mr (and Mrs) Ching to take but Mr Ching was repeatedly and adamantly opposed to the sale of any of his Digger shares. Nor, in my judgment, would there have been any prospect of Mr Manning selling the entirety of Mr Ching's Digger shares within the first three weeks of the curatorship. Second, on any view the market for Digger shares was very illiquid, yet there was no suggestion that the Plaintiffs had sought expert advice on this part of their claim before it was pleaded. Although one would not necessarily expect the Plaintiffs to have commissioned a full expert report at such an early stage of the proceedings, one would expect them to have sought at least the preliminary view of an expert and, as the experts were agreed, there was no way that 900,000 Digger shares could have been sold at Can$2.80 during this three month period.
30. As we have set out above, the claim in respect of Granville was originally pleaded as being worth £500,000 but in the Plaintiffs' opening skeleton argument this had reduced to £250,000. In the course of Advocate Garrood's oral opening, there was the following exchange with the Court:-
"THE COMMISSIONER: ...
Finally, in terms of losses, the claim in relation to Granville: you have accepted that you cannot complain that the sale of Granville at the time it was made was a sale at an undervalue. Your claim is for £250,000 in relation to Granville.
ADVOCATE GARROOD: That is right.
THE COMMISSIONER: You explain that as set out in paragraphs 9.2
and 9.3 of your skeleton argument.
ADVOCATE GARROOD: Yes.
THE COMMISSIONER: Effectively you say, "The current owners have
spent £650,000, the value of the property has gone up by £900,000 so I will take the difference between the two".
ADVOCATE GARROOD: Yes.
THE COMMISSIONER: I do not immediately see that as the correct
basis for legal quantification even if you have a claim in respect of Granville.
ADVOCATE GARROOD: I do not think we can realistically pursue that
claim.
THE COMMISSIONER: So you are removing Granville?
ADVOCATE GARROOD: I do not think we can pursue that, no.
THE COMMISSIONER: Thank you."
Whilst I do not in any way criticise Advocate Garrood for making that concession, for the Plaintiffs to surrender on this point without a shot being fired by the Defendants clearly indicates that they ought to have realised that this head of claim was likewise unarguable. In short, in the language of para.4(h) of the judgment in Richmond Pharmacology, the Plaintiffs in respect of both the Digger shares and Granville made grossly exaggerated claims.
31. Turning from matters of quantum to issues of liability, Advocate Baxter identified three further areas, in addition to the abandonment of the claim in respect of Granville, where the Plaintiffs had maintained their claims up until trial only then to concede them without argument, namely:-
(i) the issue of joint liability;
(ii) the alternative claim for loss of value in respect of the Digger shares allegedly caused by CITE's actions in discouraging investors; and
(iii) the claims made on the alternative basis that the Trust was valid.
In addition, there are what we found in the main judgment to be the numerous obstacles which the Plaintiffs faced on each of their pleaded claims, such that we concluded in para.369 that the Plaintiffs' claims were riddled with serious errors. Again an informed and dispassionate consideration of these problems would, or should, have led the Plaintiffs to realise that their entire case was ill-conceived.
32. One particular point which Advocate Baxter sought to emphasise was Mr Killmister's prescription defence (where his comments would apply equally to Mr Gidley). We dealt with this defence at, in particular, paras.345 and following of the main judgment. We quoted at para.346 the points which the Court had put to Advocate Garrood at the conclusion of the oral evidence, to which we expected an answer in the Plaintiffs' written final submissions, those points being:-
"Point one is: What information did the plaintiffs not have and could not have reasonably obtained prior to 16th December 2008 which they needed in order to be able to bring the claim in question.
Second: What is the evidence, oral or written, to prove that or to establish that the [plaintiffs] did not have and could not reasonably have obtained that information which you say that they required and could not have done that prior to 16th December 2008?
Then I think we will understand precisely how it is that you put your case on prescription and what the evidence is upon which you rely to establish it."
We also recorded in the main judgment that, despite giving the Plaintiffs yet a further opportunity during Mr Pallot's final oral address to respond to the Court's points above, they failed to do so. We therefore upheld the prescription defence of Mr Gidley and Mr Killmister.
33. At para.345 of the main judgment we quoted from para.39 of Master Thompson's judgment of 18th December, 2014, in which he referred to "the potential force of the rhetorical question asked in reply by Advocate Baxter". During the costs argument Advocate Baxter informed me that his rhetorical question had been to the same effect as the Court's point one quoted in the preceding paragraph. In those circumstances there is obvious force in his contention that from at latest December 2014 the Plaintiffs must, given their inability to respond to the Court's points during their final submissions, have realised that they had no answer to Mr Killmister's prescription defence. But I go further. Both the rhetorical question which Advocate Baxter asked in December 2014 and the points which the Court made at the hearing raised issues which the Plaintiffs ought properly to have considered, and to have considered in detail, at the outset or, at the very latest, once Mr Killmister had pleaded his prescription defence. Had the Plaintiffs given proper and timeous consideration to such issues, I am bound to conclude that they would, or should, have realised at an early stage that the prescription defence of Mr Killmister (and therefore of Mr Gidley) was bound to succeed.
