1998/35A - Smith and Inter Estate [1998] UR 35A (18 February 1998)

THE BAILIFF: This is a representation by Godfrey St. J Smith (to whom we refer as "Mr Smith") seeking orders from the Court in the liquidation of the company called Inter Estate Limited. Mr Smith is the joint liquidator of the company with John Glyn Evans, (to whom we refer as Mr Evans).

"A. Remove John Glyn Evans as a Joint Liquidator of the Company.

B. Appoint Godfrey St. John Smith as the sole liquidator of the Company.

C. Order the National Westminster Bank plc to provide a mandate to the Applicant, as sole liquidator of the Company, and to allow the Applicant to operate all the accounts held in the name of the Company at its branch at 16 Library Place, St. Helier, Jersey, JE4 8NH and provide the Applicant with all the assistance necessary to complete the liquidation as soon as possible.

D. Order John Glyn Evans to hand over all records in his possession belonging to the Company and the Shareholder to the Applicant upon the removal of John Glyn Evans as a Joint Liquidator of the Company".

The representation was served upon Mr Evans and upon National Westminster Bank plc summoning both parties to appear before the Court this morning. National Westminster Bank plc appeared through counsel but Mr Evans did not appear and was not represented.

We were told that the undertaking of National Westminster Bank plc in Jersey has recently been transferred to National Westminster Offshore Limited, but nothing turns upon this and we shall refer to the Bank as "National Westminster".

Mr Wheeler, who appeared for National Westminster, told us that, subject to the Court making a further order in relation to Mr Evans, he had no objection to the prayer of the representation being granted. Correspondence was put before us indicating that Mr Evans had agreed to resign as a liquidator. We therefore turn to consider Mr Wheelers submission on behalf of National Westminster.

The brief history of the matter is that Inter Estate Limited was dissolved and removed from the register of companies on 29 December 1983. On 11 May 1984, Mr MW Forrest was appointed liquidator by this Court. On 26 June 1990, Mr Forrest resigned and Mr Abbas Padidar and Mr Evans were appointed joint liquidators.

By a further Act of the Court of 8 January 1993, the Court accepted Mr Padidars resignation and Mr Smith was appointed in his place as joint liquidator with Mr Evans. It was not, however, until 15 August 1996, that National Westminster was informed by Mr Smith of his appointment as joint liquidator. Counsel told us that Mr Smith had been concerned with litigation in Scotland and that he had left the Jersey end of the liquidation to Mr Evans and had expected him to advise the Bank.

On 15 August the Bank was, therefore, on notice that Mr Padidar had resigned as liquidator and that he had been replaced by Mr Smith. The bank mandate had, however, not been changed and the authorised signatories remained either of Mr Padidar or Mr Evans.

On the same day as advising National Westminster of his appointment Mr Smith issued an instruction that no funds should be withdrawn from the liquidators accounts. On 19 August 1996, the Bank acknowledged that letter and confirmed "that as requested stops have now been placed on the account to ensure that no funds are removed from the account until your legal position has been resolved. Upon receipt of written confirmation of the correct signatories these stops will be removed".

Not withstanding that confirmation, on or about 12 November 1996, National Westminster cleared a cheque for £1,230.90 drawn by Mr Evans and later in that month acted on Mr Evans instructions to close the liquidators accounts and to transfer the balances amounting to £7,544.26 to Westminster Trust Company Limited which despite its ostensible connection with National Westminster is in fact wholly owned by Mr Evans.

Mr Wheeler for National Westminster acknowledged frankly that the Bank had made a mistake in acceding to these instructions from Mr Evans. Upon the complaint being made by Mr Smith, National Westminster paid back into the liquidators accounts a total of £7,544.26 out of the Bank’s own funds.

In the light of Mr Evans proposed replacement as liquidator, Mr Wheeler accordingly seeks an order from the Court directed to Mr Evans requiring him to make restitution or to procure that restitution be made by Westminster Trust Company Limited of that sum to National Westminster.

