MacFIRBHISIGH (as Curator of BL CHING) and BMM CHING v CI TRUSTEES and EXECUTORS Ltd and SEVEN OTHERS

JurisdictionJersey
CourtRoyal Court
JudgeMaster Thompson
Judgment Date05 February 2014
Date05 February 2014
ROYAL COURT
Master Thompson

I.C. Jones for the plaintiffs;

G.A.H. Baxter for the first, fourth and sixth defendants;

The fifth and seventh defendants appeared in person;

The eighth defendant did not appear and was not represented.

Cases cited:

(1) Alhamrani v. Alhamrani, 2007 JLR 44, considered.

(2) Cunningham v. Cunningham, 2009 JLR 227, dicta of Birt, Deputy Bailiff considered.

(3) Derry v. Peek(1889), 14 App. Cas. 337; [1889 90] All E.R. Rep. 1; [1889] UKHL 1, referred to.

(4) E Trust, In re, 2008 JLR 360, considered.

(5) Esteem Settlement, In re, 2000 JLR N 41; UJ No. 2000/150, dicta of Southwell, J.A. considered.

(6) La Générale des Carrières et des Mines v. FG Hemisphere Assocs. LLC, 2012 (2) JLR 172, considered.

(7) Pell Frischmann Engr. Ltd. v. Bow Valley Iran Ltd., 2008 JLR 311, considered.

(8) Royal Brunei Airlines Sdn. Bhd. v. Tan, [1995] A.C. 378; [1995] 3 W.L.R. 64; [1995] 3 All E.R. 97; [1995] BCC 899, referred to.

(9) Scruton v. Bone, 2001 WL 1612640, referred to.

(10) Vezier (née Lebreton) v. Bellego, 1994 JLR 75, considered.

(11) Weavering Capital (UK) Ltd. v. ULF Magnus Michael Peterson, [2012] EWHC 1480 (Ch); [2012] Lloyd's Rep. F.C. 561, dicta of Proudman, J. considered.

Legislation construed:

Royal Court Rules 2004 (Revised Edition, ch.07.770.72, 2014 ed.), r.6/13(1):

"The Court may .?.?. order to be struck out or amended any claim or pleading, or anything in any claim or pleading, on the ground that -

(a) it discloses no reasonable cause of action or defence, as the case may be;

(b) it is scandalous, frivolous or vexatious;

(c) it may prejudice, embarrass or delay the fair trial of the action; or

(d) it is otherwise an abuse of the process of the Court .?.?."

Text cited:

Clerk & Lindsell on Torts, 19th ed., para. 18 01, at 1081; para. 18 17, at 1089 1090 (2006).

Tort — deceit — elements of tort — plaintiff under curatorship who alleges financial loss resulting from sale of property and transfer of proceeds into trust cannot allege deceit against his financial advisers — cannot have relied on their representations, as transactions conducted by curator

Companies - corporate identity - piercing corporate veil - plaintiff to show control of company by wrongdoer and impropriety (i.e. (mis)use of company by wrongdoer as devise/façade to conceal wrongdoing) - allegation to be fully particularized - plaintiffs who commenced proceedings in 2009 in respect of events in 2005 and 2006 not permitted to re-amend order of justice in 2014 to claim to pierce corporate veil

The plaintiffs brought proceedings against the defendants for damages.

Mr. Ching (for whom the first plaintiff acted as curator) and his wife (the second plaintiff) ran into financial difficulties in 2005. Their main assets at that time included their matrimonial home; an English property; and shares in a Canadian company. In 2006, the first defendant executed a document that sought to create a trust. Ownership of the shares in the Canadian company was subsequently transferred to the first defendant as trustee. The seventh defendant was appointed as Mr. Ching's curator (he was replaced by the first plaintiff in 2008). Later in 2006, the matrimonial home and the English property were sold and the proceeds transferred to the trust.

In 2009, the plaintiffs brought proceedings against the first to fourth defendants seeking almost £3m. (the fifth, sixth and seventh defendants were joined to the proceedings in 2011). The plaintiffs claimed that it had not been necessary to create a trust and they should not have been advised to do so. It had also not been necessary to sell the properties; some of their shares in the Canadian company should instead have been sold to pay off their debts. They also claimed that the first defendant had failed to deal appropriately with the shares in the Canadian company and that the trustees had in breach of duty invested in a bond, which later lost value. In 2010, the first defendant retired as trustee and transferred the assets to the first plaintiff.

