Jersey Unreported Judgments

[2003]JCA029

court OF APPEAL

 

11^th February, 2003.

 

 

 

 

IN THE MATTER OF

An appeal by the Defendant/APPELLANT against so much of the judgment given and order made by the Royal Court, following the hearing on 18th October, 2002, as adjudged that: (1) the Defendant/APPELLANT pay damages to the Plaintiff/RESPONDENT in the sum of £125,500; (2) the Defendant/APPELLANT pay to the Plaintiff/RESPONDENT interest on the said sum of £125,500, in accordance with Practice Direction 93/1, from 16th May, 1998, until date of payment; and (3) the Defendant/APPELLANT pay the costs of the Plaintiff/RESPONDENT.

 

Application by the Plaintiff/RESPONDENT for an Order that the Defendant/APPELLANT's appeal be stayed until it shall have paid to the Plaintiff/RESPONDENT or otherwise secured: (a) the sum of £125,500, being the damages ordered by the Royal Court to be paid by the Defendant/APPELLANT; or (b) such other sum as the Court may consider appropriate; and (c) such sum as the Court thinks fit as security for the payment of the Plaintiff/RESPONDENT's costs in the Royal Court, which were ordered to be paid by the Defendant/APPELLANT.

 

Application by the Defendant/APPELLANT for an order that (a) execution of the orders of the Royal Court regarding damages, interest and costs be stayed, pending determination of the appeal by the Court of Appeal; and (b) the hearing of the summons of the Plaintiff/RESPONDENT and of the Defendant/APPELLANT be heard at the same time.

 

Advocate D. F. Le Quesne for the Plaintiff/RESPONDENT;

Advocate A.J. Olsen for the Defendant/APPELLANT.

 

judgment

SOUTHWELL JA:

1.        In this case Mr Jakobsson claimed that a boat had been sold for him by Offshore Nautical Sales Ltd ("ONS").  The central question in the case was whether the sale of the boat had been effected through Mr Neil Barnes personally, or through ONS acting by its managing director Mr Barnes.  The answer to this question turned on whether Mr Barnes had been held out by ONS as having authority from ONS as its managing director to enter into contracts on its behalf in relation to the sale of boats.  The Royal Court (Commissioner FC Hamon OBE and  Jurats Le Brocq and Georgelin) decided on 18 October 2002 that Mr Barnes had been held out as having such authority from ONS, that ONS (not Mr Barnes personally) contracted with Mr Jakobsson, and that ONS must pay damages of £125,500 to Mr Jakobsson.  On 15 November 2002 ONS appealed from the Royal Court to the Court of Appeal.  On 2 January 2003 Mr Jakobsson applied for security for his costs of the appeal, and security was agreed in the sum of £10,000.

2.        Subsequently two summonses have been issued and have come before me sitting as a single Judge of the Court of Appeal.  The first is by Mr Jakobsson seeking a stay of the appeal until ONS shall have paid to Mr Jakobsson or otherwise secured

(i)        The judgment debt of £125,500 with interest;  or

(ii)       such other sum as this Court thinks fit;  and

(iii)      a further sum as security for payment of Mr Jakobsson's costs in the Royal Court.

The second summons was issued by ONS seeking a stay of execution of the judgment pending the hearing of the appeal.

3.        Some further facts need to be mentioned as background to the two summonses.  ONS is a company in the Neal group, a group of companies controlled by members of a family named Neal.  The two members of the family most closely involved in ONS are Mr Simon Neal and Mr Mark Neal.  Mr Barnes was a fraudster who ingratiated himself with the Neals and with Mr Jakobsson.  Mr Barnes managed to secure appointment as managing director of ONS.  He defrauded Mr Jakobsson, the Neals and ONS, and is now serving a prison sentence.  Mr Jakobsson's claim that in relation to the sale of his boats Mr Barnes was acting as managing director of ONS, and not in a personal capacity, was strongly resisted by ONS and is the subject of an arguable appeal.  ONS also appeal in the alternative against the amount of damages awarded against them, alleging in effect that Mr Jakobsson was entitled to an account of the sales proceeds (not damages), and that the sales proceeds after deduction of commission and other relevant items would be in an amount substantially less than £125,500.

4.        ONS might be regarded as being by normal measures insolvent, having had at 31 December 2001 a balance sheet deficit of £847,188 according to its draft accounts.  However, in Note 1 to the draft accounts it is recorded that

"The accounts have been prepared on the "going concern" basis on the understanding that continued financial support will be provided by the parent company as required."

This means that ONS is continuing in  business on that understanding.  The draft balance sheet as at 31 December 2002 shows that the deficit had risen to £1,003,459.

