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Jersey & Guernsey Law Review – February 2008

CASE SUMMARIES

The following key indicates the court to which the case reference refers.

JRC            - Royal Court of Jersey
GRC           - Royal Court of Guernsey
JCA            - Jersey Court of Appeal
GCA           - Guernsey Court of Appeal
JPC            - Privy Council, on appeal from Jersey
GPC           - Privy Council, on appeal from Guernsey

ADVOCATES

DUTIES TO CLIENT – CONFIDENTIALITY – CONFLICT OF INTEREST

Abacus (C.I.) Limited and anor v Bisson and Ors [2007] JRC 150 Royal Ct: (Birt, Deputy Bailiff, and Jurats Allo and Le Cornu)

Advocate T. J. Le Cocq for the representors; Advocate M. St J. O’Connell for the respondents.

The representors applied for an order that the respondents ("Appleby") should cease to represent a Swedish entity called Gamlestaden Fastigheter AB ("Gamlestaden") in certain proceedings before the Royal Court (the "Baltic litigation").  The representors argued inter alia that Appleby was in possession of confidential information acquired from the first representor in one matter (the "Y matter") which may be relevant to the Baltic litigation, where the interests of Appleby's new client Gamlestaden were adverse to those of the representors.  

Held, granting the order requested by the representors –

(1)           The law of Jersey in this area was similar to English law as summarised by Lord Millett in the leading English case of Prince Jefri Bolkiah v KPMG;[1] Hirschfield v Sinel.[2]  It is incumbent on a plaintiff who seeks to restrain his former lawyer from acting in a matter for another client to establish (i) that the lawyer is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own. Although the burden of proof is on the plaintiff, it is not a heavy one and the relevant principles are as further elucidated in Prince Jefri. 

(2)           The issue in the present case was whether the information "is or may be" relevant to the Baltic litigation.  Lord Millett did not elaborate in Prince Jefri on what he meant by "may be" relevant as it was not necessary to do so in that case.  In the Royal Court's view, information "may be" relevant if there is a real (as opposed to fanciful or theoretical) risk that it is relevant. 

(3)           Underlying the development of the law in this area were two important but in some respects competing principles.  The first was that it is in the public interest that a client should feel free to disclose information freely to his lawyer in the knowledge that it will remain confidential and not used subsequently for the benefit of someone with an adverse interest to him.  The second was the countervailing public interest that the choice of lawyers open to the public should not be unduly or unnecessarily restricted.  The small size of the Jersey Bar was relevant to the second principle.  Contrary to the finding of Crill, Commissioner, in Les Pas Holdings Limited v Receiver General,[3] the size of the Jersey Bar and the nature of different firms within that profession was a relevant consideration for the Court.  It was of fundamental importance that there should not be a perception that it is difficult or impossible to find lawyers of the appropriate calibre and stature to act against substantial financial institutions in the Island.  In some cases the size of the Bar will not make a difference.  In others cases, however, where the relevance of the confidential information may be borderline or where the information barrier may be effective, the Court needed to take into account the consequences of any order it makes. 

(4)           On the facts, the Court concluded on balance that there was a real risk of some of the confidential information imparted to Appleby during the Y matter being relevant to the Baltic litigation; that Appley's representation of Gamlestaden to date had been limited to pursuing an appeal on a point of law in the Court of Appeal and the Privy Council; and that there was evidence before the Court that it would be able to obtain suitable alternative representation in Jersey.  The representors were accordingly granted an order restraining Appleby from acting for Gamlestaden in the Baltic litigation.

(5)           Obiter - Certain observations of Lord Millett in Prince Jefri (at 234) suggested that there was an absolute prohibition on a firm acting both for and against the same client at the same time in different matters.  In Jersey an absolute prohibition of this nature would be likely to cause substantial practical difficulties.  The Court had not heard argument on the point and declined to develop it further.  But its thinking was that there had to be some reasonable relationship between the two matters before a firm should be prohibited from acting for a client on one matter and against the same client on another matter.  In the circumstances this question did not call for decision and was not relied upon by the representors.

Note: See RBC Trustees (C.I. ) Limited (formerly Abacus (C.I.) Limited) v Appleby [2007] JRC 211, in which the Court re-visited this question in the light of a material change in circumstances and, holding that it was not functus officio, removed the prohibition.   See below under COURTS – FUNCTUS OFFICIO.

CIVIL PROCEDURE

COSTS – BENEFICIARY'S COSTS IN "NEUTRAL" TRUST ACTION

Alhamrani v Alhamrani and others [2007] JCA 198 CA: (Birt, Beloff and Vos JJA)

T.  Hanson for the appellant, Sheik Fahad; J. P. Speck for the respondent; the other parties did not appear and were not represented.                

