Tritton v Fortis Bank (Cayman) Ltd

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 17 July 2006
• Date: 17 July 2006
• Court: Grand Court (Cayman Islands)

Grand Court

(Smellie, C.J.)

TRITTON DEVELOPMENT FUND LIMITED

and

FORTIS BANK (CAYMAN) LIMITED (formerly MEESPIERSON (CAYMAN) LIMITED), MEESPIERSON MANAGEMENT (CAYMAN) LIMITED and MEESPIERSON NOMINEES (CAYMAN) LIMITED

D. Lightman and K. Farrow for the plaintiff;

D. Railton, Q.C. and A. Bolton for the defendants.

1 SMELLIE, C.J.: This is the defendants” application that certain amendments, made on July 28th, 2005 to the plaintiff”s statement of claim, be disallowed and struck out. The basis is that the amendments were made outside the statutory limitation periods, that they plead a new cause or new causes of action and that they do not arise from the same or substantially the same factual circumstances originally relied upon in support of the statement of claim.

Cases cited:

(1) Companhia de Seguros Imperio v. Heath (REBX) Ltd., [2001] 1 W.L.R. 112; [2000] 2 All E.R. (Comm.) 787; [2000] C.L.C. 1543;

[2001] Lloyd”s Rep. I.R. 109; [2000] Lloyd”s Rep. P.N. 795; (2000), 3 I.T.E.L.R. 134, applied.

(2) Darlington Bldg. Socy. v. O”Rourke, James, Scourfield & McCarthy, [1999] 1 Lloyd”s Rep. P.N. 33; [1999] P.N.L.R. 365, dicta of Sir Iain Glidewell applied.

(3) Gwembe Valley Dev. Co. Ltd. v. Koshy (No. 3), [2004] 1 BCLC 131; [2004] W.T.L.R. 97; [2003] EWCA Civ. 1048, applied.

(4) Knox v. GyeELR(1872), L.R. 5 H.L. 656; 42 L.J. Ch. 234, applied.

(5) Lloyds Bank PLC v. Rogers, The Times, March 27th, 1997; [1996] EWCA Civ. 1277, applied.

(6) Omni Secs. Ltd. v. Deloitte & Touche, 2000 CILR 102, referred to.

(7) P & O Nedlloyd v. Arab Metals Co., [2005] 1 W.L.R. 3733; [2006] 1 Lloyd”s Rep. 111; [2005] EWHC 1276, applied.

(8) Paragon Fin. plc v. D.B. Thakerar & Co., [1999] 1 All E.R. 400; (1998), 142 Sol. Jo. (L.B.) 243, applied.

(9) Pilmer v. Duke Group Ltd., [2001] 2 BCLC 773, considered.

(10) Prospect Properties Ltd. v. McNeil, 1990–91 CILR 171, distinguished.

(11) Steamship Mutual Underwriting Assn. Ltd. v. Trollope & Colls (City) Ltd.UNK(1986), 33 BLR 77; 6 Con. L.R. 11, dicta of May, L.J. applied.

(12) Welsh Dev. Agency v. Redpath Dorman Long Ltd., [1994] 1 W.L.R. 1409; [1994] 4 All E.R. 10, applied.

Legislation construed:

Grand Court Rules 1995, O.20, r.5: The relevant terms of this rule are set out at para. 3.

Limitation Law (1996 Revision), s.27(1): The relevant terms of this sub-section are set out at para. 73.

s.27(3): The relevant terms of this sub-section are set out at para. 82.

s.42(1): The relevant terms of this sub-section are set out at para. 65.

Limitation of Actions-amendment of pleadings-amendment outside limitation period-no leave to amend under Grand Court Rules, O.20, r.5(2) and (5) to introduce otherwise time-barred claim merely because issues arise from same general factual background as already pleaded-diverse and complex issues requiring extensive further investigation not same or substantially same facts

Limitation of Actions-breach of fiduciary duty-law applicable-no statutory limitation period for breach of fiduciary duty-claim barred by analogy with statutory limitation period if remedy sought, e.g. damages, corresponds to claim in tort or contract and not seeking equitable proprietary relief

The plaintiff brought an action against the defendants for breach of contract and breach of fiduciary duty in connection with an investment project in which it alleged the defendants advised it to participate.

The plaintiff entered into an investment management agreement with the defendants under which they would provide investment advice and services. The agreement was executed on June 18th, 1999. In early June 1999, two companies, T and L, were incorporated in the Cayman Islands as investment vehicles for Project Leo, a project in which the Nomura Group and a Czech bank, IPB (in which Nomura had a 46% interest), acquired the debts of a group of companies (CBS) in return for promissory notes from them. The plaintiff agreed to invest in T and L as part of the project and pledged to issue its own shares to IPB in return for notes issued by T and L, which IPB had acquired in return for the notes issued by CBS. The notes held by the plaintiff were thus limited to the value of T and L”s assets. T and L exchanged the CBS notes with notes issued by Pembridge Investments, which had acquired shares in IPB by virtue of its parent company”s, Nomura”s, interest in IPB. On June 2nd, 1999, Pembridge could redeem the notes issued to T and L by a put option, i.e. a right to sell its shares in IPB at a price set earlier (the ‘strike’ price).

