St John's Trust Company (PVT) Ltd v Watlington and Ors (Leave to appeal against costs order)

• Jurisdiction: Bermuda
• Judgment Date: 24 February 2021
• Docket Number: Civil Jurisdiction 2019 No xxx447
• Year: 2021
• Court: Supreme Court (Bermuda)

[2021] Bda LR 14

In The Supreme Court of Bermuda

Civil Jurisdiction 2019 No xxx447

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 M Diel and Ms K Tornari for the Plaintiff and 1^st & 2^nd Defendants

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

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

The following cases were referred to in the judgment:

Avicola Villalobos SA v Lisa SA [2007] Bda LR 81

Apex Fund Services Ltd v Clingerman [2020] Bda LR 12

JSC BTA Bank v Ablyazov [2012] EWHC 648

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

Speedier Logistics v Aardvark Digital [2012] EWHC 2776

Medcalf v Mardell [2003] 1 AC 120

Thompson v Fraser [1986] 1 WLR 17

Leave to appeal — Costs — Indemnity basis — Legal professional privilege — Negligence — Causation of costs

RULING of Hargun CJ

Introduction

1. This is an application by Conyers Dill & Pearman Limited (“Conyers”), a Non-Party, pursuant to section 12(2) of the Court of Appeal Act 1964 for leave to appeal to the Court of Appeal against the Order of the Court in its judgment of 14 December 2020 (“Judgment”) that Conyers pay 30% of the costs of these proceedings incurred by Mr James Watlington, Mr Glenn Ferguson and Cabarita (PTC) Limited, the First, Second and Third Defendants during the period 3 December 2019 to 26 March 2020 on the indemnity basis (“Costs Order”). The background facts underlying these proceedings are set out in the Judgment.

2. The Court directed that the application be heard on an inter partes basis pursuant to Order 2 Rule 3(c) of the Rules of the Court of Appeal for Bermuda.

The relevant test for leave to appeal

3. Mr Chapman for Conyers submits that the relevant test in assessing whether to grant leave to appeal is that the Court must determine whether the grounds of appeal are arguable relying upon the Court of Appeal decision in Avicola Villalobos SA v Lisa SA and Leamington Reinsurance Co Ltd[2007] Bda LR 81, which in turn cited the case of The Iran Nabuvat[1990] 1 WLR 1115, in which Lord Donaldson stated “no one should be turned away from the Court of Appeal if he had an arguable case by way of appeal” (p.1117).

4. Mr Brownbill for Cabarita (PTC) Limited (“Cabarita”), the Third Defendant, submits that the test is accurately stated at paragraph 263 of the Judgment, as recorded in the English Practice Direction (Court of Appeal Civil Division) [1999] 1 WLR 1027 and in the decision of Subair Williams J in Apex Fund Services Ltd v Clingerman[2020] Bda LR 12. Leave will not be given if the appeal has no real prospect of success.

5. In the end Mr Chapman was content, for purposes of this application, that the Court should apply the test set out in the English Practice Direction.

First Ground: finding of negligence

6. The First Ground of Appeal states that: “The Chief Justice was wrong to find that Conyers had acted negligently and negligently to a serious degree. There is no express consideration in the Judgment as to whether a failure to appreciate that Mr Gilbert was under a duty to return to Court pursuant to the duty of full and frank disclosure and to advise him of this or the failure to appreciate that Conyers were subject to a “personal” duty to correct the position was a failure that no reasonably competent barrister and attorney could have made in all the circumstances of the case and, then, whether that failure, if negligent, was sufficiently serious or gross to justify the costs order made.”

7. In this regard Mr Chapman refers to paragraphs 240 and 245 of the Judgment where the Court held that it was Mr Gilbert's legal duty to provide full and frank disclosure to the Court and it was Conyers' obligation to advise him of that duty. He also refers to paragraphs 234 and 235 of the Judgment where the Court found that Conyers was subject to a “personal” duty to ensure that the duty of full and frank disclosure was discharged. However, Mr Chapman contends, the Court failed to consider whether a failure to appreciate that this was the legal position or to discharge the duty was a failure that no reasonably competent barrister and attorney could have made in all the circumstances of the case and, then, whether that failure, if negligent, was sufficiently serious or gross to justify the costs order made.

