Trust - reasons for ordering a better statement of case and decision in
respect of costs.
[2018]JRC227
Royal Court
(Probate)
6 December 2018
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Before :
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Advocate Matthew John Thompson, Master of
the Royal Court.
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Between
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Antoine George Haddad
(aka Tony Haddad)
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Plaintiff
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And
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G.B. Trustees Limited
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First Defendant
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And
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Stuart Southgate
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Second Defendant
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Advocate R. S. Christie for the Plaintiff.
Advocate M. H. D. Taylor for the First
Defendant.
Advocate M. L. Preston for the Second Defendant.
CONTENTS OF THE JUDGMENT
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Paras
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1.
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Introduction
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1
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2.
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Background
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2-18
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3.
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The first
defendant’s answer
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19-24
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4.
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Chronology of
the first defendant’s discovery
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25-82
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5.
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Decision
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83-104
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judgment
the MASTER:
Introduction
1.
This
judgment contains:-
(i)
My reasons
for ordering the first defendant to file a further and better statement of its
case and to file a further affidavit of discovery; and
(ii) My decision in respect of the plaintiff’s
application for indemnity costs of and incidental to its application requiring
the first defendant to file a further affidavit of discovery, including the
costs of correspondence prior to the application and the cost of reviewing
documents disclosed by the first defendant.
Background
2.
The
plaintiff’s claim is in respect of a trust known as the Cedar Trust
(“the Trust”). The
plaintiff claims that he is and always has been one of the economic co-settlors
and one of the beneficiaries of the Trust.
The plaintiff’s case is that the Trust contained family wealth
belonging to the plaintiff and his three brothers, Michel, Gabriel, and
Elie. The eldest of the four
brothers was Michel. In the early
1980s it is alleged that the brothers wished to move to London and to purchase
four neighbouring houses. At this
time they were receiving advice from the second defendant. In 1982 four properties 40, 42, 44 and
46 Uphill Road, Mill Hill, London were acquired through a BVI company known as
Cedar Estates Limited.
3.
The Trust
was established on 9th March, 1989, by a deed of settlement (the
“Trust Deed”). The
assets of the Trust included the two issued shares in Cedar Estates. On the same day as executing the deed
creating the Trust, Michel executed a letter of wishes which at paragraph 3
stated as follows:-
“The Trust assets
(“the Trust Fund”) consist of two shares in Cedar Estates Limited a
British Virgin Island company. The
company is the freehold owner of four properties in Uphill Road, details of
which are set out in the Schedule to this letter. Together with cash sums which allow the
directors sufficient funds to meet the running costs of those houses. When considering the disposition of the
company’s assets under Clause 4 below the Trustees should notionally
consider the company’s assets as four separate funds, the assets of those
funds representing the four respective houses referred to in the
Schedule.”
4.
The
Schedule to the letter of wishes stated as follows:-
“Schedule
40 Uphill Road, Mill Hill -
Gabriel G. Haddad Fund
42 Uphill, Mill Hill –
Antony A. G. Haddad Fund
44 Uphill, Mill Hill –
Elie G. Haddad Fund
46 Uphill, Mill Hill –
Michel G. Haddad Fund”
5.
The
plaintiff’s complaint arose out of Cedar Estates evicting the plaintiff
in 2014 from 44 Uphill Road where he was then living, having moved in late 2006
from number 42. By this time Cedar
Estates only owned two of the properties because two of the other properties
had already been sold. Of the
remaining two properties one was then sold (with the proceeds largely applied
to pay off the mortgage over both properties), and the other distributed to Michel
who had been added as a beneficiary with the original named beneficiaries all
being excluded. The plaintiff
complains that both his eviction and the distribution of the entire assets of
the Trust to his brother Michel were in breach of trust because they failed to
have regard to the plaintiff’s interest as economic settlor of assets,
alternatively as a person in whom trust assets had vested, alternately as a
person who was intended to benefit.
6.
The
Trustee in its amended answer denies that the plaintiff was an economic
settlor, denies that the plaintiff was ever named as a beneficiary and denies
that the plaintiff ever had a vested interest under the Trust. I address below the first
defendant’s pleading in relation to the plaintiff’s case that he was
intended to benefit under the Trust.
7.
As far as
the second defendant is concerned, the second defendant is now elderly and has
not been required by the plaintiff to file an answer in these proceedings and
as long as discovery is provided the plaintiff does not intend to pursue its
claims further against the second defendant at this time. The real dispute is therefore between
the plaintiff and the first defendant.
8.
On 21st
August, 2017, the action was stayed for one month to enable the parties to
pursue alternative dispute resolution.
However, no mediation of any kind took place.
9.
On 27th
November, 2017, the matter came back for further directions when I made the
following orders:-
“1. by 5.00
p.m. Friday 22nd December, 2017, the First Defendant shall consider whether it
wishes to re-amend its Answer by production of a draft for consideration by the
plaintiff;
2. the Plaintiff and the
First Defendant shall make discovery of all relevant documents to each other by
provision of a list of documents verified by affidavit by 5.00 p.m. Friday
March 23rd 2018;
3. there shall be inspection
of documents within 7 days of service of the list of documents;
4. signed and dated witness
statements of fact to stand as evidence as in chief shall be simultaneously
exchanged by close of business by 5.00 p.m. Friday 29th June,
2018…”
10. The first defendant was allowed nearly four
months to provide discovery because the matters in dispute went back to the
early 1980s. In addition the first
defendant as Trustee had received legal advice. The first defendant needed to consider
whether claims to privilege could be made in respect of legal advice paid for
out of assets of the Trust or whether it should be disclosed.
