Al-Ibraheem v Bank of Butterfield International (Cayman) Ltd et Al
| Jurisdiction | Cayman Islands |
| Judge | Smellie, C.J. |
| Judgment Date | 08 August 2000 |
| Court | Grand Court (Cayman Islands) |
| Date | 08 August 2000 |
Smellie, C.J.
Grand Court
Civil practice and procedure - Costs — Wasted costs — Trial judge to identify wasted costs from own knowledge of conduct of proceedings and apportion costs broadly — Assessment of quantum may be referred for taxation.
Trusts - Indemnity from trust fund — Trustee not entitled to preemptive order to cost of defending challenge to trust amendment unless reasonably and properly incurred — Court may order investigation into trustee's conduct of litigation before deciding costs issue.
Legal profession - Attorney — at — Law — Personal liability — Wasted costs — Punitive order possible for payment of won client's and/or other parties' costs of litigation unnecessarily incurred due to attorney's professional misconduct.
Civil practice - Trusts — Costs — Indemnity from trust fund — Beneficiary entitled to costs of successful challenge to trust amendment based on settlor's incapacity if brought for benefit of trust as a whole.
A.J. Simmonds, Q.C., A. Arthur and A.J. Jones for Maples & Calder.
L.F.R. Cohen, Q.C., and W.J. Helfrecht for the plaintiff (appearing as amici curiae).
K.J. Farrow for the trustee (holding a watching brief).
On 10th April, 2000, this Court directed an inquiry as to whether Maples & Calder (“M&C”) should pay the whole or some of the costs of this action on the grounds that they have been guilty of misconduct within the meaning of Myers v. Elman (4), resulting in wasted costs in the action.
A notice setting out the particulars of misconduct alleged was issued y the Court on 27th April and served upon M&C. Reasons for the decision taken by the Court of its own motion to issue the notice were given in writing on 10th April. In essence, the misconduct alleged is the failure on the part of M&C to inform the Court of crucially important information within their knowledge gained as the legal advisers to the trustee. This information related to the incapacity and incompetence of the settlor of the trust. The concern is whether its timely disclosure would have saved significant costs expended in the action.
The plaintiff's complaints that grounded her originating summons by which the action was commenced in September 1996 were complaints that the settlor, her father, had become incapacitated and incompetent to make decisions about the trust and to give valid and effective receipt for capital paid out from the trust ostensibly for his benefit. A particular concern raised in the originating summons was whether at the time when he purportedly effected the second amendment to the trust deed in July 1996, by which contingent beneficial interests were changed, the settlor had the capacity to do so.
A further ground upon which the notice directed an inquiry arises from action taken by M&C, or by the trustee upon M&C's advice, when it was discovered that the second amendment had not been notarized. Although all recognized that the second amendment was invalid without the notarization required by the deed of settlement, M&C advised or took steps to obtain notarization or to facilitate notarization without referring the matter to the Court, which had by then been seised of this action for some 2 1/2 years.
M&C deny that any of the actions, omissions or advice questioned in the notice can be described as professional misconduct. They naturally view the allegations with utmost concern, as they regard their professional reputation as being at risk. Mr. Simmonds affirmed to me that M&C will vigorously defend their conduct at any subsequent hearing.
This is the ruling following the inter partes hearing – taken at the request of M&C – on whether the notice should have been issued in the first place. I accepted that such an inter partes hearing was appropriate, as its purpose was to enable the Court to reconsider whether the inquiry should proceed at all. The hearing was taken over 17th – 21st July. Having heard the very full and able arguments on both sides and, having given the matter careful consideration, I am of the view that the inquiry must proceed.
M&C's assertion is that the notice is wrong in law and fundamentally misconceived. Mr. Simmonds, Q.C. in his arguments relied upon the leading English cases on the matter of wasted costs orders decided since Myers v. Elman (cases which were not brought to my attention or considered by me when the notice was issued). They establish that proceedings against lawyers in the exercise of the Court's disciplinary jurisdiction over them as its officers, by which the Court may require them to pay the wasted costs of an action resulting from their misconduct, are proceedings which are only to be instituted in plain and obvious cases where there are no serious issues in dispute and which are amenable to being disposed of in a summary manner.
