David Stone (sitting as Deputy High Court Judge):
- This is the latest salvo in what has been described in this court as an "orgy of litigation" between two brothers, concerning (among other things) some time share properties in Northern Cyprus.
- Having been commenced in 2001, nearly 17 years ago, the proceedings have made little progress: the present dispute once again relates to who are the proper parties to the proceedings.
- The matter comes before me on appeal from a decision of Deputy Master Lloyd of 24 April 2017 by which the current claimants, John Anthony Popely and Andrew Popely (the Claimants) were given permission to continue this claim as a derivative action against the First Defendant, Ronald Albert Popely, for the benefit of the Third Defendant, Casterbridge Properties Limited (Casterbridge).
- Also before me was an application dated 15 January 2018, listed before me by order of Roth J of 19 January 2018. In the event, the parties did not wish to have that application dealt with, albeit had I decided that application one way, this appeal would have been rendered otiose. Rather, the parties asked me to hear only the appeal from Deputy Master Lloyd's decision. This is my judgment on that appeal.
Background Facts
- To understand the five grounds of appeal advanced, it is necessary to set out in some detail the initial dispute, and some of the various proceedings over the past 16 years. Unfortunately, this by no means represents the full extent of the various disputes between the brothers, nor those between members of the Popely family and third parties.
- These proceedings were initially filed by the elder of the two brothers, John Henry Popely, against his younger brother Ronald Albert Popely on 10 August 2001. For the sake of clarity, and meaning no disrespect, I will refer to the various family members by their first names. As there are two people called John Popely, I will refer to the father as John Snr and to his son as John Jnr. The original claim included an allegation that Ronald acted in breach of an oral agreement made with John Snr during 1997. The agreement related to ownership, among other things, of a time share resort in Northern Cyprus. For the purpose of these proceedings, at all relevant times, the time share rights had vested in Casterbridge. The shares in Casterbridge were owned 30% by a trust called the Blue Ridge Trust (the beneficiaries of which were John Snr's family) and 70% by a trust called the Mars Trust (the beneficiaries of which were Ronald's family). Both trusts were established in St Vincent and the Grenadines (which, for brevity, and, again meaning no disrespect, I will refer to as St Vincent). The trustee of both trusts was St Vincent Trust Service Limited (SVTS). In short, John Snr's position was that Ronald conducted the affairs of Casterbridge so that all the profits of the business ended up in the Mars Trust to benefit Ronald's family and none ended up in the Blue Ridge Trust to benefit John Snr's family.
- Ronald initially attempted to avoid service of John Snr's claim issued in this court, but it was eventually served, and the court held that it had jurisdiction to determine the claims.
- Following the bankruptcy of John Snr in 2005, his trustee in bankruptcy sold the right, title and interest in the claim (including the right to prosecute and continue it and the right to recover and receive any money or property from Ronald) to SVTS as trustee of the Mars Trust for £15,000. SVTS then applied to this court to be joined as a claimant with the intention of discontinuing the proceedings.
- In order to prevent this, the Claimants, John Snr's two children, John Jnr and Andrew and four of their children (all then minors) applied to be joined as parties to the claim and for permission to continue the claim as a derivative action on behalf of Casterbridge. This claim was based on an alleged breach of fiduciary duty that Ronald owed to Casterbridge. The Claimants wish to recover the share of the profits that they say should have found their way to the Blue Ridge Trust, rather than to the Mars Trust. The claim is currently for over £4 million. Whilst Ronald denies the claim, and has filed a defence, it was submitted before me that Ronald is not suggesting that there is no case to answer. Nor was there a submission that the claim is hopeless.
- Casterbridge was originally incorporated in the British Virgin Islands (BVI) in November 1997 but was "migrated" to St Vincent in April 1998. In 1999 the Secretary of State in the UK sought, and in 2000 obtained, a winding up order against Casterbridge. More recently, there has been an attempt by Ronald to "migrate" Casterbridge again, this time to Nevis (on 18 December 2015). That "migration" is in dispute.
- On 18 January 2007, Master Moncaster gave judgment on the Claimants' application (Popely v Popely, Master Moncaster, 18 January 2007) in which he commented (at paragraph 15):
"Therefore, the unfortunate result, as it seems to me, if these proceedings are not allowed to continue will be that the underlying dispute between the brothers is simply not going to be litigated at all, and that seems to me an unfortunate result. No doubt it is true that John [Snr] has made his bed in the shape of conducting his affairs in the very untransparent way that he has done and through St Vincent companies which has led to grave difficulties
but nonetheless it does seem to me that it should be the case that this, as it seems to me, genuine and real dispute between the two brothers should be adjudicated upon, and the only available way of doing that seems to me to be in the current proceedings."
- Further, Master Moncaster said this at paragraph 19:
"In those circumstances, where what is being asked to be done is to substitute parties who, on the defendant's view, are the proper claimants for the wrong claimant, I do not see how they can now complain that applying to substitute the proper claimants for the wrong claimant is an abuse of the process: quite the reverse, it is correcting existing faults and joining the proper parties to the claim so that the dispute can be adjudicated upon."
- Master Moncaster discussed Casterbridge at paragraph 34:
"There is then the other claim brought on behalf of Casterbridge. That is even more complicated
The claim is perhaps an unprecedented one in that it is a double derivative action, so to speak, in that [SVTS] will not bring the claim, so that the beneficiaries of the Blue Ridge Trust have to bring the proceedings joining the trustee and the proceedings which they are seeking to bring as beneficiaries with the trustee as a necessary defendant are proceedings for a derivative claim on behalf of Casterbridge which is a company owned by the trust. It is submitted by [SVTS] that the derivative claim can only be brought by a registered shareholder and that therefore it can only be brought by [SVTS]."
- Further, Master Moncaster said this at paragraphs 35 and 36:
"35. I am not convinced that the authority to which I was referred, which is really dealing with a different point, is authority for a hard and fast rule that a derivative claim cannot be brought by beneficiaries under a trust in the way in which they seek to do so here. A derivative action is supposed to be a flexible means of preventing the company's constitution being used in order to shield wrongdoers from accounting to the company for company property they have misappropriated. I am not at all sure that the court would hold that in a case where the shareholder is a trustee who is refusing for, so far as appears, bad reasons to lend its name to the [claim] (or at any rate it has not established it is good reasons) it can prevent its beneficiaries from having the claim adjudicated. The trustee of course may well wish not to bring the claim in its own name because of the risk as to costs it would face, and it seems strange that the reason for refusing to lend its name, which would be a very proper reason in cases such as this, should make it impossible for the beneficiaries to have the issue decided."
"36. Again, I come back to what seems to me the fundamental point, that if, as here, there is a genuine dispute as to whether Ron Popely has defrauded Casterbridge then it should be justiciable and not to be able to be made non-justiciable by the fact that the shareholder, St. Vincent, is, as it appears to be now, for whatever reason that may be, implacably hostile to John [Snr] and John [Snr's] family who are the beneficiaries (or were, I will come back to this point) under the Blue Ridge Trust. Therefore, if that were the only objection to the joinder of the beneficiaries I would think it not appropriate to rule upon that on this application. The application should be allowed and then, when the question arises under the rules, as to whether the derivative action should continue or not, that question will be one of the questions for decision and, given the novelty of the position and the difficult position, it seems to me to be better if that decision were one made by a judge rather than by a Master."
