Henderson J
IN THE GRAND COURT OF THE CAYMAN ISLANDS HOLDEN AT GEORGE TOWN, GRAND CAYMAN Cause No. 129 of 2011 BETWEEN: (1) GEORGE DAVIDSON (2) MAUREEN DAVIDSON (3) ALLENDALE LIMITED Plaintiffs AND: (1) KHALDOUN MOUALEM (2) STARMOUNT SECURITIES LIMITED (3) MARTIN SLOWE ESTATES LIMITED (4) MARTIN SLOWE (5) FINER HOMES LIMITED Defendants Appearances: Mr. Sam Dawson of Solomon Harris instructed Mr. Peter Jervis, Q.C. for the Plaintiffs/Respondents Ms. Laura Clemens of Bodden & Bodden instructed Mr. Tom Lowe, Q.C. for the Defendants/Applicants Before: Hon. Justice Henderson Heard: August 28 & 29, 2012 JUDGMENT This inter partes review of my earlier ex parte order extending the period of validity of the Writ of Summons presents two issues: 1) should the ex parte order be set aside on the ground that the extension deprives the Defendants of a limitation period defence and there was no good reason for the extension? 2) should the ex parte order be set aside on the ground that one of the plaintiffs had been removed from the register before the Writ was issued and, by the time it was restored to the register, the limitation period had passed? Nature of the Claim
The Statement of Claim in the present proceeding ("the Cayman Pleading") says that the Plaintiff Maureen Davidson ("Mrs Davidson") is the sole shareholder and beneficial owner of the Plaintiff Allendale Limited ("Allendale"). Allendale was incorporated in the Isle of Man in 1979. For many years, the Davidson's lived in Carlisle, England and owned property there.
In the late 1980s Allendale assembled a small commercial land assembly in central Carlisle. These properties were held in a partnership called "Portland Properties" ("Portland") in which Allendale owned a 25% interest. The Plaintiff George Davidson ("Mr. Davidson") owned 50% of Portland as a "bare trust trustee", an interest he held in trust for his wife. The remaining 25% interest was owned by the Defendant Khaldoun Moualem ("Mr. Moualem").
The properties, which were well situated for commercial and retail development, were contiguous and located in the Botchergate area in the heart of Carlisle. In addition to the Portland Properties, Mr. and Mrs. Davidson owned other properties in Carlisle. The Botchergate and other properties had been obtained with financing provided through a credit facility from Barclays Bank. Tenants in these properties were paying rent which amounted to approximately GBP 600,000 per year; the rental income was used to finance the borrowing from Barclays which was in excess of GBP 3 million by 1996.
Portland and the Davidsons had decided to seek planning approval for a 160,000 sq. ft. redevelopment of the Botchergate properties for a mixed retail and commercial use. By 1996, the Davidsons were residing permanently in the Cayman Islands. Because they were only in England periodically, they provided the 25% partnership interest in Portland to Mr. Moualem in exchange for his agreement to manage the Botchergate properties and their other business interests in their absence.
In December 1996 the plaintiffs were approached by the Defendant Martin Slowe ("Mr Slowe") on behalf of the corporate entities which are the second, third and fifth defendants (collectively the "Starmount Companies"). Mr. Slowe represented to the plaintiffs that the Starmount Companies were experienced commercial and retail property developers. The Starmount Companies and Mr. Slowe (together the "Starmount Defendants") owned other commercial properties in Botchergate which could be combined with the Botchergate properties to form a much larger and potentially more lucrative commercial land assembly upon redevelopment.
A joint venture agreement (the "Joint Venture Agreement") was entered into in December 1996 for the combination of all these properties into one land assembly. It was agreed that the Starmount Companies would finance the acquisition of certain additional commercial properties over which both the plaintiffs and the Starmount Companies had options. The Joint Venture Agreement provided that the Starmount Defendants would assume responsibility for paying the monthly financing costs incurred by Portland and owed to Barclays. Planning approval for a 160,000 sq. ft. mixed use commercial and retail development would be requested. With planning approval in hand, the properties were to be sold by tender to the highest available bidder. A formula was agreed upon under which the Davidsons and Allendale would receive through Portland a minimum of GBP 5 million plus a GBP 1 million payment upon signing the Joint Venture Agreement. The agreement guaranteed Portland a pro-rata share of any sale proceeds in excess of GBP 8 million. An important provision of the Joint Venture Agreement was a put option (the "Portland Notice") which allowed Portland to require its interest to be purchased by the Starmount Companies if an offer was made for the properties which exceeded GBP 8 million but which was not accepted.
The Joint Venture Agreement included a term by which the Starmount Defendants agreed to act with "utmost good faith" towards the plaintiffs and by which they agreed to try to maximise the return on the investment for both sets of parties. The parties also pledged to make full disclosure to each other of all relevant information about the progress of the joint venture.
During most of 1997, Mr. and Mrs. Davidson were distracted by a significant family difficulty. It is said that they were not in any event experienced property developers and for these reasons were "vulnerable" to the machinations of the Defendants, who were aware of their vulnerability and exploited it.
Planning approval was received in June 1997. By that time the joint venture partners had received two offers to purchase the freehold (but not the leasehold) interest "subject to certain reasonable and standard conditions" from two experienced commercial developers in the amounts of GBP 9.5 million and GBP 11 million respectively.
