Eagle Merchant Bank of Jamaica Ltd and Crown Eagle Life Insurance Company Ltd v Paul Chen Young. Ajax Investments Ltd and Domville Ltd (No 2)

• Jurisdiction: Jamaica
• Judge: CORAM: ANDERSON: J. , ROY K. ANDERSON J
• Judgment Date: 04 May 2006
• Judgment citation (vLex): [2006] 5 JJC 0401
• Date: 04 May 2006
• Court: Supreme Court (Jamaica)

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

IN COMMON LAW

CLAIM NO. C.L. 1998/E. 095

BETWEEN

EAGLE MERCHANT BANK OF JAMAICA LTD

1 ^ST PLAINTIFF

AND

CROWN EAGLE LIFE INSURANCE CO. LTD

2 ^ND PLAINTIFF

AND

PAUL CHEN-YOUNG

1 ^ST DEFENDANT

AND

AJAX INVESTMENTS LIMITED

2 ^ND DEFENDANT

AND

DOMVILLE LIMITED

4 ^TH DEFENDANT

COMPANY LAW -

1 Appearances: Michael Hylton, Q.C, Solicitor General; Mrs. Michele Champagnie, Ms. Debbie-Ann Fraser; Ms. Julie Thompson, Ms. Nicola Brown, Ms. Francine Fletcher instructed by the Director of State Proceedings for the 1st and 2 ^nd Plaintiffs; Mr. Abe Dabdoub, Mr. Conrad George and Mr. Roderick Gordon instructed by Roderick Gordon for the 1 ^st Defendant; Mr. Abe Dabdoub, and Mr. Jalil Dabdoub instructed by Mr. Raymond Clough and Dabdoub & Dabdoub for the 2 ^nd and 4 ^th Defendants.

CORAM: ANDERSON: J

2 There is a profound sense in which, what has now come to be regarded as the calamitous "collapse of the Jamaican domestic financial sector" in the mid 1990s, found its fullest expression in the decline of the Eagle Financial Network. That group of companies (the "Group") was headed by Dr. Paul Chen Young, a Jamaican economist and entrepreneur, the first defendant herein. I believe I do no violence to where this judgment will take me to say that by all accounts, by the mid nineties, Dr. Chen Young had become the public face of the Group, and was the person who was perceived as the leader thereof. As a banker, Dr. Chen Young had emerged from relatively humble beginnings to become the head of what was the first, and eventually to become, the largest Jamaican owned financial conglomerate.

3 On or about March 1996, the Government of Jamaica took control of the Group of companies which then included the first and second plaintiffs herein for a consideration of one dollar ($1.00). The first and second Claimants, at the time this suit was instituted, then owned by the Government of Jamaica, now sue Dr. Chen Young, along with two other companies which according to the allegations and the pleadings, were also controlled by him. This issue of control will resonate throughout the consideration of this matter. Because of the specific claims being made by the protagonists in these cases, and I use that word "cases" advisedly, I have decided to set out here and for ease of reference to anyone who will be brave enough to read this judgment in its entirety, the terms of the statement of claim, as amended, as well as the Defence and Counterclaim. I should point out that, in their closing submissions, counsel for the claimants sought further amendments to the amended statement of claim in light of the evidence which was placed before the court.

4 This historic trial lasted several weeks spread over several months and generated several volumes of documents of which it has been my duty to take cognizance. There have been more than twenty volumes of transcripts of the evidence, (notwithstanding the submission of voluminous witness statements), covering the substantive trial, as well as the trial of a preliminary issue as to the admissibility of the expert evidence given in a report at the request of the plaintiffs. There were sixteen (16) witnesses who testified, including the First Defendant who became the first person in Jamaican legal history to give his evidence from overseas by way of video link as now allowed by the Civil Procedure Rules 2002. There were as well, more than twenty-five volumes of exhibits, each exhibit containing scores and, in some cases, even hundreds of pages. There is also the expert's report which, as indicated above, was itself the subject of a trial within this trial and which gave rise to a full forty (40) page judgment. Closing submissions by the Claimant's counsel covered one hundred and fifty eight double-spaced typed pages, including appendices and over two hundred and thirty footnotes. The Defendants' closing submissions covered over one hundred and thirty single space typed pages, referred to over one hundred and ninety authorities and contained over six hundred footnotes. The Defendants also submitted a "Closing Reply" to the submissions of the Claimants' counsel, covering a further thirty-five pages. Also of interest to note in these proceedings was that when the trial eventually started, the First Defendant was also an Ancillary Claimant as he purported to file a claim for contribution and indemnity against several persons including persons who would be called as witnesses for the Claimants, and who thereby became Ancillary Defendants. These claims were later withdrawn. However, it may be borne in mind that their position as ancillary defendants would have exposed them to potential liability if they remained in that position and if the Claimants succeeded.