- Further, Master Moncaster said this at paragraphs 44 and 45:
"44. There are proceedings on foot in St Vincent by the beneficiaries against the trustee. One complaint that is made by St Vincent to the beneficiaries' application here is that this is all something that has to be done in St Vincent, and I am told that those proceedings are due for trial in April this year. In those circumstances, I think that in addition to requiring the views of the liquidator of Casterbridge, although I will allow the substitution of the beneficiaries as the claimants there will have to be a stay of that claim also to await the determination of the St. Vincent proceedings which will need to be amended to include a claim for declaration of invalidity of the astonishing document that has been executed by Lex.
45. Therefore, in this unhappy dispute, in this unhappy family, very little progress I am afraid is being made because although, as I said, I think twice already, that what seems to me to be required is for the substantive issues to be decided between the two brothers or their respective trusts and companies. At the moment that cannot be done immediately because of the difficulties that arise in Ireland and in St Vincent. The present applications, although in substance, are good applications for joinder so that I am allowing the joinder, will have to await decisions of the Irish court and the St Vincent court respectively so far as Ruislip and Casterbridge respectively are concerned."
- In the event, on 6 March 2007 Master Moncaster joined John Jnr and Andrew and their children to the proceedings, as well as Casterbridge. However, he deferred to a further hearing the issue of whether the Claimants should be permitted to pursue the claim as a derivative action on behalf of Casterbridge, and stayed the proceedings in the meantime. The stay in relation to Casterbridge was until final determination of related proceedings in St Vincent.
- The relevant St Vincent proceedings were finally compromised on 2 February 2015. This led to Cosmos Trust Limited (Cosmos) being substituted for SVTS as trustee of the Blue Ridge Trust.
- Thereafter, on 16 August 2016, the Claimants issued an application to lift the stay and obtain permission to continue the claim as a derivative action on behalf of Casterbridge. The application also sought:
a. the appointment of John Jnr and Andrew as representatives of all beneficiaries of the Blue Ridge Trust (and not just their four children); and
b. the substitution of SVTS with Cosmos as the Second Defendant.
- At the direction of Chief Master Matthews, the Claimants' application was initially listed to be heard before the Chief Master over two days.
- As it turned out, the Chief Master was not available, and the two day hearing took place before Deputy Master Lloyd on 21 and 22 March 2017. At that hearing, the Claimants were represented by Mr Timothy Evans of Counsel, and Ronald and Casterbridge were represented by Mr Richard Owen-Thomas of Counsel. I will return below to the significance of the representation of Casterbridge.
- At that hearing, Ronald and Casterbridge requested an adjournment to enable them to obtain documents through proceedings in Gibraltar against Ms Kristina Phelan, a former advisor to Ronald. Deputy Master Lloyd refused that application, and there has been no appeal from that refusal.
- Following the hearing, the Master delivered a written judgment on 24 April 2017 a draft of which was, in the usual way, reviewed by the parties prior to handing down. Indeed, the Master's draft judgment was included in the bundles before me, along with the approved version of that judgment. An Order was sealed on 27 April 2017 permitting the Claimants to continue the claim as a derivative action brought against Ronald for the benefit of Casterbridge.
- A notice of appeal was filed in the names of both Ronald and Casterbridge on 15 May 2017. The grounds of appeal relied on at that time were all different from those now advanced by Ronald. Amended grounds of appeal were filed along with a skeleton argument on or around 10 August 2017, and following several extensions of time, permission to appeal was given by Arnold J on 29 September 2017.
Parties to this Appeal
- Before Deputy Master Lloyd, the defendants were Ronald, SVTS and Casterbridge. These are set out in the Order of the Master of 27 April 2017.
- The Appellant's Notice filed in these proceedings on 15 May 2017 notes in the box headed "Details of the party appealing":
"Ronald Popely and Casterbridge Properties Limited"
The legal representative for both appellants is given as Clarke Kiernan LLP, a firm of solicitors in Tonbridge. The firm's reference for this particular matter is listed as "ACG/Casterbridge".
- Following a change of solicitors and counsel in summer 2017, the appeal before me was pursued only by Ronald. However, since the change of solicitors and counsel, no notice of discontinuance of Casterbridge's appeal has been filed and no correction has been requested of Arnold J's order of 29 September 2017 granting permission to appeal to both Ronald and Casterbridge. Nor was any request made to correct the various extensions of time granted by Arnold J since the change of solicitors and counsel.
- As this is relevant to one of the grounds of appeal now advanced by Ronald, I say more about this below.
Grounds of Appeal
- Ronald's Amended Grounds of Appeal are as follows:
"1. The Learned Master was wrong in law to conclude that there were sufficient grounds to justify the derivative action because:
1.1 he failed to have any or any proper regard to and/or to apply the practice in paragraph 5 of Practice Direction 19C Derivative Claims that applications for permission to continue a derivative action should be decided by a Judge of the Chancery Division.
1.2 he failed to have regard to and/or apply the principle that a shareholder can only bring a derivative action (by way of exception to the rule in Foss v Harbottle) where the wrongdoers are improperly using their control to stifle a claim by the company.
1.3 he failed to have any or any proper regard to and/or to apply the principle that permission to bring a derivative action on behalf of a foreign company will only be granted in accordance with the laws of the country of incorporation.
1.4 he failed to have any or any proper regard to and/or to apply the principle that a beneficiary under a trust could only bring a derivative action if the circumstances were sufficiently special to make it just for the beneficiary to have the remedy rather than the trustee.
1.5 he failed to have any or any proper regard to and/or to apply the Court's discretion and whether in all the circumstances this was an appropriate case in which permission to continue these proceedings by way of a derivative action should be given."
Respondent's Notice
- There was in the bundles a Respondent's Notice dated 13 October 2017. Oddly, this was not referred to in either of the skeleton arguments or in the oral hearing before me.
- The Respondent's Notice sets out three additional grounds on which I am asked to uphold the Master's decision. As each was advanced in argument by Mr Evans, who appeared for the Claimants on this appeal, I discuss them below in relation to the relevant ground of appeal.
Nature of the Appeal
- Appeals to the High Court are governed by CPR Part 52. CPR Part 52.11(3)(a) provides that an appeal is to be allowed if the decision of the lower tribunal is "wrong".