In about February 1997 Messrs. Moualem and Slowe agreed to vary the Joint Venture Agreement. Mr. Moualem agreed to substantial variations at Mr. Slowe’s request which were contrary to the interests of the plaintiffs and would reduce substantially their share of the proceeds of sale. The minimum sum of GBP 5 million which was payable to Portland was now said to be GBP 5 million less certain expenses (in the amount of about GBP 1 million) incurred by the Starmount Companies and less the interest payments made by the Starmount Companies to Barclays Bank on behalf of Portland. In addition, it is alleged that Messrs Slowe and Moualem and the Starmount Companies entered into a “supplemental agreement” which provided that Starmount’s minimum share of the sale proceeds would be increased.
It is said that these amendments to the Joint Venture Agreement were not disclosed “fully or at all” to Mr. and Mrs. Davidson. On August 5, 1997 Mr. Moualem sent a Deed of Variation to Mr. Davidson “without explanation” and requested that he sign it. At this point the Cayman Pleading is unclear. There may have been some conversation between the two men about the changes because it is alleged that Mr. Moualem sent the document while “purporting to make minor changes”. It is said that Mr. Davidson was not given “any full or adequate disclosure” about the changes.
It is also alleged that Mr. Slowe and the Starmount Companies made a secret agreement with Mr. Moualem in the summer of 1997. They agreed to pay to Mr. Moualem and his wife the sum of GBP 50,000 in exchange for his agreement to ensure that Portland did not exercise the Portland Notice put option. The two offers which had already been received could have triggered the delivery of the Portland Notice and thus the put option.
It is alleged that there were additional financial benefits bestowed upon Mr. Moualem by the Starmount Defendants "as part of an agreement to secure his allegiance". Mr. Moualem was induced by Mr. Slowe to terminate the tenancies of the Botchergate properties. Messrs. Slowe and Moualem agreed not to advise the Davidsons that the income of the partnership had dropped accordingly and that Barclays were no longer being paid.
The defendants proceeded to put the properties up for sale by tender in the fall of 1997. It is said that Mr. Slowe caused the tendering process to be conducted in a commercially unreasonable manner. He stipulated that no tender could be made unless the tendering party bid for both the freehold and the leasehold interests at equivalent values. This discouraged anyone with an interest in acquiring the freehold alone from tendering at all. Mr. Slowe also insisted that no offers could be made which were "subject to contract". It is said that this stipulation precluded any "serious" commercial property developer from bidding. The plaintiffs were not told of these conditions.
Although there were twenty-four commercial developers with an interest in tendering, not one did so. They were discouraged from tendering by the unrealistic terms and conditions.
The tendering process ended unsuccessfully on December 8, 1997. Mr. Slowe then declared that the Joint Venture Agreement had been frustrated and was terminated.
For several months, the Starmount Defendants paid the monthly interest charges to Barclays as they had agreed. When the Starmount Defendants and Mr. Moualem terminated all the tenancies on the Botchergate properties (without telling the plaintiffs they had done so) they stopped making payments on the Barclays Bank loan facility. By December 1997 the tendering process had ended without any offer having been received and the Barclays credit facility was in default.
Around December 1997 Mr. Davidson returned to Carlisle. He discovered some documents which suggested to him "some form of agreement" between Messrs. Moualem and Slowe about the variation of the Joint Venture Agreement. It is alleged that when he confronted Mr. Moualem about this, the latter agreed that he had been acting on behalf of Mr. Slowe and the Starmount Defendants. Mr. Davidson demanded that the Starmount Defendants honour their contractual obligation to pay the monthly interest charges (which were five months in arrears) but the latter refused. Mr. Davidson tried and failed to sell the Botchergate properties in order to discharge the debt to Barclays. He alleges that the Defendants interfered and "frustrated" that.
In February 1998 Barclays appointed an Administrative Receiver (the "Receiver") over the assets of Portland including the Botchergate properties and the other properties owned by the plaintiffs. It is alleged that the Defendants "persuaded" Barclays to do that. It is also said that the Starmount Defendants interfered with the Receiver's attempts to sell these properties and in essence convinced the receiver that they were the only viable purchasers. In the result, the Starmount Defendants acquired the Botchergate properties for GBP 2.9 million, less than half of the minimum price they had agreed to pay for the plaintiffs' interest, from the Receiver. The Defendants then proceeded to carry out the development for which planning approval had been obtained and have profited substantially from that. The result was virtual financial ruin for the plaintiffs.
On these allegations, the plaintiffs seek damages for conspiracy, intentional interference with economic relations, misrepresentation and bad faith negotiation, breach of duty of confidence, and breach of duty of good faith. They also seek a declaration that the defendants have been unjustly enriched to the detriment of the plaintiffs and an order for restitution. In the alternative, they ask for an accounting of the profits and an order requiring those profits to be paid to the plaintiffs. Procedural History 20. On August 27, 2003, Allendale and Mr. Davidson (but not Mrs Davidson) commenced an action against Messrs Moualem and Slowe, the Starmount Companies, Portland itself, and a law firm in the Carlisle District Registry, Queen's Bench Division in the High Court of Justice. At the time, although convinced they had been defrauded, the plaintiffs say they knew little of the circumstances.
In June 2004 the plaintiffs requested and obtained limited disclosure of certain documents. Apparently, the plaintiffs needed these in order to plead.
A Statement of Particulars of Claim was filed in the summer of 2004 alleging as much of the claim as was understood at that time. This pleading has not been provided to me.
The Starmount Defendants filed their Defence on September 16, 2004. Mr. Moualem filed a Defence and then an Amended Defence on February 8, 2005.
