Fidelity National Title Insurance Company v Trott & Duncan Ltd

• Jurisdiction: Bermuda
• Judge: Shade Subair Williams J
• Judgment Date: 05 February 2019
• Neutral Citation: [2019] SC Bda 10 Civ
• Docket Number: COMMERCIAL JURISDICTION 2018 No: 74
• Court: Supreme Court (Bermuda)
• Date: 05 February 2019

[2019] SC (Bda) 10 Civ

In The Supreme Court of Bermuda

Williams, J.

COMMERCIAL JURISDICTION 2018 No: 74

Between:

Fidelity National Title Insurance Company

Plaintiff

and

Trott & Duncan Limited

Defendant

Plaintiff: Mr. Keith Robinson and Mr. Kyle Masters ( Carey Olsen Bermuda)

Defendant: Mr. Mark Diel and Ms. Katie Tornari ( Marshall Diel & Myers Limited)

Application to Strike Out (RSC 18/9) and Court's Inherent Jurisdiction / Date of Accrual of Cause of Action for Professional Negligence Claim / Whether Claim is for Actual Loss or Contingent Loss

RULING

RULING of Shade Subair Williams J

Shade Subair Williams J

Introduction

1 The Plaintiff commenced these proceedings by a Specially Indorsed Writ of Summons filed on 13 March 2018 followed by an Amended Statement of Claim filed on 28 August 2018. The underlying claims allege breaches of a retainer agreement for client legal services and professional negligence asserting that the Defendant failed to exercise the care and skill to be expected of reasonably competent attorneys in the performance of their duties pursuant to the retainer.

2 By summons dated 8 October 2018, the Defendant seeks to have the Plaintiff's Specially Indorsed Writ of Summons and Amended Statement of Claim (“the Amended Claim”) struck out under RSC O.18/19 and/or under the Court's inherent jurisdiction on the basis that no reasonable cause of action against the Defendant has been disclosed. The Defendant further relies on grounds asserting that the claims are scandalous, frivolous and/or vexatious and an abuse of the process of the Court.

3 The Plaintiff's summons action for these proceedings to be stayed pending the determination by the Privy Council of the appeal of the Court of Appeal's decision in Mexico Infrastructure Finance LLC v The Corporation of Hamilton Civ. Appeal No. 19 of 2016 (“The Court of Appeal proceedings”) was not argued. In any event, it would seem that the stay application has now been rendered futile by the Privy Council judgment which was delivered post-hearing on 21 January 2019 in Mexico Infrastructure Finance LLC v Corporation of Hamilton [2019] UKPC 2 (“the Privy Council proceedings”) in favour of the Corporation of Hamilton.

4 Having heard Counsel for both parties on the Defendant's strike out application, I reserved my ruling which I now provide together with reasons herein.

Factual Background:

5 The dispute between the parties to these proceedings is an offspring from the hard-fought litigation between Mexico Infrastructure Finance LLC (“MIF”) and the Corporation of Hamilton (“the COH”). The facts giving rise to this battlefield have been summarized in various written judgments of the Courts which have been later rehearsed by media outlets in Bermuda and beyond.

6 It all started with ambitions for Par-La-Ville Hotel and Residences Ltd (“PLV”) to build and develop a five-star hotel complex on the site of the Par-La-Ville car park in the City of Hamilton (“the Car Park”) which was to open on 31 August 2016. It was envisaged that the new hotel would attract and accommodate the needs of opulent business travelers. The COH aspired to collect rental profits from the leasing of the Car Park and revenue stemming from the use of a new underground car park. The COH's general outlook on the project was that the new hotel would increase the vibrancy of Hamilton City and result in enhanced revenues for other city services.

7 For these reasons, on 11 April 2012 the COH entered into a development agreement and an agreement for the lease with PLV. The COH was further motivated to secure a loan agreement wherein MIF would lend an $18,000,000 sum to PLV to meet the anticipated cost of borrowing monies in the estimated sum of $350,000,000 for the building and development of the luxurious hotel complex. The security for the $18,000,000 loan was to take the form of a guarantee (“the Guarantee”) and mortgage over the COH's freehold interest in the Car Park (“the Mortgage”).

Summary of Legal Advice given to the COH

8 The COH instructed Mr. Charles Flint QC to provide a legal opinion on its powers to provide the security for the loan. Mr. Flint QC, by a written opinion dated 10 May 2013 (narrowly pre-dating the 2013 Amendment), advised that the COH were not so empowered and that section 23(1) of the Municipalities Act 1923 (“the 1923 Act”) did not confer any general powers on the COH to provide financial assistance to a commercial developer.

