International Credit & Inv Company (Overseas) Ltd v Adham
| Jurisdiction | Cayman Islands |
| Judge | (Murphy, J.) |
| Judgment Date | 22 October 1996 |
| Date | 22 October 1996 |
| Court | Grand Court (Cayman Islands) |
(Murphy, J.)
L.J. Cohen, Q.C. and H. St.J. Moses for the plaintiffs;
E. Sibley and M.M. Garcia for the fifth defendant.
(1) -Biggin & Co. Ltd. v. Permanite Ltd., [1951] 1 K.B. 422; on appeal, [1951] 2 K.B. 314; [1951] 2 All E.R. 191.
(2) -British Motor Trade Assn. v. Salvadori, [1949] Ch. 556; [1949] 1 All E.R. 208, applied.
(3) -Chaplin v. Hicks, [1911] 2 K.B. 786; [1911–13] All E.R. Rep. 224.
(4) -Penvidic Contracting Co. Ltd. v. International Nickel Co. of Canada Ltd.UNK(1975), 53 D.L.R. (3d) 748; [1976] 1 S. Ct. Rep. 267, followed.
(5) -Tate & Lyle Food & Distrib. Ltd. v. Greater London Council, [1982] 1 W.L.R. 149; [1981] 3 All E.R. 716, distinguished.
(6) -Wood v. Grand Valley Ry. Co.UNK(1915), 22 D.L.R. 614; 51 S. Ct. Rep. 283, dicta of Davies J. applied.
Tort-economic loss-damages-proof-detailed estimate of loss suffices if precise quantification not reasonably practicable and no contrary evidence or request for discovery-difficulty of assessing cost of large-scale and complex investigation no reason for refusing damages or awarding nominal amount
Tort-economic loss-damages-expenses of investigating alleged conspiracy recoverable as damages, not costs of litigation-not only expenses of establishing existence of cause of action but also of collecting further evidence in support
The plaintiffs sought damages for conspiracy by the defendants to defraud them of the assets of two companies, such damages to include the costs and expenses of investigating the conspiracies prior to litigation.
Following findings against the defendants on liability for several heads of damage (in proceedings reported at 1996 CILR 89) the fifth defendant challenged the quantum of the plaintiffs” claim in respect of the professional fees of the accountants conducting investigations on behalf of the plaintiffs” liquidators.
A partner in the firm gave evidence of the number of man-hours spent in the investigation of the conspiracies. Referring in detail to the evidence of colleagues given at the trial and to his firm”s system of time-costing, he made an estimate of the percentage of time allocated to investigating each of the conspiracies and each defendant”s involvement therein, in a process which covered activities in many countries and over a period of several years.
He explained that he could have gone beyond the time-sheets and fee reports from which he made his estimates to the working-papers and personal diaries of his colleagues which detailed individual tasks, but that even then a completely accurate quantification would not have been feasible.
The plaintiffs submitted that (a) since, due to the nature and scale of the investigation, an exact calculation of its cost was impossible, they had sufficiently proved their case in damages by producing an informed estimate supported by detailed evidence of how it was arrived at; more extensive proof could not reasonably be expected in the absence of a
request for discovery or contradictory evidence from the fifth defendant, particularly since the expense of quantifying the plaintiffs” losses would eat directly into any damages which they would subsequently recover; and (b) since the investigating accountants were not expert witnesses but witnesses of fact, their professional fees were properly classified as damages rather than costs of the litigation, and in what had been an ongoing investigation, the plaintiffs” claim could not be limited to the expenses incurred before they were in a position to commence proceedings.
The fifth defendant submitted in reply that (a) as the plaintiffs had not produced all working-papers and time-sheets to enable the precise quantification of professional fees incurred and had not called additional evidence from the deponents at trial, the sum claimed could only be pure speculation, in response to which the court could, at most, award nominal damages; and (b) in any event, the cost of investigations undertaken after a cause of action had been established, if recoverable, should be assessed as costs in the litigation rather than damages and, as such, would be subject to taxation by the court if not agreed.
Held, awarding damages as claimed:
(1) The difficulty of assessing damages was not a reason for denying the plaintiffs recovery of the amount claimed or awarding only a nominal sum. Since a precise quantification of the costs of the investigation was not reasonably practicable given the scale and complexity of the work undertaken (and any more detailed examination of the available evidence could still involve estimation) the plaintiffs had sufficiently proved their case in damages. The onus was on the defendant challenging the quantum either to seek further evidence by way of discovery or itself to produce contradictory evidence, especially since the expense of proving the costs would operate effectively to reduce the damages recovered by the plaintiffs (page 273, lines 17–31; page 275, lines 3–13; lines 20–33; page 278, lines 22–35).
