C.A. CUTNER v. GREEN 1980 J.J. 269 [1980 J.J. 269] (source: Jersey Legal Information Board - JLIB 2001-2007) CUTNER v. GREEN and TRUSTEES OF MARC BOLAN CHARITABLE TRUST COURT OF APPEAL (Wilmers, Davies and Clyde, JJ.A.): December 11th, 1980 Civil Procedure appeals appeals against exercise of discretion in exercising powers of Superior Number under Court of Appeal (Jersey) Law 1961, art. 15 and Court of Appeal (Jersey) Rules 1964, r.12/2, will not interfere with lower court s exercise of discretion in interlocutory matter except on grounds of law or if injustice otherwise caused if appeal against final order, hearing de novo strictly limited to same material considered in lower court Trusts liabilities of trustees restoration of loss trustee in breach of trust to restore trust fund and income it should have earned interest calculated according to rates available in Jersey during relevant investment period such order of restitution not caught by Interest on Debts and Damages (Jersey) Law 1971 P.R. Le Cras for the appellant; J.A. Clyde-Smith for the respondents. WILMERS, J.A.: The judgment which I am about to give is the judgment of the Court. In this case Mr. Lewis Cutner appeals to this Court against the refusal of the Royal Court to set aside a judgment in default of appearance entered against him on the 9th February, 1979. The material facts can be stated shortly in simplified form. In 1973 the late Mr. Feld set up a trust in Jersey of which, in circumstances which do not matter, Mr. Cutner became one of the trustees. C.A. CUTNER v. GREEN 1980 J.J. 271 Mr. Cutner is an English solicitor practising in England. The trust deed contained a provision which required Mr. Feld s prior written approval to investment of trust monies. The trust funds were banked with Wallace Brothers Bank of Jersey. In December, 1973, a sum of 430,000 was transferred from that bank to Lloyds Bank Limited in England. The whole of it was received at the Great Portland Street branch in London of Lloyds Bank. This was Mr. Cutner s bank and branch. Some 400,000 went into Mr. Cutner s client account. The balance of 30,000 went to another account. Lloyds Bank, by letter dated the 6th February, 1980, have stated that this was done on the instructions of their customer, that is to say Mr. Cutner. In another letter dated the 30th April, 1980, Lloyds Bank have said that they can trace no written evidence from Messrs. Lewis Cutner as to why 30,000 was paid into the account of Warrior Music Projects Limited. These letters, in our view, are not inconsistent with each other. They appear to say that not only 400,000, but 430,000 of the trust money was received at Mr. Cutner s bank; that 400,000 of this found its way into Mr. Cutner s client account, and that the other 30,000 was transferred on the oral instructions of Mr. Cutner or his agents into another account. There is no suggestion that this other account in any way belonged to the cestui que trust, or that by causing money to be paid to it Mr. Cutner, in his capacity as trustee, discharged some duty under the trust. The 400,000 was then used for a disastrous speculation in pictures, and
much of it has been lost. It is conceded that none of the transfer of any of the 430,000 from Jersey was ever authorised by Mr. Feld. In this action, the plaintiffs, as the present trustees, claim against a number of persons, including Mr. Cutner, in respect of these unauthorised transfers, and the losses which have thereby occurred to the trust funds. Mr. Cutner concedes liability in respect of the 400,000, which went into his C.A. CUTNER v. GREEN 1980 J.J. 272 client account, and thence into the picture speculation, but he says (a) that he knows nothing of the 30,000 and (b) that he should not be held liable in respect of the interest lost. Mr. Cutner was regularly served with the Order of Justice in this case. Upon the advice of counsel he deliberately chose not to enter an appearance, and allowed judgment against him to go by default. It is clear that he did so because, on advice, he thought that such judgment could not be enforced against him in England. Judgment, regular on the face of it, was entered against him in default on the 9th February, 1979, as I have said. The plaintiffs then proceeded to take the necessary procedural steps in England to enforce their judgment there. They registered their judgment under the Foreign Judgments (Reciprocal Enforcement) Act 1933. Mr. Cutner then applied in England to set this registration aside. At this stage it became clear to him that in fact the judgment was enforceable