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Jersey Unreported Judgments |
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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Monteagle Int'l Ltd and Anor v Grocery Market Research Ltd and Anor [2022] JRC 051 (28 February 2022) URL: http://www.bailii.org/je/cases/UR/2022/2022_051.html Cite as: [2022] JRC 51, [2022] JRC 051 |
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Before : |
Advocate Matthew John Thompson, Master of the Royal Court. |
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Between |
Monteagle International Limited |
First Plaintiff |
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And |
Monteagle International (UK) Limited |
Second Plaintiff |
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And |
Grocery Market Research Limited |
First Defendant |
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And |
Anthony Dumas |
Second Defendant |
Advocate J. Harvey-Hills for the Plaintiffs.
Advocate M. L. A. Pallot for the Defendants.
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Paras |
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1. |
Introduction |
1-3 |
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2. |
Background |
4-11 |
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3. |
South African proceedings |
12-16 |
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4. |
The Defendants' submissions |
17-37 |
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5. |
The Plaintiffs' submissions |
38-57 |
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6. |
The Defendants' submissions in reply |
58-66 |
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7. |
Decision |
67-124 |
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8. |
Costs and other directions |
125-134 |
judgment
the master:
1. This judgment contains my decision in respect of an application by the defendants to join Marshall Monteagle Plc ("MM Plc"), Monteagle Consumer Group Limited ("MCG") and Monteagle Merchant Groups Southern Holdings 2 Limited ("Southern 2"). The application was to join these companies as parties to the defendants' answer and counterclaim on the basis summarised later in this judgment.
2. In respect of the application to join MM Plc, the plaintiffs submitted to the wisdom of the court. The application to join MCG and Southern 2 was opposed.
3. MM Plc is a Jersey company quoted on the Johannesburg Stock Exchange and is the parent company of the first plaintiff. MCG is a South African company. Southern 2 is a South African company and is the parent company of MCG.
4. The general background to the present dispute was considered by me firstly in a judgment dated 23rd November 2020 reported at Monteagle International Limited and Anor v Grocery Market Research Limited and Anor [2020] JRC 244. That judgment contained my decision in respect of an application by the plaintiffs seeking a better statement of the defendants' answer and counterclaim. The general background to the proceedings was summarised at paragraphs 2 to 6 of that judgment as follows: -
5. I also refer to a further judgment dated 20th October 2021 reported at Monteagle International Limited and Anor v Grocery Market Research Limited and Anor [2021] JRC 260. That judgment contained my decision in respect of an application for summary judgment by the defendants in respect of non-payment of monies said to be due under a loan agreement. My conclusions were set out at paragraphs 92 to 98 as follows: -
6. Following on from paragraph 98 a further and better statement of losses claimed by the plaintiffs was filed in accordance with directions issued by me on 20th October 2021.
7. The present application relates to the defendants' counterclaim where they claim certain interests in the Monteagle Group. These interests were summarised in the defendants' skeleton at paragraphs 3.4 as follows: -
(i) The defendants were 28% shareholders in the first plaintiff and MCG or held equitable rights equivalent to a shareholder.
(ii) The parent company of MCG held a 28% shareholding or equitable rights equivalent to a 28% shareholding in MCG for the first and/or the second defendants. That parent company by the time of the application before me was understood to be Southern 2.
(iii) The parent company of the first plaintiff held a 28% shareholding or equitable rights equivalent to a 28% shareholding in the first plaintiff for the first and/or the second defendants. That parent company by the time of the application before me was understood to be MM Plc which was a Jersey company which was why Advocate Harvey-Hills submitted to the wisdom of the court in respect of this part of the defendants' application.
(iv) Alternatively, that the defendants had a 28% interest in the Fast Moving Consumer Goods Divisions ("FMCG") of the first plaintiff and MCG and a continuing entitlement to a share of the profits of the FMCG Divisions of these entities.
(v) The answer and counterclaim at paragraph 76.2.3 also claims a 28% interest in a company known as Monteagle Logistics Limited ("MLL") based on an agreement dated 20th and 21st December 2010 between MCG and the second defendant.
(vi) The answer and counterclaim at paragraph 76.2.5 and 76.2.6 respectively also claims a 50% interest in respect of Monteagle India ("MI"), which is stated to be a division of the first plaintiff, and a 50% shareholding in Monteagle International (India) Pvt Ltd, based on an agreement dated 1st October 2014.
(vii) The answer and counterclaim at paragraph 72.37 further claims a 25.2% interest in the Minerals Division of the MM Group based on the defendants' claim to a shareholding interest in the first plaintiff and MCG.
(viii) The defendants further argued that their claim to a shareholding interest also gave them an interest in respect of a South African company formerly known as Monteagle Africa Limited ("MAL") which entitles them to 28% of the proceeds received by MCG in respect of the sale of MAL which occurred in October 2019 (as claimed at paragraph 76.2.7 of the answer and counterclaim).
8. The application to join MCG was because the defendants were claiming a 28% interest in MCG or alternatively equitable rights on the same basis as they were claiming a 28% interest or alternatively equitable rights in the first plaintiff.
9. The application to join Southern 2 was because it was the holding company of MCG in which the defendants' claimed a 28% shareholding or equitable rights equivalent to such a shareholding.
10. The application to join MM Plc was because the defendants claimed it held a 28% shareholding or equitable rights equivalent to a 28% shareholding in the first plaintiff for the defendants.
11. The application to join third parties was also made because of the defendants' claims to an interest in the FMCG division of MCG, an interest in MLL and an interest in the proceeds of sale of MAL.
12. It is also right to refer to the fact that there are certain proceedings in South Africa relevant to the application before me. I address later in this judgment the chronology in terms of when proceedings were started in Jersey and when proceedings were started in South Africa.
