Jersey Unreported Judgments

[2010]JCA214

COURT OF APPEAL

24^th November 2010

	Before     :		Sir Philip Bailhache, Kt., sitting as a single judge.
Between		Durant International Corporation
		Kildare Finance Limited		Respondents
And		The Federal Republic of Brazil
		The Municipality of Sao Paulo		Applicants
And		(1) Deutsche Bank International Limited
		(2) Deutsche International Custodial Services Limited
		(3) Deutsche International Corporate Services Limited
		(4) Deutsche International Trustee Services (CI) Limited		Parties Cited

 

Application for leave to appeal the decision of the Royal Court given on 6^th September, 2010.

Advocate D. S. Steenson for the Applicants.

Advocate E. Jordan for the Respondents.

JUDGMENT

Bailhache ja:

1.        This is an application for leave to appeal a judgment of the Royal Court (Birt, Bailiff, and Jurats Le Breton and Morgan) given on 6^th September, 2010, determining that Jersey was the most natural and appropriate forum for the resolution of the dispute between the parties.  Both parties are agreed on the legal test to be applied.  It is conveniently encapsulated in the judgment of this Court in Jaiswal v Jaiswal [2007] JLR 305, at paragraph 76:-

"What makes (or does not make) one forum more appropriate than another depends upon a comparison of various factors said to favour the one or the other. The exercise is one of evaluation rather than of discretion. However, from the perspective of an appellate court, such exercises have this measure of affinity: it will not interfere with the decision of the court of first instance unless that court has taken into account irrelevant factors, has failed to take account of relevant factors, or has reached a conclusion outside the spectrum of reasonableness. It is not for the former simply to substitute its view for that of the latter (Maçon v. Quérée (née Colligny) (4), applying The Abidin Daver (1))."

2.        Mr Steenson for the applicants told me that he also had firmly in mind the dictum of Templeman LJ in Spiliada Maritime Corporation v Cansulex Limited [1987] 1 AC 460 where the Judge stated:-

"In the result, it seems to me that the solution of disputes about the relative merits of trial in England and trial abroad is pre-eminently a matter for the trial judge.  Commercial court judges are very experienced in these matters.  In nearly every case evidence is on affidavit by witnesses of acknowledged probity.  I hope that in future the judge will be allowed to study the evidence and refresh his memory of the speech of my noble and learned friend Lord Goff of Chieveley in this case in the quiet of his room without expenses to the parties; that he will not be referred to other decisions on other facts, and that submissions will be measured in hours and not days.  An appeal should be rare and the appellate court should be slow to interfere."

3.        Counsel's submissions in this case were succinct, and certainly measurable in hours, and I am grateful for the clear and concise manner in which they have been placed before me.  Counsel contended that leave should be granted in this case because the Bailiff's decision was wrong and fell outside the spectrum of reasonableness.  Mr Steenson submitted that the Bailiff had misstated the relevant test at paragraph 19 of his judgment and had conflated two principles by placing undue weight upon matters such as convenience or expense.  The fundamental principle established in the Spiliada was to "find that forum which is the more suitable for the ends of justice and is preferable because pursuit of the litigation in that forum is more likely to secure those ends."

4.        What the Royal Court stated at paragraph 19 was this:-

"The applicable test when considering an application of this nature is well established in Jersey and is summarised in the speech of Lord Goff in Spiliada Maritime Corporation-v-Cansulex Limited [1987] 1 AC 460.  The court is concerned to establish which is the appropriate forum for the trial of the action i.e. that in which the case may be tried most suitably for the interests of all the parties and the ends of justice.  Lord Goff also approved use of the expression "the natural forum" as being that with which the action had the most real and substantial connection.  Thus, one is looking for connecting factors which will include matters such as convenience or expense (such as availability of witnesses), the law governing the relevant transaction and the places where the parties respectively reside or carry on business.  In a case such as this, where the defendants have not been served as of right, the burden lies on the plaintiffs to show that Jersey is the appropriate forum."

That seems to me to be an admirably succinct and accurate summary of the principle.

5.        Before turning to the submissions of Mr Steenson I should deal first with a preliminary point raised by Miss Jordan for the respondents.  Miss Jordan submits that the applicants have submitted to the jurisdiction by filing an answer in the proceedings and that it is no longer open to them to argue that Jersey is not the appropriate forum.  It is true that on 1^st November, 2010, having obtained an extension of time by consent, the applicants did file an answer without reserving their position as to jurisdiction.  Mr Steenson's response to that is that no-one was misled as to the applicants' continuing intention to pursue their case on whether Jersey was the appropriate forum.  The judgment of the Royal Court was delivered on the 6^th September, 2010, and a notice of appeal was filed on 4^th October, some four weeks before the filing of the answer.

