Vision En Analisis Y Estrategia, S.A. De C.v v Christopher Ronald Erwin, also known as Christopher R Erwin and/or Christopher Erwin

JurisdictionBermuda
CourtSupreme Court (Bermuda)
JudgeMussenden J
Judgment Date12 August 2022
Docket NumberCIVIL JURISDICTION 2019: No. 279
Between:
(1) Vision En Analisis Y Estrategia, S.A. De C.V
(2) Capitaliza-T, Sociedad De Responsabilidad Limitada De Capital Variable
Plaintiffs
and
(1) Christopher Ronald Erwin, also known as Christopher R. Erwin and/or Christopher Erwin
(2) Emerging Manager Platform Ltd

(a segregated accounts company sued in the name of the Laureola Investment Fund account) ( a non-cause of action Defendant)

(3) Laureola Advisors Inc.
(4) Emerging Asset Management Ltd.

( a non-cause of action Defendant)

(5) Bella, LLC
(6) Laureola Advisors USA, LLC
(7) Laureola Policy Servicing, LLC
(8) Erwin Legal, PC, also known as Erwin Legal PC and/or Erwin Legal, A Professional Corporation and/or Erwin Legal a Professional Corporation
(9) Emerging Manager Platform 2 Ltd

(a segregated accounts company sued in the name of Laureola Investment Master Fund account) ( a non-cause of action Defendant)

(10) Apex Fund Services Ltd

( a non-cause of action Defendant)

Defendants

[2022] SC (Bda) 62 Civ

CIVIL JURISDICTION 2019: No. 279

In The Supreme Court of Bermuda

Appearances:

Sam Stevens, Carey Olsen Bermuda Limited, for the Plaintiffs

Mark Diel, Katie Tornari, Chris Snell, Marshall Diel & Myers Limited, for the Third Defendant

RULING (COSTS)

RULING of Mussenden J

Introduction
1

This matter comes before me on three Summonses as follows:

  • a. The Third Defendant's – Laureola Advisors Inc. (“ Laureola”) – Summons dated 1 December 2021 for an Order that the Plaintiffs pay its costs of the claims commenced against it and subsequently discontinued, together with an inquiry of damages sustained by it as a result of the fact that the Freezing Injunction obtained by the Plaintiffs was subsequently discharged;

  • b. The Plaintiffs' cross-Summons dated 7 February 2022 for an order that Laureola pay the Plaintiffs' costs of the claims; and

  • c. Laureola's Summons dated 12 April 2022 for an Order requiring the Plaintiffs to discontinue their claims against Laureola following the Plaintiffs having obtained an Order granting them leave to discontinue those claims, but the Plaintiffs having failed to file a notice of discontinuance. The Plaintiffs obtained that leave to discontinue as long ago as 8 October 2021.

Background
2

Mr. Christopher Erwin (“ Mr. Erwin”) and Mr. Gordon Bremness (“ Mr. Bremness”) founded Laureola which was incorporated in the British Virgin Islands (“ BVI”) on 21 December 2012. Since incorporation, Mr. Bremness has acted as Laureola's sole director and, at varying times, Mr. Erwin served as Laureola's Chief Investment Officer, Reserve Director and Director of Sourcing. From the date of incorporation until 1 March 2021, it was known that Mr. Erwin owned at least 12,500 voting shares in Laureola.

3

Laureola is an active company engaged in fund management. At all relevant times, the Plaintiffs believed based on information available to them that Laureola received an income stream from both the Second Defendant (“ EMP”) and the Ninth Defendant (“ EMP2”) in the form of investment management fees. EMP and EMP2 are Bermuda segregated accounts companies which form part of the well-known fund administrator, the Apex Group.

4

Mr. Jose Hernandez filed his Third Affidavit dated 4 February 2022 (“ Hernandez 3”) on behalf of the Plaintiffs. He set out some background to this matter as follows. In proceedings in California (the “ California Proceedings”), the Plaintiffs obtained judgment against Mr. Erwin in September 2019 (the “ California Judgment”). In those proceedings, Mr. Erwin provided sworn testimony that (i) he had a share interest in Laureola; and (ii) he transferred his equity interest in those shares into another entity known as Bella LLC (“ Bella”) for no consideration.