11. At the same hearing I raised with Advocate
Taylor for the first defendant the nature of the first defendant’s case
in relation to the plaintiff’s assertion that they were intended to
benefit under the Trust. This was
put most simply in the plaintiff’s response to the first
defendant’s request for further and better particulars of the order of
justice dated 6th June, 2017. Request 6 asked:-
“Please specify, for the
avoidance of doubt and so that the first defendant may understand the case of
the Plaintiff in this regard, what interest it is alleged that the brothers
were intended to have in the Properties and/or in the Trust Fund”.
12. The plaintiff’s answer was:-
“The order of justice is
clear. The interest which the
brothers were intended to have was that they would be treated as the true
discretionary beneficiaries of the Trust.
The context in which the Trust was established is, however, relevant
background to the discretionary interests.”
13. The first defendant provided its first list of
documents on 23rd March, 2018 comprising of 1,747 documents listed
in Schedule 1.
14. A second list of documents was provided in a supplemental
affidavit dated 2nd May, 2018 comprising of some 500 additional
documents.
15. A third affidavit was provided on 5th
September, 2018 listing 1,120 documents.
16. Shortly before the hearing I was provided with
a draft fourth affidavit by Advocate Taylor. Advocate Taylor explained that the list
attached to this affidavit was a complete chronological list to replace the
lists attached to the three previous affidavits together with certain
additional documents. The final
form of the list and the fourth affidavit was also going to have attached to it
documents from an English firm of solicitors (Lester Aldridge) with
correspondence from the Lester Aldridge files to be listed chronologically with
other working papers also being disclosed.
17. The plaintiff’s application that the
first defendant file a better affidavit of discovery was supported by a second
affidavit from the plaintiff and the first affidavit of Matthew David Caples
dated 24th October, 2018 an employee of Dickinson Gleeson Advocates.
18. The precise orders sought by the plaintiff in
its summons are as follows:-
“1. A final
order that the First Defendant give discovery by such date as the Court thinks
fit, in compliance with the requirements of Practice Direction RC 17/07, and in
particular:
1.1. that the First Defendant give discovery of
all documents within its possession, or where it has a right to possession,
inspection, or production of the documents;
1.2. that the First Defendant make reasonable
searches for documents;
1.3. that the First Defendant give discovery of
documents in a convenient order, preferably listed individually and in date
order;
1.4. that the affidavit verifying the list of
documents include a statement setting out clearly the extent of the search that
has been carried out to locate documents, and include a clear explanation of
what has been done and a clear answer to the specific questions which have been
put about specific classes of documents; and
1.5. that the affidavit contain a written endorsement
from the advocate with overall responsibility for the case or the discovery
process that he or she is satisfied that his or her client’s discovery
obligations have been met.
2. A final order that the
First Defendant give inspection by such date as the Court thinks fit, in such
a format that the
documents correspond conveniently with the
List of Documents in
the discovery affidavit, and without duplication.
3. A final order that the
First Defendant give the discovery and inspection in paragraphs 1 and 2 either:
3.1. in
relation to all of its discovery documents, in one single list and one single
deduplicated discovery run, and the First Defendant be liable for the
Plaintiff’s costs of dealing with the First Defendant’s discovery
and inspection to the date of this order on the indemnity basis; alternatively;
3.2. in relation to the discovery documents not
provided in the First Defendant’s first two lists and first inspection,
in one single list and one single discovery run, both deduplicated from the
First Defendant’s first two lists and first inspection, with such order
as to costs as the Court thinks fit; alternatively;
3.3. Such other order as the Court thinks
fit.”
The first defendant’s answer
19. I firstly deal with the first defendant’s
answer and the issue raised at the directions hearing on 27th November,
2017 referred to above. The Act of
Court issued at this directions hearing gave the first defendant an opportunity
to plead its case in response to the plaintiff’s answer to request 6 of
the first defendant’s request for further and better particulars. However, the first defendant has not
done so. This means that no case
has been advanced to date by the first defendant in response to the
plaintiff’s claim that he was intended to benefit under the Trust. Rather the pleading filed to date simply
does not admit this aspect of the plaintiff’s case.
20. I should record the first defendant does plead
that it was entitled to have regard to the letter of wishes provided by Michel
and to exclude the named beneficiaries, to appoint Michel and to distribute all
remaining assets of the Trust to him.
However, this is not an answer to the plaintiff’s assertion that
he was intended to benefit under the Trust.
21. I consider that I possess power to require a
party to make its case clear by reference to Rule 6/15 of the Royal Court
Rules 2004, as amended, as applied in Holmes v Lingard & Anor
[2018] JRC 184.