5.        The principal element in ONS's business was a franchise from BA Peters plc for the sale of "Fairline" yachts.  This franchise granted to ONS is stated by Mr Simon Neal to have expired on 8 September 2000, and then to have been granted to another company in the Neal group, Offshore Nautical (CI) Limited ("ON(CI)").  It is somewhat puzzling that when in January 2003 the agreed security for costs of the appeal was paid into Court, the cheque for £10,000 was signed on an account with Barclays Bank "FOR AND ON BEHALF OF OFFSHORE NAUTICAL (CI) LIMITED T/A OFFSHORE NAUTICAL SALES LIMITED".  It seems therefore that as recently as January 2003 ON(CI) has been trading under the name of ONS.  How and why this has come about is not explained in the affidavit of Mr Simon Neal.  Advocate Anthony Olsen for ONS told me that it had been a mistake of the Bank.  If so, it is the more surprising that Mr Mark Neal had been prepared to sign the cheque.

6.        There has as yet been no stay of execution of the judgment, as to the sum of £125,500, or interest on that sum, or Mr Jakobsson's costs in the Royal Court, which total over £75,000.  Advocate John Kelleher for ONS has failed to respond to requests for payment.

7.        Advocate Kelleher has by letters dated 11 February, 2 July and 19 November 2002 told Advocate David Le Quesne for Mr Jakobsson that if Mr Jakobsson were successful in his claim against ONS, he would be unlikely to recover any part of the sums ordered by the Royal Court to be paid by ONS to Mr Jakobsson, because ONS is without funds of its own.

8.        Nevertheless ONS has been able to carry on its defence and incur substantial costs, put by Dr Kelleher at the close of the stage of discovery and inspection of documents at over £40,000, and by the close of trial amounting to a sum similar to that incurred by Mr Jakobsson (£75,000) in the Royal Court proceedings, to a further unknown sum in costs so far of the appeal, and the sum of £10,000 provided as security for the appeal.  It is to be assumed that these moneys have been provided either by other companies in the Neal group or by members of the Neal family.

9.        It is alleged that further sums have been provided to ONS to make good losses suffered by other clients.   It appears from the draft accounts of ONS already referred to that this is the case, and that the sums provided have been large.

10.      Mr Le Quesne argued that ONS should not be permitted to carry on its appeal while (i) being funded by others to continue in business, and to conduct the proceedings and now the appeal, (ii) failing to pay any part of the sums ordered to be paid to Mr Jakobsson by the Royal Court;  and (iii) seeking to shelter behind the impecunious state of ONS coupled with the failure of the Neal group and family to provide money to pay Mr Jakobsson, apparently as the sole creditor of ONS remaining unpaid.  Mr Le Quesne argued that this Court has jurisdiction to make the order sought in Mr Jakobsson's summons, staying the appeal until payment has been made of such sums as this Court may now order, and that this Court should in the particular circumstances of this case make such an order.

11.      Mr Olsen (in place of Dr Kelleher) on behalf of ONS resisted the making of any such order, and argued that on the contrary the appropriate order to be made at this stage is an order staying execution of the judgment of the Royal Court pending the determination of ONS's appeal.  Mr Olsen argued that

(i)        this Court has no jurisdiction to make the order sought by Mr Jakobsson;

(ii)       even if there is jurisdiction, this is not an appropriate case for the order to be made, having regard to the circumstances I have described, and the strength of ONS's grounds of appeal.

12.      The first question to be decided is whether there is jurisdiction in the Court of Appeal of this Island to make such an order as Mr Jakobsson seeks.  Mr Le Quesne has referred to the express power in the Civil Practice Rules in England and Wales, and to recent cases decided by the English Court of Appeal in relation to the application of that express power, in particular Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2001] EWCA Civil 1915 (18 December 2001, unreported) and Bell Electric Ltd v Aweco Appliance Systems GmbH & CO KG [2003] 1 All ER 344.  Those cases were different from the present one because in each case the appellant defendant was seeking to rely on its foreign domicile (and in Agrichem in addition on its impecuniosity) to resist payment of the judgment debt despite there being no stay of execution.

13.      Mr Le Quesne argued that the Jersey Court of Appeal has inherent power similarly to order payment of the judgment debt, or part of it, into Court, and if payment is not made timeously, either the stay or the striking out of the appeal.  He relies on a number of Jersey authorities in which the scope of the inherent jurisdiction of the Jersey Courts has been considered.  In Mayo Associates SA et al v Cantrade Private Bank Switzerland (CI) Ltd (1998) JLR 173 the Court of Appeal considered fully the circumstances in which inherent powers of the Jersey Courts may come into operation.  In a passage on pages 187 to 191 the Court of Appeal per Smith JA emphasised that

(i)        The main test as to whether a Court possesses any particular inherent power is necessity.  "The Court has a particular procedural power because it has to have it to be a Court in any meaningful sense."

