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Jersey Unreported Judgments |
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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Between v Sanne Holdings Limited [2021] JRC 273 (04 November 2021) URL: http://www.bailii.org/je/cases/UR/2021/2021_273.html Cite as: [2021] JRC 273 |
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Appeal against the decision of the Judicial Greffier dated 17 May 2021
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Before : |
T. J. Le Cocq, Esq., Bailiff, sitting alone |
Court ref: 2019/165
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Between |
David Banks |
Plaintiff |
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And |
Sanne Holdings Limited |
First Defendant |
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Sanne Fiduciary Services Ltd |
Second Defendant |
Court ref: 2021/066
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Between |
Hunters Investments Limited (previously called Crill Canavan Investment Limited) |
Plaintiff |
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And |
Geoffrey Crill |
First Defendant |
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Simon Young |
Second Defendant |
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Peter Machon |
Third Defendant |
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Sanne Holdings Limited |
Fourth Defendant |
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Sanne Fiduciary Services Limited (previously called Sanne Trust Company Limited) |
Fifth Defendant |
Advocate H. Sharp for David Banks and Hunters Investments Limited.
Advocate J. D. Kelleher for Simon Young, Peter Machon, Sanne Holdings Limited and Sanne Fiduciary Services Limited.
judgment
the bailiff:
1. On 8 July 2021, I issued a decision dismissing the appeal of the Second - Fifth Defendants ("the Defendants") against a decision of the Judicial Greffier of 20 April 2021. On that occasion, I indicated that reasons would follow at a later date. These are those reasons.
2. The nature of the Defendants application before the Judicial Greffier was to put a requirement into the proceedings that before the Plaintiffs might proceed with an application for summary judgment there should first be a hearing before the Court to consider whether any summary judgment application should be allowed to proceed at all.
3. In the decision, the Judicial Greffier declined to make such an order and his reasons are set out in his judgment of 17 May 2021 Hunters Investments Limited v Crill and Ors [2021] JRC 139 ("the Judgment").
4. Having set out the arguments of the parties, in paragraphs 19 and 20 of the Judgment, the Judicial Greffier set out his decision and reasons:
5. HILs case against the Defendants is set out fully in its Order of Justice. In summary, however, HIL's case is:
(i) All of the Defendants knew that Sanne Holdings was balance sheet insolvent from March 2010 onwards. At that time Sanne Holdings had issued £4 million 10% preference shares to Ivegill which constituted a liability to be recorded on Sanne Holdings balance sheet. There was a lack of financial resources to do this and so the Defendants determined wrongly to account for the shares at an incorrect nominal value rather than the true liability created at £4 million. This in effect concealed a balance sheet insolvency although the Defendants knew their accounting was wrong. They had been told by Appleby that the accounting treatment of the preference shares was unlawful on 4 February 2010, and by Carey Olsen at a meeting on 19 May 2011. Sanne Holdings never received either formal written advice or approval from its auditors who have refused to hand over any written advice. This financial information was kept from HIL which was at the time its largest single shareholder. HIL alleges fraudulent silence and false accounting including back dated minutes of a meeting, a misleading letter of 20 May 2011, created to keep Sanne Holdings insolvency a secret from HIL. This, it is alleged, was necessary part of HIL's case as, without it, the Defendants would not have been able to execute a transfer deal in 2011. The result of this is that HIL sold its equitable interest at a heavy discount.
(ii) When the question of false accounting was raised, with Sanne in pre-action correspondence, Sanne Holdings and Sanne Fiduciary Services Limited made a false complaint to the Law Society in which it apparently claimed that the accounts were accurate and the 10% preference shares were recorded as equity and not as a liability. This was untrue. The Law Society rejected the complaint at the preliminary stage.
(iii) Other allegations are made relating to Sanne's state of knowledge and lack of the provision of adequate explanations and allegations are made of a large number of mis representations made in the proposal that was put to HIL in November of 2010 and which ultimately resulted in the 2011 transfer of HIL's shares. Those misrepresentations included suggestions that there was a crisis in the Sanne business. Furthermore, so it is alleged, the Second and Third Defendants asserted to HIL that they would use Article 41 of Sanne Holdings Articles of Association to take their part in the Sanne business to a trading subsidiary company which they could do without breach of a number of covenants.