22. My reasons for requiring the first defendant to
make its position clear arise from the duty in the overriding objective
contained in Rule 1/6 to actively manage cases, which includes a duty to
identify issues. Without a clear
pleading from the first defendant on whether or not the plaintiff was intended
to benefit under the trust at any time, the extent of the issue in dispute is
not clear. Simply not admitting the
plaintiff’s case was not a justifiable stance for the first defendant as
trustee to take.
23. The first defendant is a trustee and has been
so since 2004. As a trustee the
first defendant should therefore know whether it was intended that the
plaintiff and his brothers were intended to benefit under the Trust or
not. The first defendant therefore
should know whom the Trust was intended to benefit and whether anyone intended
to benefit are those named as beneficiaries or other individuals. A trustee should also ascertain whom a
trust is intended to benefit when appointed as trustee. In this case it was clear from
Michel’s letter of wishes that those named as beneficiaries were not
persons whom it was intended should benefit when the Trust was set up. In the well-known case of Schmidt v
Rosewood Trust Ltd [2003] UKPC 26, the Privy Council held that the object
of a power was as a matter of discretion potentially entitled to seek
information from Trustees to hold them to account. The plaintiff in the present case seeks
to hold the Trustees to account based on his argument that he was always
intended to benefit.
24. An individual or entity that has acted as
trustee for 14 years should be able to form a view as to whether or not someone
was intended to benefit under a trust, even if they were not named as a beneficiary,
where such a person seeks to hold a trustee to account for alleged breaches of
trust. The present pleading of the
first defendant does not do so and therefore the Royal Court will not know what
the first defendant’s case is in relation to this important aspect of the
plaintiff’s claim. The issue
is also significant in relation to the production of witness statements because
the plaintiff is also entitled to know what case he has to meet in advance of
having to produce witness statements.
Chronology of the first defendant’s discovery
25. This section of the judgment deals with the
events relevant to the plaintiff’s application following on from the
order for discovery set out at paragraph 3 of the Act of Court of 27th November, 2017.
26. The first communication was a letter from
Bedell Cristin for the first defendant suggesting mediation by a letter dated 2nd
March, 2018. This letter stated:-
“The case is about to
enter a more significant phase from a costs point of view and it would seem
sensible to delay that expense if mediation is a proposal which is acceptable
to your client.”
27. In relation to this letter, the implication is
that the first defendant had not started preparing to meet its discovery
obligations until early March, which is what appears to be meant by the
reference to the case about to enter a more significant phase. Advocate Christie made the submission,
which was not challenged by Advocate Taylor, that as Bedell Cristin’s
letter was only being sent some three weeks before discovery was due to be
provided and in the absence of any other evidence, the timing of this request
for mediation suggested that the first defendant did not start preparing its
list of documents until over three months after the initial discovery order had
been made.
28. The request for mediation was rejected until
the discovery process was completed as a previous stay for ADR had not led to
any ADR taking place or indeed to any response during the stay from Bedell
Cristin to make arrangements for such ADR.
29. The first defendant’s first affidavit of
discovery was provided on 23rd March, 2018. This affidavit was not endorsed by
Advocate Taylor as required by paragraph 20 of Practice Direction RC17/07
which provides as follows:-
“20. Where the person swearing the affidavit is not the
advocate with overall responsibility for the case or for the discovery process,
the affidavit must contain a written endorsement from the advocate with overall
responsibility for either the case or for the discovery process that the
advocate concerned is satisfied that his or her client’s discovery
obligations have been met.”
30. Advocate Taylor during argument enquired why
this endorsement was required. As
stated in my Article “Is there A ‘Woolf’ in Jersey?”
2018 JGLR Volume 1, the endorsement reflects the duty on advocates contained in
Hanby v Olliver [1990] JLR 337 at 347 line 40, namely that:-
“The advocate owes a duty to
the court carefully to go through the documents disclosed by his client to make
sure, so far as is possible, that no relevant document has been withheld from
disclosure.
The existence of this duty on the
advocate enables—and, indeed, requires—the court to proceed on the
basis that a list of documents which appears to have been prepared with the
assistance of the party’s advocate and is verified by an affidavit in
proper form ought to be regarded as conclusive, save in exceptional
circumstances.”
31. At paragraph 77 of the JGLR Article I stated:-
“…more is required than
just advising the client of the test on discovery and leaving it to the client
to carry out the entire process.”
32. The list of documents provided on 23rd
March, 2018, was in chronological order as required by paragraph 14 of Practice
Direction RC17/07.
33. On 29th March, 2018 Advocate
Christie informed Advocate Taylor that he would be in a position to exchange
documents on 3rd April, 2018 and suggested this occurred by means of
an exchange of a USB stick, once the plaintiff’s discovery list had been
provided.
34. Advocate Christie received a reply on 29th
March, 2018 that Advocate Taylor was on leave until Monday, 16th April,
2018 and therefore his secretary would have to await Advocate Taylor’s
return for Advocate Taylor to deal with the matter.
35. Given that the order of 27th November,
2017 provided for inspection within 7 days of service, the reply that
inspection should be delayed until Advocate Taylor’s return was
unacceptable. Advocate Taylor, in
view of his absence for two weeks, should have made arrangements with one of
his colleagues to ensure that inspection could take place in compliance with
the court order.
