Jersey Unreported Judgments

Fraud - application for leave to appeal on two grounds referred to the plenary Court by McNeill JA on 17th January, 2012.

[2012]JCA025

Court of Appeal

27 January 2012

Before     :

Dame Heather Steel, D.B.E., President; M. S. Jones, Q.C., and; J. W. McNeill, Q.C.

 

Application for leave to appeal on two grounds referred to the plenary Court by McNeill JA on 17^th January, 2012.

Advocate D. S. Steenson for the Applicants.

Advocate S. M. Baker for the Respondents.

JUDGMENT

MCNEill JA:

1.        These are applications for leave to appeal for the purpose of setting aside certain judgments below issued by the Commissioner (HWB Page, QC).  The following short summary of salient facts is taken from the relevant judgment of 20 December 2011 of the Royal Court.

2.        The applications are in respect of contested interlocutory applications arising in connection with a trial of an action which had been due to start on 11 January 2012 and expected to run for five or six weeks.  The action is essentially a civil fraud claim, by the Federal Republic of Brazil and the Municipality of Sao Paulo, to funds of the order of US$10.5 million (plus interest) held in bank accounts in Jersey in the name of the defendants (Durant International Corporation and / or Kildare Finance Limited) and currently the subject of a freezing order granted by the Royal Court on 13 March 2009.  The funds are said to represent the traceable proceeds of bribes, secret commissions, or otherwise fraudulent payments, received by Sr. Paulo Maluf and / or his son Sr. Flavio Maluf in early 1998 in connection with a major public works contract in Sao Paulo for the construction of the Avenida Agua Espraiada, the main contractor for which was a company by the name of Mendes Junior Engenharia S/A.  Paulo Maluf is a well known figure in the political and business worlds in Brazil.  He is a former Governor of the state of Sao Paulo (1979 - 1983) and a former Mayor of the Municipality of Sao Paulo (1993 - December 1996).  Flavio Maluf is a businessman and (it is admitted) a director of Durant.  Durant and Kildare are alleged by the plaintiffs to be owned or controlled by Paulo Maluf and / or Flavio Maluf. 

3.        These applications come before this court following a hearing before one of our number, Mr. McNeill QC, sitting as a single judge, on 17 January 2012, when he refused the applications for leave to appeal before him with the exception of two specified issues.  The first issue arises out of an application made on behalf of the present respondents (the Federal Republic of Brazil and the Municipality of Sao Paulo) for leave for the oral evidence of two witnesses for them as plaintiffs (Mr. Santoro and Mr. Alves) to be given by video link from Brazil.   The second arises in respect of a separate application by them to be permitted to adduce as evidence in respect of their case at trial, an affidavit by one Dr. Marques. 

4.        On the first matter the Royal Court, on 20 December 2011, granted leave to adduce evidence by video-link.  The court found that it had jurisdiction: a potential issue in respect of which McNeill JA did not grant leave and which has not been referred to the full court.  The issue referred to this court can fairly be said to be one as to res judicata; under that brocard, the present applicants had objected below to the court entertaining the application in December 2011 because a similar application had been made by the present respondents to the same Commissioner, and was dismissed with costs, on 9 November 2011 (albeit, on that occasion, the application was in respect of four witnesses). 

5.        The Royal Court characterised the application before it in December as "pre-eminently one of case management": see paragraph 15 of the decision below.  As the learned Commissioner continued in that paragraph:-

"It is not uncommon for case management decisions legitimately to be re-visited in the light of later developments.  Unmeritorious attempts to re-open earlier decisions for no good reason tend to be treated simply as an abuse of court and sanctioned appropriately in costs." 

6.        The appropriateness of that characterisation is not an issue referred to this full court.  The Royal Court then exercised its discretion in the following way:-

"16.     As will have been evident to both parties at the time, one of my chief concerns on the previous occasion was that the Plaintiffs' approach to the application assumed far too much as to the Court's readiness to make an order of this kind and that the supporting evidence was less than satisfactory in a number of respects.  And, although the Act of Court does not reflect it, I gave a clear indication at the time of dismissing the earlier application that the Court was not closing the door on any further application; which, no doubt, is why following the last hearing the Defendants sought, as they did, to have a representative present at any further discussions with prospective witnesses that might take place concerning their willingness or otherwise to travel to Jersey.  The fact that the earlier application was dismissed rather than adjourned (as another application was) is, accordingly, of no consequence. 

17.      What has since happened is that, as described below, the Plaintiffs have made further significant efforts to try to persuade witnesses to make the journey to Jersey, in two cases with success (it seems) but in two others, the subject of the present application, to no avail.  They have also addressed in some detail the logistics of any video-link operation in a way which they had previously failed to do.  In those circumstances, I see no reason to treat their renewed application as illegitimate."

