Michael W Jones v Stewart Technology Services Ltd

• Jurisdiction: Bermuda
• Judgment Date: 30 October 2017
• Date: 30 October 2017
• Docket Number: Civil Jurisdiction 2016 No 307
• Court: Supreme Court (Bermuda)

[2017] Bda LR 117

In The Supreme Court of Bermuda

Civil Jurisdiction 2016 No 307

Between:

Michael W Jones

Plaintiff

and

Stewart Technology Services Ltd

Defendant

Mr K Simons for the Plaintiff

Mr P Perinchief for the Defendant

The following cases were referred to in the judgment:

Broadsino Finance Co Ltd v Brilliance China Automotive Holdings Ltd [2005] Bda LR 12

Global Construction Ltd v Hamiltonian Hotel & Island Club Ltd [2005] Bda LR 81

Price v Nunn [2013] EWCA Civ 1002

Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853

Resolution Chemicals Ltd v Lundbeck [2013] EWHC 739

Hunter v Chief Constable [1982] AC 529

Strike out application — Whether reasonable cause of action — Issue estoppel — Whether defendant a privy of parties to US action said to give rise to estoppel — Abuse of process

JUDGMENT of Hellman J

Introduction

1. By a summons dated 19 December 2016, which was reissued in substantially the same form on 3^rd February 2017, the Defendant seeks to strike out the Plaintiff's statement of claim: (i) pursuant to RSC Order 18, rule 19(1)(a), on the ground that it discloses no reasonable cause of action; or alternatively: (ii) pursuant to RSC Order 18, rule 19(1)(b) and (d), on the ground that it is scandalous, frivolous or vexatious, or is otherwise an abuse of the process of the court, in that it depends upon issues which have been judicially determined by a State Court in the USA (“the US action”). The claim was also said to be an abuse of process in that it allegedly breached various settlement agreements between the parties to the US action.

Background

2. The Plaintiff, a consulting actuary, was formerly a business partner of Patrick Sutherland and Yanique Lawrence, who are husband and wife. Although they are not named in the latest iteration of the statement of claim, their identity is not in dispute and is relevant to the second limb of the Defendant's strike out application.

3. The Plaintiff claims that he was formerly the owner of 45 per cent of the shares in an insurance broker called Insigne Consulting Inc (“Insigne Consulting”), which was incorporated in North Carolina in around 2000, and that Mr Sutherland and Ms Lawrence owned the other 55 per cent. The company was dissolved in 2010.

4. The Plaintiff's claim is for breach of contract. The nub of the claim, as contained in his re-amended statement of claim read in conjunction with his affidavit evidence, is as follows:

• i. In or about late 2001/early 2002, in the United States, the Plaintiff and the co-owners of Insigne Consulting (ie Mr Sutherland and Ms Lawrence) agreed to form a company in Bermuda to facilitate Insigne Consulting's offshore insurance business. The ownership of the new company would mirror the ownership of Insigne Consulting. Ie the Plaintiff would own 45 per cent of the shares and Mr Sutherland and Ms Lawrence would own the other 55 per cent.

• ii. The new company was the Defendant. It was incorporated in Bermuda on 16^th August 2002. At all material times Mr Sutherland or alternatively Mr Sutherland and Ms Lawrence had “total and full control over the affairs of the Defendant”. It was agreed that the Plaintiff would not be a signatory on the Defendant's bank account. This was “to avoid ties to the United States”, and because he only had a Jamaican passport, which had expired.

• iii. However, after the Defendant was incorporated, Mr Sutherland, in his capacity as an agent of the Defendant, made an oral agreement with the Plaintiff that in consideration for the Plaintiff undertaking work to transfer Insigne Consulting's offshore consulting ventures to the Defendant, the Plaintiff would be entitled to 45 per cent of the profits generated by those consulting ventures, reflective of his interest in Insigne Consulting (“the Agreement”). Mr Sutherland made this agreement as an agent of the Defendant in that he was acting with its actual or ostensible authority.

• iv. The Plaintiff undertook the necessary work, and Insigne Consulting's offshore consulting ventures were duly transferred to the Defendant.

• v. From 2007 through 2012 the Defendant distributed to Mr Sutherland profits in excess of $1,900,000.00. These profits were generated by the offshore consulting ventures referred to the Defendant by Insigne Consulting. The Plaintiff did not learn of these distributions until in or around July 2012. They were deliberately concealed from him by the Defendant.

• vi. It is not known if the Defendant has distributed any profits subsequently.

• vii. The Defendant, in breach of contract, has not paid any profits to the Plaintiff, let alone the 45 per cent share to which he was contractually entitled.

5. Mr Sutherland was originally named as the First Defendant to the action and the original version of the statement of claim referred to him and Ms Lawrence by name. However the claim against him was discontinued. The Plaintiff filed an amended statement of claim, which was subsequently re-amended, in which references to Mr Sutherland and Ms Lawrence by name were replaced by references to an “agent” or “agents” of the Defendant. In an affidavit sworn in opposition to the strike-out application, the Plaintiff explained that this was simply to avoid confusion and that the facts relied on were the same. Similarly, in the re-amended statement of claim the Plaintiff alleges that the Defendant distributed profits in excess of $1,900,000.00 to “parties other than the Plaintiff” whereas in an affidavit sworn in support of a summons for leave to serve the writ out of the jurisdiction he specified that Mr Sutherland distributed the profits to himself.

6. I should note that the re-amended statement of claim exists in two versions: a version showing the amendments and a “clean” version. The text of these versions is slightly different. Eg the version showing the amendments avers that at all relevant times “the agents of the Defendant” (ie Mr Sutherland and Ms Lawrence) have had full control over its affairs, whereas the clean version makes this averment in respect of “the Defendant's agent” only (ie Mr Sutherland). The version showing the amendments avers that in return for work done by the Plaintiff in transferring the offshore ventured of Insigne Consulting to the Defendant, “the Defendant would make distribution to the owners of Insigne Consulting, in proportion to their ownership percentages of Insigne Consulting Inc”. In the clean version, “the Defendant would distribute 45% the profits generated by those ventures to the plaintiff, reflective of his ownership percentage in Insigne Consulting Inc”. However, in both versions it is absolutely clear that the contract price depends upon the Plaintiff's interest in Insigne Consulting.

The law on striking out

7. The law on striking out was summarised by the Court of Appeal in Broadsino Finance Co Ltd v Brilliance China Automotive Holdings Ltd[2005] Bda LR 12. Stuart-Smith JA, giving the judgment of the Court, stated at 4 – 5.

“… Where the application to strike-out on the basis that the Statement of Claim discloses no...