- In Tanfern Limited v Cameron-Macdonald [2000] 1 WLR 1311, Brooke LJ said this at paragraph 32:
"The epithet "wrong" is to be applied to the substance of the decision made by the lower court. If the appeal is against the exercise of a discretion by the lower court, the decision of the House of Lords in G v G (Minors: Custody Appeal) [1985] 1 WLR 647 warrants attention. In that case Lord Fraser of Tullybelton said, at p 652:
"Certainly it would not be useful to inquire whether different shades of meaning are intended to be conveyed by words such as "blatant error" used by the President in the present case, and words such as "clearly wrong", "plainly wrong", or simply "wrong" used by other judges in other cases. All these various expressions were used in order to emphasise the point that the appellate court should only interfere when they consider that the judge of the first instance has not merely preferred an imperfect solution which is different from an alternative imperfect solution which the Court of Appeal might or would have adopted, but has exceeded the generous ambit within which a reasonable disagreement is possible.""
- Both parties agreed that this is not a hearing de novo, but rather a review in the proper sense. I have proceeded on that basis.
- Counsel for the Claimants rightly pointed out that none of the five grounds of appeal now relied on by Ronald had been argued before Deputy Master Lloyd. In relation to pure points of law, counsel for the Claimants accepted that I should deal with them. Into this group, he placed only Ground 1, and I have proceeded on that basis.
- For new points which are not pure points of law, counsel for the Claimants submitted that the appeal court should not permit new points to be raised, except in exceptional circumstances. In The Prudential Assurance Company Limited v Commissioners for Her Majesty's Revenue and Customs [2017] 1 WLR 4031, the Court of Appeal (Lewison, Christopher Clarke and Sales LJJ) said this at paragraph 23 and following:
"23. Although a party who is dissatisfied with the outcome of a trial may appeal to this court (usually with permission) the appellate process is, in general, limited to a review of the first instance decision. It is thus the starting point that parties are expected to put before the trial judge all questions both of fact and of law upon which they wish to have an adjudication.
24. There are a number of reasons for this. First, parties to litigation are entitled to know where they stand and to tailor their expenditure and efforts in dealing with (and only with) what is known to be in dispute: Jones v MBNA International Bank [[2000] EWCA Civ 514]. Second, it is a disproportionate allocation of court resources for the Court of Appeal (which usually sits in panels of three judges) to consider for the first time a point which could have been considered, and correctly answered, by a single judge at first instance. Moreover if the Court of Appeal deals with a point for the first time, it is neither a review nor a re hearing; which are the two processes contemplated by the CPR. Third, if resolution of a new point entails the re-opening of the trial it not only entails inevitable further delay, which is itself a reproach to the administration of justice, but is also wasteful of both the parties' and the court's resources and unfair to a party who conducted a trial on what has turned out to be a false basis. Fourth, there is a general public interest in the finality of litigation. It is for similar reasons that the Court of Appeal applies stringent criteria for the reception of fresh evidence on appeal.
25. If the point is a pure point of law, and especially where the point of law goes to the jurisdiction of the court, an appeal court may permit it to be taken for the first time on appeal. But where the point, if successful, would require further findings of fact to be made it is a very rare case indeed in which an appeal court would permit the point to be taken. In addition before an appeal court permits a new point to be taken, it will require a cogent explanation of the omission to take the point below.
26. These points are discussed more fully in Crane (trading as Indigital Satellite Services) v Sky-in-Home [2008] EWCA Civ 978 .
27. Until very recently in deciding whether or not to grant permission to appeal the Court of Appeal heard only from the would-be appellant. Partly for that reason the mere fact that permission to appeal has been granted on a particular point does not prevent the respondent from objecting that the point on which permission has been granted is a new point which the appellant ought not to be able to advance for the first time on appeal: Mullarkey v Broad [2009] EWCA Civ 2 at [29]."
- In my judgment, there is no difference in principle between appeals to the Court of Appeal discussed in that case, and appeals to a High Court judge from a decision of a master. As Hale LJ (as she then was) said in Hertfordshire Investments Limited v Bubb [2000] 1 WLR 2318 at paragraph 25:
"It is in the interests of every litigant and the system as a whole that there should be an end to litigation. People should put their full case before the court at trial and should not be allowed to have a second bite at the cherry without a very good reason indeed."
- Mr Christopher Boardman, who appeared for Ronald at the appeal, was not able to advance before me any reason beyond the change of counsel and solicitors following the Master's decision. He did not seek to raise that the law had changed or that the public interest required these new points to be raised now. In my judgment, the change of counsel in these proceedings is not "a very good reason indeed" for allowing Ronald to have another bite at the cherry. In short, the hearing conducted before me was entirely different from the hearing conducted before Deputy Master Lloyd five arguments were put to me that were not put to him. This is not an acceptable way to conduct litigation. If it were, then any hearing before a master would, in effect, be a dry run an opportunity to test arguments. Further, any litigant unsatisfied with a master's decision (which will usually be at least one of the sides to a dispute) might simply have another go before a judge of the court. Ronald has been advised throughout these proceedings by solicitors and counsel. It is not an answer that current counsel has now thought up arguments that escaped earlier counsel. If that is the case, then Ronald's remedies may lie elsewhere.
- As I heard argument on the five substantive grounds of appeal, I have set out my findings in full below. But I wish to stress that this is not the way to conduct litigation before this court.
Deputy Master Lloyd's Judgment
- Deputy Master Lloyd's judgment ran to 28 numbered paragraphs. He first set out the history of the dispute. At paragraph 14 he noted that the principles relating to the bringing of derivative actions are well known. At paragraph 15 he set out the issues argued before him:
a. Whether the Claimants had shown sufficient grounds to justify the proposed action; and
b. Whether any decision on that issue should be adjourned whilst Ronald and Casterbridge attempted to obtain documents from Gibraltar.
Paragraphs 16 to 23 deal with the adjournment application, which the Master rejected, and which is not the subject of this appeal.
- At paragraph 23, the Master turned to the Claimants' derivative application. At paragraphs 23 and 24, he discussed the parties' submissions on which test to apply: a Beddoe Summons test or a prima facie case test, which Mr Owen Thomas on behalf of Ronald and Casterbridge sought to elevate to the summary judgment test. The Master rejected that submission.
- At paragraphs 25 and 26, the Master considered whether the evidence established a prima facie case, and then, in conclusion, at paragraph 27, he applied the test in Abouraya v Sigmund [2014] EWHC 277 (Ch) and declared himself satisfied that the Claimants had shown sufficient grounds to justify the grant of permission to bring a derivative action. He also agreed to make the representation order sought and to substitute Cosmos as the Second Defendant in place of SVTS: there is no appeal from those orders.
First Ground of Appeal The Hearing should have been before a Judge
- Ronald's first ground of appeal is that Deputy Master Lloyd wrongly failed to consider whether he had jurisdiction, or should exercise jurisdiction to continue the claim as a derivative action. Had he done so properly, it is said that he ought to have referred the application to a judge following Practice Direction 19C Derivative Claims, which provides for such applications to be assigned to the Chancery Division and decided by a judge.
- It is clear that this issue was not brought to the Deputy Master's attention it is a point run for the first time on appeal. But it is a pure point of law, and as set out above, counsel for the Claimants rightly conceded that I should deal with it.
