Steven Goodman v Dawn Cummings

• Jurisdiction: Cayman Islands
• Judge: Ingrid Mangatal
• Judgment Date: 02 July 2019
• Year: 2019
• Court: Grand Court (Cayman Islands)
• Docket Number: Cause No.: FSD 204 of 2016 (IMJ)

Between:

Steven Goodman

Plaintiff

and

Dawn Cummings

(discontinued On 18 January 2019)

1 ^st Defendant

DMS Governance Limited

2 ^nd Defendant

Before:

The Hon. Justice Ingrid Mangatal

Cause No.: FSD 204 of 2016 (IMJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

HEADNOTE

Civil Procedure — Application for Summary Judgment, Order 14, Rule 12 of the Grand Court Rules — Application to Strike Out, Order 18, Rule 19—Vicarious Liability — “Wilful Neglect or Default”-pleading

Appearances:

Mr. Hefin Rees QC instruction by Mr. Paul Smith, Mr. Ben Hobden and Mr. Jordan McErlean of Conyers Dill & Pearman on behalf of the Plaintiff

Mr. Ben Valentin QC instructed by Mr. Mark Goodman and Ms. Kirsten Houghton of Campbells on behalf of the Defendants

IN CHAMBERS

Introduction

1 In December 2016 the Plaintiff Mr. Steven Goodman (“Mr. Goodman”) brought proceedings against (i) the first-named Defendant Ms. Dawn Cummings (“Ms. Cummings”) for breach of common law director duties and/or breach of fiduciary duties; and (ii) the second-named Defendant DMS Governance Limited (previously DMS Offshore Investment Services Limited) (“DMS”) as being vicariously liable for the acts of Ms. Cummings and/or for breach of contract. Mr. Goodman brought the proceedings by way of assignment to him of certain causes of action of Tangerine Investment Management Limited (In Official Liquidation) (“Tangerine”).

2 The assignment took place pursuant to a Deed of Assignment dated 18 March 2014 (“the Deed”). Mr. Goodman's claim was brought against the Defendants after the Deed was sanctioned by the Grand Court, Foster J, in May 2015.

3 Mr. Goodman asserted that Ms. Cummings was a director of Tangerine, whose principal business was to act as Investment Manager to funds established by Axiom for the purpose of providing loans to English law firms, from 19 December 2011 until her resignation on 17 October 2012. In broad summary, it is alleged that, during that time, she: (i) caused Tangerine to enter into panel law firm agreements with unsuitable firms, without due diligence and outside the agreed investment criteria; (ii) caused Tangerine to pay out, or failed to challenge the payment of approximately £15 million of Tangerine's money to entities owned or controlled by Timothy Schools (“Mr. Schools”), the sole owner and a director of Tangerine; and (iii) failed to take any or any adequate steps to scrutinize Mr. Schools.

4 The allegation of vicarious liability against DMS is made on the basis that the acts and omissions of Ms. Cummings were carried out in the course of Ms. Cummings' employment and/or agency. It is further alleged that DMS breached its contract with Tangerine by failing to ensure that Tangerine met its obligations pursuant to the relevant investment management agreement and by failing to monitor Ms. Cummings' performance.

5 It is further alleged that these breaches on the part of Ms. Cummings and/or DMS caused the termination of the investment management agreement. The loss in facilitation fees to Tangerine have been alleged to be in the region of £55 million over a four year period.

6 Ms. Cummings, in a Defence filed 30 March 2017, denied the allegations made by Mr. Goodman and denied that her conduct caused the alleged loss or any loss or damage. She also contended that she is entitled to rely on the terms of various indemnity provisions in Tangerine's Articles of Association (“the Articles”), which she averred, provide her with defences to Mr. Goodman's claims, and to rights of action against Tangerine.

7 DMS, in its Defence, denies that it is vicariously liable to Mr. Goodman as alleged in the Statement of Claim or at all. It also denies that it is liable pursuant to any contract alleged to have been entered into between DMS and Tangerine or that it is otherwise liable to account or pay compensation to Mr. Goodman.

8 At paragraph 4 of the Defence, it is pleaded as follows:-

• “4. This Defence is advanced without prejudice to the Second Defendant's contention that the Claim should be summarily dismissed pursuant to GCR Order 14 rule 12 and/or GCR Order 18 rules 12 and/or 19 and/or in the exercise of the inherent jurisdiction of this Honourable Court on the grounds that the essential allegations that (i) the Second Defendant is vicariously liable in respect of the acts or omissions of the First Defendant and (ii) the Second Defendant assumed any contractual obligations to Tangerine, and consequently the claim advanced in the Statement of Claim:

  • 4.1 has no prospect of success at trial, and/or

  • 4.2 does not contain the necessary particulars of the allegations of vicarious liability and/or breach of contract; and/or

  • 4.3 discloses no reasonable cause of action against the Second Defendant; and/or

  • 4.4 is frivolous and vexatious; and/or

  • 4.5 is otherwise an abuse of the process of the Court.”

