Raymond Davis v Minister of Finance and Attorney-General

JurisdictionBermuda
JudgeBaker P,Bell JA,Smellie JA
Judgment Date14 August 2018
CourtCourt of Appeal (Bermuda)
Date14 August 2018
Docket NumberCivil Appeal 2017 No 21

[2018] Bda LR 84

In The Court of Appeal for Bermuda

Before:

Baker P, Bell JA, Smellie JA

Civil Appeal 2017 No 21

Between:
Raymond Davis
Appellant
and
Minister of Finance and Attorney-General
Respondents

Mr M Diel for the Appellant

Mr J Cooper for the Respondents

The following cases were referred to in the judgment:

Oatham v Dickens & Gibbons [1977] Bda LR 1

Cates and Panchaud v Dill [1956] Bda LR 1

Donoghue v Stevenson [1932] AC 562

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 46

Caparo Industries v Dickman [1990] 2 AC 605

Murphy v Brentwood [1991] 1 AC 398

Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181

Stovin v Wise [1996] AC 923

Negligence — Economic loss — Preliminary issue — Duty of care to update Cause Book to show satisfaction of judgment — Legal principles

JUDGMENT of Smellie Ja

Introduction

Introduction

1. This is an appeal from a decision on a preliminary issue taken in the action as to whether the First Respondent (“the Minister”) as judgment creditor owed the Appellant, as judgment debtor, a duty of care to update the Cause Book of the Supreme Court to show that judgment had been satisfied. The Appellant claims that as the result of the Minister's breach of this putative duty of care, he has suffered substantial economic loss.

2. Justice Hellman determined the issue in favour of the Minister and against the Appellant who now invites this Court, through Mr Diel, to hold to the contrary.

3. Mr Diel acknowledged, as Justice Hellman found, that there are no reported cases of a duty of care having been found on facts that are substantially the same as the facts of the present case and that it has been necessary therefore to resort to first principles in the field of the tort of negligence. These will come to be examined below after the following description of the circumstances of the case.

4. Justice Hellman tried the issue against the background of an agreed statement of facts and so the relevant facts are taken as helpfully set out in his judgment and, where necessary, as elaborated from the agreed statement of facts1.

Background

5. The Appellant, apart from being a respected writer and political activist2, is also a businessman and property developer and it is in these latter capacities that he brings this action.

6. In the 1990s he was the majority shareholder of a company known as Pembroke Laundromat Ltd (“the Company”) which operated a laundry business in Pembroke. Disagreements arose between the Appellant and the minority shareholder Mr Collin Smith (“Mr Smith”) and Mr Smith petitioned to wind up the Company on the just and equitable grounds, citing oppressive behaviour on the part of the majority shareholder. On the basis of Mr Smith's petition, the Court appointed the Official Receiver as provisional liquidator who duly certified that the Company, on account of its indebtedness, was insolvent. The liquidation therefore proceeded under the supervision of the Court.

7. Among the Company's creditors was the Government of Bermuda which had claims in the liquidation for various unpaid fees, taxes and levies amounting to BMD 101,203.00.

8. However, in three separate actions filed in 1996 personally against the Appellant and/or Mr Smith, the Government had also sued to recover various amounts of the unpaid debt. These actions were filed in Causes 1996/159; 1996/369 and 1996/385.

9. Judgment was obtained eventually in one of these three actions – Cause 1996/159 —for the amount of BMD 16,530.00. This was on the basis of a default judgment entered by the Minister on 25 September 1996 when the Appellant and Mr Smith failed to file a defence.

10. No judgment was obtained in either of the other two personal actions – Causes 1996/369 or Cause 1996/385 —and while they remained shown on the Cause Book as active until formally discontinued at the instance of the Minister on 28 July 2009, no claim in damages is made now about those actions. In the absence of a judgment having been obtained in either of them, no duty of care can be said to have arisen as neither gave rise to a lien under the Real Estate Assets Act 1787 (“the Act”) —that which is claimed, as will be explained, to have given rise to the duty of care.

11. Accordingly, the complaint and this appeal relate only to the action in Cause 1996/159. That action, although satisfied by a payment made on 24 July 1997 (in circumstances to be further explained below), remained shown on the Cause Book as unsatisfied until circa 28 July 2009, when the Minister also formally notified the Registry of the Supreme Court that the default judgment had been satisfied.