I have in evidence an unsigned draft copy of an Amended Particulars of Claim ("the Amendment"). The document is undated but contains at the end a reference to "this [blank] day of [blank] 2004". Mr. Robin Henry Ledgard Shaw, an English solicitor who represented the Starmount Defendants, has said in his affidavit (at para. 9) that the Amendment was "served in that action in 2004".
From this document, it is possible to infer the content of the original Particulars of Claim (to which I will refer as the "Original UK Pleading") and to examine the allegations added to it in the Amendment. For the most part, the allegations in the Original UK Pleading mirror those in the Cayman Pleading. Added to the Original UK Pleading was an allegation that Mr. Slowe instructed the English law firm to require a tendering party to submit an unconditional offer for three separate interests: the freehold and two leasehold interests. He also instructed them that the vendors "might disregard" a tender which did not include an offer at the "proper value" for each of the three interests. Thus, the Amendment clarifies the manner in which the plaintiffs were alleging that the tendering process had been sabotaged.
It was also alleged for the first time in the Amendment that the secret agreement between Messrs Moualem and Slowe included an agreement that the former would not challenge the tendering process (by invoking an arbitration clause) and would not allow Portland to dispose of its properties "in any other way" if the tendering process was (as envisaged) unsuccessful. Some new particulars about how Mr. Slowe and the Starmount Defendants interfered with the attempts of the Receiver to sell the properties were included as well.
On February 10, 2005 a Deputy Master ordered the plaintiffs to pay substantial security for costs, the first instalment to be paid by February 18, 2005 and the second by June 1, 2005 (later changed to June 15, 2005). A number of case management directions were given. The parties were ordered to make standard disclosure by list by April 15, 2005 (later changed to April 29) with inspection of documents seven days later; I am told by Counsel that inspection occurred on May 13, 2005. Witness statements were to be exchanged by June 3, 2005 (later changed to June 17, 2005).
The Defendants in England delivered their standard disclosure list of documents to the plaintiffs on April 28, 2005. Supplemental lists were delivered several months later.
The Davidsons and Allendale were unable to comply with the order for security for costs so the action was dismissed in December 2005.
At some time after the dismissal, Mr. Davidson made a complaint to the Cumbria police asserting that he had been defrauded. He says that he “followed up regularly with the Cumbria authorities from 2007 to 2009”. (There is no mention of 2006 in his evidence.) At some time in 2009 the police advised Mr. Davidson that they would not prosecute the Defendants. Mr. Davidson then “appealed this decision to higher police authorities in the United Kingdom in 2009 and 2010”. His appeal was not successful.
In 2009 Mr. Davidson “consulted” (vol. 1 p. 505) Mr. Jervis about the possibility of launching an action against the Defendants in the Cayman Islands. Mr. Jervis obtained the pleadings and witness statements filed in the UK action. For reasons which are not fully explained, Mr. Davidson did not at that time begin proceedings.
In 2011 Mr. Davidson “retained” (vol. 1 p. 504) Mr. Jervis to commence an action against the Defendants in the Cayman Islands. The Writ in the present action was filed April 7, 2011. Mr. Jervis wrote by email to the English solicitors to the plaintiffs on June 30, 2011 to say he had been retained. He observed that his client had provided him with a “substantial” number of documents but doubted that he had a "full set". He requested all of the documents and particulars as to when the various documents had been disclosed to the English firm.
It was not until the end of August 2011 that Mr. Jervis received the additional material he requested from the UK law firm. The Statement of Claim was filed on October 5, 2011. The Writ, which was valid for 6 months (until October 6, 2011) as leave to serve it out of the jurisdiction was required, had not yet been served. Leave to do so had not yet been obtained.
On October 5, 2011 the plaintiffs filed an application to extend the validity of the Writ for an additional four months and for leave to serve the Writ outside the Cayman Islands. The applications were heard on an ex parte basis by me on November 29 and 30, 2011 and adjourned generally to allow the plaintiffs to prepare and present further argument. On December 29, 2011 I granted a four-month extension of the validity of the Writ and granted leave to serve the Defendants outside the country. The present application is an inter partes review of both orders. Extension of the Validity of the Writ
The ex parte order extending the validity of the Writ was made pursuant to Order 6 Rule 8 of the Grand Court Rules, which reads as follows: 8. (1) For the purpose of service, a writ (other than an office copy of a writ) is valid in the first instance – (a) where leave to serve the writ out of the jurisdiction is required under Order 11, for 6 months; and (b) in any other case, for 4 months, beginning with the date of its issue and an office copy of a writ is valid in the first instance for the period of validity of the original writ which is unexpired at the date of issue of the office copy. (2) Subject to paragraph (3), where a writ has not been served on a defendant, the Court may by order extend the validity of the writ from time to time for such period, not exceeding 4 months at any one time, beginning with the day next following that on which it would otherwise expire, as may be specified in the order, if an application for extension is made to the Court before that day or such later day (if any) as the Court may allow. (3) Where the Court is satisfied on an application under paragraph (2) that, despite the making of all reasonable efforts, it may not be possible to serve the writ within 4 months, the Court may, if it thinks fit, extend the validity of the writ for such period, not exceeding 12 months, as the Court may specify.
The Writ was issued on April 7, 2011 but no attempt was made to serve the Writ during its initial period of validity which lasted until October 6, 2011. The Writ was valid for a period of 6 months as leave to serve the Defendants outside the jurisdiction was needed.