The plaintiff claimed that, by causing it to become involved in Project Leo, the first defendant had acted in breach of the investment management agreement and the second and third defendants (who were the plaintiff”s directors) had breached their legal and fiduciary duties. The plaintiff alleged that it had sustained losses on or before June 2nd, 1999, when Pembridge became entitled to exercise the put option and T and L were compelled to buy IPB shares at the strike price, which, the plaintiff alleged, had been set too high. Thus the T and L notes it held were ultimately worth less than the shares that IPB had acquired from the plaintiff in return. However, since the agreement had not become effective until June 18th, 1999 and the alleged losses preceded that date, the contract claim was unsustainable. On July 28th, 2005, the plaintiff sought to amend the claim to allege that the defendants owed it a duty of care and had breached that duty. The defendants applied to have the amendments struck out on the ground that the statutory limitation period had expired.

The plaintiff submitted that (a) the first defendant was acting as de facto administrator and investment manager to the plaintiff between June 2nd and June 18th, 1999, and consequently owed it a duty to exercise reasonable care, skill and diligence, which it breached by failing to offer advice prior to the plaintiff”s involvement in Project Leo; (b) the second and third defendants owed similar duties to the plaintiff, which they breached by failing to seek advice from the first defendant before causing the plaintiff to participate in the project; (c) the amendments were permitted under the Grand Court Rules, O.20, r.5, since the proposed claim in tort, even if it were found to give rise to a new cause of action, arose from the same or substantially the same facts as previously pleaded; (d) the defendants had breached their fiduciary duties because the decision to participate in Project Leo was not in the plaintiff”s interests, and, since this was a claim in equity (akin to a breach of trust), no limitation period applied; (e) the breach of fiduciary duty was fraudulent and had been deliberately concealed by the defendants, and the limitation period in respect of this claim should be extended to run from the time the plaintiff discovered the breach; and (f) the plaintiff suffered loss as a result of T and L”s agreeing (on June 3rd, 1999) to exchange the more valuable CBS notes for the Pembridge notes, whose value was limited to the IPB shares.

The defendants submitted in reply that (a) the breaches of duty alleged did not advance the plaintiff”s case since, as a matter of law, the plaintiff could not suffer loss by the issue of its own shares for valuable consideration; (b) the plaintiff”s shareholders did not, in fact, suffer any loss as a result of its participation in Project Leo, since the value to IPB of its participating shareholding was, by definition, equal to the value of the plaintiff”s assets, all of which IPB had contributed; (c) the amended pleadings not only gave rise to new causes of action but were also based on new matters of fact that would require extensive investigation (including issues of Czech law, the financial position of CBS and the intentions of IPB, Nomura, T and L regarding the CBS notes) and were

therefore statute barred; (d) the equitable claim for breach of fiduciary duty should be barred by the application by analogy of the statutory time limits, as required by s.41(1) of the Limitation Law, since the remedy claimed (i.e. damages) corresponded to the remedies sought in tort and contract; and (e) the plaintiff should bring a separate action in respect of the alleged fraudulent breaches of fiduciary duty, because to allow this amendment would unjustly deprive the defendants of their reasonably arguable limitation defence.

Held, striking out the application:

(1) The amendment alleging breach of a duty of care would be disallowed. This was a new cause of action based in tort, which did not arise from the same or substantially the same facts as the original claim, since, although it sprang from the same general factual background, it would require further investigation into diverse and complex issues that had not previously been examined. The tort claim did not, therefore, fall within the exception to the limitation period provided by the Grand Court Rules, O.20, r.5(2) and (5). The claim was statute barred because the loss allegedly suffered as a result of T and L”s substitution of the CBS notes for the Pembridge notes occurred no later than June 3rd, 1999, which was more than six years prior to the date of this application (para. 50; paras. 60–63).

(2) The amendment alleging breach of fiduciary duty would also be disallowed. This being a claim in equity, it was not subject to any statutory limitation period. However, since the plaintiff”s claim was only for damages, which corresponded to the remedy sought in tort and contract, and not for any form of equitable proprietary relief, the claim would be barred by analogy with the claims in tort and contract, as provided by the Limitation Law, s.42(1). This was consistent with settled practice that a court of equity should apply the comparable legal time limits unless it was unjust to do so. Even if viewed as an action for breach of trust, the claim would be barred by s.27(3) of...