Esteem Settlement and the No 52 Trust (Abacus (CI) Ltd as Trustee), Re, Grupo Torras SA v Al Sabah

• Jurisdiction: Jersey
• Court: Royal Court
• Judge: Birt, Deputy Bailiff and Jurats de Veulle and Georgelin
• Judgment Date: 12 March 2002
• Date: 12 March 2002

ROYAL COURT

Birt, Deputy Bailiff and Jurats de Veulle and Georgelin

N.F. Journeaux for the plaintiff;

N.M. Santos-Costa for the second and third defendants;

J.A. Clyde-Smith for the trustee;

The first, fourth, fifth, sixth and seventh defendants did not appear and were not represented.

Cases cited:

(1) Derby & Co. Ltd. v. Weldon (No. 2), The Times, October 20th, 1988, distinguished.

(2) Eagle Star Ins. Co. Ltd. v. Arab Bank PLC, English High Court, February 25th, 1991, unreported, considered.

(3) Lubrizol Corp. v. Esso Petroleum Co. Ltd. (No. 2), [1993] F.S.R. 53, referred to.

(4) Prudential Assur. Co. Ltd. v. Fountain Page Ltd., [1991] 1 W.L.R. 756; [1991] 3 All E.R. 878, distinguished.

Additional cases cited by counsel:

Att.-Gen. of Gibraltar v. May, [1999] 1 W.L.R. 998.

Enhrning v. Nordic Link Ltd., Royal Ct., January 24th, 1997, unreported.

Civil Procedurediscoveryuse of documents obtainedimplied undertaking that documents disclosed under compulsion of court to be used only in action for which soughtcompulsion not limited to order for discovery

Civil Procedurediscoveryuse of documents obtainedcourt may allow use in foreign parallel actions where interests of justice outweigh need to protect privacy and confidentialityinappropriate to release indirectly to foreign trustee in bankruptcy without proper application to court

The plaintiff applied for permission to use documents, disclosed by the defendants and the trustee of Jersey trusts in proceedings in Jersey, in actions against the defendants in other jurisdictions.

The first defendant owed the plaintiff over US$700m., arising out of fraud on his part. A trustee in bankruptcy had been appointed in the Bahamas where the first defendant now lived. The plaintiff brought actions in various jurisdictions to enforce an English judgment for the debt against the assets of the trusts set up by the first defendant in Jersey, the Bahamas, the Cayman Islands and Switzerland. In the course of the proceedings in Jersey, the court ordered the trustee to produce all documents of which the court should be informed.

The plaintiff applied for permission to use these documents, and those disclosed by the defendants, in any current or future proceedings brought by them against the first defendant in other jurisdictions, and to release the documents to the first defendant's trustee in bankruptcy. The plaintiff submitted that (a) the implied undertaking that disclosed documents would be used only in the proceedings in which they were produced applied only to documents produced under compulsion of a court order, e.g. an order for discovery; and (b) as no specific order for discovery had been made in the Jersey proceedings, but the documents had been produced voluntarily, they could be released.

The defendants and the trustee submitted in reply that (a) the documents had been disclosed in the Jersey action under the compulsion of a court order which was equivalent to an order for discovery; (b) the plaintiff's application was too wide in relation to both the documents to be released and their proposed use; (c) it would be prejudicial for the plaintiff to submit evidence of their dealings with the Jersey trusts as relevant to the determination of issues in respect of foreign trusts, in circumstances in which they had not given evidence; and (d) findings of fact by foreign courts could have a prejudicial effect on the outcome of future Jersey proceedings.

Held, allowing the application in part:

(1) As the order made by the court for the production of all documents of which the court should be informed was equivalent to an order for discovery, those documents which had been disclosed under the compulsion of that order were subject to an implied undertaking that they would not be used outside the proceedings. However, as the same order had also allowed the defendants to choose which documents to exhibit in support of their case, the implied undertaking did not apply to those documents which they had chosen to disclose voluntarily ( para. 9).

(2) It was in the interests of justice to release the plaintiff from its implied undertaking in respect of those documents disclosed by the trustee to aid in the recovery of its judgment debt, notwithstanding the need to protect privacy and confidentiality. Moreover, the objections of the trustees and defendants to the release of the documents were unfounded as (a) it was unnecessary to require the plaintiff to make a more detailed application in this case, specifying the documents to be released and the uses for which the documents were required; (b) the trustee could explain the documents in question before a foreign court, if that was in the interests of either the trustee or the beneficiaries; and (c) a foreign court's findings of fact in relation to a Jersey trust would have little weight in any future Jersey proceedings. However, given the wide class of documents to be released, the proposed uses requested by the plaintiff were excessive. The documents were only to be used by the plaintiff, without a further application to the court, in the existing proceedings in the Bahamas, the Cayman Islands and Switzerland ( paras. 16-19).

