Arnage Holdings Ltd v Walkers (A Firm)
| Jurisdiction | Cayman Islands |
| Judge | David Doyle |
| Judgment Date | 05 May 2021 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO: FSD 105 of 2014 (DDJ) |
The Hon. Justice David Doyle
CAUSE NO: FSD 105 of 2014 (DDJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
O33 r 3 GCR: preliminary issues, separate trial of separate issues; principles to be applied and guidance; English and local precedents; case management considerations
Mr. Graham Chapman QC, Mr. Ben Hobden, Ms. Roisin Liddy-Murphy and Ms. Sean-Anna Thompson for the Plaintiffs
Mr. Mark Simpson QC, Mr. Sebastian Said, Mr. Nico Leslie, Mr. Daniel Hayward-Hughes and Ms. Mehreen Siddiqui for the Defendant
In this judgment I decide that certain issues (namely retainer, duty and breach) should not, as requested by the Plaintiffs, be heard at a separate trial in advance of other issues including loss, causation and illegality. The judgment refers to the relevant law in respect of preliminary issues and split trials, the position of English and local precedents, gives brief reasons for the decision reached by the court and makes provision for certain case management directions.
The papers in respect of this matter were placed before me on 23 March 2021 and I noted that the matter had been listed for 19 April 2021.
On 24 March 2021 on my direction an email was sent to the attorneys in this case requiring them to file an agreed reading list and electronic bundle before 4pm on 1 April 2021 and position statements (no more than 20 pages) before 4pm on 8 April 2021. It was further indicated that the matter remained listed on 19 April 2021 with a start time of 9:30am and a maximum of 2 hours allocated.
I am grateful to the attorneys Mr. Graham Chapman QC, Mr. Ben Hobden for the Plaintiffs and Mr. Mark Simpson QC and Mr. Sebastian Said for the Defendant who appeared at the hearing for their assistance to the court.
Following the judgment of the Court of Appeal in these proceedings being handed down on 1 February 2021 the attorneys for the Plaintiffs wasted no time and filed an application by way of summons dated 4 February 2021 (the “Preliminary Issues Summons”) seeking the following order:
“The issues as to (i) whether the Plaintiffs (or any of them) were clients of the Defendant; (ii) whether the Defendant owed duties to the Plaintiffs (or any of them) and, if so, which duties; and (iii) whether the Defendant breached any such duty and, if so, in what respect(s) (the “Preliminary Issues”) be tried as preliminary issues (the “Preliminary Issues Trial”).”
The Plaintiffs also sought directions in respect of the exchange of pleadings on the Preliminary Issues and sought a hearing post 1 August 2021 with an estimate of 5 days. Further directions were sought in connection with trial bundles, skeleton arguments and authorities, discovery and witness statements and oral evidence at the Preliminary Issues Trial.
The present issue before the court for determination is whether it is appropriate to proceed to determine the Preliminary Issues at the proposed Preliminary Issues Trial.
The Defendant (“Walkers”), a Cayman Islands law firm, describe this case as “a highly unusual professional negligence action” in which the “Plaintiffs seek over US$390 million in damages, reflecting the alleged value of assets held by Ms. Rabello [the Fourth Plaintiff] and the Second and Third Plaintiffs (“Arnage” and “Brooklands”) that have been incorporated by the Brazilian Courts into the bankruptcy of a petrochemical conglomerate (“Petroforte”). There is also an unquantified claim for the loss of the entirety of Ms. Rabello's assets / estate” (paragraph 9 of Walkers' position statement dated 8 April 2021).
A generally endorsed writ was filed as long ago as 4 February 2014. On 24 July 2014 Walkers applied for a strike out and/or summary judgment and/or security for costs. On 18 September 2014 the Plaintiffs applied for a strike out or summary judgment. There were various delays beyond the control of the court and on 24 July 2019 the Hon. Anthony Smellie, Chief Justice, handed down his judgment in favour of the Plaintiffs as to liability with loss and damages to be assessed. The Chief Justice dismissed an application by Walkers to strike out the case on the ground of illegality. The Chief Justice declined to grant security for costs. The matter went to the Court of Appeal and in a judgment delivered on 1 February 2021, the Court of Appeal allowed Walkers' appeal against summary judgment and dismissed the appeal against the refusal to strike out the Plaintiffs' case. The attorneys have indicated that the appeal against the refusal to grant security for costs is due to be heard by the Court of Appeal on 25 May 2021.
In essence, the Plaintiffs claim that they were clients of Walkers and that in breach of duties of trust, loyalty and confidence owed to them as clients or former clients Walkers accepted instructions from Dr. Alfonso Braga (“Dr. Braga”), a Brazilian court-appointed trustee of bankruptcy for the estate of Petroforte.
Dr. Braga sought to identify the ultimate beneficial owner (“UBO”) of Securinvest (a company owned by Arnage and Brooklands) which was said to have been used as a vehicle of fraud on Petroforte. As Arnage and Brooklands were incorporated in the Cayman Islands Dr. Braga decided to come to this jurisdiction and Walkers accepted his instructions. They obtained two Norwich Pharmacal disclosure orders on 27 May 2010 and 2 July 2010. The disclosure indicated that Ms. Rabello was the UBO of Securinvest.
To cut a long story short, the courts in Brazil extended the Petroforte bankruptcy to her personal assets and she was also made bankrupt. The losses claimed in these proceedings are alleged to flow from the inclusion of Securinvest's and Ms. Rabello's assets into the Petroforte estate which is further alleged to have been the consequence of Walkers' breaches of duty in accepting instructions from Dr. Braga and obtaining disclosure that Ms. Rabello was the relevant UBO of Securinvest.
The Plaintiffs attribute their losses to the Cayman disclosure obtained by Walkers for Dr. Braga.
In addition to issues of liability, causation and quantum Walkers have also raised the defence of illegality. Walkers aver that it was Ms. Rabello's own deception and participation in the fraud on the creditors of Petroforte which brought about her personal bankruptcy and losses. On the issue of illegality, the court will, as stated by Sir Alan Moses in the Court of Appeal (at paragraph 169 of his judgment), have to assess the extent and gravity of Ms. Rabello's wrongdoing and weigh any proven fraud committed by Ms. Rabello against any breaches of Walkers' duties to any of the Plaintiffs established as its clients. The court will have to determine whether, in the public interest, it is proportionate to bar Ms. Rabello's claim. In the words of Sir Alan Moses “much will depend on the facts as found at trial.”
There are references to lies in respect of the identity of the UBO of Securinvest prior to the disclosure being ordered and Walkers' position is that if Ms. Rabello had told the truth in September 2009, then Dr. Braga would have had no need to go to the Cayman Islands in search of the correct identity of the UBO of Securinvest. Walkers add that if she had told the truth in 2009 her personal bankruptcy and the losses would have occurred in any event. Walkers deny that the Superior Tribunal de Justica in Brazil relied on the disclosure obtained in the Cayman Islands and raise various other causation issues some of which are referred to in the judgment of the Court of Appeal and I do not repeat them within this brief overview.
Under the Grand Court Rules (“GCR”) the court must seek to give effect to the overriding objective of dealing with matters in a just, expeditious and economical way. The parties and their attorneys are obliged to help the court to further the overriding objective. This required co-operation and assistance is essential to the administration of justice.
Furthermore, the court must further the overriding objective by actively managing proceedings. This may include identifying the issues at an early stage, deciding promptly which issues need full investigation and trial and accordingly disposing summarily of the others, deciding the order in which issues are to be resolved, dealing with as many aspects of the proceeding as is practicable on the same occasion and giving directions to ensure that the trial proceeds quickly and efficiently.
Whenever a proceeding comes before the court, the court should also consider making orders of its own motion for the purpose of giving effect to the overriding objective of the GCR.
Under Order 33 rule 3 of the GCR, it is provided that the court may order any question or issue arising in a cause or matter, whether of fact or law or partly of fact and partly of law, and whether raised by the pleadings or otherwise, to be tried before, at or after trial of the cause or matter, and may give directions as to the manner in which the question or issue shall be stated.
Under Order 33 rule 4(2) of the GCR in actions begun by writ different questions or issues may be ordered to be tried by different modes of trial and one or more questions or issues may be ordered to be tried before the others.
Under Order 33 rule 7 of the GCR, it is further provided that if it appears to the court that the decision on any matter or issue arising in a cause or matter and tried separately from the cause or matter substantially disposes of the cause or matter or renders the trial of the cause or matter unnecessary, it may dismiss the cause...
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