Hiscox Services Ltd, Hiscox Agency Ltd and Hiscox Insurance Company (Bermuda) Ltd v Yuval Abraham
| Jurisdiction | Bermuda |
| Judge | Hargun, C.J. |
| Judgment Date | 05 October 2018 |
| Neutral Citation | [2018] SC Bda 68 Civ |
| Docket Number | CIVIL JURISDICTION COMMERCIAL COURT 2018: No. 131 |
| Court | Supreme Court (Bermuda) |
| Date | 05 October 2018 |
[2018] SC (Bda) 68 Civ
In The Supreme Court of Bermuda
Hargun, C.J.
CIVIL JURISDICTION COMMERCIAL COURT 2018: No. 131
Mr. Keith Robinson and Mr. Henry Tucker of Carey Olsen Bermuda, for the Plaintiffs;
Mr Saul Froomkin, QC of Christopher E. Swan & Co., for the Defendant.
Stay of civil proceedings pending the determination of criminal proceedings arising out of the same facts — whether the rule in Smith v. Selwyn [1914] 3KB 98 still applies in Bermuda — whether stay should be granted under the inherent jurisdiction of the court — whether appropriate to stay an application for summary judgment
By Summons dated 24 August 2018, the Plaintiffs seek summary judgment against the Defendant under Order 14 of the Rules of the Supreme Court 1985 in an amount equivalent to US $1,506,960 and CHF 334, 000. In response the Defendant has applied to stay the Plaintiffs' application for summary judgment until the criminal investigation and any subsequent criminal proceedings, arising out of the same facts, against him have been concluded, or pending an indication from the appropriate authority that the criminal charges would not be pursued.
There are a number of other applications made by the parties arising out of and related to the Mareva injunction granted by the Court on 25 April 2018. First, the Plaintiffs seek an order that the Defendant file a further and better affidavit of his assets and that such an affidavit should cover the period following the first suspicious transaction, 6 June 2017 to date. Second, the Plaintiffs seek an order that paragraph 10 (1) of the Order dated 25 April 2018, allowing the defendant to spend up to $5000 be varied so as to reduce the amount allowed to $1250 per week. Third, the Defendant seeks an order that he be permitted to obtain from his assets a lump sum of $33,650.98 on account of unpaid living expenses and $50,000 on account of legal advice and representation.
The Plaintiffs, Hiscox Services Ltd (“HSL”), Hiscox Agency Ltd (“HAL”), Hiscox Insurance Company (Bermuda) Ltd (“HIC”), are three companies incorporated in Bermuda engaged in the business of insurance and are members of the Hiscox Group, listed on the London Stock Exchange. At all material times, Yuval Abraham, the Defendant, was employed in Bermuda as Chief Financial Officer of HSL.
It is said by the Plaintiffs that during the period 6 June 2017 to 16 February 2018, the Defendant caused or procured online transfers to be made from the bank accounts of the Plaintiffs with HSBC Bank of Bermuda to Montres Journe New York LLC (“Montres Journe”) in the total sum of US$1,506,960 and Kari Voutilainen in the amount of CHF 334,000.
The Plaintiffs maintain that the Defendant procured these online transfers by producing false invoices for various fictitious consulting and other business services in the names of “Montres Consulting” (for the payments to Montres Journe) and “KV Brokerage Consulting” (for payments to Kari Voutilainen). It is the Plaintiffs case that there was no sensible business purpose for making these payments. Montres Journe and Kari Voutilainen are manufacturers and/or retailers of luxury timepieces and the payments, the Plaintiffs allege, to Montres Journe and Kari Voutilainen were in fact made in consideration of the purchase of luxury watches by the Defendant.
By Writ of Summons dated 25th of April 2018 the Plaintiffs commenced proceedings against the Defendant seeking a declaration that the Defendant is liable to account to the Plaintiffs for the sum of US$1,847,960, being funds of the Plaintiffs wrongfully acquired by the Defendant, on the grounds of his breach of fiduciary duty and/or breach of trust.
By an Order dated the 25 April 2018, Hellman J granted an injunction restraining the Defendant from removing from Bermuda any of his assets which are in Bermuda up to the value of $1,847,960 or in any way dispose of, deal with or diminish the value of any of his assets whether they are in or outside Bermuda up to the same value. By paragraph 8 of that Order, the Defendant was required to disclose to the Plaintiffs all his assets worldwide whether in his own name or not and whether solely or jointly owned, giving the value, location and details of all such assets. Paragraph 8(2) expressly provided that if the provision of any of this information is likely to incriminate the Defendant, he may be entitled to refuse to provide that information to the Plaintiffs.
