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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Geneva Trust Company (GTC) SA v Tchenguiz (Royal Court : Hearing (Civil)) [2025] JRC 063 (6 March 2025) URL: https://www.bailii.org/je/cases/UR/2025/2025_063.html Cite as: [2025] JRC 063, [2025] JRC 63 |
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Before : |
Advocate David Michael Cadin, Master of the Royal Court |
Between |
Geneva Trust Company (GTC) SA (formerly Rawlinson & Hunter Trustees SA) |
Plaintiff |
And |
Robert Tchenguiz |
Defendant |
Advocate J. S. Dickinson for the Plaintiff.
Advocate J. M. Sheedy for the Defendant.
judgment
the MASTER:
1. This is my judgment in relation to an application by the Defendant, Mr Tchenguiz, to vary an Act of Court dated 12 June 2019 which provided, amongst other things, that the Plaintiff, the Geneva Trust Company (GTC) SA ("GTC"), pay into Court the sum of £50,000 by way of security for costs to support an undertaking given by its parent company to pay any adverse costs orders obtained by the Defendant.
2. Whilst the factual background to these proceedings is complex, for the purposes of this judgment, I propose to adopt the summary set out by Commissioner Birt in his judgment dated 17 February 2025 (Geneva Trust v Tchenguiz [2025] JRC 046):
3. The following procedural background is also relevant:
(i) Proceedings were instituted in 2018 and Particulars of Claim were filed in September 2018. An Answer was filed in October 2018.
(ii) In June 2019, for the reasons set out in a judgment reported at Geneva Trust Company (GTC) SA (formally known as Rawlinson Hunter Trustees SA v Tchenguiz [2019] JRC 110A, Master Thompson ordered that GTC pay £50,000 into Court as security for the Defendant's costs. Those monies were paid.
(iii) There were further amendments to the pleadings, and as noted in a File and Parties' Judgment dated 31 October 2023:
(iv) The application to lift the stay came before me in October 2023 and I granted the application. In giving a File and Parties' judgment dated 31 October 2023, I noted that Mr Tchenguiz did not oppose the application to lift the stay in principle "provided that the amount of security for costs is increased... albeit that he has not made any formal application to increase the amount of security" (at paragraph 12(ii)). In the absence of any formal application, I declined to increase the amount of the security.
(v) In advance of a directions hearing listed for 28 November 2023, a letter was sent by the Defendant's Advocates to the Plaintiff's Advocates on 14 November 2023 seeking audited financial statements for GTC and its parent. No such statements were supplied and nor did the Defendant issue any further application for security for costs at that time. Indeed, from the correspondence it does not appear that this issue was raised again until 9 January 2025.
(vi) On 28 November 2023, I gave directions to progress the matter to a trial with a time estimate of 5 days.
(vii) Between November 2023 and July 2024, there were without prejudice and other discussions between the parties. A consent order was issued in the Guernsey proceedings in July 2024.
(viii) In August 2024, the parties applied for a date fix appointment for a trial and in September 2024, the trial date was fixed for 10 March 2025, with a time estimate of 5 days.
(ix) Pursuant to a consent order, further amended pleadings were filed including a Re-Re-Amended Answer on 22 November 2024 and a Re-Re-Amended Reply on 27 December 2024.
(x) On 13 January 2025, the proceedings came before Commissioner Birt for the purposes of a pre-trial review when extensive directions were given.
(xi) On 31 January 2025, the Defendant's summons to vary the order previously made for security for costs was issued.
(xii) That summons came before me on 17 February 2025 and by consent, I made an order providing for disclosure of unaudited balance sheets, profit and loss accounts and notes for the Plaintiff and its parent company, Geneva Holding Company (GHC) SA, for the period ending 31 December 2024 but subject to the imposition of restrictions as to their use/distribution.
(xiii) Those unaudited accounts were provided to the Defendant and Ms Martin has now filed her Thirty-Sixth Affidavit setting out, amongst other things, the comments of PWC to the effect that:
" The information contained in the documents provided cannot be relied upon as they are unaudited;
- The financial information contained in the documents is unconsolidated and so does not provide a full picture of the financial position of the entities and its subsidiaries; and
- There are issues with the documents including -
o Missing information required by the Swiss Code of Obligations; and
o Discrepancies within the financial statements which raise questions with respect to accuracy."