8. In my view, a fair reading of the Judgment, makes it clear that the Court did indeed consider that the failure to appreciate the legal position or to discharge the duty was a failure that no reasonably competent barrister and attorney could have made in the circumstances and that it was sufficiently serious to justify the costs order.

9. The starting point is to note the representations made by Conyers at the ex parte hearing for the purposes of obtaining the ex parte injunction. As set out at paragraphs 59 and 60 of the Judgment, the application for an injunction was justified on the basis that unless the Court granted the injunction there was a risk that the assets of the Brockman Trust, a charitable trust, may be dissipated by Mr Tamine and secondly, the concern that Mr Tamine will seek to use the new directors to slow down or prevent the litigation which SJTC had commenced against him. For present purposes, it was emphasised by counsel that the injunction was required “to hold the ring” pending the determination of the inter partes hearing and, secondly, that there was no prejudice to Mr Watlington and Mr Ferguson if they were prevented from holding board meetings while their authority was scrutinised. It was emphasised that the sole purpose of the injunction was to preserve the status quo pending the inter partes hearing. As noted at paragraph 62, had the Court been advised by SJTC that it intended to use the ex parte injunction to launch an application to replace SJTC with Medlands (PTC) Limited (“Medlands”) as the trustee of the Brockman Trust, the Court would have refused the application for the ex parte injunction.

10. In breach of the representations made at the ex parte hearing, which led to the grant of the ex parte injunction, as noted at paragraph 46 of the Judgment, Mr Gilbert and Conyers applied for and obtained the Order of the 19 December 2019 in the trust administration proceedings (“Trust Proceedings”), without any reference to Mr Watlington and Mr Ferguson, the majority directors of SJTC, or the Court which had restrained Mr Watlington and Mr Ferguson from acting as directors of SJTC, which had the overall effect that:

• (a) SJTC was removed as trustee of the Brockman Trust.

• (b) A company of which Mr Gilbert was the sole shareholder and sole director, Medlands, was appointed as successor trustee.

• (c) All legal professional advisors continued to provide their services as before to the successor trustee, Medlands.

• (d) The injunction proceedings and the proceedings challenging the appointment of Mr Watlington and Mr Ferguson as directors were rendered an academic exercise.

11. As noted at paragraph 67 of the Judgment, it does not appear that Mr Gilbert or Conyers deny that the application to appoint Medlands as successor trustee in the Trust Proceedings was a material development and would ordinarily require disclosure to the Court and the other parties to the proceedings. The sole justification advanced by Mr Gilbert and Conyers for not advising the Court or other parties of the momentous development is the legal contention that Mr Gilbert had no duty to disclose because these proceedings were by that stage inter partes and reliance was placed on a single decision in JSC BTA Bank v Ablyazov[2012] EWHC 648 (Comm). For reasons set out in paragraphs 68 to 73 of the Judgment this position was entirely untenable bearing in mind that Mr Watlington, Mr Ferguson and Cabarita had no means of finding out that such an application to change the trustee was contemplated by SJTC, and as a result Mr Gilbert and Conyers were under a duty to advise the Court in relation to this momentous development. Further, as noted at paragraph 239 of the Judgment, a review of the authorities shows that this has been the legal position since at least 2004 and is reflected in standard practitioner texts. The clear implication of the last sentence of paragraph 239 of the Judgment is that the failure to appreciate that this was the legal position was a failure that no reasonably competent barrister and attorney could have made in all the circumstances of the case.

12. Furthermore, as noted in paragraphs 46 and 246 of the Judgment, this was not a technical breach of the duty of full and frank disclosure without any significant consequences in the pending proceedings. As noted at paragraph 246 of the Judgment, the application to change the trustee prior to the inter partes hearing, was in clear breach of the representations made to the Court that the sole purpose of the ex parte order was to preserve the status quo and that the grant of the ex parte injunction would not disadvantage Mr Watlington and Mr Ferguson in any material way. As noted in paragraph 46, the effect of the Order of the 19 December 2019 was, contrary to the representations made to the Court at the ex parte injunction hearing, to fundamentally change the position of SJTC and indeed to render it an empty vessel. Conyers must have appreciated that the application in the Trust Proceedings and the resulting Order of...