6.        Miss Jordan drew attention to Rule 6(7)(7) of the Royal Court Rules which provides, so far as material, that "time limits for the filing of pleadings ... shall not apply, and shall not begin to run until the application has been dismissed by the Court or abandoned, as the case may be."  A notice of appeal having been filed there was no need to file an answer to the order of justice.  Counsel relied upon the decision of this Court in Solvalub Limited v Match Investments Limited [1996] JLR 361 where the respondent had accepted service of the Order of Justice but challenged the jurisdiction of the Royal Court.  Subsequently the respondent had filed an answer and counterclaim while at the same time continuing to protest the jurisdiction.  Le Quesne JA held that the respondent had accepted the jurisdiction of the Royal Court, despite its stated protests, and its pleading had gone far beyond a mere denial of the Court's jurisdiction.  Indeed the respondent had actually invoked the Court's jurisdiction by filing a counterclaim.

7.        Miss Jordan very properly also drew attention to a passage from another judgment of this Court, in Jaiswal v Jaiswal [2007] JLR 305, at paragraph 77.  Beloff JA there stated:-

"Counsel for Anand had yet another arrow in his quiver. He argued that Karamjit had, by various actions, submitted to the jurisdiction of the Royal Court and that, by so submitting, had disabled himself from contending that the High Court of Delhi was a more appropriate forum for resolution of the issues as to the validity of the Jersey will. This argument, apparently ventilated before the Royal Court, was rejected so peremptorily that no reference was made to it in the judgment. There is in it an element of paradox. From a fair reading of the various documents relied on by Anand, Karamjit was at all material times taking the position in the Jersey courts that the appropriate forum was India. The facts are very different from those of Solvalub Ltd. v. Match Invs. Ltd. (6), where the respondent had asked for positive relief (by way of counterclaim) and was, in our respectful view, properly held no longer able to contest the jurisdiction of the Royal Court.

But even if on close analysis, Karamjit had at some stage dropped his guard, and failed to continue to protest the jurisdiction of the Royal Court, at most this would, in our view, prevent him from contending that the Royal Court was not an appropriate (or any rate available forum), it would not prevent him from contending that another forum was more appropriate."

8.        Counsel drew other authorities to my attention but they do not, in my judgment, add anything of substance to the thrust of her submission, namely that by filing an answer on the merits without any reservation as to jurisdiction the applicants had waived their right to argue the Brazil was the more appropriate forum for the action to be heard.  It does not seem to me that, taken in the round, the filing of the answer in this case does disentitle the applicants from pursuing their appeal.  The respondents were well aware that a notice of appeal had been entered when the answer was filed.  Even if, by failing to reserve the position, the applicants could be prevented from contending that the Royal Court was not an appropriate forum, they are not disentitled from arguing that Brazil is the more suitable forum for the ends of justice.  I therefore reject the preliminary objection of counsel for the respondents.

9.        I turn accordingly to the substance of the application.  Mr Steenson submitted that Brazil was the most natural forum for the resolution of the dispute because:-

(i)        The respondents were Brazilian;

(ii)       The principals behind the applicants were Brazilian;

(iii)      The alleged underlying fraud took place in Brazil;

(iv)      The witnesses to the alleged fraud are Brazilian;

(v)       The alleged fraud was to be adjudicated in accordance with Brazilian Law.

It seems to me that all those factors, with the exception of the now admitted fact that the Maluf family has an interest in the applicant companies, were before the Royal Court.  The involvement of the Maluf family in the applicant companies emerged only with the filing of the applicants' answer to the Order of Justice.

10.      The Royal Court addressed the arguments advanced by counsel for the applicants and concluded that, notwithstanding the availability of Brazil as a forum, Jersey was the most appropriate place for the resolution of this dispute.  The Royal Court concluded that, so far as the convenience of witnesses was concerned, the balance between Jersey and Brazil was fairly evenly spread.  As to the parties, while the plaintiffs were in Brazil, the defendants were BVI companies which were administered in Jersey.  As to the applicable law, the claims in knowing receipt and unjust enrichment appear to be governed by Jersey law.  This was an undeveloped area of law which would not be straightforward for a foreign judge to grasp.  Conversely, whether or not Mr Maluf had been guilty of fraudulent conduct raised issues which were probably common to every system of law.  Mr Steenson sought to argue that the reverse was the truth, that whether or not there had been a Brazilian fraud was complex and if the fraud were established recovery of the monies in Jersey would ensue almost automatically.  I prefer the analysis of the Royal Court.  Finally the Royal Court found that the situation of the assets in Jersey was an important factor, pointing towards Jersey as the appropriate forum. 

