Jersey Unreported Judgments

Companies - application for leave to appeal against the judgment of this Court of 18th November 2021

[2022]JRC013

Royal Court

(Samedi)

20 January 2022

Before     :

T. J. Le Cocq, Esq., Bailiff, sitting alone

 

Advocate H. Sharp Q.C. for the Plaintiff.

Advocate E. Davies for the First Defendant.

Advocate J. D. Kelleher for the Second to Fifth Defendants

judgment

the bailiff:

Introduction

1.        This is an application by the Second to Fifth Defendants ("the Sanne Defendants") for leave to appeal against the judgment of this Court of 18^th  November 2021 (Hunters Investments Limited v Crill and Ors [2021] JRC 295) ("the Judgment") by which the Court determined that Carey Olsen should cease to act for the Sanne Defendants.

2.        The principles under which the Court will grant leave to appeal, following Glazebrook v The Housing Committee of the States of Jersey [2002] JLR Note 43, are:

(i)        The proposed appeal has a real prospect of success;

(ii)       The question to be raised on the appeal is one of general principle decided for the first time;

(iii)      The case involves a question of importance upon which further argument and a decision of the Court of Appeal would be to the public advantage.

3.        The judgment in question dealt with an interlocutory matter.  In HRCKY Limited v Hardrock Limited and another [2019] JCA 123 the Court of Appeal determined that it would only interfere with decisions of the Royal Court on an interlocutory matter if:

(i)        The Royal Court misdirected itself with regard to the principles in accordance with which the discretion has been exercised;

(ii)       The Royal Court, in exercising its discretion, is taking into account matters which ought not to have been taken into account or has failed to take into account matters which ought to be taken into account; or

(iii)      The decision is plainly wrong;

(iv)      There has been a change of circumstances after the Royal Court made its order that would justify acceding to an application to vary it.

4.        The essence of the application is that, on the argument of the Sanne Defendants, they have real prospect of successfully showing that the decision arising from the Judgment was wrong or alternatively that there are important questions of law upon which further argument and decision of the Court of Appeal would be to the public advantage. 

5.        In developing the first point, the Sanne Defendants say that the Court failed to apply or apply properly the principles relating to the protection of confidential information of former clients in that it failed to require the Plaintiff to establish that Carey Olsen was in a possession of confidential information that was or may be relevant and/or failed to consider the effectiveness of information barriers.  It is also argued that the Court failed to apply properly and/or methodically the principles relating to conflicts between witnesses and counsel and in particular the requirement for Hunters Investments Limited ("HIL") to establish that counsel for the Sanne Defendants is likely to be required as a witness.

6.        Further, it is argued by the Sanne Defendants that the Court in exercising its discretion, failed to take into account matters it should have taken into account and in particular the effectiveness of the information barrier's and HIL's failure to confirm that it intended to tender witness evidence from any of the witnesses in respect of whom it is alleged a conflict is created.  In the circumstances, the Sanne Defendants ask that the discretion should be exercised afresh by the Court of Appeal.

7.        In what is described in the notice of appeal as an "overarching ground of appeal" it is further asserted that the Court's approach involved unacceptably defuse and brief conclusions which failed to subject the issues of alleged conflict to any degree of detailed scrutiny, to deal with them consecutively or systematically, and to test the alleged risk against the appropriate legal test.  The application for leave and notice of appeal thereafter goes into detail of the arguments relating to the protection of confidential information, Advocate Kelleher's position, Advocate Jeffrey's position and Advocate Coltman's position and argues that the Court failed to analyse this adequately or address the real risks.  Many of the arguments advanced in support of this understandably echo the arguments before me below.

8.        In essence the application for leave to appeal goes to the methodology applied by the Court which it is asserted was incorrect and, had the correct methodology been applied, the result would have been different. 