against him; in other words, that he had made a mistake in not entering appearance here. By consent, his English application was dismissed on the 16th January, 1980. On the 1st February, 1980, he launched his application to the Royal Court to set aside the default judgment, and to be allowed to enter an appearance out of time. On the 16th April, 1980, the Royal Court refused to make such an order, but gave leave to appeal to this Court, subject to conditions which have been complied with. It seemed to us that this appeal might raise, as a first issue, the nature of our jurisdiction. Is an appeal to this Court a hearing de novo, or is it an appeal in the sense that the appellant must satisfy us that the order below is wrong, either because it is made on a wrong premise of law, or is a wrong exercise of a discretion vested in the lower Court. The latter would be the position if an appeal such as the present one were taken to the Court of Appeal in England, but clearly this cannot determine the position here. When we raised this matter with counsel he was, it is only fair to say, taken by sur- C.A. CUTNER v. GREEN 1980 J.J. 273 prise. He conceded that there was much merit in the English approach, but at the same time submitted that Rule 8/3(1) of the Royal Court Rules, 1968, gave the Court an unfettered discretion, and that Rule 12/2 of the Court of Appeal (Civil) (Jersey) Rules, 1964, meant that this unfettered discretion was for us to exercise de novo. His attention was drawn to Article 15 of the Court of Appeal (Jersey) Law, 1961, which, omitting immaterial parts, requires this Court to exercise its jurisdiction, so far as regards procedure and practice, as nearly as may be in the same manner as that in which the Superior Number of the Royal Court had exercised jurisdiction on an appeal from the Inferior Number. If the point is one of procedure or practice we are therefore required to look to the manner in which formerly the Superior Number would have dealt with it. If it is not, Article 12 of the same law would probably govern the matter. Since this vests in this Court the power hitherto exercised by
the Superior Number when exercising appellate jurisdiction in any appellate cause or matter, the result seems to depend on the same enquiry. How, then, did the Superior Number exercise their appellate jurisdiction in such matters as setting aside default judgments? This seemed at first far from clear. We had cited to us a number of authorities, but only two seem in point. The first is the case of Delgaty v. Falle (1958), 13 C.R. 151. I cite the relevant part of the summary of that case to be found at page 155: Whereas when an unfettered discretion has been exercised by the Inferior Number of the Royal Court, acting within its jurisdiction, the Superior Number of the Royal Court will not normally interfere with the exercise of such discretion, except on grounds of law, or unless it appears that on other grounds injustice will result from the manner in which it has been exercised. This strikingly echoes the English House of Lords case of Evans v. Bartlam, [1937] A.C. 473, C.A. CUTNER v. GREEN 1980 J.J. 274 and on its face is authority for following the practice of the Court of Appeal in England in hearing appeals from the exercise of a discretion at first instance. However, another case cited to us was Briggs & Co. (Jersey) Ltd. v. Sayers, 1963 J.J. 311. In that case, at page 312, one finds the following passage: After hearing counsel, the Court gave the judgment against which this appeal is brought, the judgment being a final judgment and not an interlocutory judgment on the plea in bar, and, in accordance with the customary rules of procedure in these matters, the appeal must be deemed to be open and not based on specified grounds. An appeal to the Superior Number of the Royal Court is not an appeal in the strict sense of the word but a re-examination of the case heard before the Inferior Number, limited to the consideration of pleas entered and documents produced, and the examination of witnesses heard, in the original action. In contrast to Delgaty v. Falle, this case indicates a rather different approach, and one apparently consistent with what is stated in the Report of the Committee of the Privy Council on proposed reforms in the Channel Islands (1947). At page 37 of that Report, one finds, about six lines down, the following: In Guernsey the Superior Number considers whether the Inferior Number reached a correct conclusion on the evidence before it, which is the correct method of dealing with appeals. But in Jersey the whole of the evidence is reheard before the Superior Number, and if any witness who gave evidence before the Inferior Number is not available, the appeal fails. We also had our attention drawn to the evidence taken by the Privy Council in 1947. Mr. Le Gros, then Lieutenant Bailiff of Jersey, at page 125, gave evidence as to the procedure adopted on appeals to C.A. CUTNER v. GREEN 1980 J.J. 275 the Superior Number. He said this, towards the bottom of the page:
I should like to point out at once it has not been explained to you that in strict legal language there is no such thing in the Island as a Court of Appeal. It simply means, (the use of the word appeal for brevity s sake), an appeal from the Inferior Number to the Superior Number. It is not an appeal in the true sense of the term, but a re-examination by the Superior Number of the judgment of the Inferior Number. It means this, that when the appeal is heard the same witnesses as appeared before the Inferior Number must appear before the Superior Number. The same documents which were produced to the Lower Court must be produced to the Superior Court. On the next page Mr. Le Gros points out that between 1934 and 1945 there were only five cases before the Superior Number which can properly be described as appeals. No wonder, then, that the practice is not easily ascertainable. We were in addition referred to the work of Mr. Le Gros himself, Traité du Droit Coutumier de l Ile de Jersey (1943), where at page 151 his account of appeal procedure is, of course, very much in line with the evidence which was given to the Privy Council. How, then, can the statement of principle in Delgaty v. Falle, on the one hand, be reconciled with Briggs case and the Privy Council Report on the other? It would seem from what was said in Briggs case, in the passage which we have quoted, that the only possible reconciliation is that the procedure before the Superior Number differed depending on whether the appeal was against a final judgment, giving a remedy as of right, or against an interlocutory one, and perhaps a discretionary one. In the former case there was a hearing de novo, though strictly limited to precisely the same material as had been before the Inferior Number. In the latter case, the English practice, if we may call it C.A. CUTNER v. GREEN 1980 J.J. 276 that, was adopted. If this is correct, then a judgment in default is, in our view, to be treated as interlocutory, and accordingly must now be dealt with on appeal on the principles set forth in Delgaty v. Falle, which we have cited. If such a distinction is not correct, we would have to choose between two mutually inconsistent authorities. In that event we would be free to choose which of them to follow. We think that in that event the principles in Delgaty v. Falle are to be preferred. Accordingly we decide on the first issue that the correct approach for this Court is not to interfere with the discretion exercised by the Royal Court except on grounds of law, unless it appears that on other grounds injustice will result from the manner in which it has been exercised. Applying this approach to the issue of the 30,000, no grounds of law have been shown to us for interfering with the decision below. Mr. Le Cras, appearing for Mr. Cutner, expressly conceded that he could not rely on such cases as Hughes v. Justin, [1894] 1 Q.B. 667. The present judgment was not for a wrong sum in the sense in which the word wrong is used in Hughes v. Justin and similar cases; it is simply for a sum greater than that which Mr. Cutner admits. This does not make it wrong. On the contrary, since on the facts before us Mr. Cutner, as a trustee, has had this 30,000 in his hands, and has failed to account for it, it seems to us inevitable that judgment should go against him in respect of it. It follows also that no injustice can be shown to result from this judgment in this respect. The appeal therefore fails on the issue of the 30,000. We turn next to the interest point. The plaintiffs submitted three schedules to the Royal Court showing different calculations. The first was for simple interest at ten per cent. The second was for similar interest, but with six monthly rests. The third was altogether
