Representation of Abdallah [2021] JRC 325 (24 December 2021)

judgment the deputy bailiff: 1. On 31 st August 2021 the Inferior Number heard evidence in relation to this matter and for the reasons set out in the extensive judgment given by the Court on 5 th October 2021 ( Representation of Abdallah [2021] JRC 249 ) ordered that the Company be wound up on the just and equitable basis. We indicated at paragraph 102 of the judgment that the parties should address the Court further as to such ancillary orders that it was invited to make. 2. On 17th December 2021, I sat alone in order to deal with ancillary applications which were sought as a consequence of the decision to wind up the Company on the just and equitable basis and, in particular, in respect of the appointment of a liquidator in this case and the powers to be given to the liquidator. 3. Prior to the hearing, both parties filed skeleton arguments and accordingly most of the orders sought by the Representor, having been modified to take into account observations made by counsel for the Company, were undisputed. However, there were two principal matters that were live between the parties upon which I gave my ruling at conclusion of the hearing and indicated that I would give brief reasons in writing for those decisions. 4. The first matter was the identity of persons under a duty to cooperate with the Joint Liquidators. The second issue was whether or not the Court should give directions convening Mr Mirza, the sole director and substantial shareholder of the Company in order that he respond to an application that he should pay the Representor's costs of the proceedings. 5. I shall deal with each issue in turn. Third parties required to co-operate with the Joint Liquidators 6. It was not disputed that I should order that certain persons should be under a duty to cooperate with the Joint Liquidators. The duty was to give the Joint Liquidators such information regarding the Company and its promotion formation business dealings, affairs or property which the Joint Liquidators may reasonably require and to attend upon the Joint Liquidators, whether in person or remotely, at reasonable times and on reasonable notice when requested to do so. It was not disputed that those persons should extend to those who are or have at any time been officers of or the secretary to the Company and those who are or have been officers of or in any employment of a body corporate that is, or was, secretary to the Company in question. 7. What was in dispute was whether or not the persons under a duty to cooperate with the Joint Liquidators should extend to " those who in the opinion of the Joint Liquidators are capable of giving information which they require, and to which the Joint Liquidators had given written notice of the same." . 8. It was said that the Court had no power to make such an order and such a requirement was more extensive than the equivalent provisions relating to a creditor's winding up under Chapter 4 of the Companies (Jersey) Law as contained within Article 183 of the Law. Article 183 provides: "Duty to co-operate with liquidator (1) In a creditors' winding up each of the persons mentioned in paragraph (2) shall - (a) give the liquidator information concerning the company and its promotion, formation, business, dealings, affairs or property which the liquidator may at any time after the commencement of the winding up reasonably require; (b) attend on the liquidator at reasonable times and on reasonable notice when requested to do so; and (c) notify the liquidator in writing of any change of his or her address, employment, or name. (2) The persons referred to in paragraph (1) are - (a) those who are, or have at any time been, officers of or the secretary to the company; (b) those who have taken part in the formation of the company at any time within 12 months before the commencement of the winding up; (c) those who are in the employment of the company, or have been in its employment within those 12 months, and are in the liquidator's opinion capable of giving information which he or she requires; and (d) those who are, or within those 12 months have been, officers of, or in the employment of, a body corporate that is, or within those 12 months was, secretary to the company in question. (3) For the purposes of paragraph (2) "employment" includes employment under a contract for services (contrat de louage d'ouvrage). (4) A person who, without reasonable excuse, fails to comply with an obligation imposed by this Article, is guilty of an offence." 9. It was argued that it would be strange for the obligation to cooperate in the case of a just and equitable winding up to extend beyond the statutory provisions relating to creditor winding up, and indeed wrong in principle. 10. Although the Court when ordering a just and equitable winding up has the power under Article 155(4)(c) to " make such orders as it sees fit to ensure that the winding up is conducted in an orderly manner " that usually leads to the Court being invited to make orders equivalent to those which the Court is expressly empowered to make under Chapter 4 of the Law. 11. It was argued on behalf of the Representor that it was appropriate to make orders as sought in this case as the people with material likely to be of assistance to liquidators in this case will not have been officers of the Company with the exception of Mr Mirza. Such persons would include the shareholders of the Company and persons connected to and working with BSI in Qatar as set out in the judgment - for example Mr Rubie and various members of his family. The Joint Liquidators might also wish to speak to the beneficial owner of Detco which ultimately received the shares that the Company owned in BSI. 12. Although a failure to comply with a duty to cooperate with the liquidator would not amount to the criminal offence created by Article 183(4) of the Law in these circumstances, it might amount to a contempt of an order of this Court with similar consequences. 13. Counsel for the Company drew to my attention the decision of the Royal Court in the matter of Montrow International Limited [2007] JRC 107 where the Court made various orders recognising the appointment of a provisional liquidator by the High Court of the British Virgin Islands. It was said that the order made on that occasion assisted the Company in its submissions regarding the ambit of the order sought by counsel for the Representor. In fact, it appeared to the Court that the scope of the order made by the Royal Court on that occasion, namely permitting the provisional liquidator to take steps in Jersey including to examine any employee of a named Jersey service provider who was " reasonably believed to have in his or her possession any property of [the company] or any information concerning the promotion, business dealings or affairs [of the company]" went rather wider than what was permitted by Article 183. 