At the conclusion of the Court of Appeal's judgment in Alhamrani v Alhamrani and others[4] the Court indicated that its provisional view concerning the costs of the appeal was that the trustee should be indemnified out of the trust fund on the basis described in the judgment and that Sheikh Fahad (a beneficiary of the trust who was a party to the proceedings) should receive his costs out of the trust fund on the standard basis.  The Court, however, gave leave to the parties to argue any other alternative course.  Counsel for Sheikh Fahad argued that his costs should be taxed on the indemnity basis on the grounds that he was acting for all the beneficiaries and the appeal raised matters of general importance.  Counsel further argued that Sheikh Fahad should receive his costs out of the trust fund on the same basis as the trustee.

Held, partially granting the application –

(1)           The Court accepted that Sheikh Fahad had in effect been acting for all the beneficiaries and that the appeal raised matters of general importance.  It was therefore appropriate for his costs to be paid out of the trust fund on an indemnity basis pursuant to Rule 12/5 of the Royal Court Rules 2004.

(2)           It was, however, not appropriate for Sheikh Fahad's costs to be taxed on the same basis as the trustee's.  A trustee had a right to be indemnified out of the trust fund for all costs reasonably incurred.  The Court's judgment had set out the mechanism for ensuring that a trustee received no more than he was entitled to by way of indemnity.  The position of a beneficiary was quite different.  An award of costs may be made in his favour out of the trust fund under article 53 of the Trusts (Jersey) Law 1984.  The Court also had a general discretion under article 2(1) of the Civil Proceedings (Jersey) Law 1956.  Where the Court exercises its power to award costs to a party Part 12 of the Royal Court Rules 2004 came into play, under which costs were awarded either on the indemnity basis or the standard basis.  Even assuming the Court had power (which was not decided) to disapply Practice Direction - RC 05/11 (which incorporated the Factor A and Factor B costs), it would not be appropriate to do so in the instant case.  The Court would be slow to introduce a third basis of taxation which was not provided for in the Royal Court Rules 2004.

COSTS – TRUSTEE'S COSTS IN "NEUTRAL" TRUST ACTION

Alhamrani v Alhamrani and others [2007] JCA 164 Court of Appeal: (Birt, Beloff and Vos JJA) 

T.  Hanson for the appellant, Sheik Fahad; J. P. Speck for the respondent; the other parties did not appear and were not represented     

The following questions arose: (1) Does a beneficiary have an automatic right to ask the Court to tax, moderate or assess the costs and expenses to which a trustee is entitled out of the trust fund when he is acting as a neutral trustee, rather than in hostile litigation? (2) If there is no automatic right to taxation, what is the threshold which a beneficiary must surmount before the Court will order a taxation, moderation or assessment? and (3) What procedures should the Court follow in relation to the request for, and the conduct of, such a taxation, moderation or assessment?

Held,

(1)           A beneficiary does not have an automatic right to require the costs and expenses of a neutral trustee to be taxed.  Any such automatic right to taxation would have to be spelled out clearly in the Rules or Law.  Part 12 of the Royal Court Rules 2004 contained no specific reference to the taxation of costs recoverable by a trustee from a trust fund and to apply the indemnity basis under Rule 12/5, with the restrictions imported by Practice Directions RC 05/11 and RC 06/02, would be to drive a coach and horses through the statutory indemnity conferred on trustees by article 26(2) of the Trusts (Jersey) Law 1984, which also arose by contract and through the inherent jurisdiction of the Court.  

(2)           A beneficiary may, however, invoke the statutory and supervisory jurisdiction of the Court in respect of the costs and expenses of a neutral trustee by raising a complaint, question or doubt about the reasonableness of those costs, which cannot be struck out or seen as obviously bad on its face.   The threshold set by the Royal Court – that there must be a "real grounds for concern" – before the Court's supervisory jurisdiction could be invoked (Allhamrani v Morgan and Others;[5] Alhamrani v Alhamrani and Others;[6] Landau v Anburn Trustees Limited[7]) was too high.  If a beneficiary could properly make an allegation that costs have been unreasonably incurred in breach of article 26(2) of the Trusts (Jersey) Law 1984 or in breach of trust, he was entitled to have that allegation determined as he would if he were raising any other proper claim against the trustee. 

