Bastion Holdings Ltd and Another v Jorril Financial Inc.
| Jurisdiction | UK Non-devolved |
| Judge | Lord Scott of Foscote |
| Judgment Date | 08 November 2007 |
| Neutral Citation | [2007] UKPC 60 |
| Court | Privy Council |
| Docket Number | Appeal No 29 of 2006 |
| Date | 08 November 2007 |
[2007] UKPC 60
Privy Council
Present at the hearing:-
Lord Scott of Foscote
Baroness Hale of Richmond
Lord Brown of Eaton-under-Heywood
Lord Mance
Sir Henry Brooke
[Delivered by Lord Scott of Foscote]
It is not possible to describe the issues for decisions on this appeal without first outlining the history that has given rise to this litigation and describing the manner in which the litigation was dealt with in the courts below. Their Lordships will start with the history.
The history
Paul Geddes was a man of considerable wealth, a man of financial power and influence in many places and, certainly, in a number of Caribbean countries. He was described by McIntosh J as "a giant in the Jamaican business sector". As is often the case with individuals of great wealth many of his assets were held by and controlled via a network of nominee companies. Some were incorporated in Jamaica, some in the Cayman Islands. These assets included a substantial shareholding in Desnoes and Geddes Ltd ("D&G"), a company incorporated in Jamaica and whose shares were quoted on the Jamaica Stock Exchange.
The D&G shareholding, nearly 11 million shares representing about 10 per cent of the issued shares, stood in the name of Bardi Ltd ("Bardi"). Bardi, too, was incorporated in Jamaica. There were two issued shares in Bardi, one in the name of Mr Geddes, the other in the name of his wife, Mrs Margie Geddes, whom he had married in 1991. Bardi had two directors, namely, Mr and Mrs Geddes. Its only corporate function appears to have been to hold investments for Mr Geddes. The D&G shareholding was by some distance Bardi's most valuable asset but it did hold other investments as well. Mrs Margie Geddes was not Mr Geddes' first wife. He had been married before and had two adult daughters.
Over the period June to August 1994 Bardi issued to Mr Geddes a number of promissory notes (18 accordingly to the Agreed Statement of Facts) for the total sum of US$4,474,326 payable on demand with interest accruing at the rate of 12 per cent per annum. Each promissory note was expressed to be given "in consideration of value received". There is no evidence as to what that value had consisted of, but it is a fair inference that it consisted of, or related to, advances of the costs of acquisition of the investments standing in Bardi's name.
Mr Geddes endorsed the promissory notes over to Securities Trust & Management Services Ltd (which later changed its name to Coverdale Trust Services Ltd.) and Coverdale endorsed and transferred the notes to its wholly owned subsidiary, Jorril Financial Inc. ("JFI"). JFI, the respondent to this appeal, is a trust company holding assets on trusts for Mr Geddes' two daughters and their respective children. It seems clear, therefore, and the contrary has not been suggested, that Mr Geddes intended his daughters and grandchildren to have the benefit of the assets held by Bardi, subject to any future appreciation in the value of those assets over and above the amount outstanding under the promissory notes. The benefit of any such appreciation would, of course, accrue to Bardi and, thus, to Bardi's shareholders.
Mr Geddes died on 9 June 1999. Under his Will Mrs Geddes became the sole beneficiary of his considerable estate and, therefore, the owner of both the issued shares in Bardi and in sole control of Bardi.
By three letters, each dated 9 August 1999 and served on Bardi on 23 August 1999, attorneys for JFI made a written demand for the payment within 14 days of the amount outstanding under the promissory notes. Payment was not made and on 8 November 1999 JFI issued a Writ against Bardi for US$7,280,987 ($4,474,326 principal and $2,806,661 accrued interest). That sum exceeded the combined market value of the investments held by Bardi. At the same time as issuing the Writ, JFI applied for, and obtained ex parte, a Mareva injunction restraining Bardi from removing from Jamaica or disposing of or dealing with any of its assets wherever situated and of whatever kind. The Writ and Order were served on Bardi on 10 November 1999 and on 28 November Bardi entered an appearance. There was then a long delay during which, their Lordships were told, there were negotiations between the parties. The negotiations evidently came to nothing for on 1 November 2000, nearly a year later, JFI issued a summons for summary judgment.
The application for a Mareva injunction had been supported by an affidavit of 5 November 1999 sworn by Mr Lance Hylton, a director of Coverdale. Mr Hylton swore a second affidavit, on 30 October 2000, to support the application for summary judgment and, on 29 June 2001, a third affidavit seeking the continuance of the Mareva injunction until satisfaction by Bardi of any judgment in favour of JFI.