9.        HIL, for its part, argues that the conclusions of the Court in the judgment are correct and obviously so, and the overall statement in the Judgment of the factual position cannot realistically be disputed.  In particular the Plaintiff points to paragraph 44 of the Judgment (itself, in part, representing part of HIL's skeleton argument) which states as follows:

"Moreover, it is argued, Carey Olsen's involvement in the case is further complicated in that they are acting for not only Sanne but their former directors, the Second and Third Defendants.  Given that there are allegations of fraud it is argued that the potential for conflict in acting for all these defendants is evident.  In summary, in HIL's skeleton argument at paragraph 38 it states:

"If one takes a step back, Carey Olsen are a consistent feature in the background history of [HIL's] claim and have at one stage or another, represented all parties before the court in respect of the various contractual arrangements, transactions and material issues that will be ventilated and carefully considered at any trial.  Carey Olsen were at the centre of events in 2011 when they acted for HIL and its partners are likely to be witnesses as to the Defendants' knowledge relevant to the allegations of fraud .  As a law firm they have become witnesses of fact and face insurmountable hurdles of conflict in what is a high value claim featuring serious allegations........"."

10.      HIL further points to paragraph 69 and 70 of the Judgment where, under the heading of Conclusion, the court said:

"69.   Looking at the matter in the round it seems to me that Carey Olsen as a law firm have been involved throughout in not only of course the conduct of this case on behalf of the Defendants but in many of the factual matters that gave rise to the litigation. 

70.   Through its former partner Advocate Jeffrey, Carey Olsen was involved in advising the Defendants with regard to the 2011 transaction which saw HIL give up its shares.  Advocate Coltman advised Sanne and clearly some information could have passed between them in connection with the meeting on 19th May 2011 in which Advocate Jeffrey may well have advised Sanne on the way that the preference shares needed to be treated which would have showed that what Sanne was proposing was illegal and would also have cast material doubt on an earlier transaction relating to Ivegill and the 10% preference shares.  That meeting may well be highly significant." 

11.      In the following paragraphs the Court as part of its conclusion made certain other observations.  For example in paragraph 72 the Court said:

"72.  There is real prospect in my view that Advocate Jeffrey and Advocate Coltman may be called upon to give evidence and even if it is unlikely that Advocate Kelleher will so be required, he could have relevant information and may be faced with the prospect of cross-examining Advocate Jeffrey on the contents of the letter that followed on from the 19th May 2011 meeting.  This was a letter written on Carey Olsen letterhead by a then partner of Carey Olsen." 

12.      In paragraphs 74 - 78 inclusive of the judgment the Court said:

"74.   I accept that it is difficult to be certain as to what confidential information, if any, may be in play in this matter.  However, Carey Olsen acted for HIL and may very well have been privy to confidential information which, even if it cannot be recalled either by Advocate Jeffrey or by Advocate Kelleher or Advocate Coltman at the present time, it may still in some way affect the manner in which the litigation might be conducted in the manner referred to in the Abacus case above. 

75.   Similarly, although I do not think it is appropriate in the context of this application to make any determination relating to admission by conduct, the fact is that such an issue may be raised in circumstances in which Advocates Kelleher and Coltman themselves promoted the complaint by Sanne to the Law Society against HIL's legal adviser which clearly was inaccurate in material respects.  As one of the authors of the complaint it is in my view potentially difficult for Advocate Kelleher to deal with any potential challenges in that regard.

76.   This is a matter that is highly contentious, complex, and contains serious allegations of wrong doing.  It is unlikely that much evidence given in this case is going to be formal or non-contentious.  It is likely to be highly contentious in all its aspects.

77.   Justice must not only be done but must be seen to be done and in my judgment the complexities of this case, interwoven throughout with advice from or representation by partners of Carey Olsen means that it is difficult to think that the potential conflict between that firm as representative and legal adviser to the Defendants and the obligations of an independent legal representative to the Courts would not exist during the course of a trial.

78.   In these circumstances, in my Judgment, Carey Olsen should no longer act for the Defendants and alternative legal representation should be obtained." 

13.      It is fair to say the Court did not approach the matter in the way that it had been invited to do so by the Sanne Defendants in their skeleton argument and submissions below.  Rather the Court considered the factual position and the fundamental principles that underpin matters of this nature and took the view in the round that the cumulative effect of all the potential conflicts made the conclusion of the Court appropriate and correct in all the circumstances. 

14.      Although criticism has been made of the Judgment and the method in which it approached the matter, I must be satisfied that the arguments show a real prospect of success.  I do not think that looked at in the round the potential and actual difficulties identified in the Judgment could do other than lead to a decision that Carey Olsen should not continue to act for the Sanne Defendants.