14. Having regard to the terms of Article 155 and the facts of this case, I broadly agreed with the arguments of the Representor but adjusted the terms of the order sought so that it provided that the persons under a duty to cooperate with the Joint Liquidators extended to " those who in the reasonable opinion of the Joint Liquidators are likely to have information which they require relevant to the liquidation of the Company owing to which the Joint Liquidators have given prior written notice of the same". Potential third party costs order against Mr Mirza 15. The Court has a discretion to order costs against a non-party where there are sufficient grounds to do so. In Leeds United -v- Admatch [2014] JRC 167 the Court said at paragraph 21: "Applicable principles for non-party costs orders 21. The principles which are applicable in deciding whether to order a non-party to pay costs were established by the Court of Appeal in Planning and Environment Minister v Yates [2008] JLR 486 . At paragraph 74, McNeill JA said this:- "(i) Costs orders against non-parties will be exceptional in the sense of having considerations outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The exceptional considerations will be fact-specific and the ultimate consideration will be that of justice as between the litigant seeking the order and the person against whom the order is sought. (ii) Generally speaking, the discretion will not be exercised against 'pure funders', namely persons with no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business, and in no way seek to control its course. (iii) Ordinarily, a non-party will not be made liable for costs if those costs would in any event have been incurred even without such non-party's involvement in the proceedings. (iv) Difficult cases will arise when non-parties fund litigation designed to advance the funder's own financial interest. (v) Where a non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit, that non-party should be liable for the costs if the claim, defence or appeal fails. But the position of an individual director who participates in or funds litigation will require careful consideration. (vi) The guiding considerations are reason and justice. (vii) Ordinarily, a non-party, non-funder, with no personal interest in the litigation and who does not stand to benefit from it will not be liable for the costs incurred by an unsuccessful party without a full hearing of the merits upon which it is contended that potential liability arises." 22. The Court of Appeal elaborated upon (v) above in Leeds United Association Football Club Limited v Admatch [2011] JCA 110 at paragraph 4 as follows:- "In advising the need for careful consideration in cases where an individual director participates in or funds litigation by his or her company, McNeill J. A. had in mind that, when deciding whether or not to exercise its discretion to award costs against the director personally, the court should determine what lay behind his or her involvement. Where a director "promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit, he should be liable for the costs if his claim or defence or appeal fails." If, however, he "can realistically be regarded as acting rather in the interests of the company (and more especially its shareholders and creditors) than in his own interests", it is likely that a costs order will not be made against him. (See Dymocks Franchise Systems (NSW) Pty. Ltd. v. Todd W. L. R. 2807 (sic), per Lord Brown of Eaton-under-Heywood, at paragraph 29)". I should add that the correct reference for Dymocks appears to be [2004] 1 WLR 2807 ." 16. So, a costs order may be made against Mr Mirza if the Court is satisfied that this is an appropriate case to do so. The Representor says that it is and relies upon the Court's findings adverse to Mr Mirza, for example at paragraphs 64 and 76. In summary, it is correctly said that the Court made specific criticisms of Mr Mirza and rejected his account that Mr Abdullah was told about the Transaction at the time and rejected his account that he was aware of it at the time of his visit to Qatar in 2016. 17. An affidavit has been sworn in support of an application for leave to serve Mr Mirza with this application out of the jurisdiction on the footing that there is a good arguable case for the relief sought by the Representor under paragraph 7 of the Schedule of Service of Process Rules 2019, which deals with claims for costs orders in favour of or against third parties. 18. I find there is a good arguable case for the relief sought by the Representor against Mr Mirza for costs, although I do not prejudge the Court's findings in relation to this matter as the Court has not yet heard from Mr Mirza on this issue and this is not a run of the mill order for the Court to consider, let alone make. 19. It was contended on behalf of the Company that the usual order should be that the costs of and incidental to the representation borne by all parties should be costs in the liquidation and rank as expenses of it. It is accepted that the Court has a discretion to make such costs orders as it thinks fit, pursuant to Article 2(1) of the Civil Proceedings (Jersey) Law 1956 . My attention was drawn to the decision in Anthony Investments [2013] JRC 221B where the respondent to an application to place the company in a just and equitable wind up was allowed its costs in the liquidation even though it was unsuccessful. Commissioner Hunt QC held that it was important in the interests of justice that the court heard from a party who opposed the Article 115 application and that the respondent was the person best placed to do so and held that it should have its costs, although not on the indemnity basis but the standard basis. I agree that bearing in mind that the vast majority (92%) of the shareholders opposed the representation that it was proper for the Company to take the stance that it did and I allowed the costs of the Company to be costs of the liquidation on the standard basis to be taxed if not agreed. 20. However, in the circumstances, it is proper that the Representor has the opportunity to argue that his costs be paid by Mr Mirza and I ordered that Mr Mirza be convened to this effect. In the first instance, that application (to which the Company is not required to be represented) should be listed for directions only with the Court determining whether or not it is appropriate to deal with this issue now or at the end of the liquidation. It is only at the end of the process of liquidation that the Court will know whether or not the Joint Liquidators have been able to identify and recover assets to the benefit of the Company and its shareholders and what opinion, having regard to the contents of any report that they produce, they have formed about the conduct of Mr Mirza up to and subsequent to the Transaction. My provisional view is that these considerations may be relevant to the incidence of costs although I have not yet heard argument from Mr Mirza or full argument from counsel for the Representor on that point Authorities Companies (Jersey) Law 1991. Montrow International Limited [2007] JRC 107 . Leeds United -v- Admatch [2014] JRC 167 . Civil Proceedings (Jersey) Law 1956. Anthony Investments [2013] JRC 221B . Page Last Updated: 02 Feb 2022 BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII