Utilicorp United Inc. and Aquila Energy Resources Corporation v Renfro and Bermuda Trust Company Ltd and Hickory Hill Corporation 1994 Civil Jur. No. 226

• Jurisdiction: Bermuda
• Judgment Date: 19 August 1994
• Date: 19 August 1994
• Docket Number: Civil Jurisdiction 1994 No, 226
• Court: Supreme Court (Bermuda)

In the Supreme Court of Bermuda

Ground, J

Civil Jurisdiction 1994 No, 226

BETWEEN

Utilicorp United Inc.

First Plaintiff

and

Aquila Energy Resources Corporation

Second Plaintiff

-and-

Kenneth D. Renfro

First Defendant

and

Bermuda Trust Company Limited

Second Defendant

and

Hickory Hill Corporation

Third Defendant

and

JIGGS Investment Holdings Ltd.

Fourth Defendant

Mr. A. Woloniecki for the plaintiffs;

Mr. J. Cooper for the first defendant;

Mr. A. Martin for the second defendant; and

Mr. D. Kessaram for the third and fourth defendants.

Seaconsar Far East Ltd. v Bank Markazi Jomhouri Islami IranUNK [1993] 4 All ER 456

Cowan de Groot Properties Ltd v Eagle Trust plcUNK [1992] 4 All ER 700

Lipkin Gorman v Karpnale LtdELR [1991] 2 AC 548

Agip (Africa) Ltd v JacksonELR [1990] 1 Ch 265

Lister v StubbsELR (1890) 45 ChD 1

Attorney General for Hong Kong v ReidUNK [1994] 1 All ER 1

Polly Peck v NadirUNK [1992] 2 Lloyds Rep 238

Norwich Pharmacal Co v Customs & Excise CommissionersELR [1974] AC 133

Bankers Trust Co v ShapiraWLR [1980] 1 WLR 1274

American Cyanamid v EthiconELR [1975] AC 396

Babanaft International Co v BassatneUNK [1989] 1 All ER 433

Rules of the Supreme Court, O. 11

Conveyancing Act 1983, s. 37

Worldwide Mareva injunction — Forum non conveniens — Tracing claim — Fraud — Discovery — Non-disclosure — Indorsement of writ

REASONS FOR ORDER

PROCEDURAL BACKGROUND

This matter came before me on a variety of summonses. The first in chronological order was the second defendant's summons of 29th June 1994 to strike out the indorsement on the writ as disclosing no cause of action and as an abuse; to set aside service on the second defendant and dismiss the action on the basis of duplicity of actions and forum non conveniens; and to set aside a Mareva injunction made on 17th June on the grounds of material non-disclosure. The first defendant then issued a summons of 8th July 1994 to discharge the orders giving leave to issue the writ and to serve it upon the first defendant out of the jurisdiction and to set aside service on the first defendant on the grounds that the action is not within the relevant paragraph of Ord. 11 r.1; that even if it were, it is not a proper case for such service; and that in any event there was material non-disclosure on the ex parte application for leave. The third and fourth defendants also applied by summons of 12th July to set aside service upon them. The second defendants then, by a further summons of 18th July 1994, sought an order dismissing the action on the basis of failure to serve a statement of claim, and, in the alternative, an order staying the action on the grounds of forum non conveniens. The plaintiffs responded to this with a summons to enlarge time for the service of the statement of claim until 30th September 1994.

The third and fourth defendants had originally included in their summons an application to discharge the Mareva order as against them, but before me they abandoned that on the basis that they did not submit, and had no intention of doing anything which might be taken as submitting, to the jurisdiction. Although the first defendant had not made any such application in his summons his counsel was also at pains to make it clear to me that he did not, at this stage, address the Mareva for the same reason.

It will be apparent from the above that the action is still at an early stage, and that there is no statement of claim, only a generally indorsed writ. Nevertheless, the matter has already been before me on certain procedural points, when I indicated that the second defendant's challenge to the jurisdiction on forum grounds was really a question of seeking a stay, and I understand that that is the reason for that part of their second summons.

The generally indorsed writ contains twelve numbered Paragraphs, divided into various sections corresponding to the parties sued. Paragraphs one to three contain damages claims against the first defendant only, for conspiracy to injure or defraud. These relate to certain transactions taking place in the United States of America in the approximate period 1988 to 1992. These transactions had no direct connection with Bermuda and there is no dispute that they are also the subject of pre-existing proceedings in Texas, but it is said in paragraph one that the proceeds of the alleged fraud were transferred to the other, defendants.