7.        The Royal Court then proceeded to determine the application by reference to the facts and circumstances before it, again a matter which is not referred to this court.  The issue referred to this court, in respect of this judgment, is:-

"Whether, assuming that the Royal Court was correct in categorising as one of case management the application for evidence to be given by video-link, it erred in accepting that there was before it such a change of circumstances as was sufficient to entitle it to entertain a further application on a matter which it had already determined and dismissed." 

8.        The requisite nature or quality of change of circumstances has not previously been the subject of decision of the courts in this jurisdiction.  We were referred, however, to numerous authorities from the English courts. We consider it necessary to refer only to two.

9.        In Bass Taverns Limited v Carford Engineering Limited [2002] EWCA Civ 671, the Court of Appeal, hearing an appeal from the Birmingham District Registry High Court of Justice Technology and Construction Court, expressed these views in respect of a revised application for adjournment.  The Court of Appeal held that the judge had been in error in treating the matter before her as res judicata.  At the time of the earlier application there had been fatal difficulties in relation to quantum.  Those, apparently, had been resolved by the time of the subsequent application but the learned judge had reasoned that (1) the witness statement of the claimant's solicitors had failed to set out a satisfactory history of the delay or the reasons for them, (2) that the claimant still did not put forward a constructive timetable and (3) it would be "a mockery of the case management powers and duties of the court" to permit the case to proceed, given that it was relatively straightforward and no good reason had been given for the failure properly to prepare it: see paragraph 39. 

10.      In respect of the change of circumstances from fatal difficulties on quantification to proper preparation, Potter LJ, with whom Sumner J concurred, said (at paragraph 37):-

"...  It seems to me that, save where the grounds on which an adjournment is sought are identical, or virtually identical, to those already considered and found wanting on an earlier occasion, it is inappropriate to regard the doctrine of res judicata as having any application to an application for an adjournment made in a situation where circumstances have changed and the matter with which the court is concerned is the overriding objective.".

11.      Further, in Lloyds Investment (Scandinavia) Limited v Ager-Hanssen [2003] EWHC 1740 (Ch), Patten J, dealing with the power of the Court to vary or revoke an order under CPR Part 3.1(7) stated (at paragraph 7):-

"...  It seems to me that, for the High Court to revisit one of its earlier orders, the Applicant must either show some material change of circumstances or that the judge who made the earlier order was misled in some way, whether innocently or otherwise, as to the correct factual position before him.  The latter type of case would include, for example, a case of material non-disclosure on an application for an injunction.  If all that is sought is a reconsideration of the order on the basis of the same material, then that can only be done, in my judgment, in the context of an appeal.  Similarly it is not, I think, open to a party to the earlier application to seek in effect to re-argue that application by relying on submissions and evidence which were available to him at the time of the earlier hearing, but which, for whatever reason, he or his legal representatives chose not to employ."

12.      In the present matter, that is very much the way that the learned Commissioner expressed himself to the parties: see the transcript of the hearing on 9 November 2011 at page 37. The allegedly new or altered circumstances relied upon below by the present respondents were set out in the third affidavit of Mr. J A Sidwell, a partner and member of Lawrence Graham LLP, authorised by the present respondents to make that affidavit on their behalf.  The affidavit was specifically in support of the present respondents' renewed application for the witness evidence of Mr. Santoro and Mr. Alves to be given by way of video-link from Brazil. 

13.      In his affidavit, Mr. Sidwell identified that the application was being renewed following the previous application made by the present respondents, that he had noted the Commissioner's comments at the earlier hearing as to the nature of the evidence presented in support of that previous application and therefore set out "a more detailed explanation of the Plaintiffs' position regarding the possibility of certain of the Plaintiffs' witnesses giving evidence via video-link."  

14.      Mr. Sidwell deponed that he had met with Mr. Santoro and Mr. Alves in Brazil in July 2011 when they indicated that they were willing to give live evidence but not prepared to travel to Jersey "or are very reluctant to do so."  (See paragraph 10).

15.      He had met with Mr. Alves and Mr. Santoro during the week commencing 28 November 2011.  Mr. Santoro had told him on that occasion that he would not attend the court in Jersey and produced a statement setting out his reasons for not attending.  Mr. Sidwell had noted that the letter referred to "prior commitments" already arranged, and his understanding, from his meeting with Mr. Santoro was that they were business commitments which meant that he was limited in the amount of time he could give up in order to travel and give evidence in Jersey: see paragraph 15.