(3)           The procedures to be employed had to flexible.  If a Representation or an Order of Justice is commenced in respect of a trustee’s non-litigation costs, the matter would come before the Court for directions.  It was open to the Court or the Greffier at that time to order the matter to be resolved in the way that is most appropriate to the issues raised.  The Court set out how it envisaged the issues would normally be dealt with.  Issues of whether the amounts of costs, or particular items of costs, were reasonably incurred would normally be expected to be referred to the Greffier for taxation.

(4)           The Court endorsed the summary of the principles to be applied on the "taxation" of such costs made by the Deputy Bailiff at paragraph 35 in Landau v Anburn Trustees Limited,[8] subject to preferring the words "taxation" or "quantification", rather than "assessment".  The Court of Appeal further endorsed the conclusion of Bailhache, Bailiff, in Sheikh Abdullah Ali M. Alhamrani v Russa Management Limited and nine others[9] that in complex trust litigation it is desirable in appropriate cases for assistance to be obtained from English solicitors and English Chancery counsel, and where that is reasonably done, the trustee is entitle to recover his reasonable costs so incurred. 

COURTS

FUNCTUS OFFICIO

RBC Trustees (C.I. ) Limited (formerly Abacus (C.I.) Limited) v Appleby Royal Ct: (Birt, Deputy Bailiff, and Jurats Allo and Le Cornu) [2007] JRC 211

T. J. Le Cocq for the representors; M. St J. O’Connell for the respondents.

Appleby applied to the Court to re-visit its order of 6 July 2007, preventing it from continuing to act for Gamlestaden Fastigheter AB ("Gamlestaden") in certain proceedings before the Royal Court on the ground that there had been a change in circumstances.  The change was that a firm of Advocates that had previously indicated that it was willing to act for Gamlestaden was now (on what the Court found to be reasonable grounds) unacceptable to Gamlestaden and, if Appleby were to continue to be prevented from acting, Gamlesaden would now be unable to have itself legally represented in Jersey by a firm of sufficient size and resources.  A preliminary question arose whether the Court was functus officio. 

Held,  granting Appleby's application and removing the prohibition-

(1)           The Court was not functus officio.  "A court is functus when it has performed all its duties in a particular case.  The doctrine does not prevent the Court from correcting clerical errors nor does it prevent a judicial change of mind even where a decision has been communicated to the parties.  Proceedings are only fully concluded, and the court functus, when its judgment or order has been perfected.  Once proceedings are finally concluded, the court cannot review or alter its decision; any challenge to its rulings on adjudication must be taken to a higher court if that right is available": Jersey Evening Post Limited v Al Thani.[10]  However the principle only applied where a decision is final and not to a decision which is interim or requires continuing monitoring.  The July order was of the nature of an interim order analogous to an interim injunction preserving assets, which the Court was free to vary or revoke in the light of changing circumstances.

(2)           In the light of the change of circumstances, the application was granted and the prohibition against Appleby acting was removed. 

FAMILY LAW

NAMES – SURNAME – MARRIAGE AND CIVIL STATUS (JERSEY) LAW 2001

Moran and Kemp v Deputy Registrar [2007] JRC 151 Royal Ct: (Bailhache, Bailiff (sitting alone).

J. D. Kelleher for the applicants; Crown Advocate C. M. M. Yates for the respondent.

The applicants were the unmarried parents of a child.  They sought judicial review of a decision of the Deputy Registrar of St Helier to register the child with the surname of the mother rather than that of the father.  Part 1 of Schedule 3 to the Marriage and Civil Status (Forms, Registration and Fees) (Jersey) Order 2002 requires the registration of the "surname" but contains no definition or elucidation of what that meant. 

Held, refusing to grant judicial review –

The Court was concerned with a narrow point of statutory construction of the Marriage and Civil Status (Jersey) Law 2001 and the 2002 Order, not with the social or moral aspects of the case.  The Court was in no doubt that at customary law an illegitimate child takes the surname of his or her mother by operation of law.  The position had not been altered by the 2001 Law: the 2001 Law did not contain any sufficiently clear wording such as would be required to override the customary law.  The Deputy Registrar had no discretion in the matter.  Nor was the law as found by the Court in breach of either Article 14 or 8 of the European Convention on Human Rights.

IMMIGRATION

DEPORTATION OF OFFENDER

Camacho v AG [2007] JCA 145 CA: ( Beloff, Steel and Vos JJA)

S. E. Fitz, Crown Advocate; R. J. MacRae as amicus curiae for Camacho.                       

The question arose as to what impact the rights of a defendant under the European Convention on Human Rights ("ECHR"), as enacted into Jersey law by the Human Rights (Jersey) Law 2000, should have on the exercise of the Court's power to make a recommendation to the Lieutenant Governor for deportation after sentence has been served.   In particular, the issue arose as the impact of the defendant's human rights upon the exercise of the two-fold Nazari test R v Nazari,[11] that is, whether the defendant’s continued presence in the island would be detrimental to the community and secondly the impact the deportation would have on the offenders' family.