34. In short, it seems to me that the claims in these proceedings are properly to be categorised, in the terms of para.4(f) of the judgment in Richmond Pharmacology, as claims which were both hopeless and which the Plaintiffs should have realised were hopeless. Adopting the words of HHJ Coulson QC in Wates Construction, the Plaintiffs maintained claims which they ought to have known were doomed to fail on the facts or on the law, or both. Such conduct is so unreasonable as to justify an order for indemnity costs.
35. Advocate Baxter drew my attention to correspondence between the parties, starting with his email to Carey Olsen of 12th May, 2015, in which he wrote:-
"We should revisit the possibility of settlement in the light of recent developments in this case; in particular the reduction to the amounts claimed of approx. 70%.
It will be a difficult negotiation of course, not least because: (a) your clients are in a tough spot having spent all they have on a claim that has never been analysed properly (both in terms of the viability of the withdrawn/struck out causes of action and also quantum): and (b) my clients' position remains that they have no liability. Nevertheless, it is worth considering what the options are.
My clients are prepared to negotiate a settlement of their costs if your clients withdraw ...."
The Plaintiffs' response was, in short, that they were not prepared to consider any offer of settlement on a "drop hands" basis. It seems to me that Advocate Baxter is correct that the Plaintiffs' refusal to consider any offer which did not involve some payment to them reflected their failure to recognise the weakness of their claims. Nor am I persuaded by Advocate Garrood's submission that I should not have regard to these discussions simply because the Defendants failed to serve any formal offer of settlement. Given, however, the note of caution sounded at para.4(i) in the Richmond Pharmacology case and that the discussions in question took place less than two months before the start of the hearing, I do not consider that this factor could justify an order for indemnity costs.
36. In paras.77 to 79 of the main judgment we criticised the Plaintiffs' witness statements in two respects. At a directions hearing earlier this year I expressed concern at the multiplicity of these statements, which in itself could create problems for the Defendants in terms of cross-examination. For present purposes, however, the more important criticism is that the statements, in particular that of Mr MacFirbhisigh, contained much material that went outside the scope of the matters still in dispute. This remained the position even after the substantial redactions to which we referred in para.79. The submission of "voluminous and unnecessary evidence" was identified in the Marett case (as quoted in para.9 above) as a ground for ordering indemnity costs. It seems to me that the Plaintiffs' statements in the present case fall clearly within that description.
37. For the sake of completeness I now deal shortly with Advocate Baxter's remaining contentions.
(i) I was not provided with details of the court orders that the Plaintiffs were said to have repeatedly breached. In any event I am not persuaded by Advocate Baxter that this matter takes the Defendants any further.
(ii) Likewise I do not accept Advocate Baxter's complaint about the practical burdens entailed in the Defendants having to defend a case of this nature in a foreign jurisdiction. First, Mr Gidley lives and works in Jersey and Mr Killmister did so for many years before he moved to Northumberland; Jersey cannot sensibly be described as a foreign jurisdiction for either of them. Second, anyone who does business with, or for, individuals based in Jersey must recognise the possibility that they may have to justify their actions before the Royal Court.
38. At para.30 of his judgment in the Pell Frischmann case, Commissioner Page said as follows:-
Advocate Baxter submitted that that description could be applied, mutatis mutandis, with equal force to the Plaintiffs' conduct of the present case. I agree. I have no doubt that, taken as a whole, the complaints which I have upheld as set out above more than justify an order for indemnity costs.
39. Since I accede to Advocate Baxter's primary submission that the Defendants should be awarded indemnity costs generally, it is unnecessary for me to deal in any detail with his suggested alternative bases. Suffice it to say that if I had not acceded to his primary submission, I would certainly have acceded to his submission that the Plaintiffs should pay indemnity costs since November 2014. I would not, however, have been minded in any event to award indemnity costs on the issue by issue basis summarised in para.4(3) above; the exercise of trying to identify the costs referable to the four issues which AdvocateBaxter identified would, in my judgment, give rise to complexity and confusion out of all proportion to any benefit to the Defendants.
40. I therefore order that the Plaintiffs, jointly and severally, do pay the costs of the First, Second and Third Defendants on the indemnity basis, to be taxed if not agreed.
41. It was common ground between the parties that the costs of this hearing should follow the event. Accordingly the costs order which I have made in the preceding paragraph is to include the costs of the hearing on 17th November.
42. Finally Advocate Baxter indicated that the Defendants were considering applications for non-party costs orders. I record that I directed, without objection from any party, that any such application should be reserved to me.