LLeisure Time Ltd v Cox Hallett Wilkinson and Others

JurisdictionBermuda
Judgment Date12 December 2005
Date12 December 2005
Docket NumberCivil Jurisdiction 2004 No. 25
CourtSupreme Court (Bermuda)

In The Supreme Court of Bermuda

Kawaley, J

Civil Jurisdiction 2004 No. 25

BETWEEN:
Leisure Time Limited
Plaintiff
and
Cox Hallett Wilkinson and others
Defendants

Mr. J Riihiluoma for the Applicants/Defendants

Mr. A Cottle for the Respondent/Plaintiff

The following cases were referred to in the judgment:

AG v Guardian Newspapers (No. 2)ELR [1990] 1 AC 109

Schering Chemicals v Falkman LtdELR [1982] QB 127

Midland Bank v Hett, Stubb and KempELR [1979] 1 Ch 384

Intercontinental Natural Resources v Dill 1981 Civil Appeal No. 14

White v Conyers Dill & PearmanBDLR [1994] Bda LR 9

Conway v Ratiu [2005] Times Law Reports 29 November

Pender v LushingtonELR (1877) 6 ChD 70

Peters American Delicacy Co Ltd v HeathUNK (1939) 61 CLR 457

Garnac Grain Co Inc v HMF Faure & Fairclough LtdUNK [1967] 2 All ER 353

Saloman v SalomanELR [1897] AC 22

Ratiu v Conway [2005] EWCA 1302

Application for strike out — Breach of fiduciary duties of law firm — Whether under contract of retainer — Duty of confidentiality — Piercing the corporate veil

RULING of Kawaley, J
Introductory

The Applicants apply by separate but substantially similar Summonses dated August 31, 2005 to strike out the Writ and Statement of Claim on all of the standard grounds.

The Plaintiff issued its Specially Indorsed Writ on October 12, 2004. According to the Statement of Claim, its business operates on Queen Street, specializing in the sale and rental of video discs, movies and games. The First Defendant is a law firm by which the Fourth Defendant is wholly owned.

A central thesis in the Plaintiff's pleaded case is that the law firm acted as attorneys for the Plaintiff from April 1998.In broad summary, the picture painted is of the Plaintiff retaining a law firm and its trust company, the First and Fourth Defendants respectively, sharing sensitive financial data with them, and an improper acquisition of this information in or before November 2003 by one of the firm's partners, who was inspired to start a competing business with his brother, utilising data without which the notion of starting ‘Movies2Go’ would never have occurred.

The First and Fourth Defendant filed Defences on November 9, 2004. The First Defendant's main defence is that it was never retained by the Plaintiff and, accordingly, never received the confidential information. The Fourth Defendant denies that, absent ‘express instructions’, the First Defendant had access to the Plaintiff's confidential information which it admits receiving. The Fourth Defendant admits that some but not all of the partners in the First Defendant are shareholders in the Fourth Defendant during the relevant time. John Cooper, a partner of the law firm, deposes in an affidavit sworn on January 26, 2005, that the First Defendant has never since 1998 until the dispute began in the summer of 2004 acted for the Plaintiff as attorneys. The firm's management company, Coson Corporate Services Limited (‘Coson’), has provided corporate administration services to the Plaintiff since in or about 2001.

The background set out above is taken from my Ruling of March 1, 2005 on the Plaintiff's interim injunction application. The present application, as regards the First Defendant, was made after Further and Better Particulars of the Statement of Claim were furnished on or about July 27, 2005 by the Plaintiff pursuant to this Court's Order dated June 6, 2005, herein.

Although each Summons attacks the Writ and Statement of Claim in its entirety, as Mr. Cottle rightly complained, Mr. Riihiluoma did not dispute that his applications required the Court to analyze separately each of the Plaintiff's several claims against each of the two Applicants/Defendants.

Strike-Out Principles

There was no controversy over the well-settled principles governing the striking-out of pleadings, and the exceptional nature of this remedy as emphasised by Counsel for the Respondent/Plaintiff with reference to commentary set out on Order 18 rule 19 of the Rules of the Supreme Court in Supreme Court Practice 1999, Volume 1.

As regards any complaint that no reasonable cause of action is disclosed by the pleadings, the pleadings alone, with all allegations contained therein assumed to be proven, can be taken into account. As regards any other complaint, whether it is contended that the claim is frivolous or an abuse of the process of the Court, the evidence available on the application may be considered. But, in all cases, the exceptional remedy of striking-out must be resorted to only where it is obvious that a claim is bound to fail.