13. The first proceedings started were by the second defendant on 27th August 2019, where he pursued MCG and MLL in a Regional Court in Durban, South Africa, for recovery of a dividend of 350,000 South African Rand (approximately £17,500) said to be due to the second defendant from MCG relating to MLL. The original claim brought by the second defendant was for 28% of a dividend received by MCG from MLL and sums said to be payable as a result of the second defendant resigning from MLL and MCG when he left the Monteagle group generally in 2019. The claim was based on the second defendant's claim to an interest in parts of the Monteagle Group.
14. MCG filed a counterclaim which led to the proceedings being transferred to the High Court of South Africa in Durban for 51,468,303.30 South African Rand (approximately £2,500,000). In the proceedings in the High Court, MCG commenced proceedings as plaintiff against the second defendant seeking damages for breach of fiduciary duty against the second defendant relating to alleged misuses of confidential information of MCG as well as seeking to recover certain expenses and drawings against prospective profits.
15. The extent to which the proceedings in South Africa overlap with issues in Jersey was the subject of detailed submissions and therefore this question will also be addressed later in this judgment.
16. The present status of the proceedings in South Africa is that the second defendant has sought a stay of the South African proceedings pending the outcome of the Jersey proceedings having regard to the substantial overlap between the claims made according to the second defendant in the two sets of proceedings and the fact that the proceedings in relation to the plaintiffs' breach of confidence claims were commenced in Jersey prior to MCG filing its counterclaim in the South African proceedings. This issue remains to be determined.
17. Advocate Pallot in his written and oral submissions advanced the following submissions in support of his summons.
18. The second defendant in Jersey has not claimed in the South African proceedings any interest in MCG or the Monteagle Group. The second defendant was therefore entitled to ask this court to determine that claim.
19. The legal basis for the plaintiffs' claim against the second defendant in the South African proceedings was the same as that pleaded against the defendants in the Jersey proceedings and related to allegations of breaches of duties owed to MCG and the purported misuse of confidential information relating to MCG following the second defendant's departure from the Monteagle Group.
20. What led to the plaintiffs' claim and the counterclaim was the same factual matrix. At its heart was the relationship between Mr Marshall and the second defendant and what they had agreed. This was the common springboard for all the proceedings.
21. There was also a clear overlap between the losses claimed by MCG in the South African proceedings, and the losses claimed by the plaintiffs in the Jersey proceedings.
22. The same issues in respect of the breach of confidence claims would need to be determined in respect of liability in both proceedings which followed from the second defendant resigning from the Monteagle Group and operating as a competitor through an entity known as Omni Global Sourcing Solutions/Omnigss("OMNI"). OMNI is owned by the first defendant through a trust structure where the second defendant and his family are beneficiaries.
23. The commencement of the proceedings in South Africa, which occurred according to Advocate Pallot on 8th June 2020, was tactical. They were driven by a desire by the Monteagle Group to starve the defendants out of funds by bringing the same claims in two jurisdictions.
24. There will be a significant overlap between the documents required, if there are two sets of proceedings, the witnesses to be called and the evidence to be given because in essence the claim brought by the plaintiffs in Jersey and the claim brought by MCG in South Africa are the same.
25. This overlap was why the second defendant was seeking a stay of the proceedings in South Africa. The response to that application was objected in South Africa because MCG was not a party to the Jersey proceedings. Yet the plaintiffs objected in Jersey to the joinder of MCG. The approach of the Monteagle Group therefore was oppressive and tactical.
26. The extent of the overlap was illustrated by the following: -
(i) Any funds due from MCG to the defendants were due to be paid by the first plaintiff to the first defendant in Jersey. This had occurred over many years until the present dispute.
(ii) Messrs Warwick and David Marshall were at the heart of the second defendant's dealings with the Monteagle Group, MCG and the plaintiffs in Jersey and would be material witnesses in Jersey. They were also directly involved in the Jersey proceedings as past or present directors of the plaintiffs.
(iii) Profits made by MCG were paid out to the first plaintiff in Jersey.
(iv) Advocate Pallot emphasised that MCG was referred to thirty-five times in the order of justice. In his fourth affidavit, the second defendant emphasised that this was inevitable because in many respects the claims made by the plaintiffs in Jersey and MCG were inseparable.
(v) The fact that so many agreements were governed by South African law did not mean South Africa was the most appropriate forum. Little was pleaded in terms of any substantive dispute on the effect of South African law and the defendants' position was that there were no material differences between any duties owed by the defendants in Jersey as a matter of Jersey law and any duties that may be owed under South African law.
(vi) The Royal Court was the first court seized with the proceedings and the issues in dispute.
(vii) He argued that all the losses claimed in Jersey in respect of lost sales involving Spar Encore Limited (what was formerly MAL) were also claimed in South Africa.
(viii) Insofar as the plaintiffs were arguing that they were only claiming licencing fees in respect of product lines alleged to be lost by MCG, the second defendant had deposed in his fourth affidavit as follows: -
"A real question necessarily arises as to how MIL can look to properly establish in the Jersey proceedings the losses it has allegedly suffered, by virtue of the lost financing and licensing fees it would have made on MCG's sales, without there being a proper and full enquiry and analysis before the Jersey Court as to:
(i) the extent to which MCG's losses have actually been suffered; and
(ii) the extent to which those losses were suffered as a result of the conduct of the Defendants or either of them. These losses and the Defendants' liability for same are hotly contested by the Defendants and the evidence of the MM Group in respect of these matters cannot simply be taken at face value, without full enquiry."
(ix) Advocate Pallot also sought to establish how MCG and the first plaintiff were linked because he argued that 90% of the overhead expenses of the FMCG business of the MM Group were met by MCG in South Africa in order to reduce its tax burden with all profits being achieved by MCG being paid to MIL where they were retained and distributed as dividends.
