Prospect Properties Ltd v McNeill

• Jurisdiction: Cayman Islands
• Judge: (Harre, J.)
• Judgment Date: 25 May 1990
• Court: Grand Court (Cayman Islands)
• Date: 25 May 1990

Grand Court

(Harre, J.)

PROSPECT PROPERTIES LIMITED (in liquidation)

and

McNEILL and J. BODDEN II

A. Turner for the plaintiff (by its liquidator);

E. Grant for the second defendant.

Cases cited:

(1) Att. Gen”s Reference (No. 2 of 1982), [1984] Q.B. 624; [1984] 2 All E.R. 216; (1982), 78 Cr. App. R. 131.

(2) Brink”s-MAT Ltd. v. Elcombe, [1988] 1 W.L.R. 1350; [1988] 3 All E.R. 188, dicta of Balcombe and Slade, L.JJ. applied.

(3) Greenhalgh v. Arderne Cinemas Ltd., [1951] Ch. 286; [1950] 2 All E.R. 1120.

(4) Greenhalgh v. Mallard, [1947] 2 All E.R. 255, dictum of Somervell, L.J. considered.

(5) Helton v. AllenUNK(1940), 63 C.L.R. 691; 46 ALR 298, considered.

(6) Henderson v. HendersonENR(1843), 3 Hare 100; 67 E.R. 313; [1843–60] All E.R. Rep. 378, dicta of Wigram, V.-C. considered.

(7) Hunter v. Chief Constable (West Midlands), [1982] A.C. 529; [1981] 3 All E.R. 727, dicta of Lord Diplock applied.

(8) Jamculture Ltd. v. Black River Upper Morass Dev. Co. Ltd., Court of Appeal (Jamaica), Appeal No. 78/88, June 22nd, 1989, unreported, considered.

(9) Knox v. Gye(1872), L.R. 5 H.L. 656; 42 L.J. Ch. 234.

(10) Mraz v. R.UNK(1956), 96 C.L.R. 62, distinguished.

(11) Palmer and Carling O”Keefe Breweries of Canada Ltd., Re.UNK(1989), 67 O.R. (2d.) 161.

(12) Prospect Properties Ltd., In re, 1988–89 CILR 47.

(13) R. v. Kensington Income Tax Commrs, ex p. de Polignac (Princess), [1917] 1 K.B. 486, considered.

(14) Riches v. D.P.P., [1973] 1 W.L.R. 1019; [1973] 2 All E.R. 935, followed.

(15) Tito v. Waddell (No. 2), [1977] Ch. 106; [1977] 3 All E.R. 129, considered.

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

Legislation construed:

Limitation of Actions Law (Laws of the Cayman Islands, 1963, cap. 86), s.46: The relevant terms of this section are set out at page 46, lines 25–27.

Evidence-previous proceedings-relevance in subsequent proceedings-same facts in issue in criminal and subsequent civil proceedings-facts from criminal trial admissible in civil proceedings even if accused acquitted because civil standard of proof lower than criminal standard-established facts leading to conviction a fortiori admissible in civil proceedings

Estoppel-res judicata-procedural irregularity in previous proceedings-doctrine no bar to new application for relief if previous proceedings set aside for procedural irregularity and plaintiff given leave to begin proceedings de novo

Civil Procedure-abuse of process-limitation period-pleadings disclose abuse of process if cause of action clearly arises outside limitation period and plaintiff unable to escape defence that statute barred

Companies-directors-breach of fiduciary duties-no limitation period under Limitation of Actions Law (cap. 86) or English Limitation Act 1623 barring action for breach of fiduciary duty-Jamaican Trustee Act (cap. 393) not applicable in Cayman Islands

Limitation of Actions-laches-availability as defence-no decision on laches on pleadings alone-court”s discretion to refuse remedy on ground of laches only to be exercised at trial

Companies-liquidators-powers and duties-ex parte application for leave to begin proceedings against director-liquidator to file affidavit and disclose material facts, e.g. of pending applications to rectify register of members and stay winding-up proceedings but failure not necessarily justification for setting order aside

Estoppel-estoppel by conduct-acquiescence-no acquiescence by company director to ex parte order for liquidator to begin proceedings against him if delay in challenging order due to ignorance of liquidator”s application and granting of order

The liquidator of the plaintiff company sought leave to commence proceedings against one of its directors.

The liquidator had been appointed by the court to take charge of the winding up of a company in which the defendants had been directors.