9 Following the written advice of Mr. Flint QC, the COH instructed Bermuda law firm, Terra Law Limited (“Terra Law”), to provide a second legal opinion on its powers to execute the Guarantee. Having been disclosed with Mr. Flint QC's opinion, Terra Law, in a draft written opinion, advised that the COH had the power to mortgage its property pursuant to section 20(1)(b) of the 1923 Act if Ministerial approval were obtained. It further opined that the COH derived all of its powers from the statute which was vague and unclear.

10 Of note, Terra Law qualified its opinion by acknowledging that the possibility of challenge on the basis that the 1923 Act does not confer an express power to mortgage its land to support the borrowing of a third party. In the final part of the qualification, Terra Law states; “ We submit, however that the Lender can be protected against such risk through the issuance of the Mortgagee Title Insurance by Stewart Title Insurance Company (required under clause 6.1(xii) of the Credit Agreement).”

11 At paragraph 15 of the judgment in the Court of Appeal proceedings it states; “ As the learned judge noted, Mr. Flint could understandably be considered a more authoritative source of legal advice than Terra Law, and his opinion addressed the point in greater depth than that of the Bermuda law firm, which the judge commented, had addressed the point somewhat cursorily…”

Ministerial Refusal under s.23(1)(f) of the Municipalities Act 1923 and the Passing of the Municipalities Amendment Act 2013

12 By letter dated 10 July 2013, the Minister informed the Mayor that the Attorney-General's Chambers had considered the 1923 Act and concluded that it did not permit the Corporation to use its assets for the benefit of third party financing. On this basis, the Minister declined the approval required under section 23(1)(f).

13 In an attempt to bestow the COH with the legal authority it needed to honour its apparent liability under the Guarantee, the Legislature amended the 1923 Act in October 2013 by passing the Municipalities Amendment Act 2013 (“the 2013 Amendment”). (It was always common ground between the parties that the 2013 Amendment was intended to cure the concerns that the COH's statutory powers fell short of permitting it to lawfully provide the Guarantee.)

14 Section 14 of the 2013 Amendment required the approval of Cabinet and the Legislature to validate certain agreements and dispositions. A draft copy of the Guarantee was subsequently submitted and approved by the House of Assembly on 13 June 2014 and by the Senate on 25 June 2014.

MIF's Insurance Coverage by the Plaintiff upon Legal Advice of Trott & Duncan Ltd

15 At paragraph 5 of the Amended Claim, the Plaintiff avers that MIF first approached a competitor title insurance company, Stewart Title Guaranty Company (“Stewart”) for insurance coverage over the mortgage and other related costs. However, Stewart sought to insert an exclusion clause in its proposed contract in the following terms:

“ Any claim or loss by reason of any lack of legal or constitutional authority by the Corporation of Hamilton to act as mortgagor and /or guarantor of the Insured Mortgage over the Land[.]”

16 At paragraph 6 of the Amended Claim the Plaintiff explained that MIF was unsatisfied with the suggested exclusion clause and subsequently sought out the Plaintiff in hopes for obtaining coverage without a similar restriction. The Plaintiff, upon obtaining legal advice from the attorneys of Trott & Duncan Ltd (“Trott & Duncan”), issued a title policy to MIF on 18 August 2014 without any exclusion clause similar or identical to that proposed by Stewart (“the Title Policy”).

The Execution and Default of the $18M Loan and the COH's Security for the Loan

17 MIF entered the loan agreement with PLV for the $18,000,000 sum and on 9 July 2014 the COH provided the Guarantee and the Mortgage.

18 PLV, having failed to repay the loan on its due date of 30 December 2014, defaulted on the loan which led MIF to employ efforts to seek full repayment of the entire outstanding balance of $18,000,000 plus interest from the COH under the Guarantee.

19 To date, the loan remains unpaid.

Court Proceedings between MIF and the COH:

20 The 2013 Amendment was subsequently passed and the first set of Court proceedings began in the Supreme Court in an action brought by MIF against the COH for enforcement of the Guarantee. The COH, acting on the advice of its new attorney, Mr. David Kessaram of Cox Hallett Wilkinson (“CHW”), concluded that it could not properly defend the claim and consented to MIF's application for summary judgment against it. Accordingly, the Consent Order was entered by the learned Mr. Justice Stephen Hellman on 27 May 2015 (“the Consent Order”). This Court has not been made privy to or even aware of any written legal opinion proffered by CHW, save to say it would be difficult to infer from the making of the Consent Order that their advice was in tandem with that of Mr. Flint QC whose position was that the Corporation had no power to grant the Guarantee in the first instance. At paragraph 14 of the Court of Appeal judgment, the learned Bell JA stated:

“ Mr. Kessaram had not been provided with a copy of Mr. Flint's opinion, nor had he been advised that there had ever been an issue as to ultra vires, and indeed, to the contrary, had been told that the 2013 Amendment had been passed expressly to enable the...