4. Royal Court Rule 4/1(4) provides that "Any plaintiff may be ordered to give security for costs".
5. The principles applicable in relation to this Rule have been the subject of numerous decisions and have evolved with time. However, in Café de Lecq v Rossborough (Insurance Brokers) Limited [2011] JLR 031, the Court held that:
6. Those general principles, set out by the Court of Appeal in A E Smith & Sons Limited -v- L'Eau des lles (Jersey) [1999] JLR 319, were as follows:
7. An illustration of the impact of the last element of the test can be found in Banks v Apex [2023] JRC 197, where in relation to a sum of £2m sought by way of security for costs against Mr Banks in July 2023, Commissioner Martin held:
8. In Home Farm Development and Others-v-Le Sueur [2014] JRC 241, Master Thompson was considering an application for an increase in the amount of security for costs that he had previously ordered. He held that:
9. In his 2019 judgment, reported at [2019] JRC 110A, Master Thompson noted that:
10. Master Thompson then went on to consider the granular detail of the costs claimed to conclude (at paragraph 90) that, "I am not satisfied that the amount suggested of £750,000 is justified".
11. In relation to Collas Crill's costs to the date of the hearing, he noted that a schedule of costs had been provided giving a figure of £95,753.50, albeit calculated on the basis of the commercial rates charged to the client rather than the costs recoverable on taxation under the standard basis. He therefore reduced that amount to reflect costs calculated on the basis of Factor A plus a Factor B uplift of 50%, and then further reduced that sum to £50,000 to reflect the likely outcome of taxation. No schedule was provided for Collas Crill's future costs and Master Thompson therefore assessed the future costs based on his assessment of the litigation:
12. Part of the costs claimed by the Defendant related to a company called R20 Advisory Limited. This was a company ultimately owned by a related trust and provided group management and financial services; it is not and was not a law firm. For this, and a variety of other reasons, Master Thompson concluded that "I am not satisfied that it is appropriate to make any orders for security for costs by reference to the work carried out by R20 Advisory Limited."
13. As to the basis of the application, Master Thompson noted that:
14. In terms of the principles, he went on to hold that:
15. The Defendant advances his case on the basis the Thirty-Second, Thirty-Third and Thirty-Sixth Affidavits of Ms Martin sworn in January and February 2025.
16. Ms Martin deposes in her Thirty-Second Affidavit that the Defendant has been given further cause for concern that GTC and/or its parent, GHC, have insufficient assets to meet any adverse costs orders made in these proceedings and that the undertaking provided by GHC lacks substance. She specifically relies on the grounds that:
(i) following conversations with Mr Hiller, a former shareholder in GTC, in October and November 2024, she has become aware that he is apparently still owed money by GTC, that the parent company has no substance and that GTC had difficulty complying with an order to repay a sum of £1m when ordered to do so by the Royal Court in Guernsey in August 2019 (paragraphs 10(a) and 14(a) of her affidavit).
(ii) GTC's conduct has been criticised, and in particular:
(a) they wrongly used trust funds to pay their own expenses (paragraphs 10(b) and 14(a)(ii)(b) of Ms Martin's affidavit), albeit that on closer analysis it appears that this criticism was in August 2019;
(b) GTC sold assets in 2018 and was criticised for so doing in a judgment of the Royal Court in June 2023 (paragraphs 10(c) and 14(a)(ii)(a) of Ms Martin's affidavit);
(c) GTC has refused service of proceedings in the BVI and Guernsey and was criticised by the BVI Commercial Court for so doing in March 2018 (paragraph 10(d) of Ms Martin's affidavit);
(d) GTC was removed as trustee of a trust in 2019 but has refused to retire as director of a Panamanian company and this issue is to be dealt with by the Guernsey Court (paragraph 10(e) of Ms Martin's affidavit).
(iii) Costs have significantly increased beyond those estimated at the time of the previous application for security for costs (paragraphs 11 and 14(b) of Ms Martin's affidavit):
(a) The only figures provided in her Thirty-Second Affidavit are for the fees incurred by Collas Crill to date (amounting to £474,629) and the fees to be incurred to trial by Collas Crill, R20 and Counsel amounting to £201,455 which gives a total sum of £676,084.
(b) In her Thirty-Sixth Affidavit, Ms Martin expanded on those figures giving a total figure for costs incurred to date of £782,035.18 and to be incurred of £251,430, giving a total figure for costs of £1,033,465.
(c) Of Collas Crill's fees:
(1) some £219,379.99 apparently relates to the period August 2018 to June 2019, whereas Master Thompson's judgment notes that the costs then claimed amounted to £95,753.50;
(2) £255,249.97 related to the period July 2019 to December 2024;
(3) the estimate to trial was for a further £142,390, including £121,800 for preparation for trial and trial itself, in respect of which Master Thompson had previously allowed £50,000.
