GH Ltd v Bould

• Jurisdiction: Cayman Islands
• Judge: (Zacca, P., Georges and Kerr, JJ.A.)
• Judgment Date: 20 April 1995
• Court: Court of Appeal (Cayman Islands)
• Date: 20 April 1995

Court of Appeal

(Zacca, P., Georges and Kerr, JJ.A.)

G.H. LIMITED

and

BOULD and PHYLISSON LIMITED

R.D. Alberga, Q.C. and B. Ashenheim for the appellant;

J.A. Leo-Rhynie, Q.C. and A. Turner for the respondents.

Cases cited:

(1) Brinsmead v. Harrison(1872), L.R. 7 C.P. 547.

(2) Cayman Arms (1982) Ltd. v. English Shoppe Ltd., 1990–91 CILR 299, distinguished.

(3) Gleeson v. J. Wippell & Co. Ltd., [1977] 1 W.L.R. 510; [1977] 3 All E.R. 54, distinguished.

(4) Goldrei, Foucard & Son v. Sinclair, [1918] 1 K.B. 180; [1916–17] All E.R. Rep. 898, distinguished.

(5) Henderson v. HendersonENR(1843), 3 Hare 100; 67 E.R. 313; [1843–60] All E.R. Rep. 378, considered.

(6) India (Republic) v. India S.S. Co. Ltd., [1993] A.C. 410; [1993] 1 All E.R. 998, distinguished.

(7) Kendall v. HamiltonELR(1879), 4 App. Cas. 504; [1874–80] All E.R. Rep. 932.

(8) King v. HoareENR(1844), 13 M. & W. 494; 153 E.R. 206.

(9) Yat Tung Inv. Co. Ltd. v. Dao Heng Bank Ltd., [1975] A.C. 581, considered.

Estoppel-res judicata-party estopped-doctrine applicable to all parties to litigation-party may be barred from raising issue although successful on same issue in earlier proceedings

Estoppel-res judicata-joinder of parties-doctrine bars new action against person who ought to have been joined as party in earlier proceedings-plaintiff estopped from making new claims if could have been brought in previous proceedings

Tort-damages-measure of damages-difference between actual expenditure and taxed costs awarded in earlier proceedings not allowable head of damages

The respondents applied to strike out the appellant”s writ and statement of claim in deceit.

The appellant company was formed to develop and market certain property and the first respondent was its promoter and sole director. The vendor had agreed to sell the property to the appellant if certain conditions were fulfilled, one being that the first respondent had to secure contracts of sale for all the apartments in the property by a certain date. In order to meet this target the first respondent, acting through the second respondent company of which he was the sole beneficial owner, contracted with the appellant to purchase one of the apartments. He also deceived both the vendor and the investors in the project by leading them to believe that he was not the owner of the second respondent.

Dissatisfied investors took control of the appellant company which subsequently purported to rescind the contract on the ground of the first respondent”s non-disclosure of his ownership of the second respondent. The second respondent brought an action claiming that the notice of rescission was ineffectual and claiming damages for breach of contract. The appellant counterclaimed for a declaration that the rescission was valid, and in the alternative for damages for conspiracy. The Grand Court (in proceedings reported at 1992–93 CILR 160) held that the second respondent was not entitled to relief because of its deceit and that the appellant was entitled to rescission but should repay all instalments, interest and expenses.

The appellant then brought the present proceedings against the respondents for deceit, claiming as damages the difference between the taxed costs and its actual expenditure in the earlier proceedings, and for an injunction restraining the respondents from dealing with the money paid to the second respondent pursuant to the earlier judgment. The Grand Court (Schofield, J.) struck out the action, holding that the issues raised were res judicata in the wider sense of the expression since the issues had been raised in the earlier proceedings and a claim in deceit could and should have been raised there.

On appeal, the appellant submitted that (a) the doctrine of res judicata only applied to bar the re-litigation of issues by the unsuccessful party to earlier proceedings; (b) it only applied to bar the raising of issues which were properly the subject-matter of previous proceedings and did not bar proceedings against persons who could have been joined as parties in earlier proceedings; (c) the damages for deceit claimed in the present proceedings could not have been claimed in the earlier proceedings as the loss was only suffered when the earlier action had ended favourably for the appellant and it had been calculated that there was a deficit between the sum actually expended on pursuing the proceedings and that actually received following the taxation of costs; and (d) in any case, there was a good reason for not amending the pleadings in the earlier action to include a claim in deceit because had this been done, it would not have been possible to claim the difference between the actual expenditure on the suit and the taxed costs received.