- Counsel for Ronald relied on the following. Under the heading "Power of judge, Master or District Judge to perform functions of the court", CPR 2.4 provides:
"Where these Rules provide for the court to perform any act then, except where an enactment, rule or practice direction provides otherwise that act may be performed:
(a) in relation to proceedings in the High Court, by any judge, Master, Registrar in Bankruptcy or District Judge of that Court
"
- The practice direction on which Ronald relied to oust the jurisdiction of the Master is Practice Direction 19C, which relates to Derivative Claims, and which provides at 19CPD.6:
"Where a permission application to which this practice direction applies is made in the High Court it will be assigned to the Chancery Division and decided by a High Court judge."
- In short, counsel for Ronald said that the Claimants' application was one to which Practice Direction 19C applied, and therefore it should have been assigned to the Chancery Division (which it was) and decided by a judge (which it was not). Mr Boardman put his submission at two levels. First, he said that Deputy Master Lloyd did not have jurisdiction to hear and determine the application. Second, he said that even if the Master did have jurisdiction, he should have declined to exercise it, and instead should have followed the practice of referring the application to a judge. Mr Boardman cites "sound reasons" for the court's practice, including because these sorts of applications frequently involve substantial issues of fact and law, requiring early intervention to "weed out weak cases" but also to determine the preliminary issue of whether a claimant should be permitted to bring the claim said to be for the benefit of the company.
- Mr Boardman also relied on a statement in the 2007 judgment of Master Moncaster, where the master said this at paragraph 36:
"The application should be allowed and then, when the question arises under the rules, as to whether the derivative action should continue or not, that question will be one of the questions for decision and, given the novelty of the position and the difficult position, it seems to me to be better if that decision were one made by a judge rather than by a Master."
- In response, Mr Evans for the Claimants said that Deputy Master Lloyd was entitled to hear the application, and it would be wrong now to set his decision aside. He relied on four arguments.
- First, he said that CPD 19.6 is a practice guide only. It does not purport to set out the jurisdiction of the High Court. The High Court has the power to determine the application, and, he said, it is only a matter of practice whether applications of this nature are heard by deputy masters, masters, deputy High Court judges or High Court judges. A matter of practice, even as set out in a practice direction, cannot remove a master's jurisdiction. To do so, it would have to use more emphatic language, such as "such application shall not be decided by a master".
- Second, he said that, even if the Master lacked jurisdiction, the doctrine of "de facto office" would apply to cure the irregularity. He referred me to Baldock v Webster and Ors [2004] EWCA Civ 1869. That case concerned a Recorder who sat in the Queen's Bench Division, although he was not entitled to do so. The Recorder knew that he had not been authorised to sit in the High Court, but when he heard the case, he mistakenly understood that he was hearing a County Court case. The parties were not aware that the Recorder had no authority to try High Court proceedings. Having reviewed the authorities, Laws LJ (with whom Arden and Kennedy LJJ agreed) said this at paragraph 15:
"In my judgment the answer to this case is to be found by recalling the public policy on which the de facto doctrine is based. As Wade & Forsyth put it in the passage I have set out: "The logic of annulling all his acts has to yield to the desirability of upholding them when he has acted in the office under a general supposition of his competence to do so." No doubt the general reputation of the law and the public's confidence in it must be protected as surely as the interest of individual parties who have proceeded on the assumption that a judgment in their case is perfectly valid, where that is exactly how is seems to all the world. Public confidence as well as individual parties are, in my judgment, protected by the requirement that there be a court of competent jurisdiction convened to hear the case, that the judicial officer be not a usurper and that he has a colourable title to sit where he does sit."
- Arden LJ added (at paragraph 22):
"To draw over-technical distinctions in the application of the de facto doctrine would, in my judgment, provide an undesirable incentive for a party dissatisfied by the judgment of a judge to investigate and challenge his authority to hear that case."
- Third, Mr Evans said that nothing about the fact of the application being heard by a master renders it unjust. Obviously, Ronald disagrees with the decision but that does not make it unjust. Nothing has been put forward to suggest that there is any injustice in the Master's status.
- Fourth, Mr Evans raised at the hearing for the first time an argument as to transitional provisions in the practice direction. This came about because of the 2007 remark of Master Moncaster, a very experienced master, that the matter could be heard by a master, but should be heard by a judge. Mr Evans handed up a copy of the White Book from 2007, which did not include Practice Direction 19C on which counsel for Ronald relied. This prompted an inquiry of the current White Book, which indicates that Practice Direction 19C was introduced from 1 October 2007 (that is, after Master Moncaster's judgment), and includes transitional provisions. These provide at 19CPD.8:
"(1) From 1st October 2007 new rules came into force about procedures for derivative claims. The new rules are set out in CPR rules 19.9 to 19.9F.
(2) The rules of court in force immediately before 1st October 2007 apply to derivative claims begun before 1st October 2007."
- It is common ground that the pre-1 October 2007 rules contain no reference to derivative claim applications being heard by a judge.
- Therefore, Mr Evans said, as the relevant application had been filed on 1 November 2006, it was in effect grandfathered under the old regime, and so could be heard by a master. This, he said, explained why two experienced masters Master Moncaster and Chief Master Matthews each felt able to deal with the application.
- As this fourth point had only been raised for the first time at the hearing, in fairness to Mr Boardman I offered him the opportunity to make further written submissions by email. I received further written submissions from both counsel on 2 February 2017. In his email submissions, Mr Boardman helpfully conceded on behalf of Ronald that if the old version of the rules applies (that is, if the current version of Practice Direction 19C does not apply), then it would not be right to pursue his submission that the Master lacked jurisdiction. However, he did press his client's position that Practice Direction 19C applies, on the basis that John Jnr and Andrew applied to be substituted in the derivative claim by their application notice of 16 August 2016.
- Mr Evans' email response dealt only with the very last of these submissions the application notice of 16 August 2016. This application, he said, does not contain any substitution application. Rather, as is clear from the order of Master Moncaster of 6 March 2007, John Jnr and Andrew were two of the six members of the Popely family who applied to be joined as claimants by application notice dated 1 November 2006, and who were, in fact, joined as claimants by Master Moncaster's order of 6 March 2007.
- In my judgment, no criticism can be made of the Master for determining this application. It had initially been listed by Chief Master Matthews before himself. No complaint was made to Deputy Master Lloyd that he couldn't proceed. Deputy Master Lloyd was taken to Master Moncaster's judgment in which Master Moncaster was clear that the application could be heard by a master. The parties had abundant notice that the hearing would take place before a master, and did not raise that either beforehand in correspondence (which would have been appropriate had they wished to do so) or at the hearing itself. If a party wishes to raise such an issue, particularly an issue which it now says goes to jurisdiction, it must do so promptly.
- I accept Mr Evans' argument that the transitional provisions apply in this situation. The application made on 1 November 2006 was for permission to continue the claim as a derivative action on behalf of Casterbridge. This is clear from Master Moncaster's judgment and order, as well as the Amended Consolidated Particulars of Claim that were before Master Moncaster. Master Moncaster, having heard argument, joined John Jnr and Andrew and their children, but stayed their claim. All this happened prior to 1 October 2007. The later application before Deputy Master Lloyd was to lift the stay imposed by Master Moncaster. But it was not a new derivative claim it was merely a request to pursue the earlier derivative claim. Indeed, the Application Notice says so on its face:
"What order are you asking the court to make?
