St John's Trust Company (PVT) Ltd v James Watlington

JurisdictionBermuda
CourtSupreme Court (Bermuda)
JudgeHargun CJ
Judgment Date14 December 2020
Date14 December 2020
Docket NumberCIVIL JURISDICTION

In The Supreme Court of Bermuda

Before:

Hon. Chief Justice Hargun

CIVIL JURISDICTION

2019: No. 447

Between:
St John's Trust Company (PVT) Limited
Plaintiff
and
(1) James Watlington
(2) Glenn Ferguson
(3) Cabarita (PTC) Limited

(Sued in its personal capacity and in its capacity as trustee of The Waterford Charitable Trust)

(4) The Attorney General
(5) James Geoffrey Stephen Gilbert
Defendants
(6) Medlands (PTC) Limited
(7) Conyers Dill & Pearman Limited
Non-Parties
Appearances:

Edward Cumming QC, Katie Tornari and Mark Diel of Marshall Diel & Myers Limited for the Plaintiff and the First and Second Defendants

David Brownbill QC and Paul Harshaw of Canterbury Law Limited for the Third Defendant

David Chivers QC and Nicole Tovey of Walkers (Bermuda) Limited for the Fifth Defendant

Hodge Malek QC and Jeffery Elkinson of Conyers Dill & Pearman Limited for Medlands (PTC) Limited

Graham Chapman QC and John Wasty of Appleby for Conyers Dill & Pearman Limited

Consequential relief following an Order wrongly made; Scope of relevant jurisdiction; Court's power to order discovery in aid of consequential relief; ability of successor trustee to assert legal professional privilege against a former trustee in respect of documents provided by former trustee to the successor trustee; scope of ratification by conduct; scope of duty of full and frank disclosure after proceedings become inter partes; personal liability of a barrister and attorney for breach of duty of full and frank disclosure; liability of an attorney for costs for (i) breach of warranty of authority; (ii) under inherent Jurisdiction of the Court

RULING

(Consequential Relief)

INDEX

Topic

Para No .

(A) Introduction

1–6

(B) Background to the applications for information and costs

7–80

March 2020 Judgment findings

15

Pre-action correspondence

16–20

Application for an ex parte injunction

21–26

Advising the Court of Medlands' appointment

27–31

Order of Subair Williams J of 19 December 2019

32–46

Conflict of interest on part of Mr Gilbert and Conyers

47–51

Breach of Duty of full and frank disclosure to the Court

52–80

(C) Applications for information from Mr Gilbert and Conyers

81–156

The relevant jurisdiction of the Court

82–91

Cabarita's claim against Mr Gilbert

92–122

SJTC's claim against Mr Gilbert

123–133

SJTC's claim against Conyers

134–146

Issue of Legal Professional Privilege

147–156

(D) Applications for costs of the proceedings

157–247

Applications against Mr Gilbert

158–191

Applications against Conyers

192–247

Breach of warranty of authority

195–226

Costs under the inherent jurisdiction

227–247

(E) Application for leave to appeal

248–264

The appeal is academic

255–262

No real prospect of success

263–264

(F) Summary of Orders made

265

Hargun CJ
(A) Introduction
1

These proceedings relate to the claim brought in the name of St John's Trust Company (PVT) Limited (“SJTC”) that the appointment of Mr James Watlington and Mr Glenn Ferguson as directors of SJTC, by a unanimous written resolution of its sole member, Cabarita (PTC) Limited (“Cabarita”), is void and of no legal effect. The Statement of Claim seeks a final injunction against Mr Watlington and Mr Ferguson to prevent them from purporting to act as directors of SJTC; a declaration that Mr Watlington and Mr Ferguson are not directors and have no authority; and a declaration that the purported appointments by Cabarita are void.

2

By Judgment dated 26 March 2020 (“the March 2020 Judgment”) the Court ordered that the Amended Writ of Summons be struck out and the ex parte Order dated 6 November 2019, restraining Mr Watlington and Mr Ferguson from acting as directors of SJTC be discharged.

3

The present applications relate to consequential relief sought by SJTC, Mr Watlington and Mr Ferguson, and Cabarita, following the discharge of the ex parte injunction.

4

First, SJTC, Mr Watlington and Mr Ferguson, and Cabarita seek an order that Mr James Gilbert, the Fifth Defendant, and Conyers Dill & Pearman Limited (“Conyers”), should be liable to pay the costs of all parties on the indemnity basis.

5

Second, SJTC, Mr Watlington and Mr Ferguson, seek information, as set out in the draft order, from Conyers as the former attorneys or purported attorneys and/or agents or purported agents of SJTC. SJTC, Mr Watlington and Mr Ferguson, also seek information, as described in the draft order, from Mr Gilbert, as a former director and or agent of SJTC. Cabarita also seeks information from Mr Gilbert as set out in the draft order.

