Re Omni Secs Ltd (No 4)
| Jurisdiction | Cayman Islands |
| Judge | (Smellie, C.J.) |
| Judgment Date | 31 March 1999 |
| Court | Grand Court (Cayman Islands) |
| Date | 31 March 1999 |
(Smellie, C.J.)
A. Turner and D.T.J. McCahill for the plaintiff;
J. Smouha and G.F. Ritchie for the eighth defendant;
N.R.L. Clifford for the first to seventh, ninth and tenth defendants.
(1) Cellular Clothing Co. Ltd. v. G. White & Co. Ltd.UNK(1952), 70 R.P.C. 9, not followed.
(2) Hydrocarbons Great Britain Ltd. v. Cammell Laird Shipbuilders Ltd. (No. 2)UNK(1991), 58 BLR 123, considered.
(3) Hydrodam (Corby) Ltd., Re, UNK [1994] 2 BCLC 180; sub nom. Re Hydrodan (Corby) Ltd., [1994] BCC 161.
(4) Johnson v. Deloitte & Touche A.G., 1997 CILR 120.
(5) Leicester Wholesale Fruit Market Ltd. v. Grundy (No. 2)UNK(1990), 53 BLR 6, dicta of Glidewell, L.J. applied.
(6) Letang v. Cooper, [1965] 1 Q.B. 237; [1964] 2 All E.R. 929.
(7) Marshall v. London Passenger Transp. Bd., [1936] 3 All E.R. 83, dicta of Lord Wright, M.R. applied.
(8) Steamship Mutual Underwriting Assn. Ltd. v. Trollope & Colls (City) Ltd.UNK(1986), 33 BLR 77; 6 Con. L.R. 11, followed.
(9) Sterman v. E.W. & W.J. Moore, [1970] 1 Q.B. 596; [1970] 1 All E.R. 581, not followed.
(10) Swiss Bank & Trust Corp. v. Iorgulescu, 1994–95 CILR 149, applied.
(11) Welsh Dev. Agency v. Redpath Dorman Long Ltd., [1994] 1 W.L.R. 1409; [1994] 4 All E.R. 10.
(12) Worldwide Corp. Ltd. v. G.P.T. Ltd., English Court of Appeal, December 2nd, 1998, unreported, dicta of Waller, L.J. applied.
Grand Court Rules, O.20, r.5: The relevant terms of this rule are set out at page 134, line 31 – page 135, line 2.
Limitation Law (1996 Revision) (Law 12 of 1991), s.41: The relevant terms of this section are set out at page 134, lines 1–29.
Insolvency Act 1986 (c.45), s.214(7): The relevant terms of this sub-section are set out at page 139, lines 17–18.
s.251: The relevant terms of this section are set out at page 139, lines 13–15.
Civil Procedure-pleading-amendment-time-barred claims-new cause of action barred by Limitation Law (1996 Revision), s.41(3) is new allegation of new loss or injury for which new remedy sought-alleged breach of contract or duty of care may be new claim even though coincided in time with breaches already pleaded and in same legal category
Civil Procedure-pleading-amendment-time-barred claims-no leave to amend under Grand Court Rules, O.20, r.5(2) and (5) to introduce otherwise time-barred claim if minimal overlap with issues already pleaded and extensive new factual inquiries required to answer allegations
Civil Procedure-pleading-amendment-time-barred claims-leave granted to amend under Grand Court Rules, O.20, r.5(2) and (5) to restore abandoned cause of action outside limitation period if original case reasonably pleaded upon legal advice and amendment in interests of justice-potential disruption to proceedings and closeness to trial date to be balanced against benefit to plaintiff in raising all relevant matters
The plaintiff brought an action to recover damages from the defendants for breach of contract and negligent misstatement in the preparation of audit reports.
The second defendant, DH&S (Cayman), was appointed as the
accounts and answered various statutory inquiries, and the preparation of the annual audit report was carried out by its associated firm in Switzerland, the eighth defendant, D&T (Zurich). In proceedings against the two firms and their various partners following the plaintiff”s liquidation, it alleged in its statement of claim that DH&S (Cayman) had acted in breach of its contract and that both firms had breached their duty of care in tort in failing to alert it to the financial consequences of unsecured loans which it had made to or obtained on behalf of other affiliated companies during 1988 and 1989. The plaintiff claimed for losses in relation to these loans and to payments made after the issue of the 1989 audit report to the owner of the Omni Group, Werner Rey, and private companies owned by him. The general endorsement on the writ included a claim in contract against D&T (Zurich) which was omitted from the statement of claim.
