St John's Trust Company (PVT) Ltd v Watlington and Ors (Ruling on Consequential Relief)

• Jurisdiction: Bermuda
• Court: Supreme Court (Bermuda)
• Judgment Date: 14 December 2020
• Docket Number: Civil Jurisdiction 2019 No 447

[2020] Bda LR 76

In The Supreme Court of Bermuda

Civil Jurisdiction 2019 No 447

Between:

St John's Trust Company (PVT) Limited

Plaintiff

and

James Watlington

Glenn Ferguson

Cabarita (PTC) Limited (sued in its personal capacity and in its capacity as trustee of the Waterford Charitable Trust)

The Attorney General

James Geoffrey Stephen Gilbert

Defendants

Medlands (PTC) Limited

Conyers Dill & Pearman Limited

Non-Parties

Mr E Cumming QC, Ms K Tornari and Mr M Diel for the Plaintiff, 1^st and 2^nd Defendants

Mr D Brownbill QC and Mr P Harshaw for the 3^rd Defendant

Mr D Chivers QC and Ms N Tovey for the 5^th Defendant

Mr H Malek QC and Mr J Elkinson for Medlands

Mr G Chapman QC and Mr J Wasty for Conyers Dill & Pearman

The following cases were referred to in the judgment:

Bristol & West Building Society v Mothew [1998] Ch 1

Brink's Mat Ltd v Elcombe [1988] 1 WLR 1350

Fundo Soberano de Angola et al v Santos [2018] EWHC 2199

MacDougall v Gardiner (1875–5) LR 10 Ch App 606

Burland v Earle [1902] AC 83

IRC v Bibby [1945] 1 All ER 667

Todaysure Matthews Ltd v Marketing Ways Services Ltd [2015] EWHC 64

Commercial Bank of the Near East v A [1989] 2 Lloyd's Rep 319

Network Telecom v Telephone Systems International [2004] 1 All ER (Comm) 418

Speedier Logistics v Aardvark Digital [2012] EWHC 2776

Rodger v Comptoir D'Escompte (1871) LR C 465

Jai Berham v Kedar Nath Marwari [1922] UKPC 58

R v Kensington ex parte Polignac [1917] 1 KB 486

Locabail v Manios [1988] Bda LR 26

Heavener v Looms (1924) 34 CLR 306

Cox v Hakes (1890) 15 App Cas 506

Commonwealth v McCormack (1984) 55 ALR 185

A-Pak Plastics v Merhone (1995) 17 ACSR 176

Expandable Ltd v Rubin [1009] BCC 443

Re Condon, ex parte James (1874) LR 9 Ch Ap 609

Re Tyler [1907] 1 KB 865

Myers v Elman [1940] AC 282

Re TH Knitwear [1998] Ch 275

Credit Suisse Life (Bermuda) Ltd v Ivanishvili and Ors [2020] Bda LR 62

Broadcasting Investment Group Ltd v Smith and ors [2020] EWHC 2501

Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204

Sevilleja v Marex Financial Ltd [2020] UKSC 31

Fairstar Heavy Transport NV v Adkins [2013] 2 CLC 272

Burnden Holdings (UK) Ltd (in liquidation) v Fielding [2018] AC 857

Phipps v Boardman [1965] 1 Ch 992

Rawlinson & Hunter v ITG Ltd (Royal Court of Guernsey, 30 Jan 2017)

Crescent Farm (Sidcup) Sports Ltd v Sterling Offices Ltd [1972] Ch 553

In the Matter of the Bird Charitable Trust [2012] (1) JLR 62

Medlands (PTC) Ltd v Commissioner of the Bermuda Police Service [2020] Bda LR 26

El Ajou v Dollar Land Holdings [1994] 2 All ER 685

Zoya Ltd v Ahmed [2016] 4 WLR 174

Smith v Butler [2012] Bus LR 1836

Harrisons & Crossfield Ltd v LNW Railway [1917] 2 KB 755

Shell Co Australia Ltd v NAT Shipping Bagging Services Ltd [1988] 2 Lloyd's Rep 1

Yonge v Toynbee [1910] 1 KB 215

Re the Sherlock Holmes International Society Ltd [2016] 4 WLR 173

Grand Field Group Holdings Ltd v Tsang Wai Lun Wayland & Ors [2010] HKCFI 656

Ho Chor Ming v Hong Kong Chiu Chow Po Hing Buddhism Association Ltd [2013] HKCFI 1573

Ridehalgh v Horsefield [1994] Ch 205

Medcalf v Mardell [2003] 1 AC 120

Hutcheson v Popdog [2012] 1 WLR 782

Gawler v Raettig [2007] EWCA Civ 1560

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 over documents provided by former trustee to successor trustee — Scope of ratification by conduct — Scope of duty of full and frank disclosure after proceedings become inter partes — Personal liability of barrister for breach of duty of full and frank disclosure — Liability of an attorney for costs for breach of warranty of authority and under inherent jurisdiction of the Court

RULING of Hargun CJ

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.

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...