Mexico Infrastructure Finance LLC v Corporation of Hamilton (discovery)
| Jurisdiction | Bermuda |
| Judgment Date | 27 March 2023 |
| Court | Supreme Court (Bermuda) |
| Docket Number | Civil Jurisdiction 2017 No 295 |
[2023] Bda LR 26
Civil Jurisdiction 2017 No 295
In The Supreme Court of Bermuda
Cross applications for specific discovery — Legal professional privilege — Joint interest privilege — Implicit waiver — Application for leave to serve interrogatories — Guiding legal principles — Reliance and causation in claims for negligence
The following cases were referred to in the judgment:
Wang and Wong v Grand View Private Trust Co Ltd [2021] Bda LR 29
Compagnie Financiere du Pacifique v Peruvian Guano Co (1882) 11 QBD 55
Paragon Finance Plc v Freshfields [1999] 1 WLR 1183
Thyssen-Bornemisza v Thyssen-Bornemisza [1998] Bda LR 11
Lillicrap v Nalder & Son [1993] 1 WLR 94
Marriott v Chamberlain (1886) 17 QBD 151
Mr K Robinson, Mr K Masters and Mr O MacKay for the Plaintiff
Mr M Diel for the Corporation of Hamilton
Mr M Chudleigh and Ms L Williamson for Terra
RULING of Subair Williams J
1. In the case of Mexico Infrastructure Finance LLC (“MIF”) v Corporation of Hamilton (“the COH”) (Case No. 295/2017) this Court is concerned with a summons dated 29 June 2021 for leave to serve interrogatories on the Plaintiff.
2. (A 30 June 2021 summons for specific discovery under RSC Order 24/3(2) and Order 24/7 was filed by MIF against the COH. However, upon the consent of the parties, on 31 May 2022 I adjourned the summons sine die and reserved costs.)
3. In the case of MIF v Terra Law Limited (“TERRA”) (Case No. 89/2020) cross-applications for specific discovery pursuant to RSC Order 24/7 were filed and heard before me at the same hearing as the application in respect of the interrogatories.
4. The joint hearing proceeded in accordance with the case management orders I made in answer to a 30 June 2021 summons filed by Terra seeking a consolidated hearing for the trial of these two separate actions. By an Order of this Court made on 8 July 2021, I directed that the cross-applications for specific discovery, together with COH's application for interrogatories, would be heard together at a joint hearing.
5. During the 1 June 2022 hearing, MIF introduced new grounds (joint interest privilege) in support of its application for specific discovery against Terra in respect of information and material over which Terra claimed the COH had a right of legal professional privilege. The COH was given leave by this Court to be heard as an interested party to the application and competing submissions were heard from the COH, Terra and MIF on the subject of joint interest privilege on 11 January 2023.
6. At the close of the hearing of these three applications, I reserved my ruling so to provide this written decision with reasons.
7. The following summary is uncontroversial between the parties and is, in substance, largely borrowed from various previous Court rulings.
8. On 11 April 2012 the COH and Par-La-Ville Hotel and Residences Ltd (“PLV”) entered into an agreement with one another 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”) for its grand opening on 31 August 2016. This never came to pass.
9. The plan was for the Plaintiff, MIF, to extend a bridging loan in the sum of $18,000,000 to PLV for it to meet the projected cost of borrowing monies to the tune of $350,000,000 for the funding of the palatial resort. This loan was to be secured by the COH.
10. Historically, the COH derived its status as a legal person and powers to make rules, orders, by-laws, statutes and ordinances under the St George's and Hamilton Act 1793 (“the 1793 Act”). A significant portion of the 1793 Act was repealed by the Municipalities Act 1923 (“the 1923 Act”) which remains in force today. There was never an express power contained in the 1923 Act which permitted the COH to offer itself up as a guarantor. This opened up the question as to whether such a power was statutorily implied.
11. Under section 23(1)(f) of the 1923 Act, the COH is empowered to levy rates on valuation units in the City of Hamilton for municipal purposes of an “extraordinary nature” as the Minister may approve in any particular case. Section 37(1) of the 1923 Act had the effect of limiting the COH's borrowing powers.
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), rendering the issue of any guarantee ultra vires.
13. In what broadly appeared to be an effort to legitimise the Guarantee under the law, the Legislature amended the 1923 Act in October 2013 by passing the Municipalities Amendment Act 2013 (“the 2013 Amendment Act”). Section 14 of the 2013 Amendment Act 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.