5 Clearly a lot is at stake here and in order to do justice in coming to a decision or rather decisions, in this matter, I have decided that it would be useful to set out at the outset the approach I shall adopt so as to ensure that all the issues are properly ventilated and justice is not sacrificed on the altar of brevity.

6 Having reviewed the closing submissions of both Plaintiffs and Defendants, as well as the Response submissions of the Defendants, and in light of the pleadings and the evidence, I have taken the view that the way to approach this task is to define the issue to be considered; to review the evidence in relation to that issue and then to determine on a balance of probabilities which evidence is the more credible; to consider the nature of the relevant submissions made on behalf of the parties in respect of both law and facts, and to determine whether the particular claim has been made out. In this regard, I believe that the definition of the issues as set out in the Claimants' Closing submissions allows for a full consideration of the issues and the submissions and I adopt that definition for the purpose of the ensuing analysis. Based upon the pleadings, there are eight (8) discreet elements to the claim of the Claimants and four (4) in relation to the counterclaim by the First Defendant. While the specific submissions may not be pigeon-holed in the definition of the issues as I shall consider them, I will endeavour to align those submissions with the issues. Before doing so, let me make one further observation in light of the volume of authorities cited by counsel as referred to above. I shall adopt the wise approach implicit in the dicta of Lord Steyn in the House of Lords case Williams & Another (Respondents) v Natural Life Health Foods 1 1 Decided April 30, 1998 Limited and Mistlin (Appellant ). He said:

My Lords, a great many precedents were cited at first instance, in the Court of Appeal and in the printed cases lodged for the purpose of the present appeal. It is unnecessary to embark on a general review of the authorities. The sole purpose of the citation of precedent is, or ought to be, the identification of a legal principle or rule which covers, or may arguably cover, the issue in the case to be decided. And that is how I hope to approach the problem under consideration.

7 The Issues

• 1. Control of the Eagle Financial Network, Ajax Investments Limited and Jellapore.

• 2. The Liability of Directors.

• 3. The Grenada Crescent Transactions. What is to be made of them?

• 4. The First Equity and IBM Share Transactions.

• 5. Funds purportedly loaned to Domville: the true character of the transaction between CEL and Domville.

• 6. Is the Moneylending Act relevant and if so how?

• 7. Has there been any unjust enrichment?

• 8. If the Claimants succeed on any of their claims, what entitlement to interest, if any, do they have?

• 9. On the Counterclaim: Was the First Defendant's contract wrongfully terminated and if so, what rights accrue?

• 10. Is the First Defendant entitled to compensation for leave not taken?

• 11. Compensation for expenses of holidays not taken.

• 12. Are there any accrued rights to pension contributions?

8 The First Issue: The Issue of Countrol

9 One of the most contentious of the issues argued between the parties, and one which was central to and underpinned many of the other allegations of the claimants, was whether the First Defendant was "in control" of the Eagle Financial Network (EFN), Ajax Investments Limited ("Ajax") and Jellapore, an offshore company in the Cayman Islands. It is common ground that Ajax, (an industrial and provident society under the relevant statute,) was at one time the major shareholder in the First Claimant and that in time the controlling bloc of shares was transferred to Jellapore. The Claimants say that Dr. Chen Young was "in control", indeed was the controlling mind or directing will of the First Claimant as also the Second Defendant and Jellapore. The attorneys for the Defendants say, "Not so"! They submit that the Claimants have misunderstood the concept of control and the First Defendant was not "in control" as that term is to be properly understood. Indeed, this was also the position of the First Defendant when he gave his evidence. Thus, for example, he said that Ajax, as an industrial and provident society, is controlled by its committee of management and that he was not a beneficiary of the Paul Trust which held the shares in Jellapore. The attorneys for the Claimants submitted that the attorneys for the Defendants as well as the First Defendant himself, are taking a narrow "legalistic" view of the concept, and urges this court to adopt a more liberal view.

10 It was submitted that "control" means "the ability to direct the course of action of a person or entity. In that context, the First Claimant was a licensee under the Financial Institutions Act, section 2(1) of which provides as follows:

"Control" in relation to a licensee or any other company means the power of a person...