36. The plaintiff’s list of documents was
provided by email on 5th April, 2018. In the same email Advocate Christie
repeated his request for inspection of the list in the absence of Advocate
Taylor.
37. No response was received to this email in the
bundle provided to me. Accordingly,
Advocate Christie on 20th April, 2018 made a further request for
inspection.
38. On 30th April, 2018 Advocate Taylor
responded indicating he would attend to the provision of documents that week
i.e. by Friday, 4th May, 2018.
39. Advocate Christie responded by email that same
day and asked:-
“Could you let me know as
soon as possible whether you are amenable to providing the entire discovery run
on a flash drive, and in an order and file name format which is easily
referable to your discovery list or whether you would like to provide
inspection in a different format (and if so what).”
40. The response was that the documents were being
scanned on to a USB drive and would be ready on 2nd May, 2018 (see
Advocate Taylor’s email of 1st May, 2018).
41. In fact the provision of documents on a USB
stick took place on 3rd May, 2018.
On that day Advocate Christie by email again asked “I assume the file names on your drive will be in the same order
as your list and easily referable to the list.”
42. At the same time as serving the list on 3rd
May, 2018 Bedell Cristin on behalf of the first defendant served a supplemental
affidavit containing a second list of documents. Paragraph 4 of the supplemental
affidavit of William James Garfield-Bennett dated 23rd March, 2018
stated:-
“The documents produced
and shown to me in exhibit WJGB 2 were intended to be set out in the previous
list in my original affidavit but due to a misunderstanding of the instructions
by a member of staff who compiled that part of the list they were not
individually described. I now
rectify that error by this supplemental affidavit.”
43. In the course of argument Advocate Taylor
explained that part of the first list of documents had been compiled by an
employee of the first defendant who had failed to list annexures to
documents. However, this
explanation fails to discharge the obligation on an advocate which goes beyond
just advising the client of the test of discovery and leaving it to the client
to carry out the process by reference to Hanby v Olliver as set out
above.
44. Secondly, this explanation does not explain why
some 500 further documents were disclosed.
45. The production of two lists meant that the
plaintiff then had two separate lists both in chronological order but did not
have a single composite list. The
supplemental affidavit also did not contain any explanation as to the process
that had been followed by the member of staff to explain which part of the
original list was incorrectly disclosed and which documents had not been
individually described. It is not
therefore clear from the supplemental affidavit which parts of the first
affidavit were not accurate.
46. Nor was any affidavit produced by the first
defendant for the hearing before me with any explanation as to why a second
list (or indeed a third list) had been provided. Nor was there any explanation given as
to how the employee of the first defendant was supervised or how documents
provided by him were reviewed by Advocate Taylor to discharge Advocate
Taylor’s obligation to the court.
47. The only other individual involved from Bedell
Cristin was a paralegal. No
evidence was adduced as to the extent of his experience, his knowledge of the
discovery process and his ability on behalf of Advocate Taylor to ensure that
there had been compliance with the discovery process.
48. There was also no endorsement on the second
affidavit saying that Advocate Taylor or anyone else with appropriate
experience from Bedell Cristin was satisfied that the first defendant had met
its discovery obligations.
49. It is right to record however that Advocate
Taylor did say in submissions that his client was told it was not for the
client to assess whether any document was disclosable or not and any questions
should be referred to Bedell Cristin.
This submission did not however address my observations that there was
no evidence that appropriate supervision of the discovery process had taken
place.
50. On 10th May, 2018 Advocate Christie
sent an email to Bedell Cristin which stated in the first paragraph:-
“Having had a chance to
review the documents supplied, we note that they are not consistent with your
discovery list and not therefore in an easy accessible format.”
51. Bedell Cristin responded the following day by
email and stated at paragraph 2:-
“The documents listed
within William Bennett’s second Discovery Affidavit correspond entirely
to Cedar Trust>Blue File, Red File and Yellow File, partially to Cedar
Trust>Volume 1, Volume 2, Volume 4, Volume 5 and Volume 6, and partially to
Cedar Estates Limited>Blue File and Yellow File. I have included demarcations so that you
can distinguish between which documents are included within William
Bennett’s first Discovery Affidavit and second. For example, under Garfield-Bennett
Disclosure>Cedar Trust Volume 1>Cedar Trust – Volume 1 (list), you
will notice that there are two lists.
The first list corresponds with documents contained within our
client’s first Discovery Affidavit, whilst (scrolling down) the second
list (titled with ‘supplemental list’) corresponds with documents
contained within our client’s second Discovery Affidavit. I recommend using this list which
corresponds, in order, to the documents contained within the same folder and
which I trust you will find easily referable.”
52. It is fair to say that this instruction is not
easy to follow. What was not
provided on the USB stick were copies following the chronological format of
either the first list or the supplemental list.
53. What Advocate Taylor explained had been
provided for inspection were electronic copies of the original files. He took this approach because he had
been concerned not to alter the format of the original files and to avoid any
criticism for doing so.
54. While it is right for the original hard copy
files to have been preserved in their original state, the approach taken by
Bedell Cristin meant that the plaintiff could not easily identify by reference
to the lists and documents disclosed whether the documents described in the
list or in the supplemental list had in fact been disclosed.