(ii)       Inherent powers are not based simply on fairness, though fairness will be a major factor to be taken into account by the Court when deciding whether or not to exercise such powers.

(iii)      Necessity is to be judged by reference to the issues placed before the Court by the parties, and to the Court's ability to act as an effective court of justice in resolving those issues or in effectively enforcing the orders of the Court.

(iv)      Inherent jurisdiction is not "an unlimited reservoir from which new powers can be fashioned at will":  Professor Dockray in (1997) 113 LQR 120 at p.130.  The necessity for the existence of an inherent power is to be judged by reference to "the merits, consequences and alternatives to the particular power which it is claimed the Court possesses", and to relevant precedents.

14.      Mr Le Quesne also cited, amongst other Jersey authorities, Eves et al v Hambros Bank Jersey Ltd (2000) JLR 221.  In that case the question was whether there was inherent jurisdiction to restrain the commencement of vexatious court proceedings, at a time when statutory provision for a similar express jurisdiction was being considered.  The Bailiff (Sir Philip Bailhache) considered fully the circumstances in which inherent powers of the Courts of Jersey exist.  He cited in addition to Mayo v Cantrade and other Jersey authorities words of Lord Morris of Borth-y-Gest in Connelly v DPP [1964] AC 1254 HL(E) at p.1301, which had been cited with approval by Blom-Cooper JA in C Le Masurier Ltd v Aker (1992) JLR 123 at pp.130-131:

"There can be no doubt that a court which is endowed with a particular jurisdiction has powers which are necessary to enable it to act effectively within such jurisdiction.  I would regard them as powers which are inherent in its jurisdiction.  A court must enjoy such powers in order to enforce its rules of practice and to suppress any abuses of its process and to defeat any attempted thwarting of its process."

15.      Though the Bailiff accepted that at the level of the Royal Court he was bound by the decision of the Court of Appeal in Mayo v Cantrade that the test is one of necessity, he referred (as did Mr Le Quesne) to the decision of the English Court of Appeal in Ebert v Venvil [2000] Ch 484.  In that case the Court of Appeal (per Lord Woolf MR) stressed that

"from a standpoint of principle ........ the starting point must be the extensive nature of the inherent jurisdiction of any court to prevent its procedure being abused" (p.496)

and also that

"The general approach of the Courts in recent years has been not to restrict the inherent jurisdiction of the Court but to adopt a broad approach where this is appropriate." (p.497)

16.      I agree with the Bailiff that the test may have been stated rather too narrowly in Mayo v Cantrade.  But I consider that it is possible to reconcile the test of necessity as stated in Mayo v Cantrade with the words of Lord Woolf in Ebert v Venvil and those of Lord Morris in Connelly v DPP.  Where the Court is faced with abuses of its process the threshold for deciding that inherent powers are necessary to curb such abuses is not, in my judgment, a high one.

17.      Mr Olsen orally, and Dr Kelleher in his written submissions, urged that in the absence of any express rule (such as now exists in England and Wales) it would be wrong for the Court to hold that an inherent power such as that argued for by Mr Le Quesne exists.  That would, in their submission, be much too long a step from the existing Court of Appeal Rules and the existing case law.  The right course, they argued, was for Mr Jakobsson to proceed to enforce his judgment in the ordinary way, subject to ONS's application for a stay of execution.

18.      As I pointed out to Mr Olsen, that was an argument of little force, having regard to ONS's own lack of funds, and the failure or refusal of the Neal group to provide funds to meet the judgment against ONS, viewed against the background of the Neal group's readiness to meet all of ONS's debts except that owed to Mr Jakobsson.

19.      I have no doubt that the Court of Appeal has power to curb abuses of its process or of the process of the Royal Court by making appropriate orders, and is not confined to the express powers in its Rules.  But before deciding whether any, and if so what, order should be made, I have to consider first whether there is any abuse of process.

20.      The circumstances are these:

(i)        Mr Jakobsson has had since 18 October 2002 a judgment of the Royal Court against ONS for £125,500 plus interest and costs.  There has been no stay of execution as yet.  The order of the Royal Court has to be obeyed by ONS, and ONS's failure to comply with that order is a serious breach.

(ii)       It appears that all debts of ONS have been met by the Neal group or family, except this judgment debt in favour of Mr Jakobsson.  The Neal group has declared through Dr Kelleher its intention not to meet this one debt.