(x) On the plaintiffs' own case the plaintiffs were claiming for damages relating to the loss of business from suppliers to a business known as Shoprite. All the individuals within MCG who are said to have generated these sales were employed by MCG. Without these sales traders Advocate Pallot contended that the first plaintiff would have had no business in South Africa including the Shoprite business.
(xi) The Jersey proceedings also related to and contained a claim for sums due under a loan agreement (see my previous judgment in this matter dated 20th October 2021 at [2021] JRC 260 referred to above). The loan agreement according to the second defendant included monies representing profit sharing entitlements in MCG as well as the first plaintiff.
27. There were two agreements which in part were relevant to the defendants' counterclaim in Jersey. The first concerned an interest in MCG and the second an interest in MIL. Both agreements were executed on the same day and were signed by the same parties. Their terms were largely the same.
28. Although initially Advocate Pallot had sought to make his application in reliance on Rule 6/10 of the Royal Court Rules 2004, as amended, ("the Rules") he did not pursue this claim because Rule 6/10 of the Rules relates to a claim where a contribution or indemnity is sought by a defendant as a result of the filing of an answer. However, the defendants wished to join the proposed third parties to their counterclaim which was not therefore joining them to an answer but in effect to their own claim.
29. Advocate Pallot therefore accepted that the relevant rule was Rule 6/36(b) of the Rules which provides as follows: -
30. In his view both limbs of the test in Rule 6/36(b) were made out.
31. As to why he had not brought the application until now, he felt it appropriate to wait until the first directions hearing. To the extent that the application should have been made when the counterclaim was filed, he contended there was no prejudice given the history of how the matter had progressed. However, the overlap was clear as set out above.
32. In terms of why third parties should be joined:-
(i) MM Plc was needed because of the claim for an interest in MIL;
(ii) Southern 2 was needed because of the claim for an interest in MCG;
(iii) MCG was needed because an interest in the FMCG division of MCG and the first plaintiff was claimed, together with a claim to the proceeds of the sale of MAL which had been received by MCG; and
(iv) The plaintiffs' claim for MIL losses also depended on the claim on losses suffered by MCG.
33. While many documents and witnesses were to be found in South Africa, the plaintiffs would have to produce this documentation and the employees as witnesses in Jersey for their existing claim. Joining the proposed third parties to the counterclaim was not going to add significantly to the work that was going to be carried out anyway in respect of the plaintiffs' own claim.
34. In terms of joining parties the correct approach was to proceed on the assumption that if the third parties had been within the jurisdiction would they be proper parties to the action (see Massey v Heynes [1888] 21 QBD 330.
35. Massey v Heynes had been applied in AK Investment CJSC. v Kyrgyz Mobil Tel Limited [2012] 1 WLR 1804 a decision of the Privy Council on an appeal from the Isle of Man. The approach to joining a third party was explained in the above manner at paragraph 87 of the AK Investments CJSC case.
36. Even an exclusive jurisdiction clause would not necessarily be enforced if that led to a danger of inconsistent decisions (see Donohue v Armco Inc [2002] 1 Lloyd's Rep 119). Where the court noted that not to have a trial of a single jurisdiction could be "a potential disaster".
37. There was a circularity to the plaintiffs' approach in suggesting that the Court should deal first with service out and then joinder. This was the wrong way around. The correct approach was to deal with whether the parties should be joined assuming they were all in Jersey with the question of service out of the jurisdiction being dealt with if it was felt that it was appropriate to join parties.
38. Having rested on the wisdom of the court in respect of the joinder of MM Plc, Advocate Harvey-Hills' submissions therefore focused on MCG and Southern 2 which were South African companies. In his written and oral submissions, he therefore made the following observations.
39. Firstly, he was not instructed by MCG, Southern 2 or MM Plc but only the plaintiffs.
40. The position of the plaintiffs was that they could not accept that there was a common factual basis between the current claims in Jersey and the claims the defendants wished to bring against MCG and Southern 2. The second defendant's claim for an interest in MCG was a South African national wanting to sue a South African company to claim an interest in the same. This claim was a matter for the South African courts.
41. Advocate Harvey-Hills also contended that as a matter of South African law in reliance on expert evidence, that, even if MCG and Southern 2 were joined, unless they submitted to the jurisdiction any judgment of the Jersey court could not be enforced in South Africa. He therefore relied on the authority of Inter-Tel Inc v OCIS Plc [2004] EWHC 2269 to argue, by analogy that, because a Jersey judgment could not be enforced against MCG and Southern 2, this was a powerful factor against Jersey being an appropriate forum. The position that any Jersey judgment could not be enforced in South Africa in the absence of a submission to the jurisdiction was dealt with in the affidavit of Stephen Ronald Mullins SC dated 22nd November 2021 at paragraph 16.a.. The defendants' expert also agreed that the South African court had jurisdiction.
42. He accepted that individuals connected to MCG would come to Jersey to give evidence in support of the plaintiffs' claim in this jurisdiction but that did not mean that MCG was submitting to the jurisdiction.
43. In relation to the risk of inconsistent findings of fact, there was no absolute rule that you could not have two disputes in two different jurisdictions. The way to deal with that was a case management question to manage proceedings in such a way that any risks of inconsistent decisions were mitigated. However, the risk of inconsistent filings could not be resolved by finding a jurisdiction where there was none.
44. He accepted that if all the entities were in Jersey, then the two claims would be consolidated but he argued they would not be joined. This was because there were two separate divisional shareholders agreements, one in relation to MCG and one in relation to the first plaintiff. Advocate Harvey-Hills therefore contended that the claim by the second defendant against MCG was in respect of a different agreement with a different governing law and with different facts.
45. MCG could also not be forced to bring a claim against the second defendant in Jersey. It had brought that claim in South Africa which it was entitled to.