55. Where inspection is provided electronically,
paragraph 24 of the Practice Direction on discovery (RC17/07) provides:
“1. The parties may agree for copies to be
provided electronically provided that the relevant requirements of the practice
direction in relation to electronic discovery are adhered to.”
56. General principle 4. h. of the Practice
Direction on electronic discovery (RC17/08) states:-
“h. Subject to the obligation to provide
Electronic Documents in the Original Format, Electronic Documents shall
generally be made available for inspection in a form which allows the party
receiving the documents the same ability to access, search, review and display
the documents as the party giving discovery.”
57. Listing documents chronologically (albeit in
two separate lists) and then providing inspection of original files in a
different order does not meet this general principle. The documents provided electronically
should have been in the same format as the lists. This did not require any alteration to
the original files from which the documents were taken. Indeed, based on my experience of being
involved in the discovery process for many years, it is likely that a
chronological bundle was created by taking copies of relevant documents from
original files that had to be disclosed.
All therefore that was required to demonstrate compliance with general
principle 4h was to scan electronically any copies so taken to produce a copy
of the list of documents so that effective inspection could take place.
58. Advocate Christie in his letter of 4th July,
2018 where he continued his criticisms of the first defendant’s approach
stated:-
“We have been provided
with two separate chronological lists, but the discovery provided was not two
chronological runs matching those lists.
It was a series of files grouped thematically. Given that many of the files contained a
number of documents from each list, it is impossible to understand why some documents
were not included on the first list.
This is exacerbated by the fact that, in breach of Practice Direction
RC17/07 paragraph 19, your client’s two affidavits of discovery make no
attempt to explain what searches have been made for documents. In the absence of an explanation, this gives
rise to questions as to whether or not the discovery review has been done
properly.
Given the documents discovered
are not in chronological order, nor in list order, nor indeed in many cases in
any obvious order at all, it is impossible in practice to tell whether all
documents on list have been provided.
The process of review of these
documents has also been seriously delayed by the problems above and the
enormous amount of duplication in the documents you have provided. Many appear over ten times in the same or
different folders.”
59. The question of duplicates is addressed by
paragraph 12 of Practice Direction RC17/07 which states as follows:-
“12. In providing discovery a party need not disclose
more than one copy of a document where any copy only contains identical
relevant information. A copy of a document
that contains a modification, obliteration or other marking or feature relevant
to any issue in dispute shall be disclosed as a separate document.”
60. Advocate Christie’s letter of 4th July,
2018 also raised that various documents that appeared to be missing, both
generally and by reference to documents referred to in the disclosed
documents. This included files from
Lester Aldridge who had acted for Cedar Estates in relation to the eviction of
the plaintiff. This was
notwithstanding the fact that the plaintiff had raised at the directions hearing
on 27th November, 2017 the question of whether such legal advice was
discoverable (see paragraph 22 of the plaintiff’s skeleton) and that I
allowed nearly four months for discovery to enable this issue (among others) to
be addressed. Yet it did not appear
to have been addressed at all by the first and supplemental lists that were
produced.
61. By the time of Advocate Christie’s letter
of 4th July, 2018 the deadline for witness statements being
exchanged had passed. Clearly
witness statements could not be produced until the first defendant had complied
with its discovery obligations. At
this stage the non-compliance should have been brought back to me.
62. On 18th July, 2018 Advocate Christie wrote
further to Advocate Taylor stating:-
“Further to our letter of
4 July 2018, in William Bennett’s Supplemental Affidavit dated 2 May 2018
it was stated at paragraph 5 that he had become aware of various errors
concerning dates and descriptions which would be remedied in a further separate
Affidavit. We have heard nothing
further in relation to this. Please
state when you will be in a position to remedy these matters. We request that you provide a
substantive response to these questions also within 7 days.”
63. On 3rd August, 2018 Advocate Taylor replied to
Advocate Christie. Paragraph 1 of
his letter stated:-
“My client did undertake
an email search of their system to identify relevant e-mails. It was conducted by a senior member of
the Trustee. It was the policy of the
fee earners to print off and file e-mails hence the code which you have
identified on the e-mails. However,
I have requested that my client undertake a further search using its IT
consultant. A search will be made
of the electronic file for all relevant personnel who worked on the file during
the period. The current server
dates back to 2010.”
64. In relation to this paragraph, it therefore
appears that when the discovery order was made in November 2017, the first
defendant did not carry out a general search of its electronic files to produce
the first list or the supplemental list.
While I note the first defendant’s policy, that policy does not
obviate the need to carry out relevant searches of all areas unless discovery
is limited. No such order was asked for or made.
65. Secondly, the reply indicates that the review
of emails was left to an employee of the first defendant without any review by
Bedell Cristin.
66. Thirdly, it appears that a general search of
electronic files only started in August 2018 over four months after the
original discovery deadline had elapsed.
Even then the scope of what was being searched was not clear and whether
it was all of the electronic files or systems of the first defendant. In addition, nothing was provided to me
to show that the IT consultant was aware of Practice Direction RC17/08,
the general principles applicable to making discovery of any documents stored
electronically, how documents should be preserved, the obligations on the party
to explain their approach and the methods they used. Any affidavit of discovery of electronic
documentation is also required to identify the processes followed in providing
electronic discovery. This has not
occurred to date.