6

Third, Mr Gilbert seeks leave of this Court to appeal the March 2020 Judgment to the Court of Appeal.

(B) Background to the Applications for information and costs
7

As set out in paragraphs 2–7 of the March 2020 Judgment, on 6 November 2019 the Court heard an ex parte application in the name of SJTC seeking an interim injunction against Mr Watlington and Mr Ferguson to prevent them from acting as directors of SJTC or holding themselves out as such. Mr Adamson and Mr Elkinson of Conyers purported to appear on behalf of SJTC at the ex parte hearing.

8

Counsel explained that SJTC is a private trust company and is a corporate trustee administering a very valuable trust, the A. Eugene Brockman Charitable Trust (“ the Brockman Trust”). SJTC's sole shareholder, Cabarita, is a private trust company, domiciled in Nevis. Cabarita is also a corporate trustee of a charity called the Waterford Charitable Trust, a Bermudian charitable trust. The shareholding in SJTC is a trust asset of the Waterford Charitable Trust.

9

Mr Adamson advised that SJTC has commenced litigation against a Mr Evatt Tamine, a former director of SJTC, for, in part, stealing trust assets of the value of more than $20 million and SJTC is currently seeking, in separate proceedings pending in this Court (the “ Tangarra Proceedings”), a full accounting to determine whether Mr Tamine has stolen additional trust assets. The allegations of theft and other wrongdoing are strenuously denied by Mr Tamine. Mr Tamine, counsel explained, is also a shareholder and director of Cabarita and recently, more than a year after resigning his position with SJTC and the week before his defence to the litigation against him in the Bermuda proceedings was due, has used his position with Cabarita to appoint Mr Watlington and Mr Ferguson as directors of SJTC. The expanded board of directors of SJTC would now consist of Mr Gilbert, Mr Watlington and Mr Ferguson. Mr Adamson explained that SJTC's fear is that the appointment of additional directors is an attempt by Mr Tamine to derail the investigations into his activities and/or to obtain information about SJTC's litigation strategy against him.

10

Mr Watlington and Mr Ferguson were appointed directors of SJTC by a unanimous written resolution of Cabarita, the sole member of SJTC. Mr Adamson submitted that while the Bye-laws do contemplate and provide for written resolutions of the members (Bye-law 27), the wording of the Bye-law is narrowly drawn. Bye-law 27, submitted Mr Adamson, only permits members to use written resolutions where the members were entitled to attend “the Meeting and vote on the resolution”, so that “the Meeting” must be convened before the written resolution process can be utilised. Counsel submitted that only the Company (acting through its directors and secretary) can convene a meeting/circulate the resolution.

11

Further, Mr Adamson submitted that sections 79 and 80 of the Companies Act 1981 (“the Act”) provided a detailed statutory mechanism for members to require companies to circulate members' resolutions in advance of general meetings. The statutory mechanism, Mr Adamson submitted, is inconsistent with members having a freewheeling power to circulate resolutions to themselves, by-passing the scheme. The Bye-laws provide that the directors are entitled to receive notice of and attend any general meeting (Bye-law 31). This seemingly renders, submitted Mr Adamson, impossible the by-passing of members of the need to: (a) hold any general meeting at all and (b) at the very least provide notice to the director.

12

Mr Adamson also advised the Court that SJTC anticipated an action against Cabarita for seeking to derail the current litigation through, what appears to be, a clear fraud on a power/improper exercise of a fiduciary duty for an improper purpose. He submitted that if Cabarita acted in excess of its powers as a trustee in appointing Mr Watlington and Mr Ferguson as directors, as a matter of trust law, their appointment was void in equity.

13

At the conclusion of the ex parte hearing on 6 November 2019, the Court made an order that Mr Watlington and Mr Ferguson acting together or independently, be restrained from purporting to act as directors of SJTC or in any way holding themselves out as such. Paragraph 3 of the Order provided that:

the Plaintiff [SJTC] may continue to conduct its business in accordance with its Bye-laws, as if Mr James Gilbert is the sole director, without regard to the Member's Decision dated 25 October 2019”.

14

The Court and the parties had expected an inter partes hearing within the next 2 to 3 weeks. However, for various reasons the inter partes hearing did not take place until 19 February 2020. At that hearing the Court considered two applications. First, an application by Cabarita seeking an order that the Amended Generally Endorsed Writ of Summons, issued in the name of SJTC, be struck out on the grounds that the proceedings were commenced without the named Plaintiff's authority and/or pursuant to RSC Order 18, r. 19. Second, an application by Mr Watlington, Mr Ferguson and Cabarita that the ex parte Order made by the Court...

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