Anne O'Keefe and Another v Cevdet Caner and Others
| Jurisdiction | England & Wales |
| Judge | H.H. Judge Keyser |
| Judgment Date | 15 May 2017 |
| Neutral Citation | [2017] EWHC 1105 (Ch) |
| Docket Number | Cases Nos: 6068 and 6069 of 2012 |
| Court | Chancery Division |
| Date | 15 May 2017 |
[2017] EWHC 1105 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF LEVEL ONE RESIDENTIAL (JERSEY) LIMITED
AND IN THE MATTER OF SPECIAL OPPORTUNITY HOLDINGS LIMITED
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter Lane, London, EC4A 1NL
H.h. Judge Keyser Q.C.
sitting as a Judge of the High Court
Cases Nos: 6068 and 6069 of 2012
Antony Zacaroli QC and Ryan Perkins (instructed by Memery Crystal LLP) for the Applicants
Lord Goldsmith PC, QC andKathryn Purkis (instructed by Debevoise & Plimpton LLP) for the First Respondent
Terence Mowschenson QC and Nicole Langlois and Hugh Miall (instructed by Enyo Law LLP) for the Second, Third, Fourth and Fifth Respondents
Hearing dates: 8, 9, 10, 13, 14 and 15 March 2017
Judgment Approved
H.H. Judge Keyser Q.C.:
Introduction
This is my judgment upon the preliminary issue whether the claims made by the applicants against each of the first to fifth respondents are time-barred ("prescribed") as a matter of Jersey law.
The applicants are the joint liquidators of Level One Residential (Jersey) Limited ("Level One") and Special Opportunity Holdings Limited ("Special Opportunity") (together, "the Companies"). The Companies are incorporated in Jersey, but the centre of their main interest was in England and they went into administration in England on 18 November 2008 and into liquidation in England on 12 August 2012.
The first respondent is the ultimate beneficial owner of the Companies and was at all material times a director of each of the Companies. The second to fifth respondents were each professional directors of one or both of the Companies from time to time. The sixth respondent is a professional trust company that provided services to the Companies, including the provision of the second to fifth respondents to act as directors of the Companies; the claim against it does not raise any issue of limitation and it has accordingly not played any part in the trial of the preliminary issue.
The applicants' case is as follows. Between 10 April 2007 and 10 June 2008 payments of some €16m from Level One's bank accounts and payments of some €18m from Special Opportunity's bank accounts were made to or for the benefit of the first respondent or companies owned beneficially by him. Those payments ("the Payments") were not made in good faith for a legitimate commercial purpose of the Companies, and the Companies did not receive any or any adequate consideration for the Payments. Throughout the period when the Payments were made each of the Companies lacked sufficient reserves to permit distributions to be made and was insolvent. In causing or permitting the Payments to be made, the first to fifth respondents acted in breach of their duties as directors of the Companies in that they did not (a) act honestly and in good faith with a view to the best interests of the Companies or (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
The duties relied on are set out in Article 74(1) of the Companies (Jersey) Law 1991 ("the Companies Law 1991"):
"A director, in exercising the director's powers and discharging the director's duties, shall—
(a) act honestly and in good faith with a view to the best interests of the company; and
(b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances."
The applicants contend that the directors also owed fiduciary duties to creditors of the Companies. The respondents deny that any such distinct fiduciary duties existed, but they acknowledge that in the case of an insolvent company the interests of the creditors are interests of the company for the purposes of Article 74(1)(a). Further, it was common ground before me that the limitation or prescription period applicable to the fiduciary duty under Article 74(1)(a) would also be applicable to any fiduciary duty owed by the first to fifth respondents to creditors of the Companies. I was not asked to, and do not, give separate consideration to any duty other than those under Article 74.
By applications dated 4 November 2015 pursuant to section 212 of the Insolvency Act 1986, the applicants seek declarations that the respondents were guilty of misfeasance and breach of duty in respect of the Payments and an order for payment of a sum equivalent to the Payments. Detailed particulars of claim have been served in support of these claims.