46. He accepted that the first plaintiff was the finance arm for MCG but that stopped in 2019.
47. In relation to joinder under Rule 6/36 of the Rules he emphasised that for a party to be joined according to In the matter of the Bastian Broere Trust [2003] JLR 509, joinder under an equivalent of Rule 6/36 had to be "proper and necessary" not just "convenient and desirable". He argued that what was occurring was not dissimilar to the unsuccessful approach in the Broere case.
48. Advocate Harvey-Hills then explained that MCG's claim against the second defendant was issued in South Africa before the Jersey proceedings had been served which took place on 14th January 2020.
49. The losses in the claims in Jersey and South Africa were also different.
50. There was no existing lawsuit in Jersey prior to MCG commencing proceedings in South Africa because MCG was not a party to the Jersey proceedings. It was not a party to the claim in Jersey by the plaintiffs for breach of confidence. The claim against MCG was a claim about ownership.
51. In relation to the service out test, the relevant criteria were set out in Maywal Limited v Nautech Services Limited [2014] (2) JLR 527.
52. In determining whether there was a good arguable case the court had to be satisfied that the parties to be joined were necessary or proper parties to the current unamended claim. It was only then that they could be joined, and joinder was not necessary to determine the current counterclaim against the plaintiffs.
53. The case of Massey was really about a joinder where a plaintiff was not sure which defendant was liable. A similar approach was taken in Carvill America Investment v Camperdown UK Limited [2005] 1 CLC 845.
54. In relation to the agreement concerning MIL, MCG was not a party to this agreement. Advocate Harvey-Hills also made the observation that the provisions of clause 2 were not contained in the MIL agreement. Therefore, there was no sufficient common thread between the claims against the plaintiffs in Jersey and the claims against MCG for ownership interests.
55. In relation to whether Jersey was an appropriate forum Advocate Harvey-Hills reminded me of the applicable principles in Spiliada Maritime Corp v Cansulex Ltd (The Spiliada) [1987] AC 460. The relevant principles were summarised in the Rules of the Supreme Court 1998 edition at paragraphs 6.37.16 at page 378.
56. Paragraph 6.37.19 also emphasised the importance of the governing law as being an important factor and that it was generally preferable that a case should be tried in the country whose law applies, in particular if issues of law were likely to be important. A governing law issue did arise because it was clear that there was no concept of equitable rights representing a shareholding known to South African law.
57. Advocate Harvey-Hills also relied on the fact that the divisional shareholders agreement in relation to MCG contained an exclusive or non-exclusive jurisdiction clause in favour of South Africa.
58. The defendants were frustrated with the plaintiffs bringing in essence the same claim in two jurisdictions. The defendants' position (in response to a question from me put to both parties) was that they would accept there being one set of proceedings in South Africa in respect of all issues. This was made in the absence of South African advice.
59. Advocate Pallot emphasised the recognition at paragraph 44 of the Mullins opinion exhibited to Mr Mullins affidavit that the evidence relied upon by the plaintiffs in Jersey will "presumably be in some (or even most) respects the same evidence as will be relied upon by MCG in South Africa".
60. The defendants accepted that if MCG were joined to the Jersey proceedings, they could bring their own breach of confidence claim in Jersey.
61. What was at the heart of these proceedings was a falling out between Mr Warwick Marshall and the second defendant which required one trial in one jurisdiction. The submissions on case management were therefore not realistic in a case such as the present. Case management could not address the risk of inconsistent findings.
62. The question of enforceability was a risk for the defendants. As the first plaintiff holds MCG funds, enforcement could take place without having to go to South Africa in any event.
63. Advocate Pallot sought to distinguish the Inter-tel case on the basis that the facts were very different. The particular aspect that could not be enforced in England concerned committing the defendants for contempt.
64. He sought to distinguish the Broere case on the basis of a concession that the plaintiff in that case had no issue with the defendant trustees.
65. In terms of service out, joinder of MCG and Southern 2 would be proper if they were all in Jersey. The good arguable threshold was therefore met.
66. The dispute began in Jersey and therefore it was appropriate for all issues to be heard in Jersey because otherwise it was inevitable there would be a multiplicity of findings and significant risk of inconsistency.
67. In relation to whether I should consider the question of service out or joinder first, the conclusion I have reached is that I should approach the question of joinder first. This is firstly because logically, if there is no need for a joinder to occur on the assumption that all parties are within Jersey, then it is not necessary to consider the question of service out of this jurisdiction on a party not resident within this jurisdiction.
68. Secondly, this conclusion is consistent with the principle and approach taken in Massey v Heynes case at paragraph 87. In respect of this issue Lord Esher M.R. in Massey at page 338 stated as follows: -
69. In the AK Investments CJSC case, the Privy Council at paragraph 87 approved the approach in Massey by stating the following: -
70. Looking at matters within the jurisdiction, the specific Rule under which a joinder is to be considered is Rule 6/36 of the Rules set out in paragraph 29 above. How Rule 6/36 is to be construed as a matter of general principle was considered in the Bastian Broere decision at paragraph 35 as follows: -
71. In relation to Rule 6/36 there are two different limbs. The first is in Rule 6/36(b)(i) which applies to "any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon."
72. The second ground in Rule 6/36 (b)(ii) is however wider because it permits a joinder of "any person between whom and any party to the cause or matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter which in the opinion of the Court it would be just and convenient to determine as between that person and that party as well as between the parties to the cause or matter." (Emphasis Added)
73. I have referred to this distinction because Advocate Harvey-Hills correctly reminded me that I should approach joinder under Rule 6/36 on the basis of the assertions contained in the unamended answer and counterclaim in deciding whether any person should be added as a party. The claim where the defendants seek joinder is the defendants' counterclaim seeking an interest in the first plaintiff either as a 28% shareholder or on the basis of any equitable rights equivalent to such a shareholding or alternatively seeks an interest in the FMCG division of the first plaintiff.
