Pitt and Company Ltd et Al v White et Al

• Jurisdiction: Bermuda
• Judge: Kawaley, C.J.
• Judgment Date: 07 May 2013
• Court: Supreme Court (Bermuda)
• Docket Number: 434 of 2012
• Date: 07 May 2013

Supreme Court

Kawaley, J.

434 of 2012

Pitt and Company Limited et al

and

White et al

Appearances:

Mr. Jai Pachai, Wakefield Quin, for the plaintiffs

Mr. Kim White, Cox Hallett Wilkinson Limited, for the defendants

Civil practice and procedure - Pleadings — Strike-Out application on the grounds of Res judicata — Whether matter that has been adjudicated (whether expressly or impliedly) and later abandoned in previous proceedings could be pursued further by the same parties.

Kawaley, C.J.

1 By a Specially Endorsed Writ of Summons issued on November 22, 2013, the plaintiffs sought $1,036,349.59 from the defendants whom it was alleged were liable for the debts of two companies (White's at Southside Ltd. and White's at Hayward's Ltd.), although they had formally guaranteed the debts of only one company (White and Sons Limited). White and Sons Limited was wound-up by Order of Simmons ACJ on August 10, 2012; I granted winding-up orders in respect of the other two companies on August 31, 2013.

2 By Summons dated January 7, 2013, the defendants applied to strike out the Writ and Statement of Claim on the grounds that it failed to disclose a reasonable cause of action and on the grounds that the claims were scandalous, frivolous, vexatious and/or an abuse of the process of the Court. The plaintiffs filed an Amended Specially Endorsed Writ on February 5, 2013. The Amended Statement of Claim pleaded the following causes of action:

• (a) the defendant's execution of a personal guarantee of the debts of White and Sons Limited only constituted a fraudulent or negligent representation that the debts of all three companies in the Group were being guaranteed;

• (b) further or alternatively, there was an oral agreement by the defendants that they would guarantee the debts of all three companies.

3 On the face of the pleading, there is some ambiguity as to whether the plaintiffs claim is for damages for fraudulent or negligent misrepresentation or deceit, but Mr. Pachai ultimately conceded that further amendments to the pleading were required to adequately particularise the bare allegations of fraud and negligence. Nevertheless, a reasonable cause of action was disclosed.

4 The main argument deployed by Mr. White with a view to sinking the plaintiffs' ship altogether was that because the present claims not only could and should have been pursued in an earlier action, but actually were pursued and abandoned, it was an abuse of process for the claims to be pursued herein. In Civil Jurisdiction 2012: 216 (“the First Action”), the plaintiffs sued the three companies together with the defendants. The initial case against the defendants was pleaded on the basis that the written guarantee signed by them in relation to the debts of White & Sons Limited extended to the debts of the entire Group. The claim against the defendants was amended when the true position was discovered and limited to enforcing the terms of the written guarantee.

5 The First Action was commenced on June 11, 2012; the claim against the defendants in this action was amended on June 22, 2012. The Consent Order in favour of the plaintiffs entering judgment for the sum claimed under the written guarantee was entered on August 14, 2012. That judgment has now been satisfied.

6 It was common ground that when the First Action was compromised by way of a Consent Order, the preceding discussions between counsel contained no express references to waiving or reserving the plaintiffs' right to pursue the defendants for the balance of the Group's indebtedness. Thus the res judicata argument turned essentially on a consideration of whether it was open to the plaintiffs to limit their claim against the defendants in the First Action to enforcing a simple written agreement and to defer pursuing the present more complicated claims until they had sufficient time to file the present action, without expressly reserving the right to do so.

7 A res judicata argument typically arises in one of two factual scenarios. Either the new claims are quite obviously an attempt to re-litigate issues which formed the subject of an earlier proceeding; or, alternatively, the claims were not raised at all in the earlier action but because they are grounded in the same broad dispute it is contended that they could and should have been raised in the earlier action. The present application, uniquely in my experience, concerned a claim for compensation (as regards the indebtedness of two companies) which was asserted and then abandoned in the earlier proceedings.

Findings: res judicata

8 Mr. White placed before the Court an array of authorities on the res judicata principle, including many of the local cases to deal with this topic: Tensor Endowment. Ltd. and UBS Fund Services (Cayman) Ltd. v. New Stream Capital Fund Ltd. [2010] Bda LR 38; Bermuda Fire & Marine Insurance Company limited (in liquidation) v. BF&M Ltd. [1998] Bda LR 63; Englehorn v. Douglas Barnard Inc. [2002] Bda LR 9; Thompson & Thompson v. Thompson [1991] Bda LR 9 (CA); Phillips v. Phillips et al [2003] Bda LR 45; Wilson and Craig v. First Bermuda Securities Ltd et al [2002] Bda LR 60. ( Moulder v. Cox Hallett & Wilkinson et al [2010] Bda LR 78, [2011] Bda LR 40 (CA) and Wilson and Craig v. First Bermuda Securities Ltd et al [1997] Bda LR 65, [1998] Bda LR 16, were also cited in support of the adequacy of pleadings grounds.)

9 Mr. Pachai responded with a more streamlined approach, relying primarily on two persuasive authorities: Johnson v. Gore Wood & Co (a firm) [2001] 1 All ER 481 (House of Lords); and Stuart v. Goldberg Linde (a firm) [2008] EWCA Civ 2.

10 The various cases essentially demonstrate the application to different facts of legal principles which are not in dispute; accordingly, I do not propose to consider each case here. The Court of Appeal for Bermuda in Thompson & Thompson v. Thompson [1991] Bda LR 9 (CA) approved the principles governing when it is an abuse to litigate issues which could and should have been raised in earlier proceedings. These were the same principles articulated by the Judicial Committee of the Privy Council in Yat Tung Investment Co. Ltd. v. Dao Heng Bank Ltd. [1975] AC 581, where Lord Kilbrandon (at 590–591) opined as follows:

“But there is a wider sense in which the doctrine may be appealed to, so that it becomes an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings.

The locus classicus of that aspect of res judicata is the judgment of Wigram VC in Henderson v. Henderson [1843] 3 Hare 100 at p 115 where the learned judge says:

‘where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.’

The shutting out of a ‘subject of litigation’ — a power which no Court should exercise but after a scrupulous examination of all the circumstances — is limited to cases where reasonable diligence would have caused a matter to be earlier raised; moreover, although negligence, inadvertence or even accident will not suffice to excuse,...