The Defendants say that the failure to make any attempt to serve the Writ within its initial period of validity is fatal to any request to extend the period of validity. In my view, the proposition is defeated by the wording of the Rule which, except for the first 4 words ("Subject to paragraph (3)") admits of no ambiguity and should be given its plain and ordinary meaning. When a plaintiff wishes to extend the validity of a writ for a period in excess of 4 months but not exceeding 12 months, the application is made under Rules 8(2) and 8(3). In such a case the court must be satisfied that it "may" not be possible to serve within 4 months despite all reasonable efforts. To reach that conclusion, the court will consider the circumstances of any unsuccessful attempt to serve the writ as they will ordinarily be suggestive of how much time will be needed to achieve service. Rules 8(2) and 8(3) are interrelated because the possibility of an extension for as long as 12 months under Rule 8(3) may arise during an application under Rule 8(2). The opening words of Rule 8(2) – "Subject to paragraph (3)" – are simply a reminder to the reader that on some Rule 8(2) applications it will be necessary to have regard to the terms of Rule 8(3).
However, an application to extend the validity of a writ for 4 months or less is made under Rule 8(2) alone, a rule which contains no reference to possible service problems. The ex parte application in the case at bar sought an extension of just 4 months so the entitlement to the order depended only upon the terms of Rule 8(2). The court had no need to consider the terms of Rule 8(3), a circumstance which was not altered by the opening words of Rule 8(2).
Of what must the court be satisfied before granting a 4-month extension? Rule 8(2) itself provides no guidance.
The question was examined in depth by the House of Lords in Kleinwort Benson Ltd. v. Barbrak Ltd. & others [1987] 1 AC 597, a decision also known as "The Myrto". At the time of the decision, the UK counterpart of our Order 6 rule 8(2) was a provision (also O. 6 r. 8(2)) in identical terms except that the maximum period of extension in the UK version is 12 months not four. Lord Brandon (with whom the other Law Lords agreed) concluded that "there must be implied in [the rule], as a matter of construction, a condition that the power to extend shall only be exercised for good reason" (at p. 622). He said that "it is not possible to define or circumscribe" the scope of the expression "good reason". The court must consider all of the circumstances and is entitled to have regard to the balance of hardship which includes any prejudice to a defendant (see p. 623).
Kleinwort has been applied twice in the Cayman Islands. In Powell v. Port Authority and Attorney General 2009 CILR 169, Foster, J of this Court held that the Plaintiff's alleged difficulty in obtaining legal aid was not, in all the circumstances, a good reason to extend the validity of the Writ. The limitation period had already expired so the Plaintiff lost her cause of action. Subsequently, in Masri and Manning v. Consolidated Contractors International Co. 2010 (1) CILR 265, Jones, J of this Court found that the plaintiffs' attorneys had failed to exercise sufficient diligence in relation to service and had consequently been unable to establish a good reason. Thus, it is well established that *Kleinwort* defines the test I must apply.
The only additional authority cited to me on this branch of the argument is the decision of the Court of Appeal in *Bayat and others v. Cecil and others [2011] EWCA Civ 135*. The action was described as a "substantial" claim for damages for breach of contract, fraudulent misrepresentation and conspiracy coupled with some claims for alternative remedies. It was unclear when the various causes of action arose; the appeal and the proceedings below were conducted on the basis that the extension of the validity of the Writ (which was granted at first instance) "arguably" permitted service after the limitation period (or periods) had passed.
The action was commenced originally in New York. After two years had passed the claim was dismissed without any evidence having been heard. An appeal was taken but dismissed after a further 14 months. An unsuccessful attempt to appeal the dismissal to the US Supreme Court occupied another year.
Sixteen months after the latter dismissal the plaintiffs commenced an action in London. Their Claim Form was marked "Not for service out of the jurisdiction". Four months after issuing their Claim Form the plaintiffs asked for a 6-month extension of the time for service but did not request leave to serve outside the jurisdiction.
The delay was caused by the plaintiffs’ search for funding for the litigation, which had been conducted over some 2 and ½ years but had not (yet) borne fruit. They were successful in obtaining the requested extension and two further extensions for what were apparently shorter periods.
The Court held (at para. 42 ff.) that the unsuccessful search for funding for the entire litigation was no good reason to delay service of the Claim Form although it might justify an extension of time for service of the Particulars of Claim or even a stay of proceedings until funding had been obtained. Any difficulty in meeting deadlines after service of the Claim Form should have been the subject of case management by the court.
The Court of Appeal found support for its position in Glass v. Surrendran, one of the appeals which had been before it in Collier v. Williams [2006] EWCA Civ 20; and further support in City & General (Holborn) Ltd. v. Structure Tone Ltd. and another [2009] EWHC 2139 (TCC). In Glass, the only reason advanced for not serving the Claim Form was that the Claimant was waiting for an accountant’s report (Bayat, para. 45). That would have justified an extension of time for serving the Particulars of Claim but was not a good reason for delay in service of the Claim Form. In City & General, the desirability of postponing production of the Particulars of Claim was held not to justify an extension of time to serve the Claim Form (ibid.). The seemingly conflicting decision in Steele v. Mooney [2005] EWCA Civ 96 was distinguished on the basis that the expert report for which the Plaintiff was waiting had been delayed by the failure of a defendant to produce some clinical notes (Bayat, para. 46).