11.      Does the admission of the involvement of the Maluf family in the applicant companies, alter the situation?  As recorded in the judgment of the Royal Court, Mr Maluf had repeatedly denied that there was any connection between his family and the applicant companies.  The admission of the applicants in their pleaded answer that "Paulo Maluf, inter alia, had an interest directly or indirectly, in the defendants" was therefore something of a volte-face.  It does not seem to me that it would be safe to assume, having regard to the history of denials and to the carefully limited nature of the admission, that no issues will arise at trial as to the deemed knowledge of the applicants of the fraud.

12.      Mr Steenson placed great reliance upon another factor identified by the Royal Court in its judgment, but not addressed in any detail.  The Royal Court recorded, at paragraph 27, the submission of Mr Steenson that "There would be a risk of inconsistent verdicts if, for example, the Royal Court found that there had been a fraud whereas the Brazilian courts found there had not."   Counsel asserted before this Court that the Royal Court had not, however, really addressed this problem.  He contended that it was fanciful to assume that the fraud was not all of a whole and could be split into different parts.  The plaintiffs had originally joined Durant to the civil proceedings in Brazil and had joined both defendants to the Eucatex proceedings.  The change of tack was a tactical move designed to assist the forum argument in Jersey.  Counsel conceded that a judgment was more likely to be speedily obtained in Jersey, but speed of outcome did not outweigh, he contended, the need for consistency of judgment as between Jersey and Brazil.  The primary requirement was for fairness.  A witness might appear persuasive when questioned about the limited aspect of the alleged fraud concerning the assets in Jersey, but less compelling when questioned about the totality of events relevant to the alleged wider Brazilian fraud.

13.      It is true that the Royal Court did not expressly address the problem of inconsistent judgments as to the alleged fraud.  The Court concentrated rather upon the delay which would very likely ensue if this aspect of the dispute were to be rolled up in the complex, wide-ranging proceedings in Brazil.  At paragraph 34(i) of its judgment the Royal Court stated:-

"The extremely complex and broad nature of the proceedings in Brazil means that, inevitably, it will be a long time before they can be brought to a conclusion.  This is no criticism of the Brazilian judicial system; it is simply a reflection of the enormous size and complexity of the proceedings in Brazil.  Conversely, hiving off a discrete part of one of the frauds by reference to the monies passing through the Chanani account, should lead to a much earlier resolution of this particular part of the claim, because it will not have to await the outcome of the wider allegations in relation to the various frauds.  The interests of justice are usually best served by bringing proceedings to a conclusion as soon as possible. 

The Royal Court appears to have assumed that it was practical and sensible to hive off the Jersey part of the alleged fraud.

14.      It does not seem to me that this was an unreasonable assumption for this reason.  The Brazilian Court has expressly requested that the Chanani fraud, in so far as it affects the applicants, should be dealt with in Jersey.  The Brazilian Court will exclude that part of the claim from the Brazilian proceedings.  Mr Steenson described this as a makeweight point because the judge had not heard argument from the applicants before making the request to the Royal Court.  But that objection seems to me misconceived.  The failure to convene Mr Maluf was the almost inevitable result of his blowing hot and cold as to whether he and his family have, or had, any interest in the applicant companies.  The more important aspect of the Brazilian request, in my judgment, is that the judge seized of the complete dossier must be assumed to have considered whether any risk of unfairness would arise from dealing with part of the case in Jersey and the remaining part in Brazil.  It seems to me unlikely that the Brazilian judge will not have considered the risk of inconsistent judgments, and concluded that such risk did not outweigh the desirability of having this aspect of the case dealt with expeditiously in Jersey.  In any event it does not necessarily follow that a finding in Jersey that there was a fraud in relation to this limited aspect of the case, and a subsequent different finding in relation to the alleged wider fraud in Brazil, would ipso facto be wrong or unfair.  This again is a matter which the Jersey Courts are entitled to assume has been taken into account by the Brazilian judge.  The Brazilian request is not a makeweight point.  I agree with the Royal Court that it is a powerful consideration.

15.      Mr Steenson submitted that the preservation of Jersey's reputation as a co-operative jurisdiction, committed to the suppression of money laundering, was another small point of little weight.  It seems to me that the Royal Court's conclusion that it was a relevant factor to weigh in the balance was correct.  It is unlikely ever to be the decisive factor as to what is the appropriate forum, but it is nonetheless relevant.

16.      In conclusion, despite the robust efforts of counsel for the applicants it does not seem to me that there is any appealable flaw in the evaluation performed by the Royal Court, nor in its conclusion that the appropriate forum for the resolution of this dispute is Jersey.  The application for leave to appeal is accordingly refused.

Authorities

Jaiswal v Jaiswal [2007] JLR 305.

Spiliada Maritime Corporation v Cansulex Limited [1987] 1 AC 460.

Fed Rep of Brazil v Durant & Ors [2010] JRC 162.

Royal Court Rules.

Solvalub Limited v Match Investments Limited [1996] JLR 361.