Bermuda Fire & Marine Insurance Company Ltd ((in Liquidation)) v BF & M Ltd and Others 1995 Civil Jur. No. 7

• Jurisdiction: Bermuda
• Judgment Date: 09 June 1999
• Docket Number: Civil Jurisdiction No: 7,Civil Jurisdiction 1995 No. 7,Civil Jurisdiction 1995 No. 7, No. 8 and No. 393,Civil Jurisdiction 1995 No. 7 and No. 393
• Date: 09 June 1999
• Court: Supreme Court (Bermuda)

In the Supreme Court of Bermuda

Ground, J

Civil Jurisdiction 1995 No. 7, No. 8 and No. 393

BETWEEN:

The Bermuda Fire & Marine Insurance Company Limited (in Liquidation) and others

Plaintiffs

-and-

BF&M Limited and others

Defendants

Mr. G. Moss QC and Mr. W Trower for the Plaintiffs;

Mr. D. Oliver QC and Mr. R. Millett for the Shareholder Defendants;

Ms. E. Gloster QC and Mr. R. Millet for the First to Seventh Defendants;

Mr. J. Riihiluoma for the Ninth to Thirteenth Defendants;

Mr. I. Croxford QC for the Fourteenth Defendant; and

Mr. J. Crow for the Fifteenth Defendant.

Everett v RibbandsELR [1952] 2 QB 198

Ashmore v Corporation of LloydsWLR [1992] 1 WLR 446

Tilling v WhitemanELR [1980] AC 1

Allen v Gulf Oil Refining Limited [181] AC 1001

Radstock Cooperative & Industrial Society Ltd. v Norton-Radstock UDSELR [1968] Ch 605

Conveyancing Act 1983, s. 37

Joint application for order that certain issues be deemed to be preliminary issues — Summons for Directions — Application for leave to re-amend defence — Appointment of representative shareholder — Split trial

RULING

This matter came before me on three applications:

(i) a joint application by the Shareholder Defendants (being those whose names are set out in the Schedule to the Summons of 9th January 1997) and by the First to Seventh Defendants (‘the Corporate Defendants’) for an order that certain issues be determined as preliminary issues pursuant to RSC Ord. 33, rr. 3 and/or 4;

(ii) the first hearing of the Summons for Directions taken out by the plaintiffs on 20th November 1996; and

(iii) an application by the Corporate Defendants for leave to re-amend their amended consolidated defence.

The third of those applications was unopposed, and at the hearing I gave leave to amend on the usual terms. I also now give leave to make a minor amendment to the consolidated Statement of Claim, consisting of the addition of a cross-reference to paragraph 178 in paragraph 179B, the need for which emerged during the hearing. Again, that is to be on the usual terms.

The real area of dispute was over the question of preliminary issues, although two points in the Summons for Directions also gave rise to particular controversy, being applications for:

• (i) a split trial of liability and relief;

• (ii) the appointment of a representative shareholder defendant.

In addition, there was no agreement over the timetable proposed by the Summons for Directions.

Preliminary Issues

The preliminary issues were originally sought by separate summonses of 14th May 1996 and 7th August 1996 respectively, but they have been overtaken by the joint summons of 9th January 1997, taken out by the Corporate and Shareholder Defendants (‘the Composite Summons’). The application was opposed by the plaintiffs and by the other defendants who appeared. It seems that there remains a number of shareholders who for one reason or another have not been served, and a further group who are not members of the Association and are separately represented by King & Associates. Those latter did not appear on this application, although both the Composite Summons and the Summons for Directions were addressed to them.

There are 14 distinct issues listed in the Composite Summons. Four of these are sought by the Corporate Defendants alone; seven by the Shareholders alone; and three by both. All but three of these issues comprise a number of sub-issues or subsidiary questions for the Court's determination.

It was urged upon me by the applicants that good, modern trial management required the preliminary determination of these issues, and I was referred to the changing approach in the United Kingdom, and in particular to the Woolf Report (“Access to Justice,” Final Report by Lord Woolf MR, HMSO July 1996).

However, the requirement that trial Judges adopt a more pro-active approach to case management is quite distinct from the law that is to be applied when they do so, which is not itself affected. Thus, although Judges are encouraged to identify suitable issues for preliminary trial, it seem to me that the criteria by which any such identification is to be made, remain unchanged.