The reason for the marked distinction between a deadline for service of initiating process and a deadline for some subsequent procedural step is obvious: it is the former which places the defendant on notice of the existence of the claim. Once a limitation period has passed and the additional 4 or 6 months within which service is to be effected have also elapsed, a defendant has a right to assume that he is no longer in jeopardy of legal action. This is an important right which underpins the rationale for limitation periods. In making this point the Court quoted (at para 48) the following passage from the judgment of Rix, LJ in Aktas v. Adepta [2010] EWCA Civ 1170: "91 The reason why failure to serve in time has always been dealt with strictly (even if CPR 7.6(3) represents a still further tightening of the rules where a retrospective request for an extension is made out of time) is in my judgment bound up with the fact that in England, unlike (all or most) civil law jurisdictions, proceedings are commenced when issued and not when served. However, it is not until service that a defendant has been given proper notice of the proceedings in question. Therefore, the additional time between issue and service is, in a way, an extension of the limitation period. A Claimant can issue proceedings on the last day of the limitation period and can still, whatever risks he takes in doing so, enjoy a further four month period until service, and his proceedings will still be in time. In such a system, it is important therefore that the courts strictly regulate the period granted for service. If it were otherwise, the statutory limitation period could be made elastic at the whim or sloppiness of the Claimant or his solicitors. For the same reason, the argument that if late service were not permitted, the Claimant would lose his claim, because it would become time barred, becomes a barren excuse. But even where the Claimant is well within the limitation period despite his delay in serving, there is a clear public interest in the rules and the courts curtailing the efficacy of a claim form which, because it has not been served, is not very different from an unposted letter. Therefore, the strictness with which the time for service is supervised has entirely valid public interest underpinnings which are quite separate from the doctrine of abuse of process. It is sufficient for the rules to provide for service within a specified time and for the courts to require Claimants to adhere strictly to that time limit or else timeously provide a good reason for some dispensation ...."
Regarding the effect of the lack of certainty about whether a limitation period had or would soon expire, the Court quoted (at para 53) with approval the following passage from City & General (Holborn) Ltd v. Royal and Sun Alliance plc [2010] EWCA Civ 911: "7 ...It is well-settled that when debatable issues of limitation arise, it is inappropriate to attempt to decide them on an interlocutory application for an extension of time for service of a claim form. If the Claimants' argument that the claims are not time-barred is correct, they can always begin a fresh action in which, if a time-bar is asserted, it can be adjudicated upon. It is enough for a defendant to show that he might be deprived of a defence of limitation if time for service of a claim form is extended; if he can show that, an extension should not be granted or, if granted without notice, such extension should be set aside, see Hashtroodi v Hancock [2004] 1 WLR 3206 (paragraph 18) and Hoddinott v Persimmon Homes (Wessex) Ltd [2008] 1WLR 806 (paragraph 52)". Finally, the court held at para. 54-55: [54] In para 181 of his judgment, when considering the balance of hardship, the judge referred to the Claimants' loss of their claim, but did not refer to the Defendants' loss of their limitation defence, other than to say that the extension in question was "only just outside the extended period". But in the law of limitation, a miss is as good as a mile. Furthermore, the primary question in a case where limitation is engaged is not whether the Defendants could or could not assume that the claim was no longer being pursued (to which the judge did refer). The primary question is whether, if an extension of time is granted, the defendant will or may be deprived of a limitation defence. [55] It is of course relevant that the effect of a refusal to extend time for service of the claim form will deprive the Claimant of what may be a good claim. But the stronger the claim, the more important is the defendant's limitation defence, which should not be circumvented by an extension of time for serving a claim form save in exceptional circumstances.
As can be seen from some of the terminology used above, Bayat was a decision arising from a CPR application. Nothing turns on that. The imperatives addressed in strong terms in the two judgments of the Court – the marked distinction between a deadline for service of originating process and subsequent procedural deadlines, and the "primary question" of whether an extension of time will or arguably might deprive a defendant of a limitation defence – are equally compelling considerations under our Rules.
In summary, I take the following from the decision in Bayat: 1) the applicant must satisfy the court that there is a "good reason" for an extension; 2) there are many reasons for delay, such as difficulty in obtaining funding or in obtaining an expert's report, which may well provide a good reason to postpone the delivery of a statement of claim or other procedural step subsequent to service but which will not amount to a good reason to extend the validity of the writ; 3) the primary question is whether the defendant will or may be deprived of a limitation defence; 4) if the facts relevant to a limitation defence are unclear, the court should resist any invitation to embark upon an extended trial of the issue; it is enough for a defendant to show that he might be deprived of a limitation defence by an extension; 5) if the defendant might be deprived of a limitation defence, an extension should be granted only in exceptional circumstances. I turn now to consider the application of these principles to the present dispute. Limitation Periods
The claims advanced by the plaintiffs are: conspiracy, intentional interference with economic relations, misrepresentation, "bad faith negotiation", breach of duty of confidence, breach of duty of good faith, unjust enrichment and restitution. They also request an accounting of the profits.
Conspiracy, intentional interference with economic relations, and misrepresentation are torts. The ordinary time limit for actions in tort (or contract) in the Cayman Islands is six years from the date on which the cause of action accrued: Limitation Law (1996 Revision) ss. 4(1) & 7. That six year period would have expired by the middle of 2004. Insofar as the claims are equitable claims for which no period of limitation is prescribed, the Court will (at least arguably) apply the rule that where the claim is only for damages and not for any equitable proprietary relief the Court will apply the comparable time limits at law by analogy: Tritton Development Fund Ltd. v. Fortis Bank (Cayman) Ltd. & others 2006 CILR 268 (Grand Court); Paragon Finance plc v. D B Thackerer & Co. [1999] 1 All ER 400 (Court of Appeal (Civil Division)); and see Goff & Jones, The Law of Restitution, London, 2007, para. 43-1 ff. Section 29 is also material: 29. An action for an account shall not be brought after the expiration of any time limit under this Law which is applicable to the claim which is the basis of the duty to account.