Permission under former CPR19.9 (recited at paragraph 8 of practice direction 19C) to the Claimants to continue this claim as a derivative claim brought for the benefit of the 3rd Defendant against the 1st Defendant."
- The application before Deputy Master Lloyd was therefore a derivative claim filed before 1 October 2007. The old practice therefore applied (or more correctly, the new practice did not apply) such that the Master was not excluded from hearing the application.
- I also reject Mr Boardman's secondary submission that this matter was too complex to be heard by a master. There is in my judgment nothing in Mr Boardman's submissions that Deputy Master Lloyd ought to have transferred the matter to a judge on the basis of practice or on the basis that the matter was too complex for him to deal with. It is, in any event, far too late to make such a submission for the first time now.
- In light of these findings, I do not need to deal with the Claimants' other arguments. But I should indicate that, had I not rejected this first ground of appeal on the basis of the transitional provisions, I would have done so under the doctrine of de facto office for the reasons given by Mr Evans. It is clear from the Court of Appeal's judgment in Baldock v Webster that the doctrine is not to be applied technically but rather in light of the evil it is designed to avoid. Whilst I appreciate that there is a difference between a Recorder who mistakenly thought he was sitting in the court for which he was authorised, and a Master who considered that he could hear a case that ought to have been assigned to a judge, I do not consider that the principles differ. The Master was not "a usurper". He had absolute "title" to sit where he sat, and can be excused for not referring the case to a judge when he was not asked to do so. An appeal was available (with permission) from his decision. Public confidence requires that the de facto office doctrine also apply on the facts of this case. As Kennedy LJ said in Baldock v Webster (at paragraph 24):
"In reality, [the system] is maintained by listing officers ensuring that cases are listed before those who are competent to deal with them, but judges themselves checking to ensure that the cases placed in their lists are cases of the sort which they ought to try and, in the last resort, by the advocates on either side where there is a possibility that the tribunal may not be the appropriate tribunal for the particular case raising the question either with the court or with the court officer before the case is embarked upon."
In this case, the parties did not avail themselves of the last resort. Therefore, in my judgment, if I am wrong on the transitional provisions point set out above, I would, in any event, have accepted that the de facto office doctrine saves the Master's judgment, and prevents the application from being sent for a hearing de novo before a judge of the court.
- I therefore reject Ronald's first ground of appeal.
Second Ground of Appeal Wrongdoer Control and the Exception to the rule in Foss v Harbottle
- Ronald's second ground of appeal is that Deputy Master Lloyd failed to have regard to and/or to apply the principle that a shareholder can only bring a derivative action (by way of an exception to the rule in Foss v Harbottle [1843] 2 HARE 461) where the wrongdoers are improperly using their control to stifle a claim by the company. Put differently, complaint is made that the Master failed to consider whether another remedy was available: the alternative remedy now suggested is that Casterbridge should sue by its English liquidator, the Official Receiver.
- This was not a point raised before the Master: nor could it be, as Casterbridge appeared before the Master represented by the same solicitors and counsel as Ronald. As the Claimants' counsel pointed out, if the point is now allowed to be raised, it would require me to assess evidence that the Master was not asked to assess, and did not assess.
- In my judgment, for the reasons set out above at paragraphs 34 to 37, Ronald should not be allowed to raise this new argument on appeal. The law has not changed, no new facts have emerged, and there is no issue of general public importance. Ronald's then counsel did not raise the point, and Ronald's current counsel now seeks to do so, without providing any good reason for the second bite at the cherry. I would therefore reject this ground of appeal on that basis.
- However, if I am wrong in that, having heard written and oral argument from both parties, I set out below my findings on the substantive second ground of appeal.
- Ronald's counsel put his argument like this. Relying on Barrett v Duckett and Ors [1995] BCC 362, the general rule is that the proper claimant for a wrong alleged against a company is the company. There is an exception to the general rule where wrongdoer control of the company means that a proper claim would be stifled. In deciding whether or not to allow a derivative claim, it is not enough for the court to say that there is no plain and obvious case for strike out rather, it is for the shareholder to establish that s/he should be allowed to sue on behalf of the company. The shareholder will only be allowed to do so where the action being brought is bona fide for the benefit of the company for which no other remedy is available. The court will disallow a derivative claim if it is not brought for a proper purpose, or if an alternative adequate remedy is available.
- Here, he said, the company (Casterbridge) is in liquidation, and so the wrongdoer is not in control of the company, and an alternative remedy is available the liquidator can bring proceedings: see Fargro Limited and Anor v Godfroy and Ors (1986) 2 BCC 99167. Mr Boardman therefore relied on Casterbridge's liquidation and the appointment of the Official Receiver, as recognised in Master Moncaster's judgment, and referred to at paragraph 8 of Deputy Master Lloyd's judgment. However, Mr Boardman says that the Master failed to have "any regard" to this, and, in so failing, he "fell into serious and clear error".
- Mr Evans for the Claimants resisted this second ground of appeal on several grounds.
- First, he said, and said forcefully, that Casterbridge was represented before the Master by solicitors and counsel the same solicitors and counsel who appeared for Ronald. There is no indication from the record that the Official Receiver was instructing on behalf of Casterbridge, and, indeed, the correspondence states that the opposite is true Casterbridge was, for the purposes of the hearing before the Master, demonstrably under the control of Ronald. Therefore, Mr Evans says that this point could not have been put to the Master Ronald cannot be heard to say that the proper remedy is to have the Official Receiver sue on behalf of Casterbridge when Casterbridge appeared before the Master other than through the Official Receiver.
- Second, he said that, even if Ronald were allowed to raise this matter now, it would require the assessment of facts which were not before the Master. As Casterbridge is registered in St Vincent (or, perhaps, Nevis), it is St Vincent (or, perhaps, Nevis) law that applies to the question of whether another remedy is available. In the absence of any evidence to the contrary, St Vincent (and Nevis) law is presumed to be the same as English law. At the date of the hearing before Deputy Master Lloyd, Casterbridge was in good standing in St Vincent (and Nevis) because the English winding up would be ignored in those jurisdictions if they were applying English law, and hence there was no alternative remedy. Casterbridge was still under the control of Ronald.
- Mr Evans pointed to various documents which indicate that Casterbridge was during 2016 and 2017 under Ronald's control:
a. Ronald purported to hold a Casterbridge shareholder meeting on 21 July 2016 at which Ronald was appointed a director of Casterbridge;
b. In August 2016, Casterbridge, acting by Ronald as director, instructed a firm of English solicitors in relation to the current application now under appeal;
c. On 14 March 2017, Casterbridge, acting by Ronald as director, issued, together with Ronald personally, an application for the hearing before Deputy Master Lloyd to be adjourned; and
d. At the hearing before the Master, Casterbridge instructed the same solicitors and counsel as Ronald.