Held, dismissing the application for leave to appeal –

(1)           The governing law was the Immigration (Jersey) Order 1993 which extended to Jersey, with modification, the relevant provisions of the Immigration Act 1971. The Applicant was a Portuguese (and therefore EU) national.  The Jersey authorities' power to deport did not depend on EU law instruments, although article 4 of Protocol No. 3 did prohibit the Jersey authorities from making a deportation order against a national of another Member State by reason of conduct which, when attributable to citizens to the UK, does not give rise on the part of the Jersey authorities to repressive measures or other genuine and effective measures intended to combat such conduct: Pereira Roque v Lieutenant Governor[12](a decision of the Court of Justice of the European Communities).  This restriction was unlikely to be engaged in any case where deportation is to be considered for criminal misconduct: see Richard Plender The Rights of European Citizens in Jersey.[13]

(2)           More significant was the ECHR which had been domesticated in Jersey by virtue of the Human Rights (Jersey) Law 2000: see the editorial Deportation and Human Rights.[14]  Prior to the coming into effect of the ECHR in Jersey on 10 December 2006, the Court's practice had been informed by the decision of the English Court of Appeal in Nazari.  The second limb of the Nazari test called for a balancing exercise between the effect that deportation of the defendant would have on innocent persons and the interests of the community.  Several points needed to be made about Nazari: (i) the court was prepared to weigh in the scales the interests of the offender's family but not the offender; (ii) the court would not take into account particular social, economic or political conditions of the country to which the offender would be deported; and (iii) the court did no consider at all the extent to which it might be inhibited from making a recommendation for deportation of someone whose circumstances might have changed before any actual order. 

(3)           In Carmona v R[15] the English Court of Appeal reviewed the effect of the ECHR on judicial recommendations for deportation.  Potentially the English court found that three convention rights could be engaged: the right to life (art. 2); the prohibition against torture (art. 8); and the right to respect of private and family life (art. 8).  Additionally, the Jersey Court of Appeal added, the right to liberty and security of person (art. 5) might also be relevant if the offender were ordered to be detained pending deportation.  Although such rights were potentially engaged, it was held in Carmona that there was now no need for a UK sentencing court to consider the ECHR rights of an offender whose offence justified a recommendation for deportation, since this was an exercise for which the court was not qualified or equipped and which would in any event be undertaken by the Home Secretary and the Asylum and Immigration Tribunal.

(4)           In the case of O'Dette and O'Dette v Law Officers,[16] decided in 2007, the Guernsey Court of Appeal declined to follow Carmona.  The Jersey Court of Appeal accepted this conclusion (though not all of the reasons for it) and likewise held that Carmona was not applicable in Jersey.  The most significant factor was that there was no appeal (other than by way of judicial review) from a decision by the Lieutenant Governor to deport, unlike the position in the UK.  It was therefore only fair to someone whose modus vivendi was at risk to give him the fullest procedural protection in Jersey.  The Court differed from the Guernsey Court of Appeal, in particular, as to whether a judicial recommendation for deportation created a presumption or legitimate expectation that it would be followed by the Lieutenant Governor: on the contrary the Lieutenant Governor retained an unfettered discretion subject only to public law principles.   The fact that ECHR rights would not be engaged until an order was actually made did not mean that the Jersey court should not, on the basis of the facts as they were, and subject to reconsideration in the event of intervening change in circumstance, take into account ECHR rights at the time of making a recommendation.  All potentially material articles may be engaged and most usually this will be the right to respect of private and family life (art. 8).  The family rights of the offender as well of those of his family should now be considered, even if in the balancing exercise less weight is given to the former.  In considering whether the severing of a family was justified, the factors in article 8(2) of ECHR had to be considered, always informed by the doctrine of proportionality.

(5)           The Royal Court had to consider first whether the Applicant's continued presence in Jersey would be detrimental to the community, and if so satisfied, go on to consider the impact of deportation on his family.  On the facts, the Royal Court's conclusion that the Applicant's continued presence would be detrimental to the community was endorsed and, as regards the second limb of Nazari, the Deputy Bailiff had correctly balanced the competing interests in this case on the basis of the law as he applied it.  The Royal Court's decision had to stand whether viewed through the prism of article 8 of ECHR (which was the correct approach for the future) or on the traditional Nazari grounds.