The claim for restitution (unjust enrichment) may be a special case but does not require individual consideration on this application because the question is not whether the Defendants have arguably been deprived of a limitation defence on each and every cause of action but whether they have arguably been deprived of a defence on one or more causes of action.
The essence of the claims is an allegation of fraud. In resisting any limitation period defence the plaintiffs wish to rely upon the power of extension found in s. 37(1), which reads: 37(1) Subject to subsection (3), where in the case of any action for which a period of limitation is prescribed by this Law, either – (a) the action is based upon the fraud of the defendant; (b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; or (c) the action is for relief from the consequences of a mistake, the period of limitation does not begin to run until the plaintiff has discovered, or could with reasonable diligence have discovered, the fraud, concealment or mistake. References in this subsection to the defendant include references to the defendant's agent, and to any person through whom the defendant claims, and his agent. (2) For the purposes of subsection (1), deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.
The question, then, is by what date can it be said that the plaintiffs had discovered, or could with reasonable diligence have discovered, the facts demonstrating they had been defrauded. The relevant limitation period would (again, arguably) expire 6 years after that date. The plaintiffs have asserted in argument that they "only learned these facts after they received the substantial disclosure of documents from their former partners after April 29, 2005".
Mr. Davidson's first affidavit asserts that 32. It was only after the Carlisle action was over that we had the opportunity of reviewing the substantial documents which had been provided to our solicitors in the summer and fall of 2005, and which were subsequently provided to us. We then learned about the full nature and particulars of the extent of the Defendants' conduct which is pleaded in this litigation. 33. In particular, while we know some elements, as described in the Statement of Particulars attached to this affidavit, we did not know many critical facts such as the manner in which Martin Slowe, with the knowledge of Moualem, had deliberately frustrated the tendering process in the fall of 1997, and the extent to which he had worked with Drivers Jonas, our real estate agents, but then ignored their advice to ensure that tendering process had adopted a commercially unreasonable and non-viable approach. 34. We had been advised that there were 24 developers interested in the property assembly prior to the tender. Two of those parties had submitted offers to me worth £9.5 million and ultimately £11 million respectively earlier in 1997. We were therefore stunned when, after the completion of the tendering process in early December 1997, there had not been a single tender offer. It was only when I received the substantial documents disclosed by the Defendants, my partners, after the summer of 2005, in the Carlisle litigation that I understood how this had occurred. 35. We did not know the details in which Slowe and Moualem had worked in conjunction to ensure that there were no offers for the Botchergate Property which were made during the period of tendering in the joint venture, nor why there were not any offers which could be made to us in January 1998 or to Barclays when they attempted to sell the properties in the spring of 1998. This was because, as we discovered when we reviewed the documents produced in 2005, Slowe and Moualem had, without our knowledge advised Drivers Jonas, Barclays, and the Receiver in 1998, that they would not consent to any sale or development of the Botchergate Properties owned by Portland Properties on a stand alone basis. 36. We also did not know all of the facts relating to the agreement between Moualem and Slowe to ensure that we could not exercise the Portland Notice in the summer and fall of 1997, that our tenancies would be terminated, and the Barclays credit facility be put into default deliberately by Slowe in circumstances that would certainly cause the insolvency of Portland Properties in late 1997 and allow Starmount and the other Starmount Defendants to acquire the property for a fraction of its commercial value. We only learned all of the facts related to this after receipt of the full documentary disclosure in the period following April 2005. 37. We also did not understand the extent to which Moualem and Slowe continued to conspire to work against our interest in the critical period from February 1998 through the summer of 1998 when they prevented me from selling the Portland Properties Botchergate Properties independently of the joint venture, prior to the appointment of a Receiver. 38. Slowe also worked against our interests after the appointment of the Receiver, by taking the position that he would not agree to a joint development of the entire Botchergate assembly (involving both the Botchergate and Starmount Properties) with any other parties, thus ensuring that there were other serious bidders for the Botchergate Properties from the Administrative Receiver. This caused serious injury to the Plaintiffs. 39. During the summer and fall of 2005 we received witness statements in the Carlisle claim. A copy of the witness statements which were received are attached as Exhibit GD9. We believe that the documents produced in 2005 disclose facts which prove that the Defendants’ statements are materially inaccurate.
Mr. Davidson’s reference to documents received “in the summer and fall of 2005” (para. 32) is regrettably imprecise. In any event, it seems to be accepted that inspection of these documents occurred on May 13, 2005. I will allow a further short period for the study of the documents and proceed on the basis that the material facts were discovered, or could with reasonable diligence have been discovered, by the plaintiffs by May 31, 2005. It follows that the limitation period for present purposes can be taken to have expired on May 31, 2011. As a consequence, I am satisfied that the extension would (at least arguably) have the effect of depriving the defendants of a limitation period defence. Is There a Good Reason for the Extension?