- I might add that there was in the bundles before me (and before Deputy Master Lloyd) an exchange of correspondence between Ronald's then solicitors and the Claimants' solicitors on 7 and 8 March 2017. Ronald's solicitors wrote:
"We can inform you that we are instructed on behalf of Mr Ronald Popely and on behalf of Casterbridge. You are aware that Ronald Popely is a director of Casterbridge and that Mars Trust holds 70% of the shares."
- At the hearing, there was uncertainty as to whether or not Casterbridge had, on 18 December 2015, been migrated to Nevis. For the Claimants, Mr Evans denied that the migration had been effective, but in any event said that it does not matter in the absence of evidence of the law of Nevis, it is deemed to be the same as English law. Thus, he said, for present purposes, it does not matter whether it is St Vincent law or Nevis law or English law because they are deemed all to be the same.
- In reply, counsel for Ronald accepted that Casterbridge was represented at the hearing before Deputy Master Lloyd, but was unable to explain how. He accepted that this appeal was lodged on behalf of both Casterbridge and Ronald, and that Arnold J gave permission to appeal to both Casterbridge and Ronald. But he was at pains to point out that he, and his instructing solicitors, only act for Ronald.
- Whilst much was put to me in written and oral arguments, including a detailed explanation of the workings of parallel liquidations in different jurisdictions, the point is a simple one. At the hearing before the Master, Casterbridge appeared, was represented by solicitors and counsel, and urged the Master first to adjourn the hearing, and, having failed in that, to reject the Claimants' application. Casterbridge did all this through Ronald, who was purporting to act as a recently appointed director. That factual position is entirely inconsistent with the ground of appeal now argued before me for the first time that Casterbridge is in the hands of the Official Receiver and the appropriate remedy is to allow the Official Receiver to sue. Ronald may (and I stress may) have arguments that Casterbridge may be treated differently in different jurisdictions, but I cannot accept the argument that Casterbridge can, in these very same proceedings, be at one moment in Ronald's control for the purposes of the application, and the next in the control of the Official Receiver for the purposes of the appeal from that same application.
- I therefore also reject this ground of appeal on the substance. Had it been put to the Master, it could not have been made out in circumstances where Casterbridge was present and represented by someone other than the Official Receiver.
- The Respondent's Notice asked that I additionally uphold the Master's decision on the following basis:
"On [Ronald's] own evidence, he is currently exercising control over the affairs of Casterbridge. In the particular circumstances of this case, the fact that a winding-up order was made against Casterbridge in 2000 is not determinative and is not a reason for refusing the Claimants' permission to proceed with the claim."
- I accept that submission for the reasons set out above. I have no hesitation in finding that, at the time of the hearing before the Master, Ronald was exercising control over Casterbridge his and Casterbridge's solicitors said as much. The winding-up order made in 2000 against Casterbridge is not determinative and not a reason for refusing permission to the Claimants to continue with their claim.
Third Ground of Appeal Law of Incorporation
- The third ground of appeal raised by Ronald seeks to attack Deputy Master Lloyd's failure to have proper regard to or to apply the principles on derivative actions relating to foreign companies.
- Mr Evans pointed out that this third ground of appeal is again a wholly new point, which raises issues of fact and law, which the Master was not asked to address, and could not have addressed on the evidence before him. I am not so sure the way in which both parties advanced their cases means that I can deal with it as a point of law, and so I have.
- Mr Boardman put Ronald's case as follows. English courts have jurisdiction to entertain derivative claims involving foreign companies, but, he said, the courts of the place of incorporation are the most appropriate forum for the resolution of issues relating to the existence and right of shareholder to sue on behalf of the company. He relied on Konamaneni and Ors v Rolls Royce Industrial Power (India) Limited and Ors [2002] 1 WLR 1269, a decision of Lawrence Collins J, as he then was.
- Mr Boardman accepted that the Master was taken to Konamaneni, and, indeed, the Master referred to it at paragraph 14 of his judgment. However, Mr Boardman said that the way in which the Master sought to distinguish it "flew in the face of its principles and facts". In particular Mr Boardman submitted that:
a. the Master pointed out that the Claimants had failed to produce evidence that a derivative action would be permitted under the law of St Vincent (and, if so, under what conditions) but nevertheless went on to grant permission;
b. the Master was clearly not aware that the law of St Vincent requires the permission of the High Court of St Vincent to bring a derivative action; and
c. the Master relied on incorrect submissions that "all the live players are resident in England" and "Casterbridge's affairs have never had any connection with [St Vincent]".
- I note in passing that despite Ronald's position that Casterbridge has been migrated to Nevis, none of these submissions seeks to adopt the law of that country.
- Mr Boardman also pointed to a decision of HHJ Pelling QC sitting as a judge of the High Court in Novatrust Limited v Kea Investments Limited and Ors [2014] EWHC 4061 (Ch) in which the judge undertook a careful analysis of the foreign law (in that case, BVI law) the parties had relied on the expert evidence of Mr Paul Dennis QC and Mr John Carrington QC. HHJ Pelling held (at paragraph 36) that "Novatrust has failed to show a more than fanciful case that it has the right to commence derivative proceedings on behalf of Spartan without first obtaining the permission of the BVI Court".
- Mr Boardman submitted that Novatrust stands for the proposition that "the person seeking permission to bring a derivative claim has to produce evidence to establish that the law of the country of incorporation permits them to bring a derivative action and that any conditions for the bringing of such an action have been complied with."
- Novatrust does not appear to have been drawn to the attention of the Master. However, Ronald now relies on it on appeal to argue that the Claimants have failed to discharge the burden to adduce evidence to establish that the law of the country of incorporation (St Vincent or Nevis) permits them to bring a derivative action and that any conditions for bringing such an action have been complied with. Mr Boardman went further in oral argument, where he said that the Master should have stayed these proceedings, to allow the courts of either St Vincent or Nevis to decide first as a question of local law whether a derivative claim should be allowed to proceed.
- In response, the Claimants submitted that there was no evidence before the Master that St Vincent (or Nevis) law is different than English law, and certainly no evidence that the permission of the High Court of St Vincent is required in order to bring a derivative claim. I would add that foreign law is traditionally proved by expert evidence, and no permission for expert evidence has been sought or given. Mr Evans said that the Master recognised that St Vincent law applies, but, in the absence of any evidence as to St Vincent law, rightly proceeded on the basis that it is the same as English law (at paragraph 14 of his judgment). He proceeded to apply the correct test under English law.
- I do not consider that the Master can be criticised for failure to consider a case which was not brought to his attention. Nor do I consider that he can be criticised for not applying St Vincent (or Nevis) law in circumstances where neither party provided evidence of what St Vincent (or Nevis) law was. In the absence of such evidence, the Master was quite entitled to apply English law, on the presumption that they are the same: see for example Law Debenture Trust Corporation plc v Elektrim SA [2010] EWCA Civ 1142 at para 20 per Arden, Longmore and Patten LJJ and US Mortgage Finance II LLC v Dew [2017] EWCA Civ 299 at paragraph 11 per Lewison CJ with whom Henderson LJ agreed. It is too late for Ronald to seek to adduce expert evidence of St Vincent law (or indeed the law of Nevis) now.
