Bastion Holdings Ltd and Bardi Ltd v Jorril Finncial Inc.

• Jurisdiction: Jamaica
• Judge: FORTE, P. , COOKE, J.A. , K. HARRISON, J.A :
• Judgment Date: 29 July 2005
• Neutral Citation: JM 2005 CA 36
• Judgment citation (vLex): [2005] 7 JJC 2907
• Court: Court of Appeal (Jamaica)
• Date: 29 July 2005

IN THE FCOURT OF APPEAL

BEFORE:

THE HON. MR. JUSTICE FORTE, P THE HON. MR. JUSTICE COOKE, J.A THE HON. MR. JUSTICE K. HARRISON, J.A

BETWEEN

BASTION HOLDINGS LIMITED

2 ^ND DEFENDANT/APPELLANT

AND

BARDI LIMITED

1 ^ST DEFENDANT

AND

JORRIL FINANCIAL INC.

PLAINTIFF/RESPONDENT

Mr. R. Manfood Q.C., Mr. M. Manning and Miss A. Thomas instructed by Nunes, Scholefield and DeLeon & Co., for the 2 ^nd Defendant/Appellant

Mr. Allan Wood and Miss D. Gentles instructed by Livingston Alexander and Levy for the Respondent

Mr. V. Bignall observing on behalf of the Trustee in Bankruptcy

CIVIL PROCEDURE - Fraud

FORTE, P.

1 I have had the opportunity of reading in draft the judgments of Cooke, J.A, and K. Harrison, J.A. and agree with their reasoning and conclusion that the appeal ought to be dismissed. Nevertheless, I make a few comments of my own.

2 The allegation of fraud against the appellant arose on an application by the appellant for variation of a Mareva injunction granted to the respondent Jorril Financial Inc., on the 8 ^th November 1999 and which restrained Bardi from disposing or transferring its assets wherever situated. The details of the order granted by Theobalds J read as follows:

"IT IS HEREBY ORDERED THAT:

• 1. The Defendant be restrained until the determination of this action or further order whether by themselves or by their servants, agents or otherwise howsoever from removing from the jurisdiction any of their assets within the jurisdiction.

• 2. The Defendant be restrained until the determination of this action or further order whether by themselves or by their servants, agents or otherwise howsoever from disposing, mortgaging, pledging, transferring, assigning, charging or otherwise dealing with any of their assets whether real or personal wherever situated and whether within the jurisdiction or outside of the jurisdiction.

• Provided that this Order is declared to be of no effect against and is not intended to bind any third party outside of the jurisdiction of this Court unless and until this Order shall be declared enforceable or recognized and enforced by any Court of the jurisdiction in which the Defendant's assets are situated."

3 Among the assets which were owned by Bardi Ltd, were Ten Million, Nine Hundred Forty-Nine Thousand Four Hundred and Forty-Six (10,949,446) Stock Units in Desnoes and Geddes Ltd. These shares were the subject of an agreement for sale between Bardi Ltd and Bastion Holdings Ltd, a Caymanian Registered Co., which made the application for variation of the Mareva injunction ordered on the 8 ^th November 1999. The application rested on the assertion that the shares were the subject of an agreement entered into on the 1 ^st October 1999, a date preceding the Mareva injunction, and therefore should not be included in the assets referred to in the Order. Bastion Holdings Ltd on its own application was joined as a party to the action. It is the refusal of the application to vary the Mareva injunction that is now the subject of this appeal.

4 The application for the variation resulted in Jorril contesting the genuineness of the agreement. This in my opinion, necessitated a resolution by the Court as to the validity of the agreement and in particular whether the agreement was in fact entered into before the Mareva injunction was ordered on the 8 ^th November 1999. This view is supported by the following dicta of Lloyd, L.J. in the case of SCF Finance Co. Ltd. V. Masri (1985) 2 All E.R. 747:

"So I see no difficulty in the court's resolving any dispute which may arise between a plaintiff and a third party as to the ownership of assets to which the Mareva injunction has been applied. If that is so, then I can see no reason whatever why the court should be obliged to discharge the injunction on the mere say-so of the third party. If the court were so obliged, then the Mareva jurisdiction would be in danger of being nullified at the whim of the unscrupulous. If a court were not permitted to inquire into a third party's claim, but were bound to accept it at its face value, how could the court be satisfied that any transfer of assets to the third party had occurred before rather than after the injunction?"

5 In such an inquiry, the Court must be entitled to look into all the circumstances surrounding the purported transfer of assets to a third party in order to determine its validity e.g. whether, as Lloyd L.J. (supra) questioned, the transfer of assets took place before or after the order for the Mareva injunction.