67. The letter of 3rd August, 2018 from Advocate
Taylor at paragraph 4 also indicated that relevant material from the files of
his firm were to be provided. This
was also over four months after expiry of the discovery deadline had passed and
suggests that the relevant files of Bedell Cristin were not reviewed until
August 2018, notwithstanding the order made in November 2017 referred to above
and the time period allowed.
68. Advocate Christie responded by a letter dated
15th August, 2018 which included the following statement:-
“It is now almost 5
months beyond the deadline for discovery, and we are still in receipt of
partial discovery only, in a format which was extremely difficult to review, as
the disclosure lists were entirely inconsistent with the documents provided,
which were not in chronological order and contained large amounts of multiple
duplication. The way your client
has discharged (or failed to discharge) its disclosure obligations has created
huge delay and greatly increased the cost to our client of the discovery
exercise.”
69. On 5th September, 2018 a third
affidavit was provided by the first defendant. Again, there was no endorsement on this
affidavit by Advocate Taylor.
Paragraphs 4 to 9 of the affidavit state as follows:-
“4. The lists
set out in the First and Supplemental affidavits were in chronological order
and the documents disclosed should also have been in that sequence.
5. I confirm that I have
reviewed all the hard copy files held at the offices and storage of GB Trustees
Limited which are connected to this matter. Furthermore I have instructed the
Trustees IT consultancy firm to undertake a review of the electronic files and
this has required the back-up tapes to be reviewed and copies produced on USB
sticks for inspection initially by the Trustee and its lawyers. That process is
still on-going.
6. I have made enquiries from
Hawksford in Jersey which purchased the business of Rathbones which in turn had
purchased the business of Nigel Harris which was the firm that set up the Cedar
Trust. I have been informed that there are no documents held by Hawksford.
7. Documents held by the
Trustees Advocate have been disclosed. I can also confirm that I have made
contact through my Advocate with the firm of Lester Aldridge who represented
Cedar Estates Limited in the possession proceedings to request documents.
8. I do not consider that
there are any other sources of documents which I can call upon save that the
second Defendant may have material but he still remains a separate party to the
action.
9. I have attached as
"WJGB3" a list of documents of the First Defendant which consists of
documents that the First Defendant either had or used to have in its physical
possession or has or had a right to possession or has or had a right to inspect
or take copies or has or had the right to compel someone else to provide.
70. In relation to this affidavit, I firstly note
at paragraph 4 the admission that the documents disclosed by USB stick should
have been in chronological order.
71. In relation to paragraph 5, the affidavit still
does not meet the requirements of Practice Direction RC17/08.
72. The enquiries of Hawksford as the former
Trustee should have been made shortly after the discovery order was made. In addition, during the course of
argument I enquired whether any company records held by Hawksford had been
sought, rather than records held by Hawksford as the former Trustee. Advocate Taylor was unable to give this
clarification and indicated that he would seek the same.
73. In respect of the approach to Lester Aldridge
this also should have occurred shortly after the discovery order was made and
not left until some nine months later.
74. In relation to paragraph 8, since 2013 the
Trustee has administered Cedar Estates.
No list provided explained whether requests were made to former
directors of Cedar Estates for any records they had; nor does any list refer to
former directors holding such documents.
Advocate Taylor’s response was that any request would be
ignored. However, that is not a
justification for either not making the request, nor for not making any
explanation in the affidavit of discovery because such documents are within the
power of the first defendant.
75. The explanation at paragraph 9 of the third
affidavit is not clear. The
paragraph confuses listing what further documents the first defendant possesses
with an explanation of any original documents (such as originals of letters)
that the first defendant no longer possesses albeit the first defendant may
have retained copies.
76. The further affidavit led Dickinson Gleeson to write
to Advocate Taylor on 21st September, 2018 as follows:-
“It is difficult to
understand what the provenance is of the documents which this affidavit
discloses, and there is no explanation in the affidavit itself. All of the
emails concerned have a file number written at the top right, which makes clear
that this is not the result of any electronic search of the email files. It
appears that this is simply the result of further material being disclosed from
your client’s paper files. Please confirm. If this is the case, please
explain why these documents were not disclosed previously. Your client has an
obligation under practice direction RC 17/07 (inter alia) to explain what it
has done, not least so that our client can judge whether he is satisfied that
your client has discharged his disclosure obligation properly.
We have a significant concern
about this further material, which is that having briefly reviewed certain
parts of it, it appears on the face of it that there is significant duplication
between this material and the material already disclosed. This would be
completely unacceptable (as we made clear in our letter of 15 August 2018). It
is difficult enough for our client that material is being produced in
instalments. This already causes great inefficiencies in reviewing your
client’s disclosure. There was also, as we have previously observed, very
significant duplication in your client’s first tranche of documents
disclosed. If there is to be significant duplication again in this material
(which we understand is not even the final material to be provided) of the
material already provided, that is intolerable. We therefore request an
assurance that this material has been deduplicated as against the material
already provided, before our client incurs time and money reviewing it
properly. If such an assurance is given and turns out to be incorrect upon our
beginning to review the material properly, our client will apply for an order
that your client deduplicate the material (and for the costs of any such
application).