TRUSTS

APPLICATIONS FOR DIRECTIONS – FOREIGN DIVORCE PROCEEDINGS

In the matter of the H Trust [2007] JRC 187 Royal Ct: (Clyde-Smith, Cmmr. and Jurats Clapham and Le Cornu)

R. J. MacRae for the representor; D. M. Cadin for the first respondent.

In English divorce proceedings between the wife and the husband, the trustee of a Jersey trust, which had been settled by the husband, did not (pursuant to directions of the Royal Court) submit to the jurisdiction of the English court.  Though the order of the English court dividing the parties' assets was not made against the trustee, the effect was to divide the assets held in the trust.  The trustee took advice on the English order and concluded that giving effect to it would more or less exhaust the trust assets, which were limited, with only the wife receiving any apparent benefit to the exclusion of the husband and his children and grandchildren, who were also beneficiaries.  It therefore responded to the spouses with a counter proposal, stating that if the counter proposal was not accepted it would seek the directions of the Royal Court.  The counter proposal, though supported by the husband, was rejected by the wife, who asked for the matter to brought before the Royal Court.  In the interim, however, the trustee was advised that there was a possibility of enfranchisement of the lease of the manor, which had been the parties' matrimonial home, and that such enfranchisement might provide a windfall which would materially alter the parties' financial position.  In the light of the possible windfall, the trustee did not proceed with the application for directions to the Royal Court.  The trustee's decision in this regard was supported by the husband but the trustee did not consult with the wife.  It was, however, aware that the wife was in urgent need of funds.  The wife therefore brought the present action before the Royal Court seeking a direction that the trustee put the English Order into effect.  It was submitted inter alia for the wife that the trustee in seeking directions had surrendered its discretion to the Court.  It was submitted inter alia for the trustee that, for the purposes of article 9(1) of the Trusts (Jersey) Law 1984, the exercise of a trustee's power was a "question concerning" the "administration of the trust" and accordingly neither the trustee nor the Court could, when considering the exercise of powers under a trust, take into account the "personal relationship" between a beneficiary and the settlor or the orders of foreign courts of competent jurisdiction adjudicating between beneficiaries on a matter such as the division of assets on divorce. 

Held, substantially granting the wife's application –

(1)           The trustee had not surrendered its discretion.  The present practice of the Court was clearly that not every application by a trustee for directions was equivalent to a surrender of discretion.  The Court would today only accept a surrender of discretion for good reason, such as deadlock or conflict, and in most cases the trustee will seek the blessing of the Court to decisions it has already made: Re S Settlement.[17] 

(2)           When giving directions under article 51 of the Trusts (Jersey) Law 1984, the Court was not concerned with whether, under Article 9, "the trust or disposition" itself "avoids or defeats" the "rights claims or interests" conferred on the wife by English law by reason of her marriage to the husband or "contravenes" the English Order.  The only issue for the Court was whether and to what extent the trustee should be directed to exercise its powers under the trust in such a way as to give effect to the English Order and the wife's rights under it.  This was consistent with the approach of the Court in the Re the B Trust.[18]

(3)           There was no issue between counsel as to the circumstances in which the Court should seek to control the exercise of powers vested in trustees. In S and L and E v Bedell Cristin Trustees[19] the Court held that its role was a supervisory one and it was simply to ensure that decisions taken by trustees are reasonable and lawful. One aspect of this was that trustees must not act perversely, i.e. they must not take a decision to exercise their powers which no reasonable body of trustees could arrive at. 

(4)           Whilst the Court would have reached a different decision as to how to respond to the English Order, it did on the facts not regard the trustee’s decision to respond by counter proposals on an even-handed basis as being one which no reasonable body of trustees could have arrived at.  However, after its counter proposal had been rejected by the wife, the trustee had made a second decision not to apply to the Royal Court but to await the outcome of the enfranchisement proceedings.  They had abandoned their even-handed approach and this second decision was a decision which no reasonable body of trustees could have reached.  In terms of the quality of the decision, the trustee could not afford to maintain the parties at the present rate of distributions and administration costs and at the same time back what was on the facts speculative litigation as well as funding the acquisition of the manor if that litigation were successful.  In terms of procedure, no reasonable body of trustees in the position of the trustee, having formally and openly resolved to refer the matter to the Court if agreement could not be reached between the parties on its counter proposal, could abandon that position and make the second decision without even consulting one of the two parties directly affected, namely the wife, to whom the matter was of urgent and immense importance.  The second decision was accordingly set aside.  The Court proceeded to give the trustee directions, conditional upon certain actions by the husband and the wife, which gave substantial effect to the English Order to the extent of that the trust assets permitted.

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