16.      Mr. Sidwell had met with Mr. Alves on 30 November 2022 and Mr. Alves had told him that he would not attend the hearing in Jersey.  Mr. Sidwell and another individual had taken some time trying to understand Mr. Alves' reasons for refusing to attend, but Mr. Alves had simply stated that he would not attend the court in Jersey.

17.      It follows from Mr. Sidwell's third affidavit, that there had been no underlying change of factual circumstances between July and November 2011: each witness maintained that he would not, or was not prepared to travel to Jersey to give evidence.  The additional information before the court was that Mr. Sidwell had made renewed efforts both to persuade the witnesses to travel and to understand the reasons for their reluctance.   His efforts were clearly material in that he had travelled to Brazil and held face to face meetings with the witnesses, as he had done in July. 

18.      In our opinion, the appropriate test in this jurisdiction, by reference to which the Royal Court exercising its jurisdiction in matters of case management is entitled to entertain a further application on a matter which it has already determined and refused or dismissed, is that there has been a material change of circumstances or that the court, whether innocently or otherwise, has been misled as to the correct factual position, or that the grounds upon which the application is made are materially different from those already considered. 

19.      In the present case the grounds were identical at each application: the relevant witnesses either refused or were not prepared to travel.  All that had altered was that the solicitors had made further significant attempts to persuade the witnesses to travel and to understand their reasoning.  Those further efforts on the part of the solicitors did not, in our opinion, constitute either altered grounds or a material change of circumstances. 

20.      We therefore grant this application for leave to appeal; and it follows that the appeal against the decision to allow this evidence to be given by video-link must be allowed as it was not open to the Royal Court to revisit its earlier decision. 

21.      The second matter referred to us is quite separate and relates to Dr. Marques.  The issue referred is:-

"Whether, in the whole circumstances before it, the Royal Court erred in permitting the Plaintiffs to adduce as evidence for their case at trial the Affidavit of Dr. Marques."

22.      In a separate judgment of 22 December 2011, the same Commissioner (HWV Page QC) dealt with an application concerning the position of Dr. Marques, upon the affidavit evidence of whom the present respondents sought to be allowed to rely.  The Commissioner ruled that Dr. Marques "be permitted to give evidence by affidavit of the matters covered by his Third Affidavit dated 22nd October 2011 subject to the redaction of paragraphs 18 and 24."  See paragraph 5 of the judgment where the learned Commissioner gave the following reasons:-

"First, the scope of this affidavit, redacted in part as indicated, is limited to verifying the authenticity of the text of various depositions given by and interviews of Sineao De Oliveira, the receipt by Dr. Marques of a package of documents from an anonymous source and the circumstances of Mr. De Oliveira's "retraction" on 27^th February 2003.  Secondly, although the position is less than ideal for present purposes, it is understandable that it is impermissible for Dr. Marques, as a State Prosecutor, to present himself for cross-examination for the reasons that he gives.  Thirdly, here again the scope for cross-examination appears to be very limited.  Mr. Steenson argues that there are all sorts of points about which he would want to question Dr. Marques including in particular the manner in which the depositions were taken, given that they are, self evidently, not verbatim transcripts.  I accept that to this extent the Defendants will be handicapped by not being able to cross-examine him.  But looking at the matter in the round it appears to me to be a proper case for the admission of evidence on affidavit, that any concerns about the weight to be given to its content can be addressed by way of submission (and the court will of course need to be circumspect in this regard), and that it would be disproportionate to refuse the application." 

23.      In his third affidavit, sworn in Sao Paulo on 21 October 2011, Dr. Marques depones that he is a State Prosecutor, having the role of investigation and initiation of actions in civil cases, including acts of administrative improbity or misconduct in public office.  The independence of his office had been established in the 1988 Federal Constitution in order to maintain integrity and to avoid any political interference at State and Municipal level: see paragraph 8.2. 

24.      In paragraphs 9 and 10 of that affidavit Dr. Marques depones:-

"9.       The nature of my role as State Prosecutor is particularly important in the context of the provision of witness evidence by me in the current proceedings.  This is because I am unable, as State Prosecutor, to be a witness for the Plaintiffs in relation to this matter.  To do so would be potentially problematic in terms of the independence of my role in Brazil and could also be problematic in the context of the civil proceedings for which I am currently responsible for and which are currently in progress in Brazil against Messrs. Paulo Maluf and Flavio Maluf, as well as against Mr. Hani Kalouti and other persons and companies.

10.      Notwithstanding said constitutional limitations, I recognise that I have obtained and have relevant evidence to provide to the Court of First Instance (Royal Court) of Jersey in relation to the matters set out in this affidavit, and in particular the circumstances of the testimonies and the retraction by Sineao Damasceno de Oliveira (as set out in Section C below).  In the interests of justice, I have thus highlighted the circumstances in the form of this affidavit so that the Court of First Instance (Royal Court) may be fully aware of the facts in considering the weight to assign to Sineao's declaration."