74. In respect of this claim, it is clear that MM Plc as the shareholder of the first plaintiff should be joined so that the claim of the defendants to an interest in the first plaintiff can be effectually and completely determined. Without the parent company of the first plaintiff the question has to be posed how the court could otherwise effectively and completely determine the claim for an interest in the first plaintiff. In addition, looking at matters the other way round, the relief sought for a 28% interest in the first plaintiff affects MM Plc's rights as a shareholder in the first plaintiff which is an appropriate basis to join MM Plc.
75. In respect of the application to join MCG and Southern 2 strictly speaking they are not necessary parties to ensure that the claims against the first plaintiff may be factually and completely determined and/or adjudicated upon. They have no interest in the first plaintiff and no basis to object to a ruling in respect of the defendants' claim to such an interest. The first limb of Rule 6/36(b)(i) is not therefore made out in respect of MCG or Southern 2.
76. However, the conclusion I have reached is that the test in sub-paragraph (b)(ii) of Rule 6/36 is made out for the reasons advanced by Advocate Pallot. The foundation of what interest the defendants may have in the first plaintiff and MCG is in essence the same, namely what was agreed between Mr. Warwick Marshall and the second defendant. Although there are different divisional shareholders agreements which in part cover different entities, the two main agreements were signed on the same day by the same parties and there is a significant overlap between their provisions. In my judgment it would be artificial for the claim for an interest in the first plaintiff not to be dealt with at the same time as a time for an interest in MCG. The origin of any written documents and any assertion of an interest remains what Mr Warwick Marshall and the second defendant agreed. Both claims clearly arise out of the same factual matrix and are related to and connected with each other.
77. This conclusion is confirmed by the defendants' claim for repayment of the loan agreement. The loan agreement as set out in more detail in my previous judgment in this matter represents accumulated profits in the first plaintiff and MCG. As the full basis of the loan arrangement is not clear, as noted in my previous judgment, it too has its origins in what Mr Warwick Marshall and the second defendant agreed.
78. In relation to the claims by the second defendant for an interest in the MCG, there is also an inter-connection between the first plaintiff and MCG because it was claimed that MCG met expenses of the FMCG business with profits being paid out through MIL. It is further alleged that funds due from MCG to the defendants had also previously been paid by the first plaintiff to the first defendant in Jersey. It would now be artificial not to recognise the interrelationship between the two entities.
79. I do not regard the present cases as analogous to the decision in Broere albeit I accept that I am bound by the principles set out in Broere in paragraph 35. In Broere the advocate for Bastian Broere, as noted at paragraph 41, was not making any claim against the CB Trust or the CB Trustees. By contrast, in the present case the second defendant is clearly making a claim against MCG and Southern 2. It should also be remembered that the proceedings in Broere were administrative proceedings seeking documentation rather than proceedings commenced by an order of justice where a counterclaim has been filed.
80. If MCG and Southern 2 were not joined, assuming for the purposes of this part of the judgment there was a separate claim for an interest in MCG and Southern 2 its parent, there would also be a danger of inconsistent findings of fact. The view I have therefore reached is that it is not just desirable or convenient to have one trial in respect the second defendant's claim for an interest in MCG; rather it is both proper and necessary for a single trial to occur.
81. In respect of Southern 2, it is appropriate to join Southern 2 as the parent company of MCG for the same reason it is appropriate to join MM Plc as the parent company of the first plaintiff.
82. The fact that the defendants if successful in their counterclaims might face difficulties in enforcing a Jersey judgment in South Africa, if MCG and Southern 2 do not take part in Jersey proceedings is not a basis to refuse joinder. Rather, as Advocate Pallot submitted, any risk as to enforcement is a matter for the defendants. I also am not persuaded that any general principle can be drawn from the Inter-tel case which very much turns on its own facts.
83. I also wish to observe that while I have focused on the overlap between the claims for an interest in the first plaintiff and MCG, there is also a significant overlap between the claims brought by the plaintiffs in Jersey and the claims brought by MCG in South Africa. For the reasons explained later in this judgment, these claims should also be heard before one court and the same court dealing with the defendants' counterclaim. The analysis that the claims meet both limbs of Rule 6/36 also supports my view that the counterclaims also meet the threshold for joinder in Rule 6/36(b)(ii).
84. To conclude this part of my decision, this is a case that cried out for one investigation in respect of the defendants' counterclaim. The claims against the first plaintiff and MCG both have at their heart "a common thread" and are clearly closely bound up with each other.
Service Out
85. Having reached the conclusion, it was appropriate to order joinder of MM Plc, MCG and Southern 2, the question I next have to consider is whether service out of the jurisdiction should be permitted on MCG and Southern 2. This question is not raised in respect of MM Plc because it is a Jersey company.
86. Both counsel agreed that the questions to be considered in respect of an application to serve a defendant out of the jurisdiction were explored in Maywal Limited v Nautech Services Limited Paragraph 23 of the Maywal judgment states the test as follows: -
87. In the present case the parties were agreed that there was a serious issue to be tried. The questions I therefore had to consider were whether one of the gateways set out in the schedule to the Service of Process Rules 2019 was met and secondly was Jersey the suitable forum for a trial of the counterclaim.
88. Before I consider these questions, it is appropriate to set out the chronology of when steps were taken in different jurisdictions.
89. The first proceedings brought were those commenced by the second defendant in a regional court in South Africa for recovery of approximately £17,500 said to be a dividend due in respect of MLL.
90. On 9th December 2019 the plaintiffs' advocate signed the order of justice thus starting the process of issuing proceedings in Jersey against the first and second defendants for breach of confidence.
