American Patriot Insurance Agency Inc. v Mutual Holdings (Bermuda) Ltd

JurisdictionBermuda
Judgment Date22 March 2012
Date22 March 2012
Docket NumberCivil Appeal,Civil Appeal 2010 No 12
CourtCourt of Appeal (Bermuda)

In The Court of Appeal for Bermuda

Before: Zacca, P; Ward, JA; Evans, JA

Civil Appeal 2010 No 12

BETWEEN:
American Patriot Insurance Agency Inc, Kenneth A Hendricks, Diane M Hendricks
Appellants
and
Mutual Holdings (Bermuda) Limited, Mutual Indemnity (Bermuda) Limited, Glenn Partridge, David Alexander, Richard Turner, Andrew S Walsh
Respondents

Mr J Garrood for the Appellants

Mr P Smith for the Respondents

The following cases were referred to in the judgment:

Lisa SA v Leamington Reinsurance Co Ltd and Avicola Villalobos SABDLR [2008] Bda LR 61

Sanderson v Blyth TheatreELR [1903] 2 KB 533

Bullock v The London General Omnibus CoELR [1907] 1 KB 264

Bankamerica Finance Ltd v NockELR [1988] 1 AC 1002

EMI Records v Ian Wallace LtdELR [1983] Ch 59

Phoenix Global Fund Ltd v Citigroup Fund Services (Bermuda) LtdBDLR [2009] Bda LR 70

Abstract:

Claim for pre-judgment interest - Costs - Indemnity or standard basis

JUDGMENT on Costs of Evans, JA

(1) Interest

1. Payments totalling US$1 million were made by AMPAT in respect of notional reinsurance premiums as follows -

18 May 2000 $480,000

5 March 2002 $520,000

2. Judgment for the sum of $1 million was entered in favour of the Hendricks (hereinafter "the Appellants") against three Respondents (Mutual Indemnity, Partridge and Alexander, hereinafter "the Respondents") by Order of the Court dated 31 October 2011.

3. The Court further ordered that the Appellants claim for pre-judgment interest was adjourned sine die to be restored for hearing by the Court of Appeal if so advised after receiving written submissions from both parties.

4. The adjourned hearing took place on Monday 5 March 2012. Both parties were represented by Counsel.

5. The Appellants claim interest at the statutory rate of 7% per annum from the respective dates of payment stated above.

6. The Court is entitled to award interest at the statutory rate under section 10 of the Interest and Credit Charge Act 1975 "from the date of the accrual of the cause of action until judgment" (per Kawaley J. in Lisa SA v Leamington Reinsurance Co Ltd. and Avicola Villalobos SABDLR[2008] Bda LR 61 at para 30). Kawaley J. continued "This period may be abridged where it would be unjust to do otherwise", and he cited "serious delay" by the Plaintiff as a possible ground for doing so.

7. The Respondents contend that interest should be awarded only for a period of not more than four years prior to the judgment date. This was on the ground that "in the context of a fraud trial, it was incumbent" upon the Claimants "to prosecute their claims quickly", which it was alleged the Claimants had failed to do, specifically because delay occurred between January 2007 and April 2009 caused by their "insistence that Mr Walsh was a party to the fraud" and their claim against him.

8. The Court was informed by Counsel for the Appellants that Mr Walsh was added as a defendant only after the original defendants contended that they had acted in accordance with advice they received from him. This Court dismissed the claim against Mr Walsh having found that the advice he gave to other defendants was limited to one aspect of the relevant issue (namely, whether the Hendricks and AMPAT were liable for losses which were in excess of the AAP but within the additional reinsurance coverage provided by Article 3A of the Amended Treaty) and that that advice was correct. The Court further found that Mr Walsh's advice was not concerned with the issue of liability beyond that limit to which the Mutual Group might be exposed through Legion as the original insurer. The advice given by Mr Walsh, therefore, did not justify the view, which the Respondents said they formed on his advice, that the Appellants had unlimited liability beyond the AAP, or any liability beyond the limit under Article 3A.

9. The Court finds and holds -

i. that it was not unreasonable for the Appellants to join Mr Walsh as an additional defendant, having regard to the defence of the original defendants that they had acted in accordance with his legal advice, which was incorrect as a matter of fact;

ii. the Appellants ought not to be deprived of interest on account of any delay that resulted from pursuing the claim against him; and

iii. that the Appellants are entitled to recover interest at the statutory rate of 7% (seven per cent.) per annum, as follows -

(iii.a) on $480,000 from 18 May 2000 until 5 March 2003; and

(iii.b) on $1,000,000.00 from 6 March 2002 until the date of judgment, 31 October 2011.

10. The Appellants referred, in their written Submission, to the possibility of the Court ordering that the interest shall be calculated on a compound basis with periodic rests. The Court understands that that has not been the practice of the Bermuda Courts, even in "a commercial case involving allegations of fraud", and in any event the Court directs in the present case that interest shall be calculated as simple interest only.

(2) Costs

11. The Appeal succeeded against four Respondents (Mutual Holdings, Mutual Indemnity, Mr Alexander and Mr Partridge) (hereinafter "the Respondents") but it failed against Mr Turner and Mr Walsh (hereinafter "the successful Respondents").

12. The Appellants seek an order for costs in their favour against the Respondents and that their costs should be assessed on the indemnity basis, not at standard rates. The successful Respondents claim their costs against the Appellants.

13. The proceedings involved...

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