Intercontinental Natural Resources Ltd v Conyers Dill & Pearman

• Jurisdiction: Bermuda
• Judgment Date: 15 April 1982
• Date: 15 April 1982
• Docket Number: Civil Jurisdiction 1980 No. 296,Civil Appeal 1981 No. 14
• Court: Supreme Court (Bermuda)

In The Court of Appeal for Bermuda

Before: Blair-Kerr, P; Smith, JA; daCosta, JA

Civil Appeal 1981 No. 14

BETWEEN:

INTERCONTINENTAL NATURAL RESOURCES LIMITED (IN LIQUIDATION)

Appellant

v

THE PARTNERS OF CONYERS, DILL & PEARMAN, A FIRM

1st Respondents

WALTER MADDOCKS (IN HIS PERSONAL CAPACITY)

2nd Respondents

JAMES DOUGLAS ROBINSON

3rd Respondents

DOUGLAS JOHN FIELD

4th Respondents

WILLIAM MILNER COX

5th Respondents

Mr G Lightman, QC, Mr A Boyle and Mr W Hollis for the Appellant

Mr L Hoffman, QC, Mr G Collett and Mr D Donaldson for the 1st, 2nd & 3rd Respondents

Mr R Scott, QC and Mr M Jones for the 4th & 5th Respondents

The following cases were referred to in the judgment:

Bruce v Odhams Press LtdELR [1936] 1 KB 697

Re City Equitable Fire Insurance Co LtdELR [1925] 1 Ch 407

Burgess v Beethoven Electric Equipment LtdELR [1943] 1 KB 96

Re Newcastle-upon-Tyne Marine Insurance Co ex parte BrownENR (1854) 9 Beav 97

Midland Bank v Hett, Stubbs & KempELR [1979] 1 Ch 384

Evans v BartlamELR [1937] AC 473

GL Baker Ltd v Medway Building & Supplies LtdWLR [1958] 1 WLR 1216

Ward v JamesELR [1966] 1 QB 273

Re O. (Infants)ELR [1971] Ch 748

Beck v Value Capital Ltd (No 2)WLR [1976] 1 WLR 572

Birkett v JamesELR [1978] AC 297

Abstract:

Pleading - Striking out statement of claim and writ - Director's liability - Embarrassing statement of claim so lacking in primary facts as being incapable of cure by further and better particulars - Whether good arguable case or issue for trial

JUDGMENT of BLAIR-KERR, P

1. The Plaintiff is a Bermuda exempted company which was incorporated under the provisions of the Companies (Incorporation by Registration) Act 1970 of 6th February 1974. The original name of the company was Paddington Limited. On 11th February 1974, the name was changed to Intercontinental Energy Limited and on 11th March 1974 the name was again changed to Intercontinental Natural Resources Limited.

2. On 15th March 1976, a creditor's petition was presented in the Supreme Court of Bermuda for the winding-up of the company on the ground of insolvency; and an order was made for such winding-up on 19th April 196. The deficiency of assets and shortfall for creditors and members is said to be approximately US$16.8 million.

3. The First Defendants practise in Bermuda as Barristers and Attorneys under the firm name Conyers, Dill & Pearman. The Second Defendant was at all material times a partner in that firm and the Third Defendant was at all material times an employee of the firm.

4. The Fourth and Fifth Defendants were at all material times an employee and partner respectively of Cox & Wilkinson, another firm of Barristers and Attorneys practising in Bermuda.

5. The action was instituted by writ dated 19th December 1980, that is to say nearly five years after the making of the winding-up order. The relief sought was:-

"Against the First Defendant:

(1) Damages for breach of contract and negligence whilst acting as Attorney for the Plaintiff

Against the Second, Third, Fourth and Fifth Defendant:

(2) Damages for breach of contract and breach of duty whilst acting as directors of the Plaintiff."

6. The statement of claim was filed on 20th January 1981; and on 7th September 1981, with the consent of the parties, three summonses came on for hearing before Mr Justice Melville. The first in time, dated 1st April 1981, was by the Fourth Defendant for an order under O. 12, r. 30 of the Rules of the Supreme Court 1952 to set aside an order dated 29th January 1981 giving the Plaintiff leave to serve the writ and all subsequent proceedings on the Fourth Defendant out of the jurisdiction of the Supreme Court. The second summons dated 13th April 1981 was by the First, Second and Third Defendants, for an order that the statement of claim be struck out and the action dismissed as against these Defendants on the grounds that the statement of claim discloses no reasonable cause of action, is embarrassing and an abuse of the process of the court (O. 19, r. 27, O. 25, r. 4 and the inherent jurisdiction of the court). The third summons dated 20th April 1981 was by the Fourth and Fifth Defendants and was in terms similar to that of the second summons taken out at the instance of the First, Second and Third Defendants and prayed for similar relief.