6. I do not go into the detail explaining that particular aspect of the allegation but suffice to say that it is alleged that it was part of the overall campaign, if I may put it that way, to procure that HIL sell its shares in Sanne at what was in effect so it is claimed an undervalue.
7. A number of cases were put before me. Some cases are examples and I do not need to refer to them all.
8. I was referred to the overriding objective set out in Rule 1/6 of the Royal Court Rules 2004. Rule 1/6(6) is in the following terms as is relevant:
9. Rule 7/1 of the Royal Court Rules deals with the grounds for summary judgment. It states:
10. In the case of HRCKY Limited v Hard Rock Limited and another [2019] (2) JLR 47, the Court considered an application for summary dismissal and, at paragraphs 59 and 60 said this:
11. Counsel for the Plaintiffs referred me to the case of Foglia v The Family Officer Limited and Others [2021] EWHC 650 Comm in which at paragraph 10 - 18 the Court said:
12. In essence, the Defendants, as appears from their skeleton argument and submissions of counsel argue that there should be a preliminary screening hearing in relation to DB's application for summary judgment and any application that might be brought by HIL. Their reason for doing so is that any such applications would be bad on their face and would involve issues clearly more suitable for trial, which are not decisive, and which seek findings which overlap with evidence that will be needed to be called on other issues and which will simply delay the progress of those proceedings to trial. This overall statement is particularised in five paragraphs in the skeleton argument as follows:
(i) save in the very clearest of cases, finding on issues alleging deliberate fraud and/or dishonesty, which are the central issues on which the summary judgment applications seek judgment upon, are properly matters for trial, following the hearing by the court of oral testimony from all of the relevant witnesses and cross examination;
(ii) The summary judgment applications, which seemingly invites the Court to make a wide range of factual findings, will inexorably lead to the conduct of what is effectively a mini trial;
(iii) The summary judgment applications (if successful) do not appear to lead anywhere. The issues are not decisive on liability and seek no relief as a consequence either in whole or in part, and are likely to involve significant duplication of the evidence which will be necessary at trial irrespective of the outcome of the application;
(iv) DB and HIL ought not to be allowed to try their cases summarily on an issue-by-issue basis (this being the second such summary judgment application which the Defendants have faced in relation to the accounting issues with the 2010 accounts of Sanne);
(v) The summary judgment applications will inevitably significantly delay the progress of the proceedings to trial and increase the costs.
13. It is further argued that the Judicial Greffier ought to have ordered the above matters, which the Defendants characterise as self-evident, to be dealt with at a preliminary stage to determine whether or not a summary judgment application should be allowed to continue. The Judicial Greffier had power to do so under the active case management powers conferred in the furtherance of the overriding objective and because the court has a discretion as to whether or not and when to allow a hearing of a summary judgment application to take place.
14. It was argued that the correct approach for me to apply on appeal was to consider the matter afresh and in support of that the Sanne Defendants referred to the case of Alhamarani v Russa Management & Ors [2006] JLR 176. I agree that this is the appropriate test to apply on appeal and I am therefore entitled to look at the matter afresh and to exercise my own discretion whilst paying due regard to the decision of the Judicial Greffier.
15. At the time of the argument before me, a Summons had been issued in proceedings 2019/165 on 18 January 2021, for summary judgment but none issued in proceedings 2021/066. Correspondence nonetheless suggests that an application for summary judgment will be forthcoming in the latter proceedings.
16. Reference was made to DB's earlier application for summary judgment. It too concerned the Sanne Holdings 2010 accounts and was ultimately conceded by the Defendants. The effect of that Summary Judgment was to hold that the 2010 Sanne Holdings accounts were materially misstated in respect of preference shares. These shares had been issued as part of a transaction to acquire the interests of one of the principal shareholders, Ivegill Holdings Limited. The misstatement related to the fact that the liability created by issuing 10% preference shares in connection with the transaction was recorded in the accounts at an incorrect nominal value of the shares rather than at the fair value of the shares which had the effect of giving the appearance that Sanne Holdings was balance sheet solvent instead as the true position would have been, balance sheet insolvent to a relatively modest extent. It is argued that what was accomplished earlier in the summary judgment application was "entirely unclear" and no relief had been granted as a consequence nor had there been any significant narrowing of the issues. In fact, this was reflected in the judgment of the Court in connection with the original summary judgment application in which the Court said at paragraph 42 of that judgment:
17. The Defendants argue that the current summary judgment application made by DB is unclear as to what the Plaintiff may be seeking the Court to find and they make the point that a proper definition of the scope of any summary judgment application is a legitimate concern to the Defendants in respect of which they should be entitled to require clarity.
