Jersey Financial Services Commission v A.P. Black (Jersey) Ltd

JurisdictionJersey
CourtCourt of Appeal
JudgeSouthwell, Nutting and Tugendhat, JJ.A.
Judgment Date13 September 2002
Date13 September 2002
COURT OF APPEAL
Southwell, Nutting and Tugendhat, JJ.A.

A.J. Olsen for the representor;

Miss D. Gilbert for the first and fourth respondents;

A.R. Binnington for the second respondent;

W. Grace for the third respondent.

Cases cited:

(1) Arya Holdings Ltd. v. Minories Fin. Ltd., 1997 JLR 176, followed.

(2) Att. Gen. v. Blake (Jonathon Cape Ltd., third party), [2001] 1 A.C. 268; [2000] 4 All E.R. 385, considered.

(3) Biss v. Lambeth, Southwark & Lewisham Health Auth., [1978] 1 W.L.R. 382; [1978] 2 All E.R. 125, distinguished.

(4) Farmizer (Products) Ltd., Re, Moore v. Gadd, [1997] BCC 655; [1997] 1 BCLC 589, distinguished.

(5) Public Services Cttee. v. Maynard, 1996 JLR 343, considered.

(6) Securities & Invs. Board v. Pantell S.A. (No. 2), [1993] Ch. 256; [1993] 1 All E.R. 134, distinguished.

Additional cases cited by counsel:

Hobbs v. Russell, 1965 J.J. 519.

United Electronic Corp. v. Jersey Airlines (C.I.) Ltd., 1968 J.J. 1055.

Vaudin v. Hamon, [1974] A.C. 569 ([1973] UKPC 16); (1973), 117 Sol. Jo. 601.

Watson v. Priddy, 1977 J.J. 145.

Legislation construed:

Financial Services Commission (Jersey) Law 1998, art. 5: The relevant terms of this article are set out at para. 4.

art. 6: The relevant terms of this article are set out at para. 4.

art. 7: The relevant terms of this article are set out at para. 4.

Collective Investment Funds (Jersey) Law 1988, art. 1A, as inserted by the Collective Investment Funds (Amendment) (Jersey) Law 1998, art. 2: The relevant terms of this article are set out at para. 8.

art. 15, as amended: The relevant terms of this article are set out at para. 9.

art. 20, as amended: The relevant terms of this article are set out at para. 11.

art. 21: The relevant terms of this article are set out at para. 12.

Financial Services—investor protection—proceedings for compensation by financial services providers—action by Jersey Financial Services Commission under art. 20(7) of Collective Investment Funds (Jersey) Law 1998 requiring payment to compensate investors is regulatory power in public law and not tort action—no prescription period

The Commission sought an order in the Royal Court under art. 20(7) of the Collective Investment Funds (Jersey) Law 1988 requiring the respondents to make a payment for the compensation of investors.

The Commission alleged that the respondents had been involved in a collective investment fund which had been used to perpetrate a major fraud, and that their conduct in connection with that scheme had failed to comply with the requirements of the 1988 Law. The Commission commenced proceedings against the respondents on June 30th, 2000. As part of those proceedings, the Commission sought an order under art. 20(7) of the 1988 Law that the respondents pay a sum into court for distribution to those who had suffered loss as a consequence of their investment in the scheme. The court considered as a preliminary point of law whether the action brought by the Commission was prescribed. It was agreed that the cause of action in the proceedings accrued on September 27th, 1993, and therefore that, if it was a tort action, it was prescribed by art. 2(1) of the Law Reform (Miscellaneous Provisions) (Jersey) Law 1960.

The Royal Court held that (a) in Jersey, any civil action, other than in contract and property, in which liability arose from a wrong committed by a person against whom relief was sought, was an action founded on tort; (b) the Commission's cause of action under art. 20(7) was therefore a tort action as it arose as a consequence of the respondents' failure to act in accordance with their statutory obligations under the 1988 Law; and (c) as the right of action created by art. 20(7) was founded on tort, it was subject to a prescription period of three years pursuant to art. 2(1) of the 1960 Law. The action brought by the Commission was therefore already prescribed at the time the Order of Justice was served. The Royal Court proceedings are reported at 2002 JLR 294.