91. On 11th December 2019 the order of justice was served by the Viscount on the first defendant as of right as the first defendant is a Jersey company.
92. The claim by MCG for breach of confidence against the second defendant in South Africa was first referred to in the Regional Court in South Africa on 19th December 2019 by way of counterclaim to the second defendant's claim for an unpaid dividend.
93. On 23rd December 2019 an application was made to me to serve the Jersey proceedings for breach of confidence on the second defendant in South Africa on the basis that he was a necessary or proper party to the claims for breach of confidence brought in Jersey by the plaintiffs against the first defendant. I observe in passing that this is the same ground that the defendants now wish to rely on to join MCG and Southern 2 to its counterclaim.
94. Permission to serve the second defendant out of the jurisdiction with the Jersey proceedings was granted by an Act of Court issued by me on 6th January 2020.
95. On 9th January 2020 MCG applied to the Regional Court in South Africa to transfer proceedings to the High Court in South Africa because the jurisdiction of the Regional Court was exceeded as MCG were claiming against the second defendants some £2,500,000 by way of damages.
96. This chronology leads to the following conclusions: -
(i) The claim for breach of confidence issued by the plaintiffs in Jersey which led to the defendants' counterclaim for an interest in the first plaintiff was commenced before MCG in South Africa had filed a counterclaim in the Regional Court in South Africa for damages for breach of confidence. The court first seized with a claim for breach of confidence against the second defendant was therefore Jersey.
(ii) By the time the counterclaim for breach of confidence against the second defendant was filed by MCG in South Africa the first defendant had been served in Jersey as of right.
(iii) By the time an application was made to the Regional Court in South Africa to transfer proceedings to the High Court in South Africa, the plaintiffs in Jersey had applied for and had been granted an order seeking permission to serve the second defendant out of the jurisdiction in South Africa.
97. The claim in Jersey was also a significant one with the order of justice being 24 pages in length and containing 5 schedules and with a detailed analysis of lost income for the year prior to the second defendant leaving the Monteagle Group.
98. The inference I have concluded I am entitled to draw is that, given that a significant claim was brought in Jersey followed a few days later by the first step to bring a significant claim in South Africa, this was a conscious decision and appears to be tactical.
99. Given the analysis set out above about the ambit of Rule 6/36, MCG could have brought a claim against the defendants in Jersey for breach of confidence and the losses it claims to have suffered alongside the claims brought by MIL. The tests in Rule 6/36(b)(i) and (ii) would both have been met as would have the necessity of one jurisdiction to resolve matters had such an approach been taken.
100. This is because, just as there is a clear overlap in respect of the second defendant's counterclaim against the first plaintiff and MCG, there is also a clear overlap in respect of the plaintiffs' claims for breach of confidence. They both have as their origin the decision by the second defendant to leave the Monteagle Group and compete with its FMCG business through OMNI. The overlap covers the following:-
(i) Both allege misuse of confidential information and plead breaches of what in essence are the same contractual and fiduciary duties said to be owed.
(ii) The order of justice is peppered with references to MCG.
(iii) Advocate Harvey-Hills also accepted that documents would be provided by MCG to help the plaintiffs prove their claim in Jersey.
(iv) He also accepted that there would be witnesses from MCG giving evidence in Jersey to support the plaintiffs' claims including Mr Warwick Marshall and his father Mr David Marshall.
(v) Finally, the losses claimed are clearly interlinked and overlapped. The financial losses claimed by MIL depend on MCG being able to establish losses.
101. This overlap means that the test of necessity in Rule 6/36(b)(i) is met. If I am wrong in that conclusion, at the very least the test in Rule 6/36(b)(ii) is certainly met. Both claims for breach of confidence clearly arise out of the same factual matrix and are related to and connected with each other. This is why I am of the view that had MCG sought to bring its claims for breach of confidence alongside the plaintiffs' claims in Jersey it would have been permitted to do so and any challenge to separate the plaintiffs' claims in Jersey for breach of confidence from those of MCG would have failed. In expressing this conclusion, if a single action had been started in Jersey for breach of confidence by the plaintiffs and MCG, whether a stay of that action as a whole might have been granted in favour of South Africa may have arisen. Such a question is different however from the question I have analysed namely could a single claim for breach of confidence have been started in Jersey by the plaintiffs and MCG, the answer to which is an affirmative one.
102. I have referred to the extent of this overlap because there was no evidence before me from the plaintiffs that there was no equivalent to Rule 6/36 in South Africa which would have enabled one set of proceedings to have been heard in South Africa. This is despite Mr Mullins, in the opinion exhibited to his affidavit, accepting that evidence relied upon by the plaintiffs in Jersey regarding the alleged misuse of confidential information by the second defendant presumably will be in some (or even most) respects the same as the evidence relied upon by MCG in South Africa. In other words, MIL's own independent expert in South African law appears to admit that the evidence relied upon is the same.
103. With the above observations in mind, I now turn to consider the question of whether Jersey or South Africa is the appropriate forum for the purposes of the service out test.
104. In relation to whether or not MCG and Southern 2 meet any of the relevant grounds set out in the schedule to the Service of Process Rules 2019, the ground relied upon was that contained in paragraph 1(3) of the Schedule which provides as follows: -
105. In this case, as the second limb of Rule 6/36 is made out, it is clearly 'proper' for MCG and Southern 2 to be joined to the counterclaim. This is a case, as is clear from paragraph 87 of the AK Investments case, that cries out for one investigation. Therefore, just as joinder is appropriate under Rule 6/36 (b)(ii), so is the reliance on paragraph 1(3) of the Schedule to the Service of Process Rules. In reaching this conclusion, I accept that if joinder under Rule 6/36(b)(i) is not necessary so joinder under paragraph 1(3) must also not be necessary. However, it is enough for joinder to be 'proper' for paragraph 1(3) to be relied upon.
