Ted Jacobs Engineering Group Inc V. Robert Matthew Johnston-marshall And Partners And Others For Orders Of Section 1 Of The Administration Of Justice (scotland) Act 1972
| Jurisdiction | Scotland |
| Judge | Lady Paton,Lord Wheatley,Lord Drummond Young |
| Judgment Date | 06 February 2014 |
| Neutral Citation | [2014] CSIH 18 |
| Court | Court of Session |
| Date | 06 February 2014 |
| Published date | 06 February 2014 |
| Docket Number | P338/13 |
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION | |
| [2014] CSIH 18 | |
| Lady Paton Lord Drummond Young Lord Wheatley | P338/13 OPINION OF LADY PATON in the cause TED JACOB ENGINEERING GROUP INC Petitioner and Respondent; against ROBERT MATTHEW, JOHNSON‑MARSHALL AND PARTNERS AND OTHERS Respondents and Reclaimers: for orders in terms of section 1 of the Administration of Justice (Scotland) Act 1972 _______________ |
Respondents and Reclaimers: Sandison QC, O'Brien; Morisons LLP
6 February 2014
Recovery of documents
[1] The issues in this reclaiming motion are whether the Lord Ordinary erred:
a. in holding that a prima facie intelligible and stateable case had been made out in terms of section 1 of the Administration of Justice (Scotland) Act 1972 such that the petitioner is entitled to uplift certain documents which have been recovered from the respondents;
b. in exercising her discretion in favour of the petitioner;
c. in approving a confidentiality undertaking in certain terms.
There is also a cross‑appeal against the Lord Ordinary's refusal to grant recovery under two heads, namely calls 1(e) and (f) in Appendix A in the reclaiming print pages 54-56.
Procedural history
[2] On Thursday 4 April 2013, the petitioner's ex parte motion for a commission and diligence for the recovery of documents from the respondents was granted. On Friday 5 April 2013 a "dawn raid" took place at the respondents' premises at 10 Bells Brae, Edinburgh. The commissioner was Mark Lindsay QC. Documents were recovered, an excerpting exercise carried out, and the excerpted documents lodged with the Deputy Principal Clerk of Session. On 20 June 2013 an affidavit by the petitioner's legal expert Mr Greaves was lodged. On 3 July 2013 an affidavit by the respondents' legal expert Advocate Juma was lodged. On 4 and 5 July 2013 the question whether the documents should be released to the petitioners was debated before Lady Wise. On 6 August 2013, Lady Wise granted the following interlocutor:
"The Lord Ordinary having resumed consideration of the petition and answers, allows, subject to the confidentiality undertakings given, the documents recovered by the commissioner in terms of the interlocutor dated 4 April 2013 and now in the possession of the Deputy Principal Clerk of Session to be uplifted by the petitioner with the exception of (i) those documents referred to in paragraphs 1(e) and (f) of Appendix A of the petition, (ii) documents numbered 52 and 59 on the list of recoveries prepared by the commissioner, and (iii) on the concession of the petitioner the documents numbered 167 and 168 on the said list of recoveries; remits to the commissioner to carry out an exercise to exclude those documents falling exclusively within the description in paragraph 1(e) and (f) of the said Appendix A and further report directly to the court without reference to parties; continues consideration of the petitioner's motion for expenses..."
Before matters could progress further, the respondents reclaimed against that interlocutor. A motion for urgent disposal was granted. On 10 September 2013, the Lord Ordinary's full written judgment became available. The reclaiming motion took place on Tuesday 12 and Friday 15 November 2013.
Background
[3] The petitioner is a Californian company. The respondents are inter‑linked Scottish companies and a Scottish partnership all as described in paragraphs [11] to [17] below, carrying on business as architects and engineers.
[4] In 2011 the petitioner decided to expand its engineering interests in the middle east. It purchased the first respondent's engineering business in Dubai. The parties' agreement was contained in a Sale and Purchase Agreement dated 20 September 2011 (SPA) and a Closing Agreement dated 16 August 2012.