- I do not accept, as Mr Boardman seeks to suggest, that the Master sought to distinguish Konamaneni. To the contrary, it seems to me from reading the Master's judgment that he applied it. But he did not have before him any evidence of the law of St Vincent or of Nevis, because the parties had not adduced any. He was alive to the test in Konamaneni, but was unable to apply any foreign law because of the lack of evidence.
- Further, I do not consider that HHJ Pelling's judgment in Novatrust stands for the proposition that Mr Boardman submitted it did. Mr Evans did not contest that Novatrust supports the finding in Konananeni that the law that governs the right of a shareholder to bring a derivative claim in England is, as a matter of English conflicts law, the law of the country of incorporation of the company concerned. The parties all agree that that is the correct test. It is also the test applied by Deputy Master Lloyd at paragraph 14 of his judgment. But I can find nothing in HHJ Pelling's judgment to support the proposition that there is, in English proceedings, an onus on the shareholder positively to prove the foreign law and that all relevant steps of the foreign law have been complied with. HHJ Pelling had before him expert evidence as to the relevant foreign law, and so he was able to assess both what steps were required, and whether they had been taken. HHJ Pelling's conclusion at paragraph 36 is therefore unsurprising:
"I have concluded that Novatrust has failed to show a more than fanciful case that it has the right to commence derivative proceedings on behalf of Spartan without first obtaining the permission of the BVI Court."
I read this paragraph as HHJ Pelling's conclusions on the facts of the case before him. I do not interpret either that paragraph, or HHJ Pelling's judgment taken as a whole, as requiring a shareholder in all cases positively to prove that it has a right to a derivative claim under the foreign law. If the party resisting the derivative claim is content to presume that the foreign law is the same as English law (as was the case here before Deputy Master Lloyd), then I see no advantage in forcing a derivative claimant through additional hurdles. Certainly, I see nothing in HHJ Pelling's judgment that forces a shareholder first to a foreign court to seek permission under that foreign law.
- In my judgment, the Master correctly identified the test in Konananeni, and applied it in this case. In the absence of any evidence as to the law of St Vincent (and/or Nevis), he was entitled, indeed required, to assume it to be the same as English law. It was therefore proper for him to go on and consider the position under English law.
- I therefore reject Ronald's third ground of appeal.
- The Respondent's Notice asks that I also uphold the Master's judgment for an additional reason:
"In the absence of any evidence as to foreign law, the court is entitled to assume any relevant foreign law to be the same as the law of England & Wales, particularly in the case of a former Crown colony."
- As set out above, I have relied on that statement of the law. In the absence of evidence as to the law of St Vincent (and/or Nevis), the Master was entitled to assume that the relevant foreign law is the same as English law.
- As will be apparent from Mr Boardman's complaint set out at paragraph 83 above concerning the Master's reliance on an understanding that "all the relevant players are resident in England", there was a suggestion in Ronald's case as it was put that England is not an appropriate forum for this litigation. This was not a pleaded ground of appeal, and hence no permission has been given for it to be raised. It was addressed at length in Mr Evans' skeleton argument. However, it was not further raised by Mr Boardman in his oral argument on behalf of Ronald and hence I will say no more about it.
Fourth Ground of Appeal Derivative Actions and Trusts
- Ronald's fourth ground of appeal seeks to attack Deputy Master Lloyd's failure to have regard to or to apply the principles on derivative actions relating to trusts.
- The Claimants did not seek to argue that this was an issue that I ought not decide. It appears that the relevant cases were put to the Master Ronald now says he did not apply them properly.
- Counsel for Ronald put his case as follows. The Claimants' claim is a double derivative claim, as mentioned by the Master at paragraph 13 of his judgment. Mr Boardman conceded that there is no obstacle to this in law: Universal Project Management Services Limited v Fort Gilkicker Limited and Ors [2013] Ch 551. He did mention that he thought this may be the first case before the court of a double derivative claim involving both a corporate derivative claim and a trust derivative claim.
- Further, Mr Boardman said that the Master correctly recorded that "Cosmos is not willing to incur the costs risk of bringing its own derivative action" as the justification for the Claimants' seeking to bring a derivative action on behalf of Cosmos and Casterbridge. However, Mr Boardman submitted that this is not a good reason for allowing a derivative claim. He said the Master erred in failing to have proper regard to this reason, and whether it was an adequate one.
- Mr Boardman referred me to Roberts v Gill & Co and Anor [2011] 1 AC 240, where the Supreme Court gave guidance on the circumstances in which a beneficiary would be permitted to bring a derivative action on behalf of a trust. The Supreme Court held that, whilst the list of "special circumstances" justifying the grant of permission to beneficiaries is not closed, circumstances as to legal funding and/or limitation were of a different character from anything contemplated in the cases and were insufficient to justify giving permission. Whilst the Master referred to Roberts v Gill at paragraph 23 of his judgment, Mr Boardman submitted that he incorrectly interpreted it as establishing that the test for granting permission is "whether on a Beddoe Summons the Court would permit the trustee to bring the proposed action". Rather, Mr Boardman said, the Master should have gone on to consider paragraph 53 of Roberts v Gill, where the speech of Lord Templemen, giving the advice of the Privy Council in Hayim v Citibank NA [1987] AC 730 is set out in part:
"
when a trustee commits a breach of trust or is involved in a conflict of interest and duty or in another exceptional circumstances a beneficiary may be allowed to sue a third party in the place of the trustee. But a beneficiary allowed to take proceedings cannot be in a better position than a trustee carrying out his duties in a proper manner
These authorities demonstrate that a beneficiary has no cause of action against a third party save in special circumstances which embrace a failure, excusable or inexcusable, by the trustees in the performance of the duty owed by the trustees to the beneficiary to protect the trust estate or to protect the interests of the beneficiary in the trust estate."
- Thus, Mr Boardman said, the Master failed properly to consider whether there were "special circumstances" justifying the bringing of a trust derivative action. Rather, he should have paid regard to the fact that Cosmos had only just been appointed in place of SVTS. He failed to have regard to the fact that it was Cosmos's duty to pursue any derivative claim: the reasons for not doing so were "far from special".
- In response, Mr Evans for the Claimants submitted that Mr Boardman misrepresented the decision in Roberts v Gill. All five Supreme Court Justices, he said, had agreed (Lord Collins of Mapesbury obiter) that the first instance judge had been entitled to hold that the claimant had failed to show that there were special circumstances justifying the derivative claim which he sought to bring (at paragraph 75 per Lord Collins; at paragraph 78 per Lord Hope of Craighead; at paragraph 111 per Lord Walker of Gestingthorpe; at paragraph 135 per Lord Clarke of Stone-Cum-Ebony).
