Omni Secs Ltd v Deloitte & Touche

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 06 February 2001
• Court: Grand Court (Cayman Islands)
• Date: 06 February 2001

Grand Court

(Smellie, C.J.)

OMNI SECURITIES LIMITED

and

DELOITTE & TOUCHE and TEN OTHERS

OMNI SECURITIES LIMITED

and

COLEMAN

R.H. Hildyard, Q.C. and A. Turner for the plaintiff in both actions;

G.C. Vos, Q.C. and N.R.L. Clifford for the first to seventh and ninth to eleventh defendants in Cause No. 104 of 1995;

G.C. Vos, Q.C. and G.F. Ritchie for the eighth defendant in Cause No. 104 of 1995;

R.D. Alberga, Q.C. and R.L. Nelson for the defendant in Cause No. 62 of 1996.

Cases cited:

(1) Coulson v. Disborough, [1894] 2 Q.B. 316; (1894), 70 L.T. 617, considered.

(2) Enoch and Zaretzky, In re, Bock & Co.”s Arbitration, [1910] 1 K.B. 327; (1909), 79 L.J.K.B. 363, dicta of Fletcher-Moulton, L.J. applied.

(3) Payne v. British Time Recorder Co. Ltd., [1921] 2 K.B. 1; (1921), 90 L.J.K.B. 445, applied.

Legislation construed:

Grand Court Rules, O.4, r.3(1):

‘Where two or more causes of action are pending in the Court, then, if it appears to the Court-

(a) that some common question of law or fact arises in both or all of them; or

(b) that the rights to relief claimed therein are in respect of or arise out of the same transaction or series of transactions; or

(c) that for some other reason it is desirable to make an order under this rule,

the Court may order those causes or matters to be consolidated on such terms as it thinks just or may order them to be tried at the same time or one immediately after another or may order any of them to be stayed until after the determination of any other of them.’

Civil Procedure-consolidation of actions-factors for consideration-may refuse to consolidate despite common issues of fact or law if unduly prejudicial, e.g. financially, to one party-decisive whether fair trial possible without consolidation-parties” purely strategic concerns immaterial if fairness ensured by calling party to one action as witness in other-court may call witness with parties” consent or encourage rele-vant party to do so

The plaintiff brought separate proceedings against its former director and former auditors for negligence in the performance of their respective duties.

The plaintiff company in liquidation alleged that it had suffered trading losses as a result of its former auditors” failure to alert it to its potentially insolvent status, and because of its former director”s failure to remedy that position. Both proceedings were set down for trial, with time esti-mates of 12–13 weeks for the auditors” hearing and 4–5 weeks for the subsequent hearing of the claims against the director. The plaintiff applied for them to be consolidated. It was estimated that a consolidated trial would last 17 weeks. The court had refused two previous applica-tions for consolidation earlier in the proceedings.

The plaintiff submitted that (a) the causes should be consolidated under O.4, r.3 of the Grand Court Rules, since they concerned common issues of law and fact and the remedies claimed arose from the same transactions, namely those which led to its insolvency; (b) the court”s primary consideration should be to ensure a fair trial by avoiding conflicting results in the two causes; (c) any prejudice suffered by the defendant director from participating in a more lengthy trial was of secondary importance and was to be regarded as an occupational hazard of his job; (d) such prejudice would have been ignored had the plaintiff decided at the outset to sue the defendants in a single action; (e) costs could be reduced by counsel for the director not attending those parts of the trial concerned with the liability of the auditors alone; and (f) in any event, the director was obliged to carry professional indemnity insurance against the risk of litigation.

The defendants in both cases submitted in reply that (a) the existence of common issues in the two causes was only one factor to be considered and was to be balanced against undue prejudice to a defendant; (b) participation in a trial of the length anticipated for the consolidated trial would probably bankrupt the defendant director; (c) it was not a realistic option for the director to be unrepresented for parts of the trial; (d) the majority of his professional indemnity insurance had already been spent during the proceedings so far; and (e) his evidence could be made available at the auditors” trial by one of the parties calling him as a witness.

Held, dismissing the application:

(1) In exercising its discretion under the Grand Court Rules, O.4, r.3, the court had to balance the desirability of trying together actions involv-ing common or overlapping issues of law or fact against the possibility that consolidation would cause undue prejudice to one of the parties. Actions would be consolidated notwithstanding such prejudice if a fair trial could not be achieved without the causes being tried together, e.g. because the outcomes might otherwise be contradictory and deprive the plaintiff of a remedy against either defendant (paras. 5–6; para. 13; para. 18).

(2) It was clear that these two actions could usefully be tried together, since there were substantial areas of overlap between the causes of action, and more common issues were arising as the pleadings unfolded. How-ever, the financial consequences for the defendant director of having to participate in a trial estimated to last three times longer than that necessary to try the case against him were likely to be disastrous. His professional indemnity insurance was almost exhausted, so that even the predicted 4–5 week trial of his own case would probably cause him financial hardship. There was no evidence that the management company which employed him would be willing to indemnify him. It would not be an acceptable compromise for his legal representatives not to appear for those parts of a consolidated trial dealing with the auditors” liability issues, since he would then be exposed to the prospect of being found contributorily negligent in his absence in a hugely valuable cause of action (paras. 8–11; paras. 16–17).

(3) Furthermore, a fair trial of...