We also do not understand why
this material has been provided in a separate batch when we understand that
your client is still undertaking further review of the electronic material,
rather than producing the remainder of your client’s disclosure in a
single, chronological, deduplicated run. Please provide an explanation.
Finally, we note at paragraph 4
of Mr Bennett’s Third affidavit his comment that the documents disclosed
with the First and Supplemental affidavits should have been in the same
chronological sequence as the lists. That admission is noted, but the fact is
that this did not happen. Our client’s rights are reserved in relation to
that and in relation to this new disclosure if the same turns out to be the
case.”
77. On 28th September, 2018 Advocate
Taylor replied indicating that, in providing the third affidavit, he had sought
to ensure there was no duplication in the list contained in the third affidavit
but this was not cross-referred to the other disclosure previously given. This meant that the issue of any
duplication between the third list and the first two lists or between the first
list and supplemental list remained unaddressed.
78. The email of 28th September, 2018
also explained that the search of the hard drives would be completed by the
first defendant and additional material be sent the following week. I observed that this email was sent some
ten months after the original discovery order had been made.
79. On 3rd October, 2018 Advocate Taylor
indicated that a chronological list of all disclosable documents held by the
first defendant would be provided within a week with a USB stick containing all
the documents on that list. By this
time the plaintiff had issued and arranged the present summons.
80. The same email indicated that files with Lester
Aldridge had still not been received.
81. In relation to the fourth affidavit produced
shortly before the hearing (although due to administrative error I did not see
it until the hearing itself), this was still in draft. While it was a list of documents in
chronological order, a comparison between it and the first list indicated that
documents described in the first list did not appear in the fourth list.
82. Also in the fourth affidavit there was still no
explanation of what searches had been carried out both of hard copy files and
for any electronic documents in compliance with Practice Direction RC17/07
and 17/08.
Decision
83. The above chronology is a sorry saga and falls
woefully short of how an Advocate should approach discovery both by reference
to Hanby v Olliver and the two Practice Directions to which I have
referred. I say this for the
following reasons by reference to the above chronology:
(i)
The first
defendant did not appear to have started the discovery process until March
2018;
(ii) The first list did not meet the first
defendant’s discovery obligations because two further lists have been
produced and now a fourth list has been produced to replace the prior three
lists with additional documents;
(iii) There was no search of electronic files until
August 2018;
(iv) The extent of the searches to be carried out of
hard copy and electronic files has not been explained in any affidavit;
(v) The manner in which searches appear to have
been carried out for the first three lists appears to have left the process of
searching for documents either to the first defendant or to a paralegal without
any evidence the paralegal was qualified to supervise discovery or was being
supervised.
(vi) The legal advice of Bedell Cristin was not reviewed until August 2018 even
though the first defendant was on notice in November 2017 that these files had
to be reviewed;
(vii) The legal advice from Lester Aldridge was not
asked for until August 2018 even though the first defendant was on notice from
November 2017 that those files also had to be reviewed;
(viii) A single chronological list was not provided in
breach of paragraph 14 of Practice Direction RC17/07;
(ix) Duplicate documents were provided in breach of
paragraph 12 of Practice Direction RC17/07;
(x) None of the first three affidavits contained
the required endorsement from an Advocate;
(xi) The method of inspection of the USB stick
provided in May 2018 breached paragraph 24 of Practice Direction RC17/07
and general principle 4.h. of Practice Direction RC17/08;
(xii) It is still not clear that the first defendant
in its review of its electronic files has made appropriate use of technology as
required by general principle 4.c. of Practice Direction RC17/08.
84. The overall effect of the first
defendant’s approach means that discovery will only be completed nearly
one year after the original order was made and nearly eight months after the
time allowed;
85. Where a party breaches a court order, I
considered in Newman v De Lima [2018] JRC 155 and Powell v Chambers
& Anor [2018] JRC 169 what approach I should take. In summary I have to consider:-
(i)
Was the
breach serious or significant;
(ii) Was there good reason for the breach;
(iii) What approach I should take in relation to any
breach of any order and whether I should grant relief from sanction.
86. In Newman v De Lima in relation to a
failure to provide expert evidence in accordance with the court’s
timetable, I was satisfied that a fair trial could take place but required the
second defendant to pay the costs of the application for more time on an
indemnity basis; I also made unless orders to ensure future compliance.
87. In Powell v Chambers & Anor, I
granted partial relief from sanction because I felt that a total strike out for
failure to provide discovery in relation to part of the plaintiff’s claim
was a step too far.
88. As noted at paragraph 69 of Powell
discovery is serious obligation.
Documentation in most cases forms a key part of the evidence before a
trial court. This case is no
different.
89. Secondly, as again noted in Powell
discovery is necessary because it allows parties to prepare their witness
statements to address any evidence raised in documentary form. It also allows an adviser to advise
their client on the merits of their claim or defence.
90. The failure to provide discovery in this case
was also not trivial or minor. It
was not a delay of week or so (as occurred with the plaintiff); it was a delay
running to eight months, where there have been serious failings and where the
action cannot progress without discovery.