9 Pursuant to the Grand Court Rules 1995 (Revised Edition) (“ the GCR”), GCR Order 16 Rule 1, and an order of the Court dated 28 June 2017, Ms. Cummings filed a Third Party Notice against Tangerine. By that Third Party Notice, Ms. Cummings claimed against Tangerine as follows:

• “(1) A declaration that [Tangerine] is obliged to indemnify [Ms. Cummings], out of its assets, in respect of all liabilities, loss, damage, cost or expense (including but not limited to liabilities under tort, and statute) and all reasonable legal and other costs and expenses on a full indemnity basis properly payable incurred by or on her behalf in providing assistance to [Tangerine] and to its liquidators in the course of the liquidation of [Tangerine], and in defending the Main Action and in respect of any actions relating thereto.

• (2) An order that [Tangerine] pays to [Ms. Cummings] amounts representing such legal fees, costs and expenses, in advance of the final disposition of the Main Action, [Ms. Cummings] having undertaken to repay such amount if it is ultimately determined that [Ms. Cummings] is not entitled to be indemnified by [Tangerine].

• (3) Alternatively, damages for breach of [Tangerine's] obligation to indemnify [Ms. Cummings], such damages to be assessed.

• (4) Interest pursuant to s. 34 of the Judicature Law (2013 Revision) on such amount (s) which [Tangerine] is ordered to pay to [Ms. Cummings], from the date the relevant liability was incurred until the date of payment, at such rate as the Court shall deem appropriate.

• (5) An order that [Tangerine] shall indemnify [Ms. Cummings] in respect of the legal fees, costs and expenses she has incurred in defending the Main Action and in respect of any actions relating thereto, save insofar as [Mr. Goodman] has paid those costs, and in respect of the costs of her claim against [Tangerine] by this Third Party Notice.

• (6) A declaration that all amounts payable by the Company to [Ms. Cummings] pursuant to the indemnity are liquidation expenses in the liquidation of [Tangerine].

10 Mr. Goodman, on behalf of and as assignee of Tangerine, filed a Defence to the Third Party Notice on 1 September 2017.

11 Tangerine's Liquidator also on 1 September 2017 filed a Defence to the Third Party Notice. This Defence adopted the Defence filed by Mr. Goodman. The Liquidator in addition pleaded that if it is ultimately determined that Ms. Cummings is entitled to any of the substantive relief sought in the Third Party Notice, such that the Indemnity Provisions are deemed to be enforceable as against Tangerine, Tangerine sought a declaration that it should be indemnified by Mr. Goodman in respect of any liability incurred as a result of an Order made by the Court, and in respect of all and any liability incurred.

12 Replies were filed on behalf of Ms. Cummings to the Third Party Defences on 15 September 2017.

The Preliminary Issues Trial

13 In November 2017, I heard and tried four preliminary issues. My written Judgment determining those issues was delivered on 13 September 2018. Those preliminary issues were as follows:

• (1) Whether the Articles were incorporated into the terms of Ms. Cummings' appointment as a director.

• (2) Whether the provisions of the Articles extend to former directors.

• (3) Whether Ms. Cummings is entitled to rely on Article 154 of the Articles in circumstances where she seeks to rely on indemnification pursuant to an implied contract as opposed to indemnification pursuant to the Articles as per the wording of Article 154.

• (4) Whether Ms. Cummings is entitled to rely on Article 154 of the Articles as against the Third Party in respect of the expenses incurred in defending this action.

14 I determined all of those preliminary issues in the affirmative, as advanced on behalf of Ms. Cummings.

15 On 5 November 2018, following written submissions, I issued a consequential ruling, entering judgment in the Third Party claim against Tangerine making costs orders against Mr. Goodman and granting a number of declarations in favour of Ms. Cummings.

The Applications Before the Court in January 2019

16 In January 2019, four inter-related applications were before the Court. These were:

• (a) The Defendants' Summons, dated 1 September 2017, seeking the dismissal of the claims against both Defendants (the “Strike Out Application”). This application seeks either the entry of summary judgment pursuant to Order 14 Rule 12 of the GCR or the striking out of Mr. Goodman's Statement of Claim, pursuant to Order 18 Rule 19, and /or in the exercise of the Court's inherent jurisdiction. Although this application mainly is concerned with legal arguments, evidence was filed in support of the application, by Ms. Cummings, (Cummings 3, dated 26 November 2018), and Anne Storie, CEO of DMS (Storie 1, dated 26 November 2018). Mr. Goodman has filed evidence in opposition (Goodman 3, dated 17 December 2018).

• (b) Preliminary Issue 5 (“Issue 5”), which was adjourned, at Mr Goodman's request,...