7. Mr L H Hoffman, QC and Mr D Donaldson appeared for the First, Second and Third Defendants. Mr R R F Scott, QC and Mr Michael Jones appeared for the Fourth and Fifth Defendants; and Mr G A Lightman and Mr A G Boyle appeared for the Plaintiff Company.

8. Judgment was delivered on 22nd October 1981. As regards the Fourth Defendant's summons, the learned judge ordered that the order of the 29th January 1981 be set aside, and that the service of the writ and all subsequent proceedings be set aside in so far as the Fourth Defendant is concerned and that the Fourth Defendant have his cost of the summons On the other two summonses to strike out the statement of claim, the learned judge ordered that the statement of claim and the writ be struck out and that the action be dismissed with costs to the Defendants.

9. There is no appeal against the learned judge's order of the Fourth Defendant's summons; but the Company has appealed against the order that the statement of claim be struck out and that the action be dismissed. The appeal was heard on 12th, 13th and 14th April 1982. The parties were represented by the same counsel as in the court below. On 15th April 1982, we gave judgment as follows:-

"For reasons which shall be recorded and made available to the parties as soon as possible, we are clearly of the opinion that this appeal should be dismissed with costs here and in the court below, such costs to be taxed if not agreed; and we further order that this is a proper case for three legal representatives for each party."

The relevant dates are as follows:-

6/2/74	Incorporation of the Company
13/2/74	Appointment of the Second Defendant as director and Third Defendant as secretary
14/6/8=74	Appointment of Third Defendant as director

July/74	Company commenced business
17/4/75	Appointment of Fifth Defendant as director
15/3/76	Petition to wind-up
19/4/76	Winding-up order made
19/12/80	Date of the Writ in this action
20/1/81	Date of Statement of Claim
29/1/81	Chief Justice grants leave to liquidator to proceed with the action
13/4/81	Summons to strike out by First, Second and Third Defendants
20/4/81	Summons to strike out by Fourth and Fifth Defendants
July/81	Date of hearing fixed
4-11/9/81	Hearing of the three summonses before Melville, J
22/10/81	Judgment on the summonses delivered
12-14/4/82	Appeal heard
15/4/82	Judgment delivered (Reasons later)

10. Bermuda is sometimes referred to abroad as a tax haven, and there are many so-called exempt companies here. They make a substantial contribution to the economy of these Islands. They are all organised on similar lines. Their activities are restricted by law. There is the Exempted Companies Act 190. Section 6(1)(d) of this Act provides as follows:-

"6 (1) an exempted company shall not have power

(d) to carry on business of any kind or type whatsoever in these Islands either alone or in partnership or otherwise except-

(i) carrying on, from a principal place of business in Bermuda, business external to Bermuda;

(ii) doing business in Bermuda with any person, firm or corporation in furtherance only of the business of that company carried on exterior to Bermuda."

And section 8 of the Act provides as follows:-

8 (1) Every exempted company shall at all times maintain an office in these Island

(4) Every exempted company shall have sufficient directors who are ordinarily resident in these Islands so that directors' meetings may be held in these Islands.."

11. In other words, to comply with the law, an exempt company must have directors normally resident in Bermuda. Board meetings are held here; but the business of such companies is carried on abroad. They must no compete in these Islands with a local company.

12. The legal work in connection with the incorporation of the Plaintiff company was done by the First Defendant (referred to in the statement of claim as the "firm"). According to section 4 of the statement of claim the First Defendant also:

(1) obtained permission under the Exchange Control Act for shares in the Company to be held in the beneficial ownership of Pakantial NV of the Netherlands Antilles;

(2) obtained recognition of the Company's non-resident status for the purpose of Bermuda exchange control;

(3) arranged for the Company's change of name;

(4) arranged for undertakings under the provisions of the Exempted Undertakings Tax Protection Act;

(5) prepared the Company's Annual Declarations under the Exempted Companies Act 1950;

(6) arranged for meetings of the directors and the shareholders to be held in the offices of the First Defendants; and

(7) kept the Company's records and registers.

13. Four Bermudian lawyers (Second, Third, Fourth and Fifth Defendants) were appointed to the Board of the Plaintiff company. They were qualified in every respect to be directors of a company; but it is not suggested that any of them were experts in the oil trade or indeed that they knew anything about the oil trade.

14. When opening his submissions in the court below, Mr Hoffman gave the learned judge certain background information which was recorded in the judgment in these words:-

"In its short trading life of less than 2 years, the Company carried on, outside Bermuda, the business of dealing in oil and oil products. I understand it was a sort of middleman; it bought and sold oil products; it would sometimes buy and sell the product as (it) is or would buy crude oil, refine it...