15.      I do not, therefore, in the circumstances think that there is a real prospect of success. 

16.      In the event that the only issue before the Court was to have been the adequacy or otherwise of information barriers then I might have considered that this was a matter on which further argument before the Court of Appeal would have been of value.  I understand from material put before me by Advocate Kelleher, specifically the text Conflicts of Interests (Sixth Edition) by Hollander and Salzedo at paragraph 7 - 018 et seq that the time might have come to give further consideration to the sufficiency of information barriers.  However, my decision was not made on that matter alone but rather in respect of all of the potential conflicts and difficulties taken in the round and accordingly I cannot grant leave to appeal for that reason.  I think the conclusion would not have been affected by it. 

17.      On the matter of counsel being potentially called as a witness it is correct that Advocate Sharp for HIL did not confirm to the Court in terms that he would be calling Advocate Kelleher, Advocate Jeffrey or Advocate Coltman.  Indeed the Court took the view that it was unlikely that Advocate Kelleher would be called unless, of course, an issue arose in connection with the contents of the complaint to the Law Society.

18.      It is fair to observe however, that reference was certainly made by Advocate Sharp to calling those witnesses.  At page 15 of the transcript, Advocate Sharp says this:

"That raises, in our submission, going back to the inherent jurisdiction point, a number of issues.  It is appropriate or even open to Carey Olsen to now say that what is contained in a letter on Carey Olsen headed letterhead is wrong, or at least incomplete.  Are Carey Olsen really not fixed with the knowledge of their own letter?

Secondly, if there is going to be a dispute as to whether this letter is accurate, one has Advocate Jeffrey inevitably coming to give witness evidence to corroborate that he is in the habit of writing accurate letters.  I acknowledge that Advocate Jeffrey is no longer a partner of Carey Olsen, but even so it is not very attractive to have Carey Olsen potentially cross-examining Carey Olsen and disowning their own documents in order to represent people they were not representing at the meeting and to the direct detriment of their former client.  In terms of that test, is there an apprehension that justice is not being done.  I would respectfully suggest that that test is satisfied here."

19.      And in final submissions, page 111 of the transcript said this:

"..... If you know from your own letterhead written by your own lawyer that certain things occurred, I cannot readily see how Carey Olsen can now say on behalf of somebody else that they did not occur, if that is what their case if going to be.  We still have the issues of Advocates Jeffrey and Coltman also needing to give evidence.  I would refer the Court back to the broader test of inherent jurisdiction and what the [lay person's] apprehension might be as to the prospect of really Carey Olsen challenging Carey Olsen documents and/or its past and present lawyers.

The Law Society complaint.  Again the same thing as before.  You are being told it is not very relevant.  That may be the Defendants' case, but that is not our case.  As I have said before, the issue appears to be deliberate cover-up versus innocent error, but that is a matter for trial, is it not.  The Plaintiff is entitled to present its case at trial, present it fully, and present it with as much evidence - obviously subject to the Court's directions and case management - but with as much probative evidence as it can muster.  If I have not made my position clear, then let us be clear.  We say, for the reasons already advanced that privilege does not attach to the making of the complaint, for reasons already articulated, and we would wish for the advocates who made the complaint to come and give evidence.  The reason for that is because they will inevitably have to explain how the various statements about the accounts were made to the Law Society, and they are going to have to explain the mechanics as to how that happened.  Because, if they do not do that, how are the Jurats ever going to sensibly assess our case, when there was no real challenge......"

20.      Accordingly, it was clearly being canvassed before the Court that Advocates Kelleher, Jeffrey and Coltman would be required to give evidence on, potentially, highly contentious matters and the Court proceeds on the basis that there would be a very real prospect of two of those would be called although a somewhat a lesser prospect that Advocate Kelleher would be.  Nonetheless the possibilities existed and the Court proceeded on that basis. 

21.      Accordingly, leave to appeal is refused.  As I am informed that an application for leave will be renewed before the Court of Appeal at the earliest opportunity and nothing is scheduled to take place in this matter prior to a directions hearing scheduled for February before the Commissioner appointed to deal with this matter, I do not need to order a stay and accordingly do not do so.

Authorities

Hunters Investments Limited v Crill and Ors [2021] JRC 295. 

Glazebrook v The Housing Committee of the States of Jersey [2002] JLR Note 43. 

HRCKY Limited v Hardrock Limited and another [2019] JCA 123. 

Conflicts of Interests (Sixth Edition) by Hollander and Salzedo