The only reason for the extension which has been put forward has to do, again, with documents. Mr. Jervis says that he was aware of the significance of the limitation period issue to his application for an extension and for his companion application for leave to serve out of the jurisdiction. In the course of his preparation he became aware of a disclosure of documents which had been made in the English litigation not in 2005 but in 2004. Depending on the nature and extent of this disclosure, it could have the effect of demonstrating that the relevant period started to run a year earlier (in 2004) and therefore expired some time in 2010. He did not wish to proceed with his twin applications until he had accurate information about what was disclosed in 2004. Mr. Davidson provides further detail: The Writ in this action was issued in the Grand Court of the Cayman Islands on April 7, 2011. In order to complete the preparation of the Statement of Claim and this affidavit in support of a request for an order to serve the Writ and Statement of Claim ex juris on the Defendants in the United Kingdom, it was necessary to obtain documents from our former solicitors in Carlisle, Cartmell Shepherd. As a result of the recent death of Nick Richards (our previous counsel) and other delays in Carlisle, our current counsel did not receive the requested documents until the end of August 2011. Therefore the Statement of Claim in this action and this affidavit could not be finalized until recently in September. (1st affidavit of George Davidson, para. 40) ... In particular, as I have deposed in my previous affidavits, I only became aware of many of the material facts which I understand give rise to a claim by us against our former partner Moualem and joint venture partners (the Starmount defendants) as the result of documents which we received in the Carlisle litigation later in 2005, which I only had a chance to study and review after that time. I was not aware that any documents had been produced to our solicitors in Carlisle in 2004 as is alleged and because of a question as to whether documents may have been produced in 2004, we made inquiries of Cartmell Shepherd in June, July and August 2011 to determine what, if any, documents had been produced in the Carlisle litigation to our solicitors prior to 2005. (3rd affidavit of George Davidson, para. 23) In his third affidavit Mr. Davidson also said: 65. As I indicated previously in my affidavits, we only learned many of the key facts relating to the misconduct of the defendants after we received and had an opportunity to study copies of the many documents produced for the first time in the Carlisle litigation in 2005 after the disclosure made in the summer of 2005 and the following. Many of these documents we only received later that year and studied after that. 66. As we were preparing the Statement of Claim with counsel in May and June of 2011 after the issuance of the Writ, I was asked whether documents had been produced to our solicitors in Carlisle in 2004 in order to assist with the preparation of the Particulars of the Claim. I was not able to answer this question since I was unaware of documents that may have been produced at that time. I therefore made requests in June and July 2011 of our solicitor in Carlisle, Nick Richards, at the firm of Cartmell Shepherd as to what documents had been produced in the litigation prior to 2005. Despite repeated requests I did not receive any information from Mr. Richards nor explanation for why I could not get any information or receive any documents. I specifically asked that all of the materials be made available to our counsel, Peter R. Jervis in Toronto. 67. After I was unable to obtain these documents, Mr. Jervis advised me that he contacted Cartmell Shepherd in June 2011 and made inquiries to speak to Mr. Richards and to obtain the documents and he was also unsuccessful. He then sent a detailed email dated June 30, 2011 (Exhibit 4) requesting production of these documents from Mr. Richards in Cartmell Shepherd. My experience was that Cartmell Shepherd was not cooperative and would not provide the documents to me at all. They then subsequently required a significant payment to begin the process to produce the documents. Mr. Jervis advised me and I believe that he also had significant difficulty obtaining the documents and it was only after repeated requests and a discussion with another solicitor at the firm, who refused to take his phone calls for several weeks in July and August 2011 that the documents were provided at the very end of August 2011 in a box delivered to the office of Davis LLP in Toronto, Canada. I had even offered to have my daughter and son-in-law, who now reside in England, to attend at the offices of Cartmell Shepherd if that would assist and speed up the process. I learned in August 2011 that Mr. Richards had died suddenly. No explanation was given for the lack of cooperation or responsiveness for these months. 68. The Statement of Claim and the first affidavit I filed to support the motion to serve this Claim ex juris were completed shortly after receipt of these documents. I understood that my affidavit had to disclose the particulars of the content of my solicitor's file and that it could not be completed until receipt of the material from the Cartmell Shepherd file, which they refused to produce for several months. 69. I understood that it was necessary to make disclosure as much as possible of the information that had been received in the Carlisle litigation including any documents produced in 2004 in order to swear an affidavit that made full disclosure to the court. This affidavit could not be sworn until we had received the documents in the possession of Cartmell Shepherd. I only learned at the end of August that Mr. Richards had died and perhaps the reason for the lack of cooperation from anyone was because of some issues affecting his health. In any event, we obtained the documents as quickly as we could, produced the Statement of Claim within a matter of weeks along with the supporting affidavit material which was then filed with the court.
When the documents were produced to Mr. Davidson's English solicitors in 2004 they were delivered to his agent. They were, if not in his possession, at least under his control. At any time, he could have requested copies for himself. He had an unfettered right to inspect and copy the documents. (It is not alleged that Mr. Davidson's English solicitors ever claimed a solicitors' lien over the documents.)
Assuming that Mr. Davidson's evidence provides a good reason for the delay from May 2011 to August 2011, it is still entirely inadequate as it leaves many important questions unanswered. Why was he, a claimant in a major commercial action, unaware of the first disclosure of documents by the defendants in 2004? Why did he remain unaware until Counsel raised the subject with him in 2011? It is said that the 2004 documents were needed in order for the plaintiffs to plead; did not the content of the pleading, which Mr. Davidson must have reviewed, alert him to the existence of the documents? Throughout his dealings with the Cumbria police and higher authorities, did they not question him about the content of the 2004 documents? When Mr. Davidson consulted Mr. Jervis in 2009, why were the 2004 documents not obtained and reviewed?
Mr. Davidson’s extensive affidavit evidence does not begin to address these issues. I am unable to accept the plaintiffs’ assertion that “the delay has been fully explained and was necessarily and unavoidably incurred” (Skeleton, para. 144).