6 How did the learned trial judge resolve that issue? Without apologies, I set out the learned judge's conclusion in that regard. She stated:

"It is my view that the material before me gives rise to some very serious concerns particularly about the genuineness of the Sales Agreement. To list but a few of those concerns there is:

• (i) Mrs. Geddes' assertions that the arrangement for the sale of the principal assets of the 1 ^st Defendant company was to quickly raise funds to meet the Plaintiff's demand on the promissory notes. She mentions the four week time frame which she was given as an indication of the need to act quickly yet she proceeds to enter into an agreement with a 5 year deferred payment plan.

• (ii) The fact that on receiving the deposit of J$20,000,000 no attempt is made to communicate with the Plaintiff and commence payment on the debt.

• (iii) That no approach was made to the Plaintiff when a decision was made to sell the principal assets of the company. The decision was not even disclosed to the Plaintiff. Instead the Plaintiff was told about a Suit in the Privy Council which on the face of it, bore no relation to the Plaintiff's claim.

• (iv) The fact that the offer for the sale of the shares was made only to her friend Mr. Albun Whittaker.

• (v) The payment of that deposit by Mrs. Geddes herself, a factor which only came to light in cross-examination.

• (vi) The holding of the stock transfer by her attorney Malcolm McDonald and the stock certificate by Mrs. Geddes herself which effectively give rise to circumstances with the potential of leading the stocks back to her, free of the Plaintiff's claim.

• (vii) The apparent financial inability of the 2 ^nd Defendant to enter into this agreement coupled with the status of the signatory to the agreement vis-à-vis the 2 ^nd Defendant company, at the relevant time.

• (viii) The fact that the Order for the Mareva Injunction was served on the 1 ^st Defendant from November 10, 1999 yet it was two years later, after the Plaintiff's application for Summary Judgment, that the 1 ^st Defendant sought to apply for a variation of the order, to facilitate an agreement allegedly entered into in October 1999.

• (ix) The admission of Mrs. Geddes of her knowledge of the trust and of the promissory notes but on receipt of the demand having the need to seek legal advice, as to payment on the notes and the attempt to challenge the validity of the notes.

• (x) The fact that notwithstanding knowledge of the Mareva Injunction payments were made to the 2 ^nd Defendant even after the 1 ^st Defendant made an application to the court for variation of the Order, thereby acknowledging the need for a directive from the Court in this matter."

7 Having stated those concerns, the learned judge continues:

"These factors are to be viewed in the light of the lack of candor and the evasiveness which were all too clearly exhibited by Mrs. Geddes in cross-examination, particularly when asked about her knowledge of dividends declared by D & G and of certain Board decisions. The evidence is replete with instances where she did not immediately give a direct answer to questions put and generally her demeanour was not that of a witness of truth. ...

Similarly, Mr. McDonald's viva voce evidence about the purchase of the US$500,000 by Mrs. Geddes to explain the cancelled cheque in his records lacked sincerity."

8 Then the learned judge concluded as follows:

"It seems to me that these factors, without even going into other areas raised by Mr. Wood in his submissions, provide more than sufficient basis for the Court to refuse to exercise its discretion in favour of the first Defendant's application to vary the terms of the Mareva Injunction, as prayed. In all the circumstances, I am of the view that it is just and convenient to allow the Mareva Injunction which was granted on November 8, 1999 to continue until the judgment ordered in each Suit is executed.

Further, I am of the view, on the evidence presented to me in this hearing, that there was not such an agreement on November 8, 1999 as would pass the beneficial ownership in the shares, to the second defendant and no payment of dividends ought to have been made to the 2 ^nd Defendant after that date."

9 In short, the learned judge found upon good grounds expressed by her, that the allegation by Bardi, that the agreement with Bastion Holdings preceded the order for the Mareva injunction, could not be accepted.

10 As this was an application to vary a Mareva injunction which had been granted, the learned judge was entitled to conduct an Inquiry, as to the validity

11 of that assertion. [See SCF Finance Co. Ltd. V. Masri (supra)].

12 Before us, however, Mr. Mahfood, Q.C. attorney-at-law for Bastion Holdings Ltd argued strongly that it is necessary for an allegation of fraud to be pleaded, and for the details of the alleged fraud to be contained in the pleadings. He contended, that the procedure adopted by the learned judge was incorrect, and maintained that because of the allegation of fraud, the issue should be tried in a separate trial, commenced by writ and by process of pleadings.

13 In support of this contention Mr. Mahfood relied on the provision of section 170(1) of the Judicature (Civil Procedure Code) Law which provides:

"In all...