Apart from anything said in the failed negotiations, and their Lordships know nothing of their content, the first opposition to JFI's claims came in an affidavit sworn on 17 October 2001 by Paula Jackson, describing herself as "manager" of Bardi. In her affidavit she put JFI to proof that Mr Geddes had endorsed the promissory notes over to Coverdale and, secondly, asserted that Bardi had
"…sought to satisfy the demand by entering into a contract to sell its principal asset at market value, its shares in [D&G]".
She exhibited an Agreement for Sale ("the Agreement") as the contract to which she had referred. The Agreement, bearing the date 1 October 1999, was expressed to be between Bardi and Bastion Holdings Ltd ("Bastion"), the appellant in this appeal, and to set out the terms for a sale to Bastion of the D&G shares for a sum of J$76,646,122. Their Lordships will refer to the terms of this Agreement in more detail later.
On 16 November 2001 Bardi issued a summons to vary the Mareva injunction so as to allow it to complete the sale of the D&G shares to Bastion pursuant to the Agreement. In the summons the Agreement was described as "made" on 1 October 1999. It certainly bore that date but the question whether it had been made on that date or made subsequently and back-dated was to become the principal issue in the litigation. The summons to vary the Mareva injunction was supported by an affidavit sworn by Mrs Geddes on 23 November 2001. She deposed that Bardi had never had assets adequate to meet the amount outstanding under the promissory notes (para.9), that the sale of the D&G shares was "…the only secure avenue for [her] to realise a substantial sum to be paid towards the debt claimed by [Bardi]" (para.12) and that, accordingly, she had agreed on a sale of the shares at a price of J$76,646,122. She said she had agreed the terms of sale with a Mr Albun Whittaker. He was, she said, a friend of hers and was "the principal" of Bastion, a company incorporated in the Cayman Islands. The Agreement had, she said, been sent to Mr Whittaker in George Town, Grand Cayman, for signing and had been received back in Jamaica for stamping on or about 24 November 1999. The tenor of Mrs Geddes' evidence about the sale of the D&G shares was that the beneficial interest in the shares had passed to Bastion before the Mareva injunction had been granted and, therefore, that completion of the sale should be allowed to take place with the Mareva injunction applying to the proceeds of sale of the shares and not to the shares themselves.
Mrs Geddes' evidence about the Agreement led Mr Hylton to suspect skulduggery. He swore an affidavit on 18 January 2002 in which, after dealing with Paula Jackson's challenge to the endorsement of the promissory notes to Coverdale, he addressed himself to Mrs Geddes' evidence about the Agreement. He characterised it as "a fraudulent sham designed to put the D&G shares beyond the reach of [JFI]" and thus, of course, beyond the reach of Mr Geddes' two daughters and their children. He set out his reasons for this characterisation in paragraphs 12 to 14 of his affidavit. He alleged, first, that Mrs Geddes, a director of D&G, had been in possession in that capacity of price sensitive information about D&G's intentions to declare dividends on the D&G shares of J$0.50 per share payable on 17 December 1999 (the total dividend attributable to the D&G shares would be, and in the event was, J$5,474,723), and to issue to each shareholder two additional shares for every share held on 30 December 1999. The news about the dividends and bonus issue was reported in the 6 October 1999 issue of the Jamaica Gleaner but previously, Mr Hylton suggested, had not been public knowledge. In addition Mr Hylton referred to knowledge by Mrs Geddes of commercially important contracts entered into by D&G that had not become public knowledge until mid October 1999. The effect of the public acquiring knowledge of these matters, Mr Hylton suggested, had been to produce a rise in the value of D&G shares on the Jamaica Stock Exchange. The shares had stood at J$7.00 each on 4 October 1999 but stood at J$12.50 each by 20 October 1999. On 5 January 2002, a few days after the bonus issue, the D&G shares (3 times as many as before) stood at J$5.50, equivalent to J$16.50 per share before the bonus issue. The shares sold to Bastion for J$76.6 million odd had become worth J$180 million on these figures. Mr Hylton asserted, secondly, his belief that the 1 October 1999 date was a false date and that the Agreement had in fact been signed a week or so before 24 November 1999, the date on which it had been received in Jamaica for stamping. He expressed the belief that the back-dating to 1 October was intended to create the impression that the price of J$76.6 million odd had been agreed before the price sensitive information he had referred to had caused the value of the shares to rise. In...
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