In sum, I am asked to deprive the Defendants of an arguable limitation defence because the plaintiffs, having taken no (or at least inadequate) steps to familiarize themselves with the disclosed evidence in their earlier litigation, found, when they attempted to do so at the last minute in May 2011, that they could not do so in time. That is not a good reason to extend the validity of the Writ. Accordingly, I set aside my earlier ex parte Order and dismiss the application for an extension, with costs to the Defendants on the standard basis. Allendale
Allendale was dissolved on February 23, 2009 but restored to the Register in the Isle of Man on June 13, 2011. Thus, it was not in existence on the day the Writ was issued (April 7, 2011). In addition, it was not in existence on the day (May 31, 2011) upon which I have determined, for present purposes, that the limitation period expired. By the time the next step in the action was taken (on October 5, 2011) Allendale had been restored to life.
The Defendants say that an action can be commenced only by a legal entity with capacity to do so, that Allendale had no legal existence or capacity at all on April 7, 2011, and that as a consequence the proceedings are a nullity (Skeleton, para. 35).
A corporate entity draws its powers from its constitution, which is construed according to the law of the place of incorporation: Dicey, Morris & Collins, The Conflict of Laws, London, 2006, Rule 162. Moreover, "the existence or dissolution of a foreign corporation created or dissolved under the law of a foreign country is recognised in England": ibid., Rule 161. The capacity of a corporation to commence and maintain an action in the Cayman Islands is governed by our own domestic law, the lex fori. The principle that a company's capacity to sue is governed by its constitution and by the law of its place of incorporation is itself a part of the law of the Cayman Islands and of our civil procedure.
Allendale was not in existence on April 7, 2011 and had no capacity at all to commence an action. At any time prior to Allendale’s restoration on June 13, 2011 its name could have been struck from the style of cause upon application by a defendant. That does not mean the action itself was a nullity.
Allendale is just one of three plaintiffs. It has not been suggested that the other two plaintiffs, George and Maureen Davidson, suffer or have suffered from any incapacity to sue. For that reason the Writ and the proceedings cannot be considered a nullity. At the time of its issue one of the 3 plaintiffs did not exist (although this seemingly simple proposition is subject to what I say below). Upon application by the Defendants Allendale could have been removed as a plaintiff but the claims by the Davidsons would have remained extant. This fact – the presence in the action of two other viable plaintiffs – is a distinction which renders most of the authorities cited on this branch of the argument unhelpful.
Upon its restoration, Allendale was deemed by the law of its place of incorporation to have “continued in existence” throughout the period of its dissolution. I have expert evidence from Mr. Terence Patrick McDonald on the effect of the restoration in the law of the Isle of Man. He says: 4. The effect of the restoration of the Company to the Register is that:- (i) The Company is deemed to have continued in existence as if the name had not been struck off the Register and the Company has always been in existence. (ii) Any acts or proceedings taken by or concerning the Company between the date of its removal from the Register and its reinstatement on the Register are valid. (iii) In particular any steps taken by or concerning or taken on the Company's behalf in relation to any court proceedings between the date of the Company's removal from the Register and its reinstatement on the Register are validated. This evidence is uncontradicted and I accept it.
Allendale is deemed by the law of its place of incorporation to have continued in existence for all purposes related to this action as if its name had never been struck from the register. In the interval between April 7, 2011 and June 13, 2011 the claims of the Davidsons served to keep the action alive albeit in an irregular state.
Legal proceedings initiated by a single plaintiff which does not exist at the relevant date are, in general, a nullity: Dubai Bank Ltd. v. Galadari (No. 4), The Times, February 23, 1990; approved by the Court of Appeal in Fielding v. Rigby [1993] 1 WLR 1355 at 1359. However, the issuance of a Writ without authority on behalf of an existing plaintiff is not a nullity but an act capable of ratification: Presentaciones Musicales S.A. v. Secunda [1994] Ch. 271 (CA). In Presentaciones, the plaintiff company had been "dissolved" before the Writ was issued in its name but the law of its place of incorporation (Panama) permitted a dissolved company to commence an action within 3 years after its dissolution provided the action was then ratified by the (former) directors or the liquidators. The Writ in question had been issued within the limitation period but ratified after the period had passed. The Court of Appeal held that the ratification was effective and affirmed the refusal to strike the Writ. A critical element in the Court's analysis was the finding that under Panamanian law the plaintiff company continued to exist throughout the relevant period (see pp. 277 (majority) and 282 (per Roch, LJ)).
Similarly, Manx law asserts in the most unequivocal of terms that Allendale still maintained, by virtue of its restoration to the register, a corporate existence on the date the Writ was issued: "the effect of the restoration ... is that ... the Company has always been in existence" (s. 4(i)). Steps taken on behalf of the Company during its period in limbo are "validated" (s. 4(iii)). This applies specifically to "court proceedings" (ibid.).
In keeping with the decision in Presentaciones, this language should be given its plain and ordinary meaning: Allendale is now deemed to have continued in existence without interruption and did possess the capacity, on April 7, 2011, acting through its solicitor agents, to commence an action against the Defendants. The fact that the limitation period expired several weeks later is immaterial.
My conclusion is that Allendale’s removal from and restoration to the register is not a ground for setting aside my earlier ex parte order. Order My ex parte Order extending the period of the validity of the Writ of Summons is set aside, with costs to the Defendants on the standard basis. Dated this 4th day of December, 2012. Henderson, J. Henderson, J. Judge of the Grand Court