(2) The fees of the investigating accountants were recoverable not as costs of the litigation but as damages for loss directly resulting from the conspiratorial acts of the respondents, in accordance with the finding of the trial judge. They could not be classified as damages or costs according to the progress achieved in the investigation at the time they were incurred and were, moreover, the fees of professional men whose role was that of witnesses of fact rather than expert witnesses (page 279, lines 12–37).
| MURPHY, J.: This is an assessment of damages under O.37 of the | |
| Grand Court Rules. It arises as a result of the judgment of Schofield, J. | |
| dated June 1st, 1995 which provided for the assessment of damages under | |
| 15 | several heads. |
| This matter first came before me by notice of appointment under O.37 | |
| on August 9th, 1996. On that day I assessed damages under one head in | |
| circumstances in which there was no opposition from any defendant. In | |
| fact, it has become apparent that only the fifth defendant takes any | |
| 20 | position at all with respect to this assessment. |
| The second head of damages was expressed as follows in the notice of | |
| appointment returnable on August 9th, 1996: | |
| ‘That judgment be entered jointly and severally against the third, | |
| fourth, fifth and seventh defendants pursuant to para. 12.4 of the re- | |
| 25 | amended statement of claim and pursuant to conclusion No. 26 in |
| the judgment of Schofield, J. herein, in the sum of US$2,162,231 | |
| plus interest, being the plaintiffs” costs and expenses of investigating | |
| the conspiracies herein.’ | |
| On August 9th, 1996 counsel for the fifth defendant appeared and asked | |
| 30 | for time to file evidence relating to this second head. He told me (on |
| instructions which he said he had received from English solicitors) that | |
| the fifth defendant wished to adduce evidence in a number of areas. This | |
| application for an adjournment was resisted by counsel for the plaintiffs, | |
| but I granted the fifth defendant until August 30th, 1996 to put in | |
| 35 | evidence and the assessment was adjourned to October 3rd, 1996, the day |
| it was in fact heard. The fifth defendant never did file evidence for use on | |
| this assessment. I note as well at this juncture that in the interim, the fifth | |
| defendant has neither made an application for discovery nor sought to | |
| subpoena any witness in connection with the plaintiffs” damages claim. | |
| 40 | |
| Judgment of Schofield, J. | |
| I do not intend to embark upon an exhaustive summary of the | |
| extensive reasons given by Schofield, J. Reference should be made to the | |
| reasons themselves for the full background. Suffice it to say that in this | |
| 45 | action Schofield, J. found that the third, fourth, fifth and seventh |
| defendants had been guilty of dishonest participation in two separate | |
| conspiracies. The third, fourth and fifth defendants participated in the first | |
| conspiracy to defraud the first plaintiff, International Credit & Investment | |
| Co. (Overseas) Ltd. (‘ICIC’) by falsifying its accounting records. The | |
| 5 | third, fifth and seventh defendants also participated in the second |
| conspiracy, namely a conspiracy to render assets judgment-proof or to put | |
| them beyond the reach of the plaintiffs, which involved the transfer of | |
| shares in Attock Oil Co. Ltd. (‘AOC’) from Finance & Investment | |
| International Ltd. (‘FIIL’). Schofield, J. found that the plaintiffs were | |
| 10 | entitled to damages to be assessed under several heads including ‘the |
| costs and expenses of investigating the conspiracy or conspiracies.’ | |
| This action is but one aspect of the massive BCCI-related liquidation | |
| the tentacles of which extend into the Cayman Islands as well as into | |
| other countries. | |
| 15 | On July 22nd, 1991 this court appointed partners of Deloitte & Touche |
| (Cayman Islands) Ltd. as provisional liquidators of ICIC. The provisional | |
| liquidators were granted various powers-such powers to be executed | |
| within or outside the Cayman Islands-including power to collect and get | |
| in all property or assets to which ICIC was entitled, power to protect such | |
| 20 | assets, power to do all things necessary for the beneficial realization of |
| the property or assets of ICIC and power to bring or defend any legal | |
| proceedings necessary to protect the assets of ICIC. On April 29th, 1992 | |
| this court made an order that ICIC be wound up. On that day, this court | |
| also appointed partners of the same firm of accountants joint official | |
| 25 | liquidators of ICIC. As a result, personnel from that accounting firm (‘the |
| accountants’) were extensively involved in a massive investigation |
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