(d) R20 has incurred fees to date of £146,250 and has estimated future fees of £23,040; Master Thompson previously refused to take any such costs into account;
(e) Counsel has charged £133,105 to date and has an estimate for costs to trial of a further £50,000, in respect of which Master Thompson previously allowed £10,000;
(f) Experts' fees to date are £19,821 and estimated to trial in the sum of an additional £36,000.
(iv) There is the potential for a part-heard trial (paragraph 14(c) of Ms Martin's affidavit). Whilst the time estimate of 5 days was given in July 2019, the parties were free to depart from that time estimate, and in particular, they could have given a longer time estimate when they fixed the trial date in September 2024. They did not do so and as a matter of fact, the time estimate for the trial is the same estimate that was before Master Thompson when he was considering security for costs.
(v) GTC has failed to respond properly to correspondence about security for costs (paragraph 12 of Ms Martin's affidavit).
17. As to the timing of the application, Ms Martin deposes that this is not down to any delay on the Defendant's part but arises from:
(i) the protracted stay of the proceedings from March 2021 to October 2023;
(ii) negotiations in 2024 leading to the consent order in Guernsey;
(iii) belated indications made by GTC that they would be pressing ahead with these proceedings notwithstanding the consent order in Guernsey; and
(iv) GTC's delay in filing the Re-Re-Amended Reply.
18. An affidavit has been filed on behalf of the Plaintiff by Mr Hodges. He deposes that:
"17 The Plaintiff can afford the £80,000 top up, but it would rather not have those funds tied up in Court when it has ongoing funding requirements for its business and the current litigation. The Plaintiff has suffered extreme financial damage and setbacks arising from its relationship with the Defendant and continues to live with the long-term effects of that. The Defendant has made no secret of the fact that he wishes to destroy my business."
19. He further notes that:
(i) The Plaintiff has submitted it is owed approximately £600,000 in costs by the Defendant and in a letter dated 23 January 2025 sent in response to the Defendant's letter of 9 January 2025, the Plaintiff offered the Defendant an assignment of these monies. No response was given to that offer and instead, the Defendant issued his application for additional security.
(ii) Insofar as the Defendant's application is based on recent conversations, Mr Hillier has "an axe to grind" with the Plaintiff.
(iii) The Plaintiff is concerned that any financial information GTC provides to the Defendant will be shared with others and this is not a risk GTC is willing to take. GTC has therefore offered to provide it in a confidential manner, but this has not been accepted by the Defendant.
(iv) The application is an unnecessary distraction from the process of preparing this matter for trial, which is due to commence in 2 weeks.
20. Ms Martin's Thirty-Third Affidavit responds to Mr Hodges' Affidavit. Her Thirty-Sixth Affidavit was sworn after she was provided with the unaudited accounts. I have set out above her summary of PWC's comments. In addition, Ms Martin raises complaints about a "lack of transparency" on the part of GTC by reference to matters set out in her Eleventh Affidavit, sworn on 1 March 2019.
21. Master Thompson dealt with the issue of security comprehensively in June 2019. He did so on the basis of the material provided to him by the Defendant, his assessment of the proportionate and recoverable costs that would be incurred by the Defendant in progressing this matter to a trial on the basis of a time estimate of 5 days, and he made an order that extended through to trial. Crucially, his order was made to support the undertaking given by the Plaintiff's parent company and is not an order simply to provide security of £50,000.
22. If I am to revisit the issue of security, in my judgment, there must be a material change in circumstances following Republic of Brazil v Durant [2012] JCA 025 such that the security previously ordered is now insufficient.
23. However, in this case, the time estimate for trial is still 5 days and the Plaintiff's claim is still a claim under an indemnity which the Defendant denies is valid and/or effective. Little has changed since the matter was considered by Master Thompson although I do accept that the consent order entered into by the parties in Guernsey in July 2024 provides an added complication.
24. Ms Martin's Thirty-Second Affidavit contains hearsay evidence from Mr Hillier. However, he has not provided an affidavit and there may be a variety of reasons why GTC might not have paid sums owing to a former shareholder. I do not think that the hearsay evidence takes matters much further than the concerns which were raised before Master Thompson about GTC's financial position and that of its parent.
