Fireminds Operations Ltd v Bermuda Investment Advisory Services Ltd

• Jurisdiction: Bermuda
• Judge: Mussenden J
• Judgment Date: 16 December 2022
• Neutral Citation: [2022] SC Bda 96 civ
• Docket Number: CIVIL JURISDICTION
• Court: Supreme Court (Bermuda)
• Year: 2022

Between:

Fireminds Operations Limited

Plaintiff

and

Bermuda Investment Advisory Services Limited

Defendant

BM 2022 SC 96

[2022] SC (Bda) 96 civ.

CIVIL JURISDICTION

2021: No. 298

In The Supreme Court of Bermuda

Arbitration Act 1986; Application for termination of arbitration proceedings pursuant to section 39; intentional and vexatious delay; inordinate and inexcusable delay; prejudice and risk to a fair arbitration; application for extension of time to appoint arbitrator pursuant to section 38

Appearances:

Richard Horseman, Wakefield Quin, for Plaintiff

Keith Robinson and Kyle Masters, Carey Olsen Bermuda Limited, for Defendant

Judgment of Mussenden J

Introduction

1 This matter appears before me on two applications:

• a. The Plaintiffs (“Fireminds”) application under section 39 of the Arbitration Act 1986 (the “ Act”) seeking an order terminating an arbitration commenced by the Defendant (“BIAS”) against Fireminds and prohibiting BIAS from commencing further arbitration proceedings in respect of any matter which is the subject of the terminated arbitration (the “Termination Application”.)

• b. BIAS'S application under section 38 of the Act seeking an order extending the time for appointing an arbitrator and for the commencement of arbitration proceedings (“Extension Application”).

Background

2 Fireminds caused an Originating Summons to be issued on 23 September 2021 for the Termination Application to terminate arbitration proceedings that had been commenced by BIAS on or about 27 September 2019 (the “Arbitration Proceedings”) pursuant to section 39(2) of the Act.

3 On 8 October 2021, I granted Fireminds' application for an order to restrain the Arbitration Proceedings pending the determination of the Termination Application

The Evidence

Fireminds' Evidence

Michael Branco — Evidence in Chief

4 Mr. Michael Branco, Fireminds' Chief Executive Officer, swore an affidavit dated 21 September 2021. He stated that by way of a Master Services Agreement (the “MSA”) and a Statement of Works (the “SOW”) both effective as of 12 December 2018, Fireminds was engaged by BIAS to provide it with managed IT services. A dispute arose and subsequently on 27 September 2019, BIAS commenced the Arbitration Proceedings pursuant to Clause 12 of the MSA which provided for arbitration for dispute resolution (the “Arbitration Agreement”). BIAS then terminated the contracts effective 27 September 2019.

5 Clause 12 of the MSA provided the procedure and timelines for any arbitration proceedings. Clause 12(c) set out a limitation period “Either party may commence arbitration by giving Written Notice to the other party demanding arbitration and providing full particulars of the dispute. A Written Notice must in all cases be given within thirty (30) days of the cause of action or dispute arising. Such 30-day period shall be considered a limitation period with the effect that any claim or notice brought after the expiry of such period shall give the other party an absolute limitation defense.” Clause 12(f) stated “Notwithstanding the foregoing, the parties agree that the arbitration shall be heard no later than 120 days after the service of the Written Notice.”

6 Thereafter, starting in October 2019, there were attempts to appoint an arbitrator without success. Marshall Diel & Myers (“MDM”) acted for BIAS at that stage whilst Wakefield Quin (“WQ”) always acted for Fireminds in this matter. On 5 November 2019, a without prejudice meeting took place when Fireminds stated that the parties reached an agreement to settle the matter (the “Settlement Agreement”). The terms included Fireminds providing BIAS with a $36,000 credit against sums owed to Fireminds, the provision of 100 hours of Fireminds' time (at no cost to BIAS) to effect the migration of the IT services to a new IT supplier (the “Migration”) and further discussions if additional hours were needed for the Migration. Two days later, on 7 November 2021, BIAS indicated that it had to reconsider matters and alleged that no agreement had been reached as the points were “subject to contract”.

7 On 5 December 2019, Fireminds issued the credit to BIAS'S account in accordance with the purported Settlement Agreement. The amount of the $36,000 credit was more than the $32,842.50 that BIAS claimed in its Points of Claim.