(3) Moreover, it was inappropriate to allow the release of the confidential documents to the trustee in bankruptcy in the Bahamas. There was a well-established route for trustees in bankruptcy to obtain documents or information in Jersey, namely to register their appointment with the court and apply for an order in aid under the relevant bankruptcy legislation or practice. The Bahamian trustee should therefore make his application in the usual way ( para. 21).

1 BIRT, DEPUTY BAILIFF: The background to this application can be found in earlier judgments of the court in these proceedings. In briefest outline, GT has obtained judgment against Sheikh Fahad in England in respect of a fraud perpetrated on it by Sheikh Fahad and others. Over US$700m. remains outstanding under that judgment. Sheikh Fahad has been declared bankrupt in the Bahamas where he now lives and a trustee in bankruptcy in the Bahamas has been appointed. Sheikh Fahad has negligible personal assets and GT is seeking to recover its debt from various trusts set up by Sheikh Fahad in a number of jurisdictions.

2 The actions under way, or contemplated, are set out in an affidavit sworn by Mr. Andrew Keltie, a solicitor with Baker & McKenzie, the solicitors to GT. The proceedings are in Jersey, the Bahamas, the Cayman Islands and Switzerland. In Jersey there are two sets of proceedings: the 2000 proceedings, which concerned an application that the trustee of the Jersey trusts should exercise its discretion to pay the trust funds to GT as Sheikh Fahad's creditor, for the benefit of Sheikh Fahad, and the 1999 action which includes a tracing action, a claim attacking certain gifts into the trusts and an attack on the validity of the trusts themselves.

3 Many documents have been disclosed by Abacus or the trustee of the Jersey trusts and by Barbara and Mishal Al Sabah, the defendants in the Jersey proceedings. GT now wishes to use such documents for the following purposes:

(a) Any step in any jurisdiction relating to the enforcement of the judgments of the English Commercial Court, entered in actions 1993 folio No. 624 and 1996 folio No. 1206, and consolidated as Action 1993 No. 624 ("the English action"); and

(b) Any civil proceedings (including proceedings in relation to the enforcement of any judgment, order or award) in any jurisdiction directly or indirectly concerning recovery of any part of the moneys, the subject of the proceedings in the English action or any judgments entered in the English action.

4 The first issue which we have to consider is whether the documents disclosed in the 2000 proceedings are subject to the usual implied undertaking that they will not be used for any purpose other than the proceedings in which they were produced. GT says that the implied undertaking applies only to documents produced under compulsion of a court order, for example the usual order for discovery. No specific order for discovery was ever made in the 2000 proceedings. The documents were produced voluntarily by the parties for the purposes of their evidence and, accordingly, are not subject to the usual implied undertaking.

5 In support of this argument, GT relied upon the judgment of Browne-Wilkinson,V.-C., in Derby & Co. Ltd. v. Weldon (No. 2) (1) to the effect that the implied undertaking does not apply to affidavits and exhibits produced voluntarily; in that case, to oppose an application for a Mareva injunction. Such documents are not produced under compulsion by order of the court. In Prudential Assur. Co. Ltd. v. Fountain Page Ltd. (4), Hobhouse, J. applied this principle to expert reports, again on the basis that a party had a right to choose the extent to which he would adduce evidence, even though there had been an order for disclosure of any expert reports to be relied upon.

6 However, in our judgment, and despite the absence of a specific order for discovery, that is not the situation here. It is important to recall that the 2000 proceedings were proceedings instituted by the trustee seeking directions on how it should exercise its discretion. Unusually GT, as a non-beneficiary, was convened, and thereafter the proceedings became adversarial in nature. On July 27th, 2000, the Court of Appeal delivered a judgment which was very critical of the delays in the case. It made a number of orders, which were clearly intended to short-circuit the normal procedures with a view to ensuring that the matter would be ready for trial before the end of that year. In particular, the Court of Appeal ordered that affidavits should be filed, and that all relevant documents should be exhibited to those affidavits. Thus, at para. E of the Act of the Court of Appeal dated July 27th, the court ordered as follows:

"(1) On or before...