[5] As the petitioner needed licences in order to operate in Dubai, the parties agreed that, until the petitioner obtained those licences, the petitioner would do the engineering work for clients, but the first respondent would remain as the contracting party with clients. Any fees due to the petitioner for work done (referred to as "subcontracts") would be paid into an HSBC account with the title "RMJM/TJEG account". That account was, in fact, the first respondent's bank account, but, on the petitioner's averments, the parties agreed in the Closing Agreement that:
· the first respondent would act as the petitioner's agent and trustee for the purpose of (1) receiving payment from clients for the services rendered by the petitioner; (2) making payment of the sums ingathered to the petitioner (Clause 10.3, referring to "...sum received...for and on behalf of the [petitioner]"). It should be noted however that the respondents in Answers 4 and 6 deny receiving any sums as agent and trustee for the petitioner; they aver that there was no trust (page 15D) and no fiduciary duties (page 16A), and also that the relationship of the first respondent to the petitioner was that of contractor and sub‑contractor (page 11B);
· the account would be treated as a joint account (Clause 9.1);
· all payments due to the petitioner would be paid into the joint account (Clause 9);
· disbursements from the account would be made on joint authorisation (Clause 9(v));
· named persons (from both the petitioner and the first respondent) would be authorised as representatives for the account: for example Ted Jacob and Mr Shabbas for the petitioner;
[6] In practice, possibly because the account had started out as the first respondent's account and had always been operated by the first respondent, the bank was content to permit disbursements from the account on the instructions of the first respondent alone.
[7] The petitioner characterises the arrangements referred to above in statement 6 of the petition as follows:
"...as a matter of both Scots law and the law of the United Arab Emirates ('UAE law'), the obligations undertaken by the first respondent...made the first respondent subject to fiduciary duties as agent (in Scots Law) and analogous duties of good faith (under UAE law) and trustee of the petitioner with respect to the collection of and disbursement of payments for the engineering services provided by the petitioner in relation to the subcontracts..."
Those averments are denied by the respondents, who reply in answers 4 and 6 inter alia as follows:
"4. ...following the sale of the business, the relationship of the first respondent and the petitioner was to be that of contractor and sub‑contractor...
6. Under [UAE law, the proper law of the contract], the obligations arising from the SPA and Closing Agreement are purely contractual in nature. The petitioner would have no right of action against any third party who received funds in breach of those agreements. The petitioner's remedy would be solely against the first respondent for breach of contract..."
[8] The petitioner duly carried out engineering work for clients in Dubai. Fees for that work were paid into the HSBC account. The petitioner initially had access to the account and was able to check the balance. However in November 2012 that access ceased. The petitioner also ascertained that funds had been removed from the account and taken out of Dubai. Averments in statement 10 relating to e‑mail correspondence include the following:
"... By e-mail dated 2 October 2012, Mr Shabbas of the petitioner asked Ms Mallon where the funds had been transferred to. She did not reply. By e-mail dated 2 October 2012, Mr Shabbas forwarded to Rajesh Ammanathil, the first respondent's finance manager in the middle east, the e-mail sent to Ms Mallon and asked if he knew anything about the transfer of the funds. Mr Ammanathil replied 'No'. The first respondent refused and has continued to refuse to provide an accounting or other information (i) in relation to payments into and transfers out of the joint account, and (ii) more generally, in relation to the receipt by the first respondent of payments of fees relating to the subcontracts. In response to the specific query raised by the petitioner in relation to a sum of AED 237,651 (US$64,579) that had been deposited in the joint account on or around 12 October 2012, the petitioner was told by Rajesh Ammanathil, in an e-mail dated 16 October 2012, that he did not know what was to happen to the money since 'the joint account is managed by group and I have no access to this account'. The reference to 'group' was either a reference to the RMJM group of companies in the United Kingdom , including the second respondent, or it was simply a reference to the second respondent..."
In two further e-mails dated 28 November 2012 and 2 December 2012, Harry Downie, commercial director of the first respondent, stated:
"...Unfortunately we do not manage payments from the Joint Account in Dubai so I am unable to answer your question...We do not retain anything in Dubai other that the portion [of funds] which is due to RMJM. Given this situation I am unable to address the question you have raised with me..."
[9] The petitioner understood from these (and other) e-mails that monies representing its fees, amounting to about £5 million, were no longer held in the bank account in Dubai. Moreover the respondents were not forthcoming about what had happened to the money. The petitioner avers in statements 9, 14 and 18 of the petition:
"9 ... by denying the petitioner access to and any control over the joint account, the [respondents have] breached the terms of the Closing Agreement. Furthermore in the circumstances hereinafter condescended upon, the first respondent has acted in breach of trust and in breach of fiduciary duty/the duty of good faith by refusing to account to the petitioner for money that the first respondent holds on behalf of the petitioner. Furthermore, as hereinafter condescended upon, the petitioner has been informed that the fees due to the petitioner (paid to...
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