The plaintiff applied to amend its statement of claim (i) to correct or clarify factual matters, (ii) to allege (outside the statutory limitation period) breach of contract by D&T (Zurich) and its principals, (iii) to include claims (also potentially time-barred) for further losses arising from loans or advances to Rey and his private companies during 1988 and 1989, and (iv) to allege that since these transactions were unauthorized by its board and since Rey was a shadow director or agent of the company, they were performed in breach of fiduciary duty and contrary to Cayman law.
The plaintiff submitted that (a) the further claims in respect of the Rey transactions did not represent new causes of action for the purposes of s.41(1) and (3) of the Limitation Law (1996 Revision), since they were merely further examples of, and had occurred simultaneously with, causes of action already pleaded, namely, breach of contract and negligence; (b) even if the claims did constitute new causes of action, which were time-barred, the court should grant them leave to amend their pleading under the Limitation Law (1996 Revision), s.41(4) and (5) and the Grand Court Rules, O.20, r.5(2) and (5), since the losses had arisen from the factual circumstances already pleaded; (c) although the contractual claim against D&T (Zurich) had been omitted from the statement of claim upon erroneous advice, it had not been abandoned and could now be restored, since the defence alleged that a contractual relationship existed between D&T (Zurich) and the plaintiff”s parent company, and therefore no great inconvenience or expense would be occasioned in answering the claim; and (d) the remaining amendments would simply correct or further particularize existing claims.
The defendants submitted in reply that (a) the claims arising from the Rey transactions did not fall within the causes of action already pleaded even though they arose at the same time and were founded in contract and tort; (b) therefore these new causes of action, which were time-barred under the Limitation Law, could not now be pleaded and the court should not grant the plaintiff leave to do so under s.41(4) and (5) and O.20, r.5(2) and (5), since the alleged breaches of duty and resulting losses raised
issues which did not overlap with those pleaded; (c) the plaintiff should not now be permitted in response to D&T (Zurich)”s defence to allege that that firm had a contract with it, having staunchly denied that this was the case in related proceedings and having abandoned the claim as outlined in the writ; and (d) the addition of this claim (also time-barred) would cause unwarranted disruption to the time-tabling of the proceedings.
Held, making the following rulings:
(1) The plaintiff would be refused leave to amend its statement of claim to include claims in respect of the Rey transactions outside the limitation period, since they amounted to new causes of action for the purposes of the Limitation Law (1996 Revision), s.41(1) and (3). A new cause of action was defined as a new allegation giving rise to new loss or injury and for which a new remedy was sought, and since no claim had previously been made in respect of the Rey transactions during 1988–89, these were new claims in every respect, notwithstanding that the alleged breaches had coincided in time with those already pleaded and fell within the ambit of breach of contract and tort. Furthermore, the court had no jurisdiction to allow these amendments under O.20, r.5(2) and (5) of the Grand Court Rules as read with s.41(4) and (5) of the Law, since there was insufficient similarity between the factual issues now raised and those already pleaded, and the proposed amendments would require the defendants to answer new allegations relating to, e.g. shadow directorship, breach of fiduciary duty and agency, necessitating extensive and onerous new factual inquiries (page 133, lines 36–43; page 135, lines 3–9; page 136, line 14 – page 137, line 6; page 138, lines 15–36; page 139, line 23 – page 140, line 10).
(2) However, the plaintiff would be permitted to restore its claim in contract against D&T (Zurich) even though time-barred, since it arose from facts similar to those already pleaded and it was in the interests of justice that it should be revived. As the plaintiff had acted reasonably and diligently in pleading its case, given the different contractual positions adopted by both parties at different times in the history of the case, the fact that it had decided upon legal advice not to include the claim in the original statement of claim did not mean that it could not be added later. The court, in the exercise of its discretion, had to balance the interests of the plaintiff in raising all arguable issues for the court”s consideration at trial, against the burden on the defendant of responding to the restored claim, any consequent disruption to the proceedings and whether any such disruption could be adequately compensated for by an order for costs against the plaintiff. The closer to the proposed trial date, the more disruptive such amendments were likely to be. Since the amendment could be made in this case without injustice to the defendant or other litigants from delay, the court would allow it (page 143, line 6 – page 144, line 4; page 145, lines 16–33; page 146, lines 22–42).
| SMELLIE, C.J.: We have now reached the point along the | |
| 40 | meandering course of this very complex case at which the plaintiff seeks |
| leave to amend its statement of claim. | |
| Notwithstanding that the amendments would affect more than 80 | |
| paragraphs and sub-paragraphs of the present pleading, the plaintiff | |
| contends that only one provision-that in the proposed new para. 17A | |
| 45 | which seeks to add a claim in contract against the eighth defendant |
| (‘D&T |
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