Mr Wheeler relies upon the authority of Hotel Beau Rivage, Ltd -v- Careves Investments, Ltd (1985-86) JLR 70 to support his contention that the Court has jurisdiction to make such an order. At p75 Crill, the Deputy Bailiff as he then was, stated:

Was Mr Evans acting improperly or neglecting his duty? Mr Wheeler drew our attention to the unfurling of events in 1996 in more detail than we have thus far described them. They are conveniently summarised in the affidavit of Mr Smith, sworn earlier today:

"7.I wrote to John Evans on 13 June 1996, and explained that with the conclusion of the litigation in Scotland I saw no reason why the liquidation could not be brought to a conclusion. The remaining items to my mind consisted of finalising a statement of affairs, settling outstanding liquidator fees, paying the creditors, paying a final dividend to the shareholder and obtaining a discharge from the Royal Court. In a letter dated 24 June 1996, John Evans agreed with these points.

8.I became concerned about John Evans conduct after receiving a letter from him dated 26 July 1996. It became evident that John Evans had a personal dispute with Dr Strasser concerning his own fees for unrelated business which had no bearing upon the liquidators fees to be charged to Inter Estate Limited and he provided me with copies of the liquidators bank statements which were in his name and that of a former liquidator, Mr Abbas Padidar.

9.I became concerned about the operation of the accounts at the Bank as they were still held in the names of John Glyn Evans and Abbas Padidar. I wrote to the Bank on 15 August 1996, and provided it with a copy of the Act of the Royal Court confirming my appointment as joint liquidator. I requested that the Bank formally suspend all dealings on the accounts of the joint liquidators in its possession until the formality of the legal operation of the account could be established and I had provided my written consent.

10.The Bank confirmed in a letter dated 19 August 1996, that stops had been placed on the account to ensure that no funds would be removed from the account until my legal position had been resolved. Further it confirmed that only upon receipt of written confirmation of the correct signatories would the stops be removed.

11.On 5 November 1996, I received a cheque from John Evans in the sum of £1,500 in respect of my fee note from 31 March 1994, to 9 November 1995. I was most concerned that John Evans was still using cheques on which Abbas Padidar was named as a joint liquidator and on which my name did not appear".

12.I received a telephone call at 9.30 am. on Monday, 25 November 1996, from David Reid at the Bank informing me that he was in receipt of a written request from John Evans to transfer funds. I advised him during our conversation that under no circumstances should any funds be transferred out of, or moved from, the Inter Estate Limited accounts without my express written permission. I requested that he transmit the letter of authority to me for my records and review. At 2.20 pm on 25 November 1996, I received a facsimile copy of the instruction given by John Evans dated 19 November 1996, from David Reid who is employed at the Bank. John Evans had requested that all funds held in the current account 67255922 and business reserve account 83602798 be transferred to the current account of Westminster Trust Company Limited held by the National Westminster Bank plc at Library Place. I immediately telephoned David Reid to confirm again that no funds were to be transferred without my express written authority. At 2.20 pm I wrote to the Bank and reaffirmed my authority as joint liquidator and requested that no funds be transferred anywhere until further notice. I further requested that no funds be removed until I had an opportunity to revert to the Bank after discussions with John Evans and the shareholder of Inter Estate. During that afternoon I made numerous telephone calls to the Bank and spoke to David Reid, David Francis, David Eastwood, Di Rimmersol and in addition placed telephone calls to Philip Hermitage and Richard Alletson. I was informed by David Reid that the senior management team at the Bank were in a meeting which had been convened to consider whether to process the instruction from John Evans or uphold my request that the ‘stop’ be maintained on the account that was agreed by Clive T. Wright, who is a Customer Services Officer at the Bank, in writing, on 19 August 1996. Further enquiries with others at the Bank by telephone between 3.00 pm and 5.30 pm also confirmed that the meeting was still in progress.