different. It was a calculation showing what was due from this trustee, on the assumption that the trust fund had been placed with C.A. CUTNER v. GREEN 1980 J.J. 277 a bank on successive one month periods of fixed deposit at the actual rates of interest obtainable in Jersey at such times. It was this calculation which the Court adopted for the default judgment. A trustee would, of course, be under a duty to obtain at least bank interest on trust funds. He could not properly leave them on current account not earning interest. This calculation simply shows what this trust fund would have earned had it been properly invested. The defaulting trustee, in our view, is liable to make good that loss of interest. Significantly, the sum awarded by the default judgment in this respect is described as lost interest. It is thus not awarded as interest on damages. We need not finally decide whether in Jersey law there is such a thing as damages for breach of trust. English law does not know of such damages, though Scots law does. Both counsel appearing before us told us that they would look to English law for authority on the appropriate remedy in a case such as this. A defaulting trustee in English law must make restitution. See for example Re Dawson, Union Fidelity Trustee Co. Ltd. v. Perpetual Trustee Co. Ltd., [1966] 2 N.S.W.R. 211, cited in Underhill s Law of Trusts & Trustees, 13th ed., at 702 (1979). This work and passage, we are told, was referred to before the Royal Court when the default judgment was obtained. The restitution will include restitution of that which the trust fund would have produced for the benefit of the cestui que trust if the trustee had not failed in his duty. This, we think, is answer enough to the argument developed before us to the effect that a Jersey Court cannot award compound interest. We doubt if the argument is correct in the full width stated. The argument depends on showing that prior to the Interest on Debts and Damages (Jersey) Law, 1971, the Court had no power at all to award interest except where an express agreement provided for it, and that because of proviso (a) to Article 1 of that Law, interest upon interest still cannot be awarded. If what is awarded in the present case is restitution and not damages, it seems likely that there never C.A. CUTNER v. GREEN 1980 J.J. 278 was any applicable prohibition against the award of interest. A passage from Le Geyt, 1 Manuscrits sur la Constitution, les Lois, & les Usages de Jersey, at 115 116 (1846 1847) relating to intérests pupillaires seems to afford support for this view. Alternatively we do not in any event think that the relevant award was an award of interest on damages. It was, in fact, itself an award of damages, namely the lost interest. Here, too, therefore, there is no error in law. Is there any injustice? In our view there is none. First, it seems eminently just that a defaulting trustee should make good in full that which has been lost, including any interest which would have been earned if he had done his duty. Secondly, it is, we think, significant that Rule 8/3(2) of the Royal Court Rules, 1968, requires an application to set aside a default judgment to be supported by an affidavit stating the circumstances under which the default has arisen. Earlier in this judgment we have set out the circumstances. Mr. Le Cras accepted before us that one can fairly say of Mr. Cutner that he took a deliberate risk which has gone wrong. He now wants another chance. The decision not to appear was not an error or oversight; it was a deliberate
calculation. In this the present case bears a considerable similarity to the case of Haigh v. Haigh (1886), 31 Ch. D. 478, which was placed before us by the respondents. In the circumstances we can see no injustice at all to Mr. Cutner in refusing an application by him to set aside this judgment. We are not surprised that the Lower Court refused to exercise the discretion conferred on it by Rule 8/3(1). Indeed, it would have surprised us had it done so. It was urged on us that in some way Mr. Cutner may be prejudiced in seeking a contribution from the other defendants in this action, in respect of whom this action has yet to be tried. This is not so. Mr. Cutner is in no way estopped from claiming contribution by this judgment. It was also urged on us that somehow a successful claim under an insurance scheme run by the Law Society of England depended C.A. CUTNER v. GREEN 1980 J.J. 279 on Mr. Cutner being allowed to enter an appearance. We were not told how this could be so. In any event, we do not see the relevance. There was some suggestion that the actual mathematics underlying the judgment were wrong, but this point was not pursued by Mr. Le Cras. Had this appeal fallen to be decided by us de novo we would have reached the same conclusion as the Royal Court. In the result this appeal fails, and Mr. Cutner must pay the costs.