Kansa General International Insurance Company Ltd v Verdon

• Jurisdiction: Cayman Islands
• Judge: Harre, J.
• Judgment Date: 13 September 1991
• Court: Grand Court (Cayman Islands)
• Date: 13 September 1991
• Docket Number: 170 of 1991

Kansa General International Insurance Co. Ltd.

and

Verdon

Harre, J.

170 of 1991

Grand Court

Practice and procedure - Joinder of parties — Action for breach of fiduciary duties and conspiracy to defraud — Plaintiff wishing to add first proposed defendant as having allegedly dishonestly assisted in the fraud — Plaintiff wishing to add the second proposed defendant as having been the vehicle through which the fraud and misappropriation of funds was conducted — Construction of ‘ought to have been joined’ in r. 26 of the Grand Court (Civil Procedure) Rules.

Appearances:

For the plaintiff: Mr. A. Jones.

For the 1st and 2nd defendants: Mr. R. Mahfood Q.C. and Mr. T. Shea.

For the 3rd and 4th defendants: Mr. P. Lamontagne Q.C. and Mr. A. McLaughlin.

RULING

Harre, J.

1 This is a summons by the plaintiff seeking an order pursuant to rule 26 of the Grand Court ( Civil Procedure) Rules that two additional defendants be added in the suit, and leave to amend the writ and statement of claim. The first of the proposed additional defendants is Erkki Pesonen. He was President and Chief Executive Officer of the parent company of the plaintiff, and Chairman of the plaintiff and other subsidiaries which comprised its international division, until — resignation on 30th September 1906. The other defendant, which the plaintiff wishes to add is Jevco Insurance Company (“Jevco”) which is incorporated in Canada.

2 The relevant part of rule 26 of the Grand Court ( Civil Procedure) Rules reads as follows —

“26 … The court may at any stage of the proceedings either upon or without the application of any party and upon such terms as may seem just, order … the names of any parties added who ought to have been joined whether as plaintiffs or defendants or whose presence before the Court may be necessary to enable the Court to effectively and completely adjudicate and settle all questions involved in the cause or matter.”

3 The rule is similar to the corresponding English rule prior to its amendment in 1973.

4 The following allegations of fact are among those at present pleaded. The plaintiff, which is incorporated in Finland has been licensed to carry on insurance business in Canada since 1978 through a branch; from that time until mid-1987 the first defendant (“Verdon”) was its chief agent for Canada; he was succeeded by the second defendant (“David”) who was chief agent until 30th December 1989; the third and fourth defendants, which I shall call “Power Re” and “North Star” respectively, are companies incorporated in the Cayman Islands and have unrestricted class B insurers licences; both were at all material times beneficially owned and controlled by Verdon and David; through these and other companies and by virtue of dishonest schemes Verdon and David were guilty of breaches of their fiduciary duties and together with others, of conspiracy to defraud.

5 The plaintiff wishes to add Pesonen as a defendant because, in the light of what it now knows, it alleges that he dishonestly assisted in the fraud of Verdon and David. It wishes to add Jevco which, together with Power Re and North Star it says was a vehicle through which to defraud and misappropriate funds of Kansa international.

6 Jevco features in the Statement of Claim as it now stands as a company which was beneficially owned and controlled by Verdon and David jointly at all material times from 1970 until mid-1987, when Verdon apparently relinquished his ownership interest to David, and which reinsured certain risks with Kansa International Canadian branch and a related company. The new allegation involving it is that from 1982 to 1989 Verdon and David, with the dishonest approval of Pesonen, caused the plaintiff to enter into a reinsurance programme known as the Top Cover Treaties by means which it purported to reinsure its liabilities in respect of any one claim over a specified limit, and that in their capacity as underwriting managers for the plaintiff, Verdon and David manipulated the underlying insurance with the intention that there would never be any exposure to the Top Cover Treaties. They achieved this by fixing the amount covered under the underlying insurance and the amount above which the top cover provisions would come into play as the same sum. So the Top Cover Treaties, it is alleged, were nothing more than a dishonest mechanism for diverting the plaintiff's money to Jevco, Power Be and/or North Star for the benefit of Verdon, David and Pesonen.

7 The...