13.I wrote to John Evans after 12.00 pm on 25 November 1996, and advised him that his unilateral instruction to the Bank without my approval or consultation was a breach of his power as joint liquidator. I asked him to withdraw his letter of instruction. No response was forthcoming from John Evans until 5.41 pm that same day when a facsimile was received from John Evans advising me to contact his advocate at Olsen, Backhurst and Dorey. I was only informed by Philip Hermitage on 28^h November 1996, that, despite the confirmation of my authority and appointment as joint liquidator and my express written and verbal requests to the Bank, the Bank had transferred the sums of £1,300.69 and £5,012.67 from the joint liquidators bank accounts to the Westminster Trust Company Limited, a company owned by John Evans. I was most concerned that we had not followed the correct procedure in seeking to bring the liquidation to a close and in particular I was most concerned that no application had been made to the Royal Court seeking its confirmation that we may distribute funds from that account to the creditors and to the shareholder.

14.The Bank has admitted its error in correspondence dated 23 January 1997, and 24 February, 1997. The Bank refunded the sum of £1,300.69 together with £1,230.90 (which John Evans had taken as fees) to the current account and the sum of £5,012.67 to the business reserve account from its own reserves on 4 December 1996.

15.The present position is totally unsatisfactory as John Evans has not returned the funds to the liquidators accounts and the Bank will not allow the accounts to be operated without an original authority signed by both liquidators or until an order is made by the Royal Court of Jersey".

Mr Wheeler also drew our attention to a letter of 26 November 1996, written by Mr Evans to National Westminster on Inter Estate Limited headed notepaper at a time when the Bank was considering whether to honour his instruction to transfer the monies to Westminster Trust Company Limited. It is in the following terms:

"Dear Sir,

On 19 November I hand delivered to your branch a letter requesting you to close this companys current account no. 67255922 and the company’s business reserve account no. 83602798 and to transfer the resulting balances as per my letter. A copy of this letter is enclosed for ease of reference. From a telephone conversation I had with your branch yesterday I understand that these instructions have not been carried out. Although a week has elapsed I have had no explanation as to why this was not done. You will note from the mandate in your possession that I am the sole signatory on the accounts and you should have therefore honoured these instructions. Furthermore, I understand from Mr Smith, my co-liquidator, who is not mentioned on the mandate, that you have been corresponding with him regarding the account without reference to myself. This is clearly a breach of banking confidentiality. I was appointed a liquidator of this company by the Royal Court of Jersey on 19 June 1990, which Court has sole jurisdiction over the appointment and removal of liquidators. Mr Smith was appointed a liquidator to act with myself on 8 January 1993. The matter has been dealt with by the Royal Court as the company technically does not exist, having been struck off the Jersey Register of Companies. I request you, therefore, to immediately honour my instructions in accordance with the existing mandate otherwise I shall have no alternative other to seek an order from the Court. I also request you to desist from disclosing any further information regarding this account other than in accordance with the mandate you are holding and to provide me with a full explanation of your actions to date. For your information I have instructed Advocate Dr JD Kelleher of Olsen Backhurst and Dorey in this matter and he has a copy of this letter.

Yours faithfully,

(Signed): JG Evans".

Mr Wheeler described this letter as disingenuous. In our judgment that is a generous epithet. Mr Smiths name was not on the bank mandate and Mr Padidars remained on it because Mr Evans was in dereliction of his duty to give effect to the order of this Court of 8 January 1993. To suggest that the Bank was in breach of its duty of confidentiality by corresponding with his co-liquidator is an extraordinary suggestion which seems to have been made only with a view to applying pressure on the Bank to comply with his instructions. Mr Evans was aware that his instructions ran expressly counter to the wishes of his co-liquidator yet he did not confer with or inform Mr Smith at any stage. Instead he procured that assets of Inter Estate Limited were placed beyond the control of Mr Smith notwithstanding that he (Evans) was personally in dispute with the shareholder and ultimate beneficiary of the assets of the company.

In our judgment there is ample evidence that Mr Evans was in breach of his duty as liquidator of Inter Estate Limited. We accordingly grant the prayer of the representation of Mr Smith as set out above. We also direct Mr Evans to make restitution to National Westminster Offshore Limited of the sum of £7,554.26 which was improperly withdrawn from the accounts of Inter Estate Limited.

My decision is that the justice of the case requires that the costs of the National Westminster Bank plc should be paid by Mr Evans, but there should be no order for costs in favour of Mr Smith.

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