- Mr Evans pointed out that the Master referred to Robert v Gill in paragraph 23 of his judgment, and correctly referred to "paragraphs 45 and 50". Mr Evans suggested that the Master probably meant "paragraphs 45 to 50" and, to the extent it matters, I agree. Further, Mr Evans pointed out that the Master referred to Abouraya v Sigmund at paragraph 24 of his judgment. This is a more recent case in this court before David Richards J. It is a "double derivative claim" case like this one. Mr Evans said that the Master relied on paragraph 3 of the headnote to that decision, where the correct test is set out. In conclusion, the Master then said at paragraph 27 "Applying the test in Abouraya I am satisfied that the Claimants have shown sufficient grounds to justify the grant of permission to bring a derivative action and I propose so to order." Mr Evans therefore said that the Master directed himself properly to the correct test, and came to the correct conclusion.
- Further, Mr Evans said that the point now raised by Mr Boardman (that Cosmos had only just been appointed) cannot be relevant. Cosmos was appointed on 31 October 2012 nearly four years before the Claimants' permission application was issued. Nor did Mr Evans accept that the trustee's reasons for refusing to bring the claim have to be "special" rather, he said it is the "circumstances as a whole" which have to be special.
- I do not consider that it can be said that Deputy Master Lloyd failed to apply the correct test. As Mr Evans has pointed out, the Master was taken to the leading Supreme Court authority (Roberts v Gill) and he referred in his judgment to substantial and important passages of it. When he applied the test at paragraph 24 of his judgment, he referred to Abouraya: that judgment, including the section of the headnote to which the Master specifically refers in his decision, correctly states the test in Roberts v Gill. Therefore, in noting that he was "[a]pplying the test in Abouraya", it seems clear to me that the Master was mindful of the need not only to find a prima facie case that the company is entitled to relief, and that the action falls within the proper boundaries of the exception to the rule in Foss v Harbottle, but also that, in consideration of all the circumstances, there were "special circumstances" justifying the grant of permission. Those special circumstances had been set out by Master Moncaster in his earlier judgment and set out earlier at paragraph 13 of Deputy Master Lloyd's judgment: Cosmos not being willing to incur the costs risk of bringing its own derivative action. Master Moncaster had held that that "would be a very proper reason in cases such as this", and I agree. It also seems to me that all the circumstances of this case also point to special circumstances being available. In this regard, I have in mind Master Moncaster's remarks that there is a case here that needs to be tried, and Mr Boardman's comment before me that he is not suggesting that there is no case for Ronald to answer. Put another way, that is a concession that there is a case to answer. That case will not be answered if permission is not given for the double derivative claim.
- In my judgment, Deputy Master Lloyd was referred to the correct authorities, and interpreted them correctly. He also reached the correct conclusion. I therefore reject this fourth ground of appeal.
Fifth Ground of Appeal Exercise of Discretion
- By his fifth ground, Ronald seeks to attack Deputy Master Lloyd's failure to consider whether the circumstances were such as to justify the exercise of the court's discretion. Mr Evans again noted that this is a wholly new point, which asks me to assess factual materials that the Master was not asked to assess. Whilst there is some truth in that, I do accept that it would have been wrong of the Master not to have exercised his discretion, as required by the authorities. I therefore set out my ruling below on the substance of this ground of appeal.
- Mr Boardman submits that this is "an extraordinary application made in an extraordinary claim". The Claimants are seeking to keep alive the proceedings against Ronald, and to keep them under the control of John Snr's side of the family by "jumping on the back" of the existing claim. John Snr is no longer able to pursue his claim, because his trustee in bankruptcy sold the claim to SVTS. SVTS is thus entitled to pursue the claim or not, and the Claimants are seeking to side-step the assignment and prevent SVTS from obtaining what it bargained for.
- Against this background Ronald's argument is that the Master failed to consider all the relevant circumstances he failed to "stand back" and exercise the court's discretion.
- In response, Mr Evans for the Claimants said that this ground of appeal is not directed at Deputy Master Lloyd's decision, but rather at the decision of Master Moncaster of 18 January 2007. To the extent that the Claimants have "jumped on the back" of the existing contractual claim, that was done in their 2006 application, granted by Master Moncaster. It was not open to Ronald to re-argue the point before Deputy Master Lloyd, and Ronald did not do so. It is therefore also wrong to raise it in this appeal.
- I agree with Mr Evans. I have read carefully paragraph 10 of Mr Boardman's skeleton argument where he sets out the matters he submits Deputy Master Lloyd ought to have taken into account in exercising his discretion, and I have also taken into account Mr Boardman's submission on Ronald's behalf at the hearing. In my judgment, all these matters relate to issues that were before Master Moncaster, and were decided by him in his lengthy and carefully reasoned judgment of 18 January 2007. Deputy Master Lloyd was referred to Master Moncaster's judgment, and he referred to it in his own judgment. I can therefore only conclude that Deputy Master Lloyd did take into account the issues discussed by Master Moncaster. I do not accept Mr Boardman's submission that Deputy Master Lloyd failed to exercise his discretion.
- If I am wrong in that, I should add that, had I exercised the relevant discretion on the basis of the evidence and submissions before me, I would have done so to the same end as Deputy Master Lloyd. Master Moncaster found that there is a justiciable dispute. Before me, Mr Boardman conceded on behalf of Ronald that the claim against him is not hopeless: there is a case to answer. Stepping back, and looking at the entire circumstances in the round, it seems to me plain as a pikestaff that the best course, if settlement cannot be achieved, is for this claim to be heard, and heard sooner rather than later. That requires a claimant: and it seems to me that the Claimants should be given permission to proceed. They are proper claimants for the reasons given by the Master and set out above. I therefore reject this fifth ground of appeal.
- The Respondent's Notice asks that I also uphold the Master's decision on the following basis:
"The question whether the Claimants should be allowed as a matter of discretion to "jump on the back" of the Claim as originally brought by [John Snr] had already been decided in the Claimants' favour by Master Moncaster in 2007".
- As is apparent from my ruling above on the fifth ground of appeal, that is my finding.
Conclusions
- The appeal is dismissed. The Respondent's Notice is upheld. If I am wrong in that, procedural economy and the overriding objective suggest that I should set out my own views, having read the evidence that was before Deputy Master Lloyd (none of the witnesses was cross-examined) and having had the benefit of written skeleton arguments and nearly a full day of oral argument from experienced counsel. If I were to have upheld the appeal on a ground that required the decision to be made again (by a judge of the court or otherwise), I would have come to the same result as the Master for the reasons I have set out above. I would have exercised my discretion to the same end as the Master, and made the same order that he did.
- At the conclusion of the oral hearing, I urged counsel and those instructing them to assist the parties to try to settle the dispute. It does seem to me that that is in the interests of all the parties. Whilst the claim is for a substantial sum, 16 years of proceedings in England, St Vincent, France, Ireland and Gibraltar, must have put a significant dent in the sums in dispute. If settlement cannot be achieved, then steps should be taken to determine this part of the dispute once and for all. Further delay drives up costs, without driving matters forward.