(iii)      The major asset of ONS, the Fairline franchise, was moved from ONS to ON(CI) in circumstances which remain inadequately explained, and which may be consistent with a desire on the part of the Neal group and family to remove from ONS an asset through which ONS might have been enabled to meet some at least of its debts.  I stress, however, that the transfer of this franchise took place about three months before Mr Jakobsson made his first claim against ONS.

(iv)      The Neal group or family have funded ONS's defence of these proceedings in the Royal Court, the payment of security for Mr Jakobsson's costs of the appeal, and ONS's costs of the appeal.

(v)       The Neal group and family apparently intend that, if the appeal is unsuccessful, Mr Jakobsson will be faced with an insolvent judgment debtor, and with the long and expensive task of seeking to pursue companies and individuals in the Neal group and family for payment of the judgment debt.

21.      In my judgment those circumstances do constitute an abuse of process.  ONS and the Neal group and family seek to use the Courts of Jersey to further their own interests, while refusing to comply with the judgment of the Royal Court.

22.      It is in these circumstances that I have to consider what orders should be made on the two summonses.

23.      I take first ONS's application for a stay of execution.  In the circumstances I have described, it is appropriate to order a stay of execution, but on appropriate conditions.  The appeal is arguable on both liability and quantum.  Mr Olsen accepted that a stay could be made subject to conditions, in particular a payment into Court.  There must be a condition of the grant of a stay in this case that a substantial payment into Court is made.  I observe that it would not be appropriate on the evidence before this Court to order payment to Mr Jakobsson, because if the appeal were to succeed, recovery by ONS would be difficult.

24.      Weighing as best I can questions of quantum, I order that there be a stay of execution of the judgment of 18 October 2002 on condition that the sum of £160,000 is paid by or on behalf of ONS within 14 days, that is by 4pm on 25 February 2003.  In the alternative, payment of £160,000 could be secured by a bank guarantee in appropriate terms, provided that such terms are agreed by Counsel for the parties, or determined by me, before 25 February 2003.

25.      In fixing the amount of £160,000 I have taken account of ONS's grounds of appeal as to quantum.  I was told that Counsel will be seeking to agree questions of quantum so that if possible argument on the appeal will be limited to liability:  that is a most sensible course to  adopt.

26.      If £160,000 is not paid into Court, or secured by bank guarantee in appropriate terms, before 4pm on 25 February 2003, the stay of execution will cease.

27.      Turning to Mr Jakobsson's summons, I consider that in order to prevent or curb the threatened abuse of process, I must exercise this Court's inherent power to order, in the event that £160,000 is not paid into Court, or secured by bank guarantee, before 4pm on 25 February 2003, the appeal will be stayed.  But I bear in mind that I am sitting as a single Judge of this Court, and that the parties may wish to have the opportunity in those circumstances to seek the decision of the plenary Court.  Accordingly I order that in those circumstances the stay of the appeal will be until further order, and that there be liberty to either party to apply, either before me or before the plenary Court, for a final decision whether or not the stay is to continue, and whether or not the appeal is to be struck out.

28.      With regard to the costs of these two summonses, I have regard to the substance, not the form, of the result.  In substance Mr Jakobsson has won, though ONS has succeeded to the extent of securing a stay of execution, but on terms not offered by ONS.  I therefore make no order as to ONS's costs.  As to those incurred by Mr Jakobsson, it would not be appropriate to order that these be paid by ONS in any event.  ONS may or may not succeed in the appeal.  I therefore order that Mr Jakobsson's costs be costs in the appeal.

29.      Finally I wish to record my thanks to Mr Le Quesne and Mr Olsen for their brief and helpful submissions.

 

 

 

 

Authorities

James McCabe -v- Gov and Company of Bank of Ireland (1889) 14 App. Cas 413 (HL).

Ebert -v- Venvil (2000) Ch. 284.

Hammond Suddard Solicitors -v- Agrichem International Holdings Limited (2001) EWCA Civ 1915.

Bell Electrics Limited -v- Aweco Appliance Systems Gmbh and Co. KG (2002) EWCA Civ 1501.

Finance and Economics Committee -v- Bastion Offshore Trust Company Limited (1994) JLR 370.

Mayo Associates et al -v- Cantrade Private Bank et al (1997) JLR 326.

Mayo Associates et al -v- Cantrade Private Bank et al (1998) JLR 173.

D. Eves and anor -v- Hambros Bank (Jersey) Limited (2000) JLR 221.

In the matter of a Settlement (1999) JLR 220.

Connelly -v- DPP [1964] Ac 1254 (HL) E.

C. Le Masurier Ltd -v- Aker (1992) JLR 123.