On appeal, the Commission submitted that (a) as a public regulatory body, it had been given a unique discretionary power to commence proceedings for a range of sanctions when the 1988 Law was contravened; (b) in any event, an application under art. 20(7) did not have the three essential elements of a Jersey tort action, i.e. duty, breach of duty and damage; (c) it could therefore bring an action at any time, as no prescription period had been provided by the 1988 Law; and (d) there were no public policy considerations which justified the imposition of a prescription period.

The respondents submitted in reply that (a) the influence of the French law tort had widened the concept of a tort action in Jersey law beyond actions containing the elements of duty, breach of duty and damage, to include the Commission's right of action under art. 20(7); (b) the Royal Court had correctly determined that the applicable prescription period was three years, pursuant to art. 2(1) of the Law Reform (Miscellaneous Provisions) (Jersey) Law 1960; and (c) if that were not the case, a statutory prescription period of a year and a day could be constructed from the provisions of art. 15 of the 1988 Law.

Held, allowing the appeal:

(1) Placing art. 20(7) in its proper context within the 1988 Law, it was clear that it was not founded on tort:

(a) The Commission was a public regulatory body, and had been given a discretionary power to commence proceedings for a range of sanctions when the 1988 Law was contravened. An application to the court under art. 20(7) was an attempt to enforce one of the civil sanctions available to it and was indistinguishable from the other civil sanctions available under art. 20.

(b) A Jersey tort action was similar to an English tort action in that it had three essential elements: (i) a duty owed to the plaintiff by the defendant otherwise than by virtue of a contract or trust (whether pursuant to Jersey common law or statute), (ii) a breach of that duty by the defendant, and (iii) actual or threatened damage caused by and flowing from the breach (assumed in some torts), giving rise to a right of action which the plaintiff could require the court to uphold. Two of these elements were missing in this case. The duty imposed by art. 20(7) was a public duty, and was not owed to the Commission by the respondent. Moreover, no damage or loss had been suffered by the Commission and damages were not recoverable by it. Article 20(7) gave the court a discretionary power to order the payment of a sum of money into court, to be distributed by the court as it thought just.

(c) The role of the French law tort, as incorporated into Jersey law, was insufficiently wide to encompass an application under art. 20(7) ( paras. 16-21; para. 24; para. 26).

(2) Moreover, it was not possible to use art. 15 to construct a statutory prescription period applying to art. 20(7) applications, as art. 15 dealt with criminal proceedings and not civil proceedings under the 1988 Law ( para. 28).

(3) Furthermore, it was unnecessary to adopt a prescription period of any length in an art. 20(7) application, as a respondent in an application made after an unjustifiably long delay was already adequately protected. At the outset of the proceedings, he could ask the court to strike out the application as an abuse of process or apply for judicial review of the Commission's threatened use of its art. 20(7) power. If the application proceeded, the court had complete discretion whether to make an order at all. It was therefore open to the respondents in the present case to rely on the lapse of time at trial to seek to persuade the court not to make any order ( para. 30).

(4) The procedure adopted in the present case, of hearing an issue of law as a preliminary matter, was unsatisfactory as it had increased the length and the cost of the trial. It was particularly unfortunate here as (a) it had delayed the resolution of the investors' rights of action; (b) the trial involved allegations of serious misconduct on the part of the respondents; and (c) the Royal Court should have given an appropriate degree of priority in hearing to regulatory proceedings. It would be preferable for the Royal Court to hear all the relevant issues together in future cases ( paras. 32-33).

1 SOUTHWELL, J.A., delivering the judgment of the court: This interlocutory appeal arises out of proceedings which are concerned with the operation of a scheme or schemes, referred to generally as "the Delta Scheme." The Delta Scheme was operated by US and Bahamas companies and involved investment in foreign currency options dealings. The Delta Scheme ended up with investors having lost large sums of money; it is alleged about US$90m. worldwide and over £30m. equivalent for investors, via these respondents. It is also alleged to have been a major fraud on the investing public, though I stress that no allegation of fraud is made against the respondents. The final collapse of the Delta Scheme seems to have been in September 1993.

2 The present proceedings are brought by the Jersey Financial Services Commission ("the Commission") in respect of...

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