106. In relation to the threshold required by the Maywal case, I have also concluded that the defendants have met the good arguable case threshold as they have the better of the argument that MCG and Southern 2 are proper parties to the defendants' counterclaim for an interest in the first plaintiff.
107. In respect of whether Jersey is the appropriate forum, as noted above, because of the clear overlap between both the plaintiffs' claim in Jersey, the claim MCG was bringing in South Africa and the defendants' counterclaims for an interest in the first plaintiff or MCG, I asked both counsel whether their clients would agree to all issues in dispute between them being heard in South Africa.
108. The defendants' initial response during the hearing was to agree to the same. Advocate Harvey-Hills asked for time to take instructions.
109. After the hearing Advocate Pallot qualified his position to say that while he agreed that the proceedings can be heard and determined in one jurisdiction his client's submission remained that Jersey rather than South Africa was the most appropriate forum.
110. Advocate Harvey-Hills response was contained in a letter dated 14th January 2022. The response I received stated "that the plaintiffs understand that it is very unlikely that the Jersey claims could be heard in South Africa, in particular for jurisdictional reasons." No explanation was advanced in support of this statement.
111. Advocate Harvey-Hills also emphasised a point that he had made in his oral submissions that he acted for the plaintiffs only and that he did not speak for MCG and Southern 2. This led to the following statement "all that we can say at this stage is that neither MCG nor Southern 2 have given the plaintiffs any indication that they would submit to the jurisdiction to the Jersey Court or agree to the claims in existing proceedings South Africa being restarted in Jersey."
112. Finally, the letter stated, "there would appear to be very considerable legal and practical difficulties in attempting to move existing claims between jurisdictions and it would seem to be unprecedented to do so." No explanation was set out as to what these difficulties might be.
113. I did not regard the response from Advocate Harvey-Hills as answering the question I had posed. The lack of analysis in support of the assertions made set out above was also not helpful. I had made it clear in allowing Advocate Harvey-Hills a further week to respond to my question that I did not regard the question I had posed as complex in principle. The plaintiffs have not explained why the question posed was a complex one although they could have done.
114. Moreover, the position of the plaintiffs did not sit easily with the following: -
(i) The vast majority of affidavits filed on behalf of the plaintiffs have been filed by Mr Warwick Marshall whose evidence as I have noted above is at the heart of the dispute with Mr Dumas the second defendant.
(ii) Also as noted above Mr Warwick Marshall will be a key witness in the Jersey proceedings.
(iii) Furthermore, he was a director of MCG for many years until 2018.
(iv) His father remains a director of MCG.
(v) MCG will provide documents for use by the plaintiffs in the Jersey proceedings, again as noted above.
115. The plaintiffs on the one hand appear to wish to pursue their claim in Jersey in reliance on significant evidence from MCG including from its past director and yet are unable to answer a straightforward question about whether or not the disputes about breach of confidence and counterclaims for an interest in the Monteagle Group can be heard in one jurisdiction.
116. I have concluded that I am entitled to take this approach into account in deciding whether Jersey is the appropriate forum.
117. I am also entitled to take into account that the decision to bring proceedings on two fronts when at least one set of proceedings for breach of confidence could have been brought in Jersey also appears to be tactical. The failure to answer the question I posed seems to be a continuation of that tactical approach about which Advocate Pallot has complained, in my judgment with justification.
118. While therefore there are more documents and witnesses in South Africa, those documents and witnesses are going to be provided in Jersey to defend the counterclaim for an interest in the first plaintiff to a significant degree. In particular, as noted above Mr Warwick Marshall will give evidence in Jersey (and he already has done so extensively in various affidavits filed). Although for a claim in Jersey there would need to be evidence of South African law on whether a person can claim shareholder or equivalent equitable rights in a South African company, that legal argument is only a part of the dispute. What is at the heart of this dispute is what was agreed between Mr Warwick Marshall and the second defendant in respect of what interest the second defendant might have in the first plaintiff and more broadly the Monteagle Group including MCG. The evidence to be adduced for a claim against MCG is already going to be adduced in large part for the counterclaim for an interest in the first plaintiff.
119. MCG will also be providing documentary evidence and witness evidence in support of the plaintiffs' claims in Jersey. The Monteagle Group, including MCG, having elected to pursue the plaintiffs' claims in Jersey with the support of MCG before making any claims in South Africa, means that it does not lie easily in the mouth of MCG to now assert that Jersey is not the suitable forum for the second defendant's claim to an interest in MCG. The steps taken by the different parts of the Monteagle Group in this case, when the full context of what has occurred is evaluated, are therefore much more complex and are far removed from a simple claim by a South African national for an interest in a South African company.
120. A conclusion that two separate trials are required where there is significant overlap in respect of the counterclaims and the plaintiffs' claims in Jersey and similar claims in South Africa also creates the risk of inconsistent findings in respect of assertions of an interest in the Monteagle Group (and for the claims for breach of confidence). While that risk may continue in respect of the breaches of confidence claims, that is a situation brought about by the plaintiffs and MCG and could have been addressed by the first plaintiff and MCG commencing a single set of proceedings in Jersey.
121. This is also not a case where the counterclaim is made against the first plaintiff in Jersey for the purpose of joining MCG (see the discussion at paragraph 76 to 78 of AK Investments). The defendants have claims for interests in both the first plaintiff and MCG with the first plaintiff (and MM Plc as its parent) being pursued as of right for a substantive claim for an interest in those companies. The counterclaim for an interest in the first plaintiff is also a direct response to the plaintiffs electing to sue the first and second defendants in Jersey, when the Monteagle Group and therefore the first plaintiff knew that the second defendant was asserting an interest in the first plaintiff.