25.      By reason of these statements, the present respondents wished the authority of the Royal Court below to adduce this affidavit in evidence, but without Dr. Marques being available for any form of cross examination.

26.      In seeking leave to appeal, Advocate Steenson for the applicants contended that it was illogical to accept that Dr. Marques could not be the subject of cross examination but still to allow the content of his affidavit to be evidence for the present plaintiffs.  For the respondents, Advocate Baker submitted that it was understandable that Dr. Marques would not be permitted to present himself for cross examination due to constitutional reasons and that, as the learned Commissioner had identified, concerns as to weight to be given to his evidence could be addressed in the usual way in counsel's submissions. 

27.      This issue raises an important point.  It almost goes without saying that State Prosecutors, either through the terms of their office or through convention, will not be compellable witnesses, particularly as regards the work of their office.  There are occasions, however, when, an application being made to another state for assistance, that application will be supported by a statement by or on behalf of the State Prosecutor setting out the reasons why the application is being made.  There may also be occasions when upon a request from State A to State B for assistance of a matter, the State Prosecutor of State B may be authorised by the state to give a statement as to certain matters. 

28.      The circumstances here are somewhat different to those to which we have just alluded.  The present respondents, the Federal Republic of Brazil and the Municipality of Sao Paulo have been able to obtain - perhaps not surprisingly - an affidavit from Dr. Marques, one of the prosecutors of the State of Sao Paolo, on matters which they, doubtless, consider germane and helpful to their claim in this jurisdiction.  Dr. Marques is able to maintain, quite properly, that his office is independent both of the Republic and the Municipality. 

29.      It seems to us, however, that there is a difficulty here.  It is a highly unusual circumstance for affidavit evidence to be allowed as part of the evidence for a litigant in a civil litigation without there being the opportunity for that evidence to be tested by cross examination.  Here it appears that this may be particularly important and the learned Commissioner, at paragraph 5 of the judgment, has accepted that the defendants would be handicapped by not being able to cross examine Dr. Marques in particular as regards the manner in which certain depositions were taken: see paragraph 5.  It is also to be taken as read that the present respondents see an advantage to them, in this civil litigation, in being able to rely upon the evidence of Dr. Marques.   At this remove from proceedings, it seems to this court difficult to envisage that the court below would be likely to feel able to accede to a submission that no weight whatsoever should be attached to evidence which was properly before it.

30.      Further, Dr. Marques did not indicate that the terms of his appointment, or of the relevant Law or of the Constitution make specific provision precluding his giving evidence in a third country. We were informed by Advocate Baker that it was understood that Dr Marques considered himself precluded by convention; but we understand that Dr Marques has appeared before a Grand Jury in New York, albeit not to be cross-examined.

31.      In our opinion, in the particular circumstances of the matter before us, the issue can be determined by reference to Dr. Marques' third affidavit.  In paragraph 9 he states, quite straightforwardly, that he is unable, as State Prosecutor, to be a witness for the plaintiffs in relation to this matter.  That is an end of the issue.  He does not seek to become a party himself to the proceedings; as to which, of course, he would have to be prepared to show proper standing.  Nor has this court sought his views.  Nor is he, in some other way, an amicus curiae.  It seems to us that Dr. Marques himself recognises that, to be a witness in a civil litigation almost inevitably brings with it the concomitant of being the subject of cross examination: and that this is something which, perhaps both in general and having regard to the particular circumstances with which he is involved, he has reached the opinion he is unable to do. 

32.      Royal Court Rule 6/20 (1) provides that, subject to other provisions of those rules and other enactments any fact required to be proved is to be proved by examination of witnesses in open court. In the particular circumstances here, we are of the opinion that the present respondents cannot rely upon an affidavit specifically taken for the purposes of this litigation where the person making the affidavit indicates that he is unable to be a witness for the plaintiffs in relation to this matter . 

33.      For these reasons we grant the application for leave to appeal and allow the appeal on this issue. 

34.      We therefore recall the Act of Court dated 19 December 2011 insofar as it granted the application for the evidence of Sergio Lima Santoro and Vivaldo Alves to be taken by way of video-link from Sao Paulo.  We also recall the decision to allow the affidavit of Dr. Silvio Marques to be adduced as evidence in the trial.  

Authorities

Bass Taverns Limited v Carford Engineering Limited [2002] EWCA Civ 671.

Lloyds Investment (Scandinavia) Limited v Ager-Hanssen [2003] EWHC 1740 (Ch).

Republic of Brazil v Durant [2011] JRC 237.

Republic of Brazil v Durant [2011] JRC 238.