25. Mr Hillier apparently told Ms Martin that the parent company has no substance and could not meet any adverse costs order. However, Master Thompson had draft accounts before him; I have unaudited financial statements. Whilst there may be a disagreement between the parties as to the conclusions, if any, that can be drawn from the audited documents recently provided, the Plaintiff's parent company remains in existence, the Plaintiff continues to be regulated by FINMA in Switzerland and there is no indication that FINMA has any concerns over its financial viability. In my judgment, Master Thompson's conclusions apply with equal vigour to the current position:
26. It follows that I do not regard any of the matters allegedly raised by Mr Hillier as being sufficient to establish a material change in circumstances.
27. Ms Martin's Thirty-Second Affidavit makes various complaints about GTC's financial and litigation conduct. Some of that conduct itself pre-dated Master Thompson's decision; some of the criticism post-dated it. The judicial criticism of the Plaintiff's conduct as a trustee and as a litigant is extensive. However, a Plaintiff's character is not relevant for the purposes of the test for security for costs set out in A E Smith & Sons Limited -v- L'Eau des lles (Jersey). Nor do I think that the judicial criticisms identify that the Plaintiff company is now in such financial distress that it amounts to a material change in circumstances which requires the Court to reopen the security previously ordered.
28. As to the costs, I can readily accept that the Defendant has spent, and will spend, significant sums of money in defending these proceedings. Those figures are not, and cannot be, determinative given Master Thompson's finding that the parties had engaged in internecine warfare which had led to significant and disproportionate increases in the costs being incurred. Indeed, according to Ms Martin's affidavit by the end of trial, the Defendant will have spent over £1m defending a claim which has now been quantified for trial at approximately £745,000.
29. Moreover, little substantive detail has been provided in relation to any of the figures claimed for costs. For the purposes of the application before me, I think that these claimed costs must be discounted significantly following Procom (Great Britain) Ltd v Provincial Building Co. Ltd [1984] 1 WLR 557 (which was cited with approval in Montague Goldsmith AG (in liquidation) v Goswick Holdings Limited [2020] JRC 245B):
30. There are, however, some islands of certainty amongst the otherwise swirling fog of costs:
(i) Master Thompson refused to allow any sums for R20's costs, and in my judgment, I should do likewise;
(ii) at the time of the application before Master Thompson, the costs incurred to date with Collas Crill were said to be £95,753.50 but had not been calculated on the standard basis. They are now claimed at £219,379 albeit that no substantive detail has been provided nor has an explanation been proffered as to the difference;
(iii) Master Thompson exercised his judgment to determine that of the fees incurred with Collas Crill, £50,000 was potentially recoverable by the Defendant were he to prevail at trial and that assessment was not appealed;
(iv) in my judgment, Master Thompson's assessment of the recoverable costs at that date was entirely appropriate;
(v) he further decided that a further £65,000 should have been sufficient to progress the matter to trial. I do not disagree.
31. On the basis of Ms Martin's current figures, Master Thompson identified 23% of the Defendant's costs with Collas Crill as being potentially recoverable, although I fully accept that he did not approach the assessment in that way. Between Master Thompson's decision and the end of trial, according to Ms Martin, the Defendant will have incurred a further £397,639 with Collas Crill. There is nothing before me to indicate that the Defendant and/or his lawyers have changed their approach to this litigation such that the recoverability rate applicable to their costs might have altered. Applying a 23% allowance to the amount claimed from Master Thompson's decision to the end of trial, gives an amount of recoverable costs in the sum of £91,456, as opposed to the sum of £65,000 allowed by Master Thompson.
32. I accept that the fees incurred with Counsel and experts are significantly higher than those allowed by Master Thompson (£238,926 as against £10,000) but in absence of any substantive detail, it is difficult, if not impossible to form a proper view as to recoverability. In my judgment, although somewhat arbitrary, it is not unreasonable to apply a similar 23% allowance, which would give a figure for the recoverable costs of counsel and experts in the sum of £54,952.
33. In terms of the overall likely recoverable costs, on the basis of applying the 23% recoverability rate, these have therefore increased by a total of £71,408.
34. Whilst an increase in recoverable costs of that amount might appear to be material as against the initial total of £125,000 allowed by Master Thompson, that is only one half of the equation.
(i) In the course of these and related proceedings (conducted under Case No, 2017/278) the Plaintiff has obtained orders for its costs to be paid from the trust on the usual trustee indemnity basis. In correspondence, the Plaintiff's advocates have assessed those costs as amounting to approximately £600,000. In support of those orders, Collas Crill hold a sum in excess of £328,000. One of the orders (for some £200,000) is subject to appeal, and the other (for some £400,000) is still subject to taxation.