Mr. Simmonds sought to rely upon the recent cases as authority for the proposition that the limitations described above upon the Court's jurisdiction would apply even in the most egregious circumstances of alleged misconduct once there were serious issues to be inquired into other than summarily. He argued that on any view of the allegations against M&C, the case would not be one which could be described as plain, obvious and summary in procedure. Mr. Simmonds sought, by reference to the factual assertions raised by the notice, to show that there were indeed serious issues to be tried which could not be disposed of within the confines of the procedure laid down by the notice.
These are issues of fact which fall under three main headings. They were discussed at the inter partes stage but (appropriately so) only for the purpose of deciding whether they would inevitably give rise to the form of protracted litigation which the recent cases are said to prohibit. When I come to consider the recent cases, I will explain why I do not accept that the policy considerations which most directly influenced the English Courts in deciding those cases have the same significance in the Cayman Islands. This is notwithstanding that much of the advice given in them is salutary and relevant here. I will also explain why, in any event, I do not consider that the procedure to be envisaged in this case would necessarily fall foul of what I discern to be the guidance given in the most authoritative of them, Ridehalgh v. Horsefield (6).
Mr. Simmonds also cited the recent English cases as laying down a clear requirement of the strict proof of a causal link between the impugned conduct of the lawyer and the wasted costs in the action. He submitted that no such causal link can be shown in this case or, at the very least, if such a link is to be shown, that could only be done by means of a detailed and protracted examination of the proceedings in the action at every stage and by reference to the manner in which those proceedings could have been avoided or shortened had M&C fulfilled the duty of disclosure alleged. It followed, he submitted, that the inquiry into the causal link would necessarily be very involved and therefore itself run counter to the prohibitive principles laid down in the recent cases.
I take a different view of the legal requirements of causation, one which I consider to be in keeping with the approach which was taken in Myers v. Elman (4) itself. This was the view advanced by Mr. Cohen, Q.C. and which will be more fully examined below.
It will be apparent from the issues outlined above that there are two points of principle arising upon this application and which I believe are of first impression in this jurisdiction: (a) to what extent the recent English authorities which now govern the procedures to be applied upon a Myers v. Elman type of inquiry are applicable in the Cayman Islands; and (b) whether the requirement laid down in the English cases for strict proof of a causal link between the conduct complained of and the wasted costs applies in the Cayman Islands.
Before addressing these legal issues I will briefly consider the factual issues with a view to addressing just how complex an inquiry they might involve and, equally important at this stage, so as to indicate as clearly as I can my own impression of the ambit of the allegations of misconduct. I emphasize that the views expressed are to be taken as indicating no decided position upon the merits.
While the notice sets out extensively what I consider to be the salient allegations, one benefit of the inter partes hearing has been the crystallization of the issues. I consider that M&C are entitled to approach their response with the narrowest possible focus to be afforded. A good deal of time and expense might be saved by that means. The inter partes hearing served to identify that there are three main aspects to the factual allegations.
In the letter of 12th September, 1996 from M&C on behalf of the trustee (in response to Boxalls' letter of 9th September, 1996 by which Boxalls notified the trustee of the commencement of this action and of the matters raised by the plaintiff in the originating summons) M&C stated that “the trustee has, as you know, been aware of issues which might arise from Mr. Djeddah's ill-health and has monitored the position very carefully. It has seen no evidence of incapacity.”
By the ninth affidavit filed by Mr. Robert Forster (a trust manager of the trustee) in the proceedings, it is accepted on behalf of the trustee that the statement that the trustee “has seen no evidence of incapacity” was not correct. Mr. Forster, speaking of his own understanding as the officer of the trustee who succeeded to primary responsibility for this trust in November 1994, states in his affidavit that –
“I had seen – in the sense of read reports of – evidence of both capacity and incapacity. I had...
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