Paragraphs four to six of the writ concern the first, third and fourth defendants, and an alleged conspiracy between them to conceal the proceeds of the supposed fraud, the remedies claimed being damages for conspiracy (paragraph 4), recovery of the sums alleged to have been concealed as money had and received to the plaintiff's use or paid under a mistake of fact (paragraph 5), and damages for conversion and breach of trust (paragraph 6). This group of claims is misleadingly pleaded, as the conspiracy is again alleged to cover the period 1988 to 1992, while it is plain from the evidence relied upon by the plaintiffs in the course of the hearing that any such conspiracy must relate to a later period commencing in 1992. This was conceded by plaintiffs' counsel in argument. The error will have to be rectified formally, but that can probably be done under the rule permitting a writ to be amended once without leave before the close of pleadings.

The next group of claims is expressed to be against all the defendants, and includes claims for a tracing remedy (paragraph 7). discovery (paragraph 8) and an account (paragraph 9): The sum sought to be traced is referred to as ‘the said US $7.947.015.’ That sum is the amount of brokerage fees alleged to have paid by the plaintiffs to the first defendant as a result of the fraudulent conspiracy pleaded in paragraph 1, and is also the amount sought to be recovered from the first, third and fourth defendants under paragraph 5 as money had and received and/or paid under a mistake of fact.

The next group of claims is against the second defendant alone, and is for an order pursuant to section 37 of the Conveyancing Act 1983 setting aside as fraudulent any and all transfers of assets made to them as the trustees of the Hickory Hill Trust, by the first third or fourth defendants. A similar claim is made in respect of any transfers by the first defendant to the third and fourth defendants. There is then finally a claim for interest against all defendants.

The writ was issued on 17th June 1994, and was then immediately served upon the second defendant, who is a company registered in Bermuda, and the plaintiffs then came before the Chief Justice on an ex parte summons seeking, inter alia, leave to serve notice of the writ outside the jurisdiction upon the first, third and fourth defendants. That leave was sought on the grounds set out in Order 11, rule 1(1)(j) which provides that service out of the jurisdiction is permissible with leave of the Court—

‘if the action begun by the writ being properly brought against a person duly served within the jurisdiction, a person out of the jurisdiction is a necessary or proper party thereto;‘.

The writ having been duly served by then on the party within the jurisdiction, the Chief Justice granted that leave. He also granted a Mareva injunction against the first, third and fourth defendants, having previously granted a similar injunction against the second defendant earlier in the morning.

As an aside I should note that the plaintiffs should also have sought, when seeking leave to serve out, leave to issue a concurrent writ for service out. That is because they did not get leave to issue the original writ, as required by Ord. 6 r. 7(1), so that it is stamped ‘not for service out of the jurisdiction.’ In such a case the proper course is to seek leave to issue a concurrent writ for service out under Ord. 6 r. 6(2), thus curing the original omission; see generally the White Book, 1979 ed., at note 6/6/3. This is a requirement which is more honoured in the breach than the observance; no express point has been taken on this technical failure; and the defect has been overtaken by the subsequent grant of leave to serve out, so I do not propose to make anything of it.

FACTUAL BACKGROUND

At this stage in these proceedings there is no statement of claim. However, at the hearing before the Chief Justice the plaintiffs filed affidavit evidence, and I take this summary of the elements of their claim from that. I should stress that what follows is largely a narrative summary of the plaintiffs' allegations and does not amount to findings of fact, which would be premature at this stage.

The plaintiffs are American companies, the second plaintiff (‘Aquila’) being a wholly owned subsidiary of another wholly owned subsidiary of the first plaintiff (‘Utilicorp’). Aquila is in the business of the production and sale of oil and natural gas. It is alleged that two senior employees and directors of Aquila, Vincent Marquez and Richard Stegall, conspired with the first defendant in this action, Mr. Kenneth Renfro, and certain companies controlled by him, to defraud the plaintiffs on a substantial scale involving millions of dollars. That alleged fraud is the subject of proceedings in Texas (‘the Texas action’) brought by the plaintiffs, and in which Mr. Renfro is one of many defendants. The other defendants in the Bermuda action are not parties to the Texas action.

In the Texas action The fraud alleged is pleaded as follows—

‘41. The conspiracy to defraud involved Marquez and R. Stegall, as plaintiffs' fiduciaries, obtaining from a seller the lowest price that seller was willing to sell a particular property. Instead of providing the lowest selling price to the plaintiffs, however, Marquez and R. Stegall would submit a higher figure to the plaintiffs in a proposal for the acquisition of that property representing that such an appropriation was necessary for the purchase of, the...