8 The Migration started which required Fireminds, at BIAS'S request, to maintain and not disconnect the IT servers holding BIAS'S information until the Migration was complete. There was a series of correspondence between the parties about the process and progress of the Migration and sometimes this necessitated correspondence between counsel. On 1 December 2020, Fireminds received notification from BIAS that the Migration was complete. The last communication from MDM to WQ was on 4 March 2020. Fireminds had recorded 97 hours of work on the Migration over approximately 15 months.

9 On 11 August 2021, WQ received a letter from Carey Olsen Bermuda Limited (“CO”) indicating that CO had been instructed to take over the matter, that BIAS wanted to proceed to arbitration, its claims now amounting to $107,069.84 remained unresolved and failing an admission of liability, it would write to the Bermuda Bar Association to appoint an arbitrator. WQ replied that a binding Settlement Agreement had been agreed but that even if one had not been reached, any further claims would be time barred.

10 At the hearing of this matter, Mr. Branco gave evidence that he had resigned from Fireminds effective 31 December 2021 and was currently on garden leave with a clause to participate in any litigation whilst on garden leave. He would be released from Fireminds and any obligations effective 31 December 2022.

Michael Branco — Cross-Examination

11 Mr. Branco was cross-examined by Mr. Robinson. He stated that he was seeking opportunities overseas. However, he was prepared to answer to a subpoena to participate in these proceedings or the Arbitration Proceedings.

12 The thrust of his evidence was as follows:

• a. Fireminds did not have a business relationship with the Trott & Duncan law firm ( “T&D”). However, One Communication, a connected but legally separate company, had sought legal advice from T&D on a company matter.

• b. Fireminds considered Ms. Kiernan Bell to have a conflict as she was a director of a client company.

• c. After the meeting of 5 November 2019 between Fireminds and BIAS, he left thinking that they had resolved the matter. When presented with the email dated 7 November 2019 from MDM to WQ about the meeting and challenged that as a result of the wording of paragraphs (d) and (e) about the 100 hours to be provided by Fireminds, Mr. Branco stated that he took the paragraphs to mean that there was disagreement about the number of hours, whether 100 or another amount. He denied that after the 5 November 2019 there were still ‘ongoing settlement discussions’ noting his use of those words in his affidavit evidence was a reference to whether the hours committed by Fireminds was going to be 100 hours or some other amount of hours, for example 500 hours. He stated that as of 7 November 2019 Fireminds was surprised that there was a reconsideration of the purported Settlement Agreement.

• d. The Migration was completed at the end of November 2020. Fireminds had continued to invoice BIAS monthly for service until that time and BIAS had paid those invoices.

• e. Mr. Branco stated that at the 5 November 2019 meeting in MDM boardroom, he knew that Tim Marshall was a lawyer there, he thought in semi-retirement but he and his attorneys did not raise any issue of conflict as they did not think that Mr. Marshall was involved in the matter. Later on, in February 2020, he saw an email thread which had copied in Mr. Marshall. He asserted that although Mr. Marshall was not a director of Fireminds, the Fireminds group of companies were all the same business.

• f. Mr. Branco conceded that a letter from WQ to MDM dated 20 March 2020 requested the parties to focus on the Migration first and after it was completed they could revisit other issues including conflict of interest and any additional claims. He explained that he was focused on making the customer happy with Fireminds' services.

BIAS'S Evidence

Robert Pires — Evidence in Chief

13 Mr. Pires, the Chief Executive Officer and Chief Investment Officer of BIAS, swore an affidavit 26 November 2021. He stated that BIAS is an investment manager licensed to conduct investment business pursuant to the Investment Business Act 2003 and regulated by the Bermuda Monetary Authority (“BMA”). Its primary business is managing the assets of individuals and institutions which requires a high level of trust. Its business requires data and information to be managed well and securely. Thus, its information technology (“IT”) systems are an important part of its business. Mr. Pires stated that the BMA had issued guidance notices in respect of which required BIAS to seek approval prior to outsourcing services, in particular cloud services. Part of the process was for BIAS to carry out a risk evaluation and due diligence on the service provider.

14 Mr. Pires stated that BIAS had not delayed the prosecution of the Arbitration Proceedings in a manner that could be described as intentional, vexatious, inordinate or inexcusable. Rather it was Fireminds that had repeatedly thrown up roadblocks designed to avoid the due prosecution of the matter in a timely manner.

15 Mr. Pires stated that almost from the outset Fireminds failed to meet its obligations under the SOW and the MSA which was dated 13 December 2018 and effective 12 December 2018 for a period of two years. On 30 July 2019 BIAS set out its complaints in a letter before action dated 30 July 2019 ( “LBA”) which called for Fireminds to cure the breaches of contract within 30 days and to pay BIAS the damages for losses it had...