18. The Defendants are accordingly concerned that they are now facing further and costly summary judgment applications which will cover similar ground to the original summary judgment application, and which will overlap with matters in trial. This, it is argued, will enable DB (and HIL) to take successive bites of the cherry on an issue-by-issue basis in relation to isolated and non-decisive issues. This could be a continuing process which is not in accordance with the overriding objective and the evidence that would be needed to be deployed by the Defendants in response to any such summary judgment applications would duplicate the evidence that would need to be deployed at trial.
19. It is argued that the Court has the power to stop such conduct on the part of the Plaintiffs because it has powers of active case management under the overriding objective and ultimately the order of a summary judgment application is at the discretion of the Court. Rule 7/1(2) RCR states:
20. Further it is argued that the Court can deal with matters under its inherent jurisdiction.
21. It is well understood that there is a high threshold for a Plaintiff to reach in order to succeed in a summary judgment application. The Plaintiff must be able to establish that there is no real prospect of successfully defending the claim or the issue. The Court should not engage in making findings of fact. It is asserted that the current/anticipated summary judgment applications would be in relation to accusations of dishonesty and/or fraud. It is correct, indeed, that dishonesty and fraud feature significantly in the pleadings in this case. It is argued by the Defendants that where that is the case and in particular where the Court might need to determine whether or not certain parties have done something deliberately or innocently, that assessment will need to be made by way of oral evidence and cross examination at a trial. Whilst there is no complete ban on summary judgment applications where there are allegations of fraud or dishonesty it is clear, and has been emphasised in a number of judgments, that the Court needs to proceed cautiously where such allegations are involved.
22. The Defendants argue that that part of the Judgment which suggests that the holding of a preliminary hearing would invite such applications in regard to all and any contested applications, as overstating the position and submits that for summary judgment applications it will often be clear to the parties that there would be a saving of time and costs even if the summary judgment application is contested.
23. In answer to the Judicial Greffier's statement in the Judgment that for him to permit a preliminary examination as wished for by the Defendants would enable a Defendant to have "two bites of the cherry" it is argued that in fact in this case the Plaintiffs were themselves seeking to have multiple bites of the cherry by making successive applications on discreet issues in isolation to the other issues requiring determination at trial.
24. The case of Corbin v Dorynek & Flath [2020] JRC 031 was put before me. In that case the Court was considering applications for a split trial on liability and quantum and preliminary issues and not, as such, summary judgment. However, the principles in that case were urged upon me as being helpful.
25. In that case the following principles were accepted as applying:
(i) Only issues which are decisive or potentially decisive should be identified;
(ii) The question should usually be questions of Law;
(iii) They should be decided on the basis of a Schedule of Agreed or assumed facts;
(iv) They should be triable without significant delay, making full allowance for the implications of a possible appeal;
(v) Any order should be made by the Court following a case management conference.
26. It is further argued that the Judicial Greffier was wrong in referring to the possibility of the Plaintiffs recasting their summary judgment applications. It was clear, so it was argued, that what the current DB application and the anticipated HIL application are likely seeking summary judgment and judicial findings that the misstatement of the 2010 Sanne Holdings accounts was deliberate and made with the intention of concealing the insolvency of that company from HIL. It is argued that given that that was the thrust of the application for summary judgment it would be difficult to see how that might be recast in a way that would address the concerns raised before the Judicial Greffier. The Defendants repeat their arguments to the effect that:
"(i) It's generally inappropriate for the Court to make findings of dishonesty or fraud on a summary basis, without having heard all the evidence and in particular the oral evidence of those accused of acting fraudulently;
(ii) The Plaintiffs Summary Judgment applications will not be decisive of liability or lead to any relief;
(iii) That there is an inevitable and significant overlap between the issues on which summary judgment is sought and the evidence which will be adduced in relation to the remaining issues in the case at trial."
27. Advocate Kelleher accepted that he has not in his research discovered any cases that show that the Court has taken the stance that he urges upon me and ordered a preliminary assessment of any application for summary judgment to determine whether or not it should proceed but he argues that this could be simply a case management matter.