(ii) The Defendant also has the benefit of an order for costs in his favour against the Plaintiff and approximately £81,000 remains outstanding prior to taxation.
(iii) Even allowing for a significant 20% reduction in the amount of costs owing to the Plaintiff and yet to be taxed on the trustee basis, and the amount likely to be due to the Defendant under his existing costs order after taxation gives a figure due to the Plaintiff of just under £300,000, which sum is currently held by the Defendant's Advocates, albeit that they are holding it on behalf of another client.
(iv) The monies due to the Plaintiff are assets of the Plaintiff which are now within the jurisdiction, within the control of the Court given that they emanate from costs' orders in favour of the Plaintiff and are also within the control of Collas Crill as they hold the funds.
(v) Quite apart from the fact that there may inevitably be a netting of costs' orders before any funds are finally paid away to the potential prejudice of any party, given the control mechanisms in place, these additional assets amount to additional security for costs which has been provided since Master Thompson considered the position.
35. In my judgment, when determining whether there has been any material change such as might allow Master Thompson's order to be reopened, the apparent increase in the Defendant's recoverable costs must be put alongside the increase in the assets of the Plaintiff which are now subject to the control of the Court and/or the Defendant's advocates. When the two are side by side, it is evident that any apparent increase in recoverable costs is not material.
36. As to the other factors raised by Ms Martin:
(i) She complains that GTC has failed to respond properly to correspondence about security for costs. Having reviewed the correspondence between the parties, I do not accept the criticisms made. If anything, it was the Defendant that failed to engage with the Plaintiff and chose instead, to issue a summons.
(ii) There is always a risk of a trial going part heard. However, given the additional assets of the Plaintiff which are now subject to the control of the Court and/or the Defendant, any increase in costs which might occur as a result of the trial going part heard would not be material.
(iii) She refers to a "lack of transparency" as set out in her Eleventh Affidavit, sworn on 1 March 2019. This affidavit and/or its contents would have been available to Master Thompson in June 2019 and in my judgment, it cannot amount to a material change in circumstances.
37. In my judgment, there has been no material change in circumstances, and certainly nothing "so special or unusual" (which was the phrase used in Home Farm Development and Others-v-Le Sueur) that might justify the revisiting of the amount of security for costs and on that basis alone, I would dismiss the application.
38. Further and/or alternatively, if I were to be wrong about there not being any material change in circumstances, I would in any event hold that the application was too late.
39. The overwhelming majority of the costs have been incurred by the Defendant; on Ms Martin's figures some £782,035 has been incurred and there is a further £251,430 to be incurred. The Defendant committed to incurring these costs on the basis of the security previously ordered, and without having raised the issue of additional security in correspondence with any vim. Indeed, Mr Tchenguiz has defended these proceedings from 2018 to the end of December 2024 on the basis of the security ordered by Master Thompson and it was not until January 2025 that he really started asking further questions about this issue. In my judgment, echoing the comments of the Court in Banks v Apex, it is "now too late to change tack".
40. That is particularly so as this application:
(i) was first mooted in October and November 2023, but not pursued by the Defendant;
(ii) could have been made shortly after the Guernsey consent order in July 2024 and/or at or about the time the trial dates were fixed with the Royal Court in September 2024 when the majority of the matters now raised by Ms Martin as allegedly giving her cause for concern would have been known; and
(iii) is being heard 2 weeks before the start of the highly-contested trial and I note the comments of Sir Michael Birt, Commissioner, in his judgment dated 17 February 2025 in which he declined to order the trial of a preliminary issue on the basis that, amongst other things:
41. Further, in my judgment, the usual order would be for a stay of proceedings pending provision of the additional security which would inevitably impact on the trial and/or trial preparations. Even were I not to order a stay pending provision of any additional security, that risk remains, especially given Master Thompson's finding that "what exists on both sides is internecine warfare and a total lack of trust." The practical consequences of any order I might make are matters which I must take into account when exercising my discretion as to whether to order additional security, particularly if those consequences might contravene the Overriding Objective (paragraphs 1/6(2)(a), (2)(b), 2(d), 2(f) and 1/6(6)(b), (6)(g) and 6(l)) or conflict with the very recent observations of the Royal Court in this case.
42. Accordingly, I decline to order any additional security for costs on the basis that there has been no material change in circumstances and/or in any event, the application is made too late and/or cannot be ordered without interfering with the trial and/or preparations for the same.