122. Given that the plaintiffs elected to bring a claim in Jersey prior to any claim in South Africa being made by MCG which has led to the present counterclaim and, given that the counterclaim for an interest in the first plaintiff clearly overlaps with the claim for an interest in MCG which requires determination in one jurisdiction (as do the claims for breach of confidence), and given the tactical approach of the Monteagle Group including the plaintiffs and MCG to which I have referred to above, I have concluded that Jersey is the appropriate forum to resolve the second defendant's counterclaim for an interest in MCG.
123. In reaching this conclusion I accept that ordinarily the claim by a South African national to an interest in a South African company would be heard in South Africa. However, this is far from a usual claim for the reasons I have set out in this judgment and the factors I have referred to and I am therefore satisfied that Jersey is the appropriate forum for resolution of the second defendant's counterclaims in relation to MCG. The applications to join MCG and Southern 2 and serve the same out of the jurisdiction are therefore granted. I will deal with the mechanics of service when this judgment is handed down.
124. I wish to add that in reaching this conclusion I intend no disrespect to the South African courts in relation to the proceedings brought by MCG for breach of confidence against the second defendant in South Africa and the current application for a stay of those proceedings which is a matter for the South African courts. However, for the reasons I have referred to above, I consider that those proceedings could be determined in Jersey if MCG so elected.
125. Following the handing down of my substantive decision in relation to this matter I was addressed by the parties on the question of costs. The defendants argued that they were the clear winner applying the approach in Watkins v Egglishaw [2002] JLR 1. The plaintiffs argued that these costs arose out of an amendment by the defendants and therefore the usual order was that the defendants should pay any costs thrown away or occasioned by the amendments. In this case the plaintiffs however contended that the appropriate order was plaintiffs' costs in the cause or costs in the cause.
126. The conclusion I reached upon was that the defendants should have an order for costs in their favour on the standard basis for the following reasons.
127. Firstly, this was an application that was clearly resisted by the plaintiffs who did not want third parties joined to the counterclaim they faced. This is clear from the extensive submissions, affidavits and authorities that were put before me. This was not therefore a case of a party resting on the wisdom of the court and making brief observations about what matters the court might consider in relation to any application to join a third party and to grant permission to serve that third party out of the jurisdiction. Such applications are frequently dealt with on the papers with an affidavit or brief submissions in relation to that application, which is therefore dealt with primarily as a matter between the applicant and the court. Any other party who has submitted to the wisdom of the court therefore either makes no observations or brief observations to assist the court only. The plaintiffs' position in this case was very far removed from that sort of approach and instead was a full-scale resistance to the application which submissions I have before rejected.
128. The application was also not principally an application to amend the answer and counterclaim but to join third parties. This was not therefore a case of having to analyse the amendments to the answer and counterclaim which only related to changes to insert the correct names but was about whether or not third parties should be joined and in the case of MCG and Southern 2 permission should be given to serve them out of the jurisdiction.
129. The reason why ordinarily amendment application costs are paid by the wasted party has recently been explored in the English decision of Various Claimants v MGN Limited [2021] EWHC 771 (Ch) at paragraph 35 as follows: -
130. This case, however, was not about a change of tack. The defendants had always pleaded their counterclaim from the outset. The step they had not taken was that they had not sought to join the third parties until now. However, that was because I firstly had to deal with extensive requests for information made by the plaintiffs. [See [2022] JRC 244]. Secondly, the matter was then stayed for Alternative Dispute Resolution ("ADR") and thirdly the second defendant sought repayment of a loan agreement which he said was to fund his litigation moving forward (understandably albeit unsuccessfully). The issue of joinder was then raised at a stage before any other directions had been given. While it could have been raised at an earlier stage, as there were other issues occupying the parties, the application to join the third parties, because a directions hearing has not taken place, is not a late application, or one made at the court door or which might prejudice a hearing fixed for trial. There was also no evidence of any prejudice to the plaintiffs as a result of the application being made now rather than when the answer and counterclaim was filed. In expressing this view, I accept that joining the third parties makes these proceedings and any trial in due course more complex and may delay when a trial date is fixed. However, such factors are outweighed by the need for one judgment as found in my substantive decision in this matter.
131. In relation to the argument that the usual order on an application to join third parties was costs in the cause, where an application is not resisted and therefore becomes a matter between the applicant and the court in the manner described above, I agree that the normal order is likely to be costs in the cause. However, the fact that is a normal order does not fetter the discretion that exists to make a different order. This is clear from Jobas Ltd v Anglo Coins Ltd [1987] JLR 359.
132. Given the general discussion and having regard to Watkins v Egglishaw, in this case in my judgment there was a clear winner, namely the defendants who sought to convene the third parties which in the case of MCG and Southern 2 was resisted. I accept that the plaintiffs submitted to the wisdom of the court in relation to their application to join MM Plc but that only became clear when skeleton arguments were filed and exchanged. It did not affect the substance of the dispute between the parties and the costs incurred in preparing for that dispute. Those costs had to be incurred to deal with whether or not MCG and Southern 2 should be joined as parties and permission to serve them out of the jurisdiction should be granted.
133. I also took into account, in deciding to order costs in the defendants' favour, my criticisms of the plaintiffs' conduct and the tactical approach that I consider was being taken. A costs order is an appropriate order to discourage such conduct.
134. The only other matter it is necessary to refer to, due to a timetable being set for when the third parties were to be served and pleadings filed in response, was that, because the plaintiffs made it clear they were going to appeal this decision (which they are of course entitled to do as of right), I directed that any appeal and any challenge by the third parties to the granting of permission to serve them out of the jurisdiction should be heard at the same time by a single court. This was because both the appeal and any such challenge were likely to cover very similar if not the same ground and it was not appropriate to have two different courts consider the same or very similar questions.