28. The Plaintiffs for their part, observed that any preliminary hearing would inevitably be decided in the absence of full affidavits and therefore the applying party would be prevented from bringing forward their best evidence and arguments to the Court. It is only if the preliminary hearing finds in favour of the applying party that evidence would then be served, and the full case would be deployed for the summary judgment hearing.
29. This, so it is argued, complicates the existing procedure and would have the effect of benefitting parties who would have no real defence to a summary judgment application.
30. With regard to the factual background, the Plaintiffs state that they have given the Defendants a number of opportunities to address their questions as to why a summary judgment application is not merited by reference to the evidence. This was, so I am told, met by a summons issued in the DB proceedings without warning seeking a stay of the entire proceedings.
31. The Plaintiffs rely on Foglia cited above, to the effect that it is perfectly acceptable to seek summary judgment in fraud cases by reference to contemporaneous records, common sense and logic without the necessity of engaging in a mini trial. Each case turns on its particular facts and to form any view in some form of preliminary hearing, so the Plaintiff asserts, the Court would need to see the affidavit evidence from both sides.
32. It is further submitted by the Plaintiffs that the Defendants wish to put in a preliminary step before they can bring a summary judgment application in effect deprives the Plaintiffs of full access to justice. The Plaintiffs assert that their case is compelling to the effect, that the 2010 accounts were deliberately misstated and that lies have been told.
33. The Plaintiffs assert that the Defendants desire to argue at a preliminary hearing that the Court should be slow to make findings of dishonesty at a summary judgment hearing and should not conduct a mini trial can only properly be assessed by the Court with a proper and informed understanding of the evidential dispute between the parties if any.
34. The Court can of course give directions, amongst others, as to the timing of any application for summary judgment and indeed could give other case management directions such as may impinge upon the ambit of any such application and, possibly, the evidence that may be adduced to deal with it.
35. However, in my view, whereas the Court should be proactive in case management, it should not impose another layer of hearings or permission before a party can bring an application that is expressly provided for within Rule 7/1 of the Royal Court Rules.
36. The Court can make such an application of its own motion and it may grant summary judgment if any party before it brings such an application. Naturally, if the nature of the summary judgment application is such that in principle, or in fact, the Court should not grant it then the summary judgment will itself be unsuccessful and there would be a very real prospect of an adverse costs order against the unsuccessful party. I do not, of course, prejudge any costs order that might be made in this case should such an application be made and should it be unsuccessful. That will depend upon a number of factors on which I have not been addressed and I would not propose to give any indication. The natural sanction, however, for meritless applications which are either unsuccessful on their facts or brought on wrong principles, is an adverse costs order and that is the risk that an unsuccessful applicant takes in all matters.
37. I agree with the Plaintiffs characterisation of any potential application along the lines anticipated by the Defendants in this appeal. In effect, the Court would be asked to make a ruling without, possibly, understanding the position of the various parties in law and in fact. A Court should only make a ruling on the basis of incomplete information in exceptional circumstances where it is clear that for reasons unconnected with the information that is not before the Court the matter must either succeed or fail as the case may be. If it is not clear, and if it is fact specific, I cannot see how the Court should attempt a preliminary consideration without the full information that would normally be before it in a summary judgment application.
38. Moreover, although I do not suggest that the Royal Court Rules are not capable of supplementation or augmentation under the inherent jurisdiction of the Court or otherwise there is a clear mechanism, namely Rule 7/1, for the bringing of a summary judgment application and it does not appear to me to be appropriate or indeed necessary to place an additional hurdle before a party in taking what is a procedural step provided for within the Rules.
39. It is for those reasons that I upheld the judgment of the Judicial Greffier and dismissed the appeal.
40. However, I add this. The nature of this litigation requires in my view robust management to bring this matter before the Court for final determination. Interlocutory processes which do not advance the matter to final determination, cause unnecessary delay or unnecessarily add to the costs, are to be avoided. The original summary judgment application does not appear to me to have been thought by the determining court as achieving a great deal.
41. Should therefore any summary judgment application be made which, so the Defendants may wish to argue, clearly does not advance the matter to final determination or result in a material narrowing of the issues or the potential saving of time or costs overall . It is open of course to them to seek the directions of the Court in a case management hearing.
