Pitt & Company Ltd and BGA Ltd v White and White

• Jurisdiction: Bermuda
• Judgment Date: 07 May 2013
• Date: 07 May 2013
• Docket Number: Civil Jurisdiction 2012 No 434
• Court: Supreme Court (Bermuda)

[2013] Bda LR 40

In The Supreme Court of Bermuda

Civil Jurisdiction 2012 No 434

Between:

Pitt & Company Limited BGA Limited

Plaintiffs

and

Gary White and Michael White

Defendants

Mr J Pachai for the Plaintiffs

Mr K White for the Defendants

The following cases were referred to in the judgment:

Thompson & Thompson v ThompsonBDLR [1991] Bda LR 9

Yat Tung Investment Co Ltd v Dao Heng Bank LtdELR [1975] AC 581

Stuart v Goldberg LindeUNK [2008] EWCA Civ 2

Re Glencore Grain LtdBDLR [1996] Bda LR 64

Strike out application — Winding-up — Debts of White & Sons Limited — Written guarantee — Res judicata — Fraud or negligence

RULING ON STRIKE OUT of Kawaley CJ

Introductory

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:

• i. 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;

• ii. 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 — New Stream Capital Fund LtdBDLR[2010] Bda LR 38; Bermuda Fire & Marine Insurance Company Limited (in liquidation) v BF&M Ltd. [1998] Bda LR 63; Englehorn v Douglas Barnard IncBDLR[2002] Bda LR 9; Thompson & Thompson v ThompsonBDLR[1991] Bda LR 9 (CA); Phillips v...