14. So, on 9 July 2014 the COH secured MIF's $18,000,000 loan to PLV in the form of (1) a guarantee (“the Guarantee”) and (2) a mortgage deed of 4 August 2014 conveying the COH's freehold interest in the Car Park (“the Mortgage”). Additionally, MIF obtained title insurance coverage from Fidelity National Title Insurance Company (“Fidelity”) to protect against the risk of loss of the $18,000,000 loan.
15. PLV defaulted on the loan which matured on 30 December 2014. Consequently, judgment was entered against PLV for the principal loan amount and PLV became the subject of winding-up proceedings.
16. The Plaintiff endeavoured to recover the proceeds of the loan through enforcement of the Guarantee against the COH. It is a matter of record that in May 2015 a Court of concurrent jurisdiction entered summary judgment against the COH in favour of the Plaintiff in the form of a Consent Order. However, fresh proceedings were subsequently commenced by the COH giving way to litigation about the validity of the Guarantee. At the close of those proceedings the Honourable Mr Justice Stephen Hellman ruled that the grant of the Guarantee was indeed ultra vires. This decision was upheld by the Bermuda Court of Appeal and the Judicial Committee of the Privy Council1. Those proceedings may be termed the “Guarantee Proceedings”.
17. This action, commenced by a Generally Endorsed Writ of Summons amended on 28 January 2020, is being referred to as the “Mortgage Proceedings”. In these Mortgage Proceedings, the Plaintiff is in pursuit of declarations from this Court stating, inter alia, that the Mortgage is valid and binding and that the Plaintiff has good equitable title to the Car Park, notwithstanding the demise of any hope for enforcement of the Guarantee.
18. The COH claim that the Mortgage is ultra vires for the same reasons that the Guarantee was found to be so. The Defendant points to the Privy Council's findings that the Guarantee was purposed to assist PLV, the developer, in obtaining funding for the development of the lavish project, so to enable PLV to obtain credit. These purposes did not qualify under the governing legislation as municipal purposes. On those arguments, the COH says that the Mortgage, too, is ultra vires.
19. MIF's pleaded case against the COH goes further than the single question of the validity of the Mortgage. MIF's case is that the COH represented to MIF that it had the capacity to enter into the Mortgage and that it wrongly and negligently represented to MIF that it had the capacity to enter into the Guarantee. In its Amended Statement of Claim (“A/SOC”) of 28 January 2020, the Plaintiff referred to these representations as “Capacity Statements”.
20. On MIF's pleaded case, one of the Capacity Statements made by the COH was a July 2014 legal opinion from COH's then attorneys, Terra (the “Final Terra Opinion”). MIF asserted [9]: “…Terra had been retained to advise the Defendant in respect of the Loan Agreement, the Guarantee and the Mortgage.” MIF pleaded that it had an agreement with the COH that it, MIF, would be entitled to rely upon the Final Terra Opinion as to the question of the COH's capacity to enter into the Guarantee and the Mortgage. At paragraph 11 of the A/SOC MIF pleaded:
“The Defendant knew or ought to have known that the Plaintiff would rely upon the Capacity Statements in agreeing to enter into the Loan Agreement and accepting the Guarantee and the Mortgage as security for [the] Plaintiff's US$18,000,000 loan to PLV. The Defendant did so rely upon these statements; such reliance was reasonable in all circumstances.”
21. In its pleadings, the COH denied that the Final Terra Opinion contained Capacity Statements and further denied that MIF was entitled to rely on the Final Terra Opinion. In its Amended Defence and Counterclaim (“A/D&C”) the COH stated [11]:
“…Without prejudice to the generality of the foregoing denial, it is specifically denied that the Plaintiff was entitled to rely on the opinion of Terra and the Defendant puts the Plaintiff to strict proof thereof. The Defendant will also aver that, prior to the Terra opinion dated 9 July 2014, the Plaintiff through its attorneys, Conyers Dill & Pearman Limited (“Conyers”), had seen and reviewed draft opinions by Terra and was aware of the concerns Terra had as to the capacity of the Defendant. The Plaintiff relied on the advice of its attorneys, Conyers, and not any representations by the Defendant.”
22. The position taken by the COH is that even if the Capacity Statements2 had been made, any such statements would have been unauthorised given the ultra vires nature of the undertaking. The...
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