The law is that if there is a discrete point which, if decided one way, will dispose of the action or substantially shorten it, then it may (and indeed, all else being equal, ought) to be determined as soon as practicable: Everett -v- RibbandsELR[1952] 2 QB 198 per Romer LJ at 206. This is so whether the plaintiff wishes it or not, the principle being—

‘… if from [the] pleadings it [is] possible to identify one or more issues a decision on which would either finally determine the dispute or at least substantially reduce the length of any further trial, it is right that the judge, of course after recognising … the possible hazards of trying preliminary issues, should order such issues to be tried first.’ (Ashmore -v- Corporation of Lloyds[1992] 1 WLR 446 (HL) per Lord Roskill at 448).

On the other hand, and as a corollary of this, if the decision on the proposed issue will neither dispose of the action nor substantially shorten it, then the trial of it as a preliminary issues is likely to be counter-productive, increasing costs and the burden on the courts, and risking delay in the main trial.

Moreover, even where it will dispose of the action or substantially shorten it, the trial of a preliminary issue can be fraught with a variety of hazards, as Lord Roskill acknowledged in the passage cited above. Indeed, the cases are full of warnings from the highest courts on the dangers inherent in such a course. Among those dangers is that of a preliminary point of law being decided in a way which obviates a trial on the evidence, but which is subsequently held on appeal to be wrong. As Lord Scarman observed in one such case:

‘Preliminary points of law are too often treacherous short cuts. Their price can be, as here, delay, anxiety and expense.’Tilling -v- Whiteman[1980] AC l, at 25C.

An important factor to take into account in assessing the dangers inherent in the trial of a preliminary point will be whether or not the main action is to proceed to trial against other defendants, and to what extent the issues against the various defendants are linked. If there are multiple defendants facing linked issues, it would be rare that a dispositive preliminary point concerning some only could conveniently be entertained, because if decided in favour of those defendants, the trial of the remaining defendants could not safely be held until all appeals had been exhausted.

In this case the applicant defendants propose certain undertakings to avoid delaying the trial as a result of appeals from any determination of the preliminary issues, being (in essence):

(i) if they lose, that they will not appeal to the Privy Council before the end of the trial; and

(ii) if they win, that they will continue trial preparation pending any appeal by the plaintiffs or the other defendants, provided they get a satisfactory indemnity against wasted costs.

The second undertaking ends with an assurance that the applicants ‘… will not seek to rely on the fact of such appeal as a ground for adjourning the trial date,’ but I am not clear if that means that they will submit to trial on issues on which they were successful on the preliminary issues if the appeal process is still pending. If it does, it could render the whole thing pointless, if it does not, then it does not meet the problem of the appeal process extending beyond the date for the full trial.

However, to my mind more fundamental principles are at stake than those relating to delay and competing conveniences. This is very much a case which will have to be determined on its facts, and the principles of law to be applied will, to a certain extent, vary according to those facts as found at trial. To borrow the words of Lord Wilberforce:

‘The fact is that the result of the case must depend upon the impact of detailed and complex findings of fact upon principles of law which are themselves flexible. There are too many variables to admit of a clear-cut solution in advance.’ (Allen -v- Gulf Oil Refining Limited[1981] AC 1001 (HL) at 1011)

In such circumstances it would be particularly dangerous to attempt to try preliminary issues against some only of the defendants on assumed facts, where, whatever the outcome, there would necessarily be a trial against other defendants involving the same factual matrix.

Against that background I consider that many of the proposed preliminary points are inappropriate for determination as preliminary issues, as they cannot properly be divorced from their factual context. These include (using the numbering and brief description from the Composite Summons): (2) the fraudulent intent issue, (which includes the complex issue of imputation of directors' knowledge); (3) the causation issue; (5) the consideration issue—corporate defendants; (6) the imputation issue; (8) the declaration issue; (10) the consideration issue—shareholder defendants.

As to the remainder, there are two which do seem to me to propose pure points of law which, if the cause of action to which they relate had been the only one advanced in the case, may well have been suitable for preliminary determination. These are (1) the land issue, and (9) the instrument in writing issue, which both concern the cause of action alleged under section 37 of the Conveyancing Act 1983. However, a determination of these alone cannot now dispose of the whole action against these defendants, so that to lake them before the trial will not in fact save any time and expense, but will risk delaying and embarrassing the conduct of the action.

The issue proposed at (11), the section 48 issue, may also be in the same category. However, in view of the ambiguity over the factual context I would not in any event have thought it safe to proceed in the absence of...