Davidson v Moualem

• Jurisdiction: Cayman Islands
• Judge: (Henderson, J.)
• Judgment Date: 04 December 2012
• Court: Grand Court (Cayman Islands)
• Date: 04 December 2012

Grand Court

(Henderson, J.)

G. DAVIDSON, M. DAVIDSON and ALLENDALE LIMITED

and

MOUALEM and FOUR OTHERS

P. R. Jervis, Q. C. and S.Dawson for the plaintiffs;

T. W. G. Lowe, Q. C. and Ms.L.Clemens for the defendants.

Cases cited:

(1) Aktas v. Adepta, [2011] Q.B. 894; [2011] 2 W.L.R. 945; [2011] 2 All E.R. 536; [2010] EWCA Civ 1170, dicta of Rix, L.J. considered.

(2) Cecil v. Bayat, [2011] 1 W.L.R. 3086; [2011] EWCA Civ 135, applied.

(3) City & Gen. (Holborn) Ltd. v. Structure Tone Ltd.UNKUNK, [2009] B.L.R. 541; [2009] EWHC 2139 (TCC); on appeal, sub nom. City & Gen. (Holborn) Ltd. v. Royal & Sun Alliance plc, [2010] B.L.R. 639; [2010] EWCA Civ 911, considered.

(4) Collier v. Williams, sub nom. Glass v. Surrendran, [2006] 1 W.L.R. 1945; [2007] 1 All E.R. 991; [2006] EWCA Civ 20, considered.

(5) Dubai Bank Ltd. v. Galadari (No. 4), The Times, February 23rd, 1990, referred to.

(6) Fielding v. Rigby, [1993] 1 W.L.R. 1355; [1993] 4 All E.R. 294, referred to.

(7) Kleinwort Benson Ltd. v. Barbrak Ltd., The Myrto (No. 3), [1987] A.C. 597; [1987] 2 W.L.R. 1053; [1987] 2 All E.R. 289; [1987] 2 Lloyd”s Rep. 1; [1987] 1 FTLR 43, applied.

(8) Masri v. Consolidated Contractors Intl. Co. SAL, 2010 (1) CILR 265, considered.

(9) Paragon Fin. plc v. D.B. Thakerar & Co., [1999] 1 All E.R. 400; referred to.

(10) Powell v. Port Authority, 2009 CILR 169, considered.

(11) Presentaciones Musicales S.A. v. Secunda, [1994] Ch. 271; [1994] 2 W.L.R. 660; [1994] 2 All E.R. 737, considered.

(12) Steele v. Mooney, [2005] 1 W.L.R. 2819; [2005] 2 All E.R. 256; [2005] EWCA Civ 96, considered.

(13) Tritton v. Fortis Bank (Cayman) Ltd., 2006 CILR 268, referred to.

Legislation construed:

Grand Court Rules, O.6, r.8: The relevant terms of this rule are set out at para. 36.

Limitation Law (1996 Revision), s.29: The relevant terms of this section are set out at para. 50.

s.37: The relevant terms of this section are set out at para. 52.

Civil Procedure-writ of summons-extension of validity-good reason required to extend validity under GCR, O.6, r.8(2)-justified postponement of procedural steps subsequent to service not necessarily good reason-primary question whether defendant will or may be deprived of limitation defence-delayed review of evidence from earlier litigation not good reason

Conflict of Laws-companies-legal proceedings-proceedings by dissolved company as single plaintiff generally null-if company later restored to register, law of place of incorporation may allow retrospective validation of proceedings-existence of additional plaintiffs without incapacity may also keep action alive

The plaintiffs brought various claims in the Grand Court alleging fraud by the defendant.

The first and second plaintiffs, Mr. and Mrs. Davidson, owned property in Carlisle, England. The third plaintiff, Allendale Ltd., was incorporated in the Isle of Man in 1979 and Mrs. Davidson was its sole shareholder and beneficial owner. In the late 1980s, Allendale set up a commercial land assembly in Carlisle (‘the Botchergate properties’), held in a partnership called Portland Properties of which Allendale owned 25%, Mr. Davidson owned 50% as trustee for his wife and the first defendant, Mr. Moualem, owned the remaining 25%. The Davidsons” properties were obtained through a credit facility from Barclays Bank which was financed from the rental income from the properties.