In essence, the Court must balance two opposing fair hearing rights: the right of every plaintiff to have an arguable claim heard on its merits, and the right of every defendant not to be compelled to defend on the merits a patently hopeless claim and/or a claim so inadequately pleaded that a fair trial is thereby prejudiced. The scales are heavily tipped in favour of the Plaintiff, however, and the Defendants must make out a very clear case for striking-out to require the Court to strike-out a claim without affording the Plaintiff an opportunity to cure any deficiencies in the pleading presently before the Court.

First Applicant/Defendant's Case For Striking-Out Claims Based On An Alleged Retainer Of The Law Firm

The Statement of Claim alleges that ‘at all material times the First Defendant acted, for reward, as the Plaintiff's attorneys’ (paragraph 3). The implied terms of the contract of retainer are pleaded in paragraph 4, it being further pleaded in paragraphs 5–6 respectively, that similar duties were owed in equity, and that additional fiduciary duties were owed to the Plaintiff. The duties in equity are explicitly dependent on the existence of the retainer; the fiduciary duties are implicitly dependent on the same contractual relationship. Paragraph 23 of the Statement of Claim, which alleges a breach the same fiduciary duties by the First Defendant, is also inextricably bound up with the alleged retainer.

Paragraphs 7–8 plead that confidential information was received by the First Defendant ‘acting in its own behalf and/or for and on behalf of the Fourth Defendant’. The first limb of the breach of confidentiality claim, elaborated upon in paragraphs 9–13 and 21 of the Statement of Claim, also presupposes that the law firm was engaged by the Plaintiff as its attorneys under a contract of retainer.

But I accept Mr. Cottle's cogent submission that duties of confidentiality may be owed independently of any such contractual relationship: see e.g. per Lord Griffiths in A-G v Guardian Newspapers (No.2)ELR[1990] 1 AC109 at 268a-c; Schering Chemicals v Falkman Ltd.ELR[1982] QB1 276. And the plea of mutual agency between the First and Fourth Defendants in paragraph 2(4) of the pleading is equally not dependent on the contract of retainer.

What type of retainer is relied upon by the Plaintiff? In the Statement of Claim itself, only the most general of retainer's is relied upon, without any specificity at all. In answer 1 of its Further and Better Particulars, the Plaintiff states as follows:

‘a. The retainer was general: the Plaintiff, if and when and for so long as required, would seek and the First Defendant would provide legal services for the Plaintiff.

b. Terms are to be implied from the parties conduct; the First Defendant never provided any terms of engagement to the Plaintiff. The First Defendant professed to be the Plaintiff's attorneys; and that, in contradistinction to having in addition professed to the provision, initially through the Fourth Defendant later through Coson Corporate Services Limited, of corporate services for the Plaintiff.’

Paragraph 3 of the Statement of Claim merely alleges that the Plaintiff ‘acted, for reward, as the Plaintiff's attorneys’ without alleging that any specific services were ever provided. The Further and Better Particulars merely allege (a) a general retainer, (b) that the First Defendant ‘professed to be the Plaintiff's attorneys’, and (c) that ‘corporate services’ were provided through separate corporate entities. So it is not the Plaintiff's pleaded case that any specific legal services were actually provided for reward or otherwise between 1999 and 2004, the material time.

Having demonstrated the extent of the Plaintiff's case on the retainer, Mr. Riihiluoma then made the powerful submission that ‘the Courts have repeatedly held that there is no such thing as an implied general retainer.’ He cited firstly the judgment of Oliver J (as he then was) in Midland Bank v Hett, Stubb and KempELR[1979] 1 Ch 384 at 402:

‘Mr. Harman sought to rely upon the fact that Mr. Stubbs was Geoffrey's solicitor under some sort of general retainer … but that cannot be. There is no such thing as a general retainer … The expression “my solicitor” is as meaningless as the expression “my tailor” or “my bookmaker” in establishing any general duty apart from that arising out of a particular matter in which his services are retained … I think that the court must beware of imposing upon solicitors-or upon professional men in other spheres-duties which go beyond the scope of what they are requested and undertake to do.’

Counsel then referred to two Court of Appeal of Bermuda decisions upholding the striking-out of pleadings against local law firms based on similar grounds. In Intercontinental Natural Resources v Dill et al, Civil Appeal No. 14 of 1981, Judgment dated July 5, 1982, the relevant portion of the pleading which was struck-out read as follows:

‘The firm incorporated the Company and at all times thereafter was and held itself out to be the legal counsel of the Company and the company at all times (the Firm knew or ought to have known) relied on the Firm to act as such counsel and advise and guide the company and its officers with respect to the law …’1

After citing with approval the passage from Oliver J's judgment in the Midland...

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