The Plaintiffs application for summary judgment is made by Summons dated 24 August 2018 and is supported by the Fifth affidavit of Marc Wetherhill dated 14 August 2018 confirming that he verily believes that there is no defense to this action and the Defendant is justly and truly indebted to the Plaintiffs in the amounts particularised in the Writ of Summons. Mr Wetherhill relies upon his four earlier affidavits dated 24 April 2018, 27 April 2018, 12 June 2018 and 9 July 2018.
The Defendant has not filed any evidence in response to the application for summary judgment. Instead the defendant has filed a Notice of Motion seeking an order that the summary judgment application be stayed until the criminal investigation and any subsequent criminal proceedings against the Defendant have been concluded. In support of the stay application the Defendant relies upon the Court of Appeal decision in Arnold J. Todd v. Merkell Smith (Civil Appeal No. 16 of 1993) and the decision of Kawaley J in Capital G Bank v. Wendell Tyrone Eve [2008] Bda L.R. 60.
In the Todd case the Court of Appeal confirmed that the common law rule in Smith v. Selwyn [1914] 3KB 98 applies in Bermuda. Phillimore L.J. in that case stated that: “ It is a well established rule of law that a plaintiff against whom a felony has been alleged by the defendant cannot make that felony the basis of an action unless the defendant has been prosecuted or some good reason has been given why a prosecution has not taken place”.
The rule, as applied by the Court of Appeal in the Todd case, appears to allow for no discretion on the part of the court. The rule is expressed as a rule of law which must be applied and a stay of the civil proceedings granted if a felony has been alleged against the defendant. The Plaintiffs question whether the rule in Smith v. Selwyn continues to apply in Bermuda having regard to the Privy Council decision in Panton v. Financial Institutions Services Ltd [2003] UKPC 86. Panton was an appeal from Jamaica where the Privy Council noted that Smith v. Selwyn was no longer good law in England and that the matter of stay was a matter of discretion of the court which was required to weigh the competing considerations. The Privy Council concluded that there were no peculiar public policy considerations prevailing in Jamaica which would justify that the common law in Jamaica should develop differently in relation to this issue than the common law in England. The Board noted the move away from the rigid rule in Smith v. Selwyn in most common law jurisdictions:
“7. That movement may be briefly traced. The English Court of Appeal in 1979 in Jefferson Ltd v Bhetcha [1979] 1 WLR 898, the New South Wales Supreme Court in 1982 in McMahon v Gould 7 [1982] ACLR 202, the Federal Court of Australia in 1984 in Re Cameron's Unit Services Pty Ltd v Kevin R Whelpton and Associates (Australia) Pty Limited and another [1984] 4 FCR 428 and the Jamaican Court of Appeal in 1994 in Bank of Jamaica v Dextra Bank & Trust Co Ltd [1994] 31 JLR 361, have all held that the issue of a stay to prevent civil proceedings when criminal prosecutions arising out of the same events are also pending is a matter of discretion to be exercised by reference to the competing considerations. It is not a matter of rule. Smith v. Selwyn has been discarded.”
In light of the Privy Council decision in Panton, I conclude that the common law rule in Smith v. Selwyn is no longer good law in Bermuda. A decision of the Privy Council in relation to the development of common law is binding in Bermuda even though the decision of the Privy Council related to an appeal from another jurisdiction ( Grayken v. Grayken [2011] Bda L.R. 14, per Zacca P at [18]; and Medeiros v. Island Construction Services Co. Ltd. [2016] SC (Bda) 103 Civ (25 November 2016) per Kawaley CJ at [23]). In passing it should be noted that the English Court of Appeal decision in Jefferson Ltd v. Bhetcha [1979] 1 W.L.R. 898, which discarded the rule in Smith v. Selwyn in England, was not cited to the Bermuda Court of Appeal in Todd. Had that decision been cited in Todd it seems unlikely that the Court of Appeal would have concluded that Smith v. Selwyn represented the common law in Bermuda.
In any event even if Smith v. Selwyn still applied in Bermuda it will not apply in the present situation since its operation is limited to “felonies”. As noted by Kawaley CJ in Capital G Bank v. Eve [2008] Bda 60 at [6 and 7], the classification of offences in Bermuda has changed since the original Criminal Code was enacted in 1907, with section 3(1) providing that “offences are of four kinds, namely, treasons, felonies, misdemeanors, and simple offences”. This position was amended by the Criminal Code Amendment (No.2) Act 1905 when the felony designation disappeared from the definition of property related offences. Felonies still exist under the current version of the Criminal Code, such as “treasonable felonies” (section 85). I accept the Plaintiffs' contention that whatever charges may be brought against the Defendant they will not fall within the category of “felonies”. Mr Froomkin advised the Court that the Defendant had in fact been charged by the Bermuda authorities but did not...
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