91. The only excuse involved was that discovery was
an ongoing obligation. While that
submission is true, and the first defendant has provided additional documents
and is still endeavouring to do so, this ongoing duty does not explain why the
first defendant did not start to tackle discovery shortly after the order was
made and why there has been significant non-compliance with the Practice
Directions to which I have referred.
The fact that discovery is an ongoing obligation is not a valid excuse
for the delays that have occurred.
92. In relation to what sanction should apply, this
is a claim that goes back to the 1980s and the relationship between four
brothers. I am satisfied that a
fair trial could still could take place and therefore this is not a case where
a strike out should occur. Also,
given that the first defendant has attempted to provide further documents
albeit still without yet complying with the requirements on discovery, the
obligation to provide a further affidavit is subject to a final order albeit I
gave serious consideration to making the obligation subject to an unless
order. If the obligation is not met
by the time period I allowed and any further orders are required then absent
circumstances beyond the first defendant’s control, the first defendant
will find themselves in unless order territory.
93. As far as costs are concerned, Advocate
Christie sought the costs of and occasioned by his application on an indemnity
basis including costs of correspondence since provision of the supplemental
list and the wasted costs of reviewing the first defendant’s first three
lists of documents.
94. In relation to the test for awarding indemnity
costs, this is well-known; in particular something is required to take the case
out of the ordinary. The chronology
set out above and the matters listed at paragraph 83 above clearly mean that
this test is satisfied subject to one point I now address.
95. The one point is that some of the
correspondence from Advocate Christie on behalf of the plaintiff were requests
for specific discovery. Also, in
his summons, the plaintiff asked for “a
clear answer to the specific questions which have been put about specific
classes of documents”.
96. In my judgment this part of the summons went
beyond asking for an order that the first defendant meet its discovery
obligations but was rather an application effectively for specific discovery.
97. In relation to this part of the summons, I
indicated to Advocate Christie that at present that door was not open to him
because an application for specific discovery was premature. The argument before me was about whether
the first defendant had met its discovery obligations generally rather than
whether or not specific documents or categories of documents were missing
notwithstanding a properly formulated general affidavit of discovery.
98. This means that both in respect of the
application itself and the correspondence, costs have been incurred which
relate to requests for specific discovery.
In my judgment those costs are for another day. This means that the plaintiff cannot
recover all of the costs incurred in correspondence on discovery issues since
May of this year leading to its application, as asked for. One approach could be to consider
separately each specific item of correspondence and each preparatory task to
ascertain what part of any costs incurred related to specific discovery
requests rather than non-compliance with general discovery orders. However this approach still involves an
element of guesswork after the event and leads to a hugely complicated taxation
exercise. I therefore consider it
is better to approach matters in the round.
99. In my judgment, while I am ordering the first
defendant to pay the plaintiff’s costs of and incidental to the application
including correspondence since the second list of documents on an indemnity
basis, this should be restricted to 80% of the plaintiff’s costs. The balance of the costs will either be
considered on any subsequent specific discovery application or failing that are
plaintiff’s costs in cause.
In other words they will be recovered by the plaintiff if the plaintiff
is successful at trial.
100. In relation to the costs of reviewing
documents, this is more complicated.
Where an advocate reviews documents disclosed by another party, the
review of documents disclosed is for a number of purposes. In particular it is to ensure that copies
of documents listed have been produced, to consider whether there is a need to
apply for specific discovery and to review the contents of documents to advise
on the merits. It is clear that
Advocate Christie was carrying out all of these tasks. By way of illustration Advocate Christie
on 18th July, 2018 stated:-
“Despite the deficient
nature of your client’s discovery, our review of what has been disclosed
strongly and comprehensively supports our client’s case.”
101. In the circumstances it would not be just to
require the first defendant to pay the entire costs of the reviews carried out
to date of the first defendant’s lists already disclosed; equally the
plaintiff has incurred some costs in reviewing those documents which will be
wasted because a fresh list is going to be provided, which will also have to be
reviewed.
102. In my judgment, again a broad approach should
be taken to avoid a complicated and costly taxation. I am therefore going to allow the
plaintiff at this stage to recover 50% of its costs of reviewing the documents
disclosed by the first, second and third lists on the indemnity basis with the
balance of the costs being costs in the cause.
103. Subject to any further order the trial court
may make after the trial of this matter, or which may be made by the Royal
Court on any application for directions by the first defendant, the first
defendant should in the interim also bear these costs personally.
104. As far as its own costs of producing and
providing the first, second and third lists of documents are concerned, given
these are to be replaced by production of a fresh list, these costs should also
be borne by the first defendant personally. The costs incurred by the first
defendant in producing a new list are costs in the cause.
Authorities
Royal Court Rules 2004, as amended.
Holmes
v Lingard & Anor [2018] JRC 184.
Schmidt v Rosewood
Trust Ltd [2003] UKPC 26.
Practice Direction RC17/07.
Hanby
v Olliver [1990] JLR 337.
Practice Direction RC17/08
Newman
v De Lima [2018] JRC 155.
Powell
v Chambers & Anor [2018] JRC 169.