The plaintiffs' order of justice, as amended in 2011, contained allegations inter alia of breach of fiduciary duty by the fifth, sixth and seventh defendants, on the basis that the plaintiffs vested complete trust and confidence in them in respect of their financial affairs; breach of fiduciary duty by those defendants; dishonest assistance, i.e. that those defendants assisted the first defendant to act in breach of trust; and misrepresentation.

The defendants applied for the claims against the sixth defendant to be struck out. The plaintiffs applied to re-amend the order of justice so as to plead deceit, negligent misstatement and negligence, to introduce a claim to pierce the corporate veil (i.e. to look through the first defendant to impose liability on the sixth defendant, who was a director of the first defendant), and to widen the allegations of dishonest assistance. In relation to the new allegation of deceit, no new factual matters were set out and the plaintiffs submitted that it arose from substantially the same facts as those already pleaded.

The defendants had filed an answer, disclosure had been made and affidavits had been sworn by the parties. A trial date had not, however, been fixed, witness statements had not been exchanged and there had not been any directions for expert evidence.

Held, ordering as follows:

(1) The applicable legal principles on applications to strike out or amend pleadings were generally well known. On a late application to amend, an applicant would have a heavy burden to show, for example (a) why the new matters had not been pleaded before; (b) the strength of the new case; (c) that an adjournment should be granted; (d) that the adverse effects of an adjournment or any other preparations for trial which were required of the other party, as a consequence of the amendment, could be remedied; and (e) that the balance of justice came down in his favour. An amendment would not be permitted if it would infringe the rules of pleading or introduce a claim so hopeless that it would be liable to be struck out under r.6/13(1) of the Royal Court Rules 2004. An amendment might be allowed even if it sought to add or substitute a new cause of action which was otherwise prescribed, so long as the new cause of action arose from the same or substantially the same facts as the existing cause of action. The objective of all parties involved in civil proceedings had to be the progress of the proceedings to trial in accordance with an agreed or ordered timetable, at a reasonable level of cost and within a reasonably short time. The function of pleadings was to set out the material facts on which parties would rely at trial to establish their causes of action or defences. Advocates should not seek to persuade the court to strike out the whole or part of a pleading which contained plainly arguable causes of action, or to edit a pleading to achieve some abstract level of perfection ( paras. 27 30).

(2) The existing allegations in the amended order of justice were not sufficient to found a new claim for deceit that was suitable for trial. A claim for deceit - i.e. for loss resulting from a plaintiff's reliance on a false representation made by a defendant, who knew it to be untrue or was reckless as to whether it was true, with the intention that the plaintiff should act in reliance on it - contained an allegation of fraud. It was a very serious allegation, which had to be expressly pleaded. A party facing such an allegation was entitled to know precisely all matters relied upon, whether by way of statement, document or inference that should be drawn, as to why he was acting in a fraudulent manner. It was all too easy to characterize any allegation of misrepresentation as amounting to deceit when what in reality was alleged was breach of duty, breach of contract or an act of negligence. Something more was required to allege deceit and a plaintiff must be able to set out what made conduct fraudulent or dishonest. In the present case, no allegation of deceit was made in the amended order of justice or in the particulars. Nor were new factual matters set out in the proposed re-amended order of justice. Although the facts underlying the proposed new allegation of deceit were essentially the same as those previously pleaded, the existing allegations in the order of justice were not sufficient to found a new claim for deceit that was suitable for trial. As a matter of discretion, the plaintiffs would not be allowed a further opportunity properly to plead an allegation of deceit. The case had not been conducted efficiently; the allegation focused on events that had taken place in 2005 and 2006 (i.e. nine years would have elapsed before any trial took place); and the strain of dealing with an allegation of dishonesty in litigation was likely to be significant ( paras. 34 42).

(3) If the above finding were incorrect, the first plaintiff would not in any event have been permitted to pursue the allegation of deceit in respect of the transfer to the trust of the proceeds of sale of the matrimonial home and the English property. By the time of those transfers, the seventh defendant had been appointed as Mr. Ching's curator. Even if the fifth or sixth defendants had made representations in respect of those properties, which they knew to be untrue or were reckless as to their truth, Mr. Ching could not have acted in reliance on them because the sale of the assets and the transfer of the sale proceeds into the trust had been effected by the seventh defendant, not Mr. Ching ( para. 43).

(4) The allegations of negligent misstatement and negligence were sufficiently pleaded to be pursued to trial, with certain exceptions. The claim by the first plaintiff against the fifth and sixth defendants in relation to the transfer of any interest Mr. Ching had in the matrimonial home and the...

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