Held, dismissing the appeal:

(1) The doctrine of res judicata required that all parties to litigation bring forward their whole case whenever a given matter became the subject of litigation or be barred from doing so later. It followed that even though the appellant had been the successful party in the earlier proceedings in which the first respondent”s deceit had been established, its claim was res judicata (page 369, lines 17–22).

(2) The doctrine applied generally to preclude a party to proceedings raising issues which could and should have been raised in earlier proceedings. Since the extent of the first respondent”s deceit became apparent during the earlier proceedings and the appellant had not at that time specifically advanced a claim based upon it, it was barred from doing so now (page 366, lines 25–32;page 369, lines 23–34).

(3) Moreover, the doctrine applied to bar a new action against a person who should have been joined as a party in earlier proceedings. The first respondent was known to be the alter ego of the second respondent and had a substantial identity of interest with it. Had the appellant sought to join the first respondent in the earlier proceedings it would inevitably have been successful and it could have obtained a ruling on his liability even if the quantum of damages would have had to be assessed at a later date. In

any event, the appellant could not have claimed as damages in the present proceedings the difference between its expenditure and the taxed costs in the earlier proceedings (page 368, lines 25–32;page 369, lines 40–45;page 370, lines 18–24).

(4) It followed that the trial judge had been correct in striking out the action and the appeal would therefore be dismissed (page 372, lines 14–19).

30	ZACCA, P.: This is an appeal from a ruling by Schofield, J. striking
out the writ of summons and the statement of claim in this action as an
abuse of the process of the court and as being vexatious.
G.H. Ltd., the appellant-plaintiff, was formed for the purpose of
developing and marketing a luxury condominium complex called the
35	Great House on Seven Mile Beach in Grand Cayman. The first respondent,
Martyn Bould, was the promoter of G.H. Ltd. and, on June 3rd, 1988, was
its sole director. Mr. Bould was also the sole beneficial owner of the
second respondent, Phyllisson Ltd., a company limited by guarantee.
The land on which the Great House was to be built was owned by Mr.
40	Webster through a family company, Newco. Newco, by an agreement,
granted G.H. Ltd. an option to purchase the land for US$4m.; payable as to
$2m. in cash and on completion of the sale by the issue to Newco of
US$2m. in preference shares in G.H. Ltd. The capital of G.H. Ltd.
consisted of $50,000 in ordinary shares of $1 each and $4.5m. in preferred
45	shares also of a par value of $1 each. Of the preferred shares $2m. would

have to be issued to Newco on completion of the sale and $2.5m. would be
issued for cash to other investors. The option to purchase expired on June
30th, 1988 and could not be exercised unless two conditions were
met-Mr. Bould had to raise $2.5m. in cash from the sale to investors of
5	the preference shares and he had to secure contracts for the purchase of 12
apartments.
On June 3rd, 1988, while Mr. Bould was the sole director of G.H. Ltd.,
Phyllisson entered into a contract with G.H. Ltd. to purchase Apartment
21 in the Great House complex. Mr. Bould did not notify the intended
10	investors in G.H. Ltd. that he was the sole beneficial owner of Phyllisson.
Indeed, he told Mr. Webster in May 1988 that Phyllisson was owned by an
Englishman well known to him (Mr. Bould). In November 1988 he told
another investor in G.H. Ltd. that Phyllisson was owned by a friend of his
in England and that he was a minor partner-later corrected to
15	shareholder-in the company.
As the development proceeded, Mr. Webster and three other major
investors in the project grew dissatisfied with Mr. Bould”s management.
Eventually they gained control of G.H. Ltd. and on September 28th, 1990
the company served notice on Phyllisson that it was rescinding the
20	contract for the purchase of Apartment 21 on the ground that-
‘Martyn Bould the sole director of G.H. Ltd. at the date of [sic] the
contract was made did not disclose to G.H. Ltd. or to its shareholders
that he had a financial interest in Phyllisson Ltd. which he should
have disclosed to G.H. Ltd. and that Phyllisson Ltd. was at that time
25	aware of Martyn Bould”s interest in G.H. Ltd.’
Phyllisson filed an action-No. 401 of 1990-against G.H. Ltd.
claiming a declaration that the notice of rescission was ineffectual, an
order that G.H. Ltd. perform its obligations under the contract and
damages for breach of contract. G.H. Ltd. counterclaimed for a declaration
30	that it was entitled to rescind the contract and in the alternative for

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