12. The payment in satisfaction of the default judgment was not however, made in Cause 1996/159 but in the context of the liquidation of the Company. It came about as follows.

13. Mr Smith had in 1997 made a bid to the liquidator for the acquisition of the Appellant's majority shares in return for his payment, in part, of the Company's debts. He wished to take over the Company and continue to operate its laundromat business.

14. The Appellant agreed and a scheme of compromise and arrangement between the Company and its creditors was sanctioned by the Court. Included in the scheme was a payment, through the Liquidator, by Mr Smith of BMD 31,687.80 to the Minister in compromise and settlement of the debts owed to Government. The payment – that which was made on 24 July 1997 —was thus also meant to compromise the claims brought in the three personal actions, including Cause 1996/159 in which default judgment had been entered and which had triggered the operation of a lien under the Act.

15. When the payment of BMD 31,687.80 was made no request was then made to the Minister by anyone that the judgment in Cause 1996/159 be marked in the Cause Book as “satisfied”. Nor, for that matter, was any request made that the claims in the other personal actions be marked as “discontinued”.

16. Significantly however, on 17 October 1997, the petition to wind up the Company was discontinued by order made by consent of those interested in the liquidation —including the Appellant, Mr Smith and the Liquidator. According to the agreed statement of facts, an order was then filed with the Registry and entered to that effect by Hector Dwyer Associates, acting on behalf of the Appellant.

17. Regrettably from his point of view, the Appellant seems then not to have had in contemplation the separate matter of the personal actions, in particular that the judgment in Cause 1996/159 should be shown upon the Cause Book as satisfied; nor the implications in that regard, of the operation of the Act.

The Cause Book and the lien imposed by the Act.

18. From time immemorial, actions have been and are still recorded manually in the Cause Book maintained by staff at the Supreme Court Registry. The Cause Book contains a record of every action commenced in the Supreme Court of Bermuda. This record includes the names of the parties; when the action was commenced; and whether judgment has been awarded in favour of either party and, if so, in what amount. There is also a “remarks” column for every action in which is entered such details as when an action is discontinued and when judgment has been satisfied.

19. By convention (there being no rule mandating the practice) the attorney for the plaintiff (or defendant on a successful counterclaim) will write to the Registry to notify staff when the judgment in an action has been satisfied and the Registry will write back acknowledging receipt of the letter and inviting the attorney to attend at the Registry to update the Cause Book accordingly.

20. Though rather antiquated in today's age of information technology, this practice has worked for the purposes of the operation of liens under the Act, which is as follows.

21. In Bermuda, by operation of section 1 of the Act a judgment constitutes a lien on any real property owned by the judgment debtor3. See Oatham v Dickens & Gibbons[1977] Bda LR 1 SC per Summerfield CJ at para 12, following and applying the judgment of Smith AJ in Cates and Panchaud v Dill[1956] Bda LR 1 SC. The lien runs with the land and will not be overreached even if the land is sold to a bona fide purchaser for value, as the judgment is deemed to constitute notice of the lien to any purchaser.

22. Accordingly and in order to moderate the effect of the Act, section 19(a) of the Supreme Court Act 1905 was enacted and provides that judgments shall, as regards bona fide purchasers for valuable consideration, affect real property (i.e: “lands, tenements and hereditaments”) only as from the date on which they are signed. This was also acknowledged in Cates and Panchaud (above) at para 65.

23. A prospective purchaser will likely refuse to engage in a land transaction with someone against whom an unsatisfied judgment is shown in the Cause Book. This is obviously because if the judgment is indeed unsatisfied, by virtue of the operation of the Act, the judgment creditor could levy execution against the land to enforce it, even if the transaction is complete and the land no longer belongs to the judgment debtor.

24. It is therefore important for a judgment debtor who owns land that once the judgment is satisfied the Cause Book is updated to record this fact. As Justice Hellman also noted, updating the Cause Book may also be important for other reasons, irrespective of

whether the judgment debtor owns land, for example, for the purposes of his credit rating.

25. The contention of the Appellant is that the Minister owed him a duty of care in tort to take reasonable steps to have ensured that the Cause Book was updated to record the fact that the judgment against him in Cause 1996/159 had been satisfied.

26. It follows as he also contends, that the Minister's belated notification to the Registry in respect of Cause 1996/159 on 28 July 2009 (that mentioned above and given by the Second Respondent acting...

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