As a result of his investigation of certain transactions between the defendants in 1983, the liquidator submitted a report to the court alleging breaches of fiduciary duty and criminal malpractices on their part. The liquidator then successfully applied ex parte, by summons under the Companies Law (cap. 22), ss. 166 and 168, for orders (a) to compel the defendants to repay sums of money believed to have been misappropriated by them and (b) to bring about their prosecution.

On appeal by the second defendant, the orders were discharged on the ground, inter alia, that no affidavit had been filed in support of the summons and, in particular, the liquidator”s report had not been verified by affidavit. The liquidator was, however, given leave to begin the proceedings de novo. This lead to the institution of criminal proceedings against the second defendant and his subsequent acquittal on charges of theft, fraudulent false accounting and obtaining property by deception.

The liquidator then successfully applied ex parte for an order giving leave to commence civil proceedings against the second defendant. This application was not supported by affidavit and the liquidator also failed to disclose that he had motions pending before the court for the rectification of the register of members of the company and for a stay of the winding-up proceedings. Pursuant to this order, which was made on August 24th, 1989, proceedings were filed and served on the following day. Thereafter, the exchange of pleadings ensued up to the summons for directions and an order for discovery three months before the present hearing. At that stage (March 1990) the second defendant also sought orders to dismiss the action and to discharge the ex parte order for leave to begin it.

The liquidator made a preliminary submission that the second defendant had lost by acquiescence any right he had to attack the order for leave to commence the action.

The second defendant submitted that (a) the action should be dismissed on the grounds that it was an abuse of process in that it was a collateral attack on his acquittal in the criminal case, or that it sought to re-litigate issues already determined in his favour, or that the matter was res judicata in that the liquidator could and should have provided the evidence that was lacking m his original application at the hearing when the related order was set aside; (b) he should be dismissed from the action as the liquidator”s statement of claim did not disclose any reasonable cause of action against him because the claims were timebarred or, alternatively, he was entitled to plead laches, as a defence; and (c) the ex parte order for leave to commence the action should be discharged because the liquidator had failed to make full and frank disclosure of all material facts.

Held, dismissing the summons:

(1) The principle to be applied with respect to parallel civil and criminal proceedings against the same party is that, if the facts are determined in favour of a defendant in criminal proceedings, leading to his acquittal, he may still be found culpable on the same facts in civil proceedings because the civil standard of proof on a balance of probabilities is lower than the proof beyond all reasonable doubt

required for a criminal conviction. For the same reason, established facts leading to a conviction will be admitted in civil proceedings since it would be wholly inconsistent that they would not have been admitted against the defendant if the same issues had first had to be decided in the civil proceedings. Accordingly, no abuse of process could have arisen in relation to the second defendant even if the questions in the criminal proceedings of which he had been acquitted had been the same as those to be decided in the civil proceedings. There was, however, no question of abuse of process here, since the issues in the criminal case had been whether the prosecution had successfully proved charges of theft, false accounting and obtaining property by deception and there was no evidence that the particular allegations in these proceedings, namely as to the validity of transactions to which the second defendant was a party and breaches of fiduciary duty with respect to the plaintiff company, had been the subject of a decision in the criminal proceedings (page 38, lines 17–11; page 40, lines 14–33).

(2) Moreover, there was no question of res judicata in the liquidator”s beginning new proceedings against the second defendant. The liquidator”s original summons under the Companies Law (cap. 22), s.166 had been issued ex parte and had not been supported by an affidavit. Because of this and other irregularities, the ensuing order had been set aside upon the application of the second defendant. At that stage it would have been inappropriate for the liquidator to have responded to the second defendant”s application by then providing the affidavit evidence to argue the matter fully on its merits, especially since he was expressly given leave to begin the proceedings de novo. By doing so he would have been seeking the same relief but employing the correct procedures in such stages as he had been directed to do by the court. This was clearly a matter of procedure and not the litigation of the same substantive issues. Accordingly, res judicata did not arise as this was a plea intended to prevent the raising of issues in new or subsequent proceedings which ought properly to have been raised in earlier proceedings. There was therefore no merit in the second defendant”s claim of res judicata (and abuse of process on this ground) in respect of the liquidator”s new proceedings against him (page 45, lines 1–13).

(3) Although the liquidator”s statement of claim alleged a breach of fiduciary duty more than six years earlier, this in itself would not allow the second defendant successfully to plead a statutory limitation period or laches as a defence. It was the case that where a statement of claim disclosed that a cause of action arose outside the...