By their defences, the first to fifth respondents contend that the limitation period for the claims against them is 3 years, as being the relevant period applicable both to breach of trust and to tort under Jersey law, and that the claims are time-barred. The applicants contend to the contrary that the applicable limitation period is 10 years as being the default period applicable to personal claims under Jersey law. It is not necessary to recite the terms of the various statements of case.
On 20 June 2016 Ms Registrar Barber ordered that:
"1. The following preliminary issue will be tried between the Applicants and the First to Fifth Respondents:
Are, as pleaded at paragraph 201 of the Second to Fifth Respondents' Defence and paragraphs 3 to 6 of the First Respondent's Defence, the claims made by the Applicants against each of the First to Fifth Respondents time barred as a matter of Jersey law (the Preliminary Issue)?
2. If the answer to the Preliminary Issue is yes, the Applications brought pursuant to s. 212 Insolvency Act 1986 as against the First Respondent and the Second to Fifth Respondents shall be dismissed."
The preliminary issue falls to be determined in accordance with the law of Jersey. The duties of the first to fifth respondents to the Companies were governed by the law of Jersey, being the place where the Companies were incorporated: Base Metal Trading Ltd v Shamurin [2005] 1 WLR 1157 (" Base Metal Trading"), per Tuckey LJ at para 56. Where a cause of action is governed by the law of a foreign jurisdiction, the applicable limitation period is governed by the law of that jurisdiction: sections 1(1) and 4(1) of the Foreign Limitation Periods Act 1984. Section 212 of the Insolvency Act 1986 is a procedural provision whereby an office-holder may vindicate a cause of action vested in the company; the relevant limitation period is that applying to the company's cause of action: Re Eurocruit Europe Ltd [2008] Bus LR 146.
It is common ground that there is no authoritative decision of the Jersey courts that is determinative of the preliminary issue.
One further matter should be mentioned by way of introduction. The preliminary issue identified in the registrar's order was formulated by reference to the statements of case as they then stood; I have summarised the claims in paragraph 4 above and the limitation issue in paragraph 7 above. However, in the course of the hearing of the preliminary issue I granted an application by the applicants for permission to amend the reply to the defence of the first respondent. The gist of the amendment is to contend, in reliance on the facts pleaded in the particulars of claim, that the first respondent is a constructive trustee of the moneys received by him personally or by the companies that he owned and controlled and that no limitation period applies to the claims against him for recovery of the moneys. The amendment is important only if the applicants lose on the preliminary issue. The considerations to which the amendment gives rise are closely related to but not identical with the considerations that arise on the preliminary issue. This judgment does not deal with the issues raised by the amendment; I shall give any necessary further directions in that regard after this judgment has been handed down.
I am grateful to counsel for their most helpful written and oral submissions.
The nature of the preliminary issue
The content of the law of Jersey, as of that of any other jurisdiction outside England and Wales, is a matter of fact, though fact "of a peculiar kind": cf. Parkasho v Singh [1968] P 233, per Cairns J at 250. "[T]he evidence of expert witnesses is necessary for the Court to find that foreign law is different from English law. In the absence of such evidence, or if the judge is unpersuaded by it, then he must resolve the issue by reference to English law, even if according to the rules of private international law the issue is governed by the foreign law": MCC Proceeds Inc v Bishopsgate Investment Trust plc [1998] EWCA Civ 1680 at para 10.
In accordance with permission granted by Registrar Barber, I have been assisted by evidence from three experts, each of whom is an Advocate of the Royal Court of Jersey: for the applicants, Mr Justin Harvey-Hills; for the first respondent, Mr John Kelleher; and for the second to fifth respondents, Mr James Gleeson. I am grateful to them for their detailed and careful evidence.
The judgment of the Court of Appeal in MCC Proceeds provides helpful guidance as to the respective roles of the judge and the expert witnesses in the determination of a question of foreign law. I have particular regard to the following passages concerning the role of the judge:
"13. … Sometimes the foreign law, apart from being in a foreign language, may involve principles and concepts which are unfamiliar to an English lawyer. The English judge's training and experience in English law, therefore,...
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