In 1996, the Davidsons provided Allendale”s 25% partnership interest in Portland to Mr. Moualem in exchange for his agreement to manage the properties on their behalf. The plaintiffs were later approached by the fourth defendant, Mr. Slowe, on behalf of the second, third and fifth defendants (‘the Starmount companies’). Mr. Slowe represented that he and the Starmount companies (‘the Starmount defendants’) owned other properties which could have been combined with the Botchergate properties to form a larger and more lucrative land assembly upon redevelopment. A joint venture agreement was entered into which provided that the Starmount companies would finance the acquisition of additional properties over which both the plaintiffs and the Starmount companies would

have options and that the Starmount defendants would pay the monthly financing costs owed to Barclays. Once planning approval had been obtained, the properties would be sold by tender and the Davidsons and Allendale would receive, through Portland, a minimum of £5m. plus a £1m. payment upon signing the joint venture agreement. The agreement further guaranteed Portland a pro rata share of any sale proceeds in excess of £8m. and a put option (‘the Portland notice’) allowed it to require its interest to be purchased by the Starmount companies if an offer were made exceeding £8m. which was not accepted.

In 1997, Mr. Moualem, at Mr. Slowe”s request, agreed to variations to the joint venture agreement which were contrary to the plaintiffs” interests and substantially reduced their share of the proceeds of sale. Planning approval was received and two offers to purchase the freehold interest were made which exceeded £8m.-but Mr. Moualem did not trigger the delivery of the Portland notice and thus the put option. Further, he was induced by Mr. Slowe to terminate the tenancies of the properties and both agreed not to advise the Davidsons that the income of the partnership had dropped accordingly and that Barclays were no longer being paid. The properties were subsequently put up for sale by tender; Mr. Slowe, however, set stringent conditions for tendering and the process ended unsuccessfully. He then declared that the joint venture agreement had been frustrated and was terminated.

Around December 1997, Mr. Davidson discovered documents which suggested that there had been some agreement between Moualem and Slowe about the variation of the joint venture agreement and, in August 2003, he and Allendale commenced an action in the English High Court against, inter alios, Moualem and Slowe, the Starmount companies and Portland. In June 2004, Mr. Davidson”s English solicitors obtained limited disclosure of certain documents needed in order to complete their proceedings. The parties were subsequently ordered to make standard disclosure and inspection of these additional documents occurred on May 13th, 2005. The action was dismissed in December 2005.

In 2009, Allendale was dissolved and Mr. Davidson obtained the pleadings filed in the English proceedings with a view to launching an action against the defendants in the Cayman Islands. On April 7th, 2011, the plaintiffs issued a writ of summons in the Grand Court seeking damages for conspiracy, intentional interference with economic relations, misrepresentation, bad faith negotiation, breach of duty of confidence and breach of duty of good faith. They also sought a declaration that the defendants had been unjustly enriched to the detriment of the plaintiffs and an order for restitution; alternatively, they sought an accounting of the profits and an order requiring those profits to be paid over. Allendale was subsequently restored to the register in the Isle of Man. However, the writ, which was only valid until October, was not served, neither was leave to serve obtained. The plaintiffs filed an application under GCR, O.6, r.8(2) to extend the validity of the writ for an additional four months and for leave to serve the writ outside Cayman. These applications were granted

by the Grand Court (Henderson, J.) on an ex parte basis and the present application was an inter partes review of both orders.

The plaintiffs submitted that (i) to complete the statement of claim and affidavit in support of a request to serve the writ and statement of claim, it was necessary to obtain certain documents from the earlier English action; (ii) these documents were not received until the end of August 2011; (iii) the statement of claim and affidavit could not therefore be finalized until September; and (iv) this delay provided a good reason to extend the validity of the writ.

The defendants submitted in reply that (i) the plaintiffs” failure to make any attempt to serve the writ within its initial period of validity was fatal to their application; (ii) in any event, an action could be commenced only by a legal entity with capacity to do so; and (iii) since Allendale had no legal existence or capacity on the day the writ was issued, the proceedings were accordingly a nullity.

Held, dismissing the application:

(1) An application under GCR, O.6, r.8(2) to extend the validity of a writ for four months or less had to satisfy the court that there was a ‘good reason’ for an extension. Whilst there were many reasons for delay which provided a good reason to postpone some procedural step subsequent to service, not all were necessarily good reasons to extend the validity of the writ-the reason being that it was service of the writ which placed the defendant on notice of the existence of the claim. The primary question the court would normally have to consider was whether the defendant would be deprived of a limitation defence by an extension. If the facts relevant to such a defence were unclear, the court should not embark upon an extended trial of the issue; it was enough for a defendant to show that he might be deprived of a limitation defence. Further, an extension should be granted only in exceptional circumstances. It was not, however, a requirement that it might not have been possible to serve the writ within four months despite all reasonable efforts, which was restricted to circumstances in which r.8(3) applied (paras. 37–48).

(2) An extension would arguably deprive the defendants of a limitation defence. Conspiracy, intentional interference with economic relations and misrepresentation were torts for which the ordinary time limit was six years from the date on which the cause of action accrued (Limitation Law (1996 Revision), ss. 4(1) and 7). Insofar as the...