5

On 9 July 2019 the Plaintiffs filed a Specially Indorsed Writ of Summons (the “ Writ”) in an effort to enforce the California Judgment. Laureola was joined as a non-cause of action Defendant on the basis of Mr. Erwin's testimony in the California proceedings. The Plaintiffs sought relief to void any transfer by Mr. Erwin of his beneficial interest in his Laureola shares. The Writ has been amended from time to time.

6

On 11 July 2019 the Plaintiffs obtained an ex parte freezing injunction (the “ Freezing Injunction”) against Laureola, amongst others. The Freezing Injunction did not include a provision allowing any of the respondents to make any payments in the ordinary course of business. On 9 October 2019 an order was granted varying the Freezing Injunction to allow Laureola to make and receive payments in the ordinary course of business. On 10 October 2019 there was a further variation to the Freezing Injunction which prohibited the Fourth Defendant, Emerging Asset Manager Ltd, from making any payments to Laureola. Also on 10 October 2019 default judgment was entered against Mr. Erwin in Bermuda in the sum of $3,847,346.

7

On 14 – 16 December 2020 the Plaintiffs obtained a Norwich Pharmacal Order in BVI which revealed that Mr. Erwin had lied in his testimony in the California Proceedings and that he had not in fact transferred any interest of his shares in Laureola.

8

Mr. Stevens submitted that the onset of the Covid-19 pandemic effectively stayed proceedings for a considerable part of 2020. On 24 December 2020 Carey Olsen filed a notice of change of attorney replacing ASW Law Ltd. On 14 January 2021 Jan Woloniecki, formerly of ASW Law Ltd., passed away. Mr. Stevens submitted that the passing of Mr. Woloniecki resulted in more time being required to transition, consider and advance the action.

9

On 29 March 2021 the BVI Court granted the Plaintiffs' ex parte receivership order over all of Laureola's shares and also granted a freezing injunction against Mr. Bremness. On 27 August 2021 the BVI Court discharged the ex parte receivership order over all of Laureola's shares.

10

On 6 October 2021 the Freezing Injunction in Bermuda was discharged against Laureola. On 8 October 2021 the Plaintiffs and Laureola agreed by consent that the Plaintiffs shall have leave to discontinue all of the claims against Laureola. The cost of the discontinuance was expressly reserved.

Rules of the Supreme Court 1985 and Case Authorities
11

Order 21, rule 3 states as follows:

“21/3 Discontinuance of action, etc. with leave

(1) Except as provided by rule 2, a party may not discontinue an action (whether begun by writ or otherwise) or counterclaim, or withdraw any particular claim made by him therein, without the leave of the Court, and the Court hearing an application for the grant of such leave may order the action or counterclaim to be discontinued, or any particular claim made therein to be struck out, as against any or all of the parties against whom it is brought or made on such terms as to costs, the bringing of a subsequent action or otherwise as it thinks just.”

12

The relevant commentary in the Supreme Court Practice 1999 (the “ White Book”) at 21/5/10 states the Court has a wide discretion as to the terms upon which it may grant leave to discontinue a claim and that:

Nevertheless, it is not desirable that a plaintiff should be compelled to litigate against his will; the Court will normally grant him leave to discontinue if he wants to, provided no injustice will be caused to the defendant nor will he be deprived of any advantage which he has already gained in the litigation, which so far as possible should be preserved, but the order of the Court must take effect from the date on which such leave is granted, since the court has no power under the rules or under its relevant jurisdiction to back-date such an order.

13

Order 62, rule 3 states as follows:

“3 — If the Court in the exercise of its discretion sees fit to make any order as to the costs of any proceedings, the Court shall order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.”

14

Order 62, rule 5(3) states as follows:

“5(3) Where a party by notice in writing and without leave discontinues an action or counterclaim or withdraws any particular claim made by him as against any other party, that other party shall be entitled to his costs of the action or counterclaim or his costs occasioned by the claim withdrawn, as the case may be, incurred to the time of receipt of the notice of discontinuance or withdrawal.”

15

The relevant commentary in the White Book at 21/5/9 states:

“It is open to a plaintiff to apply for and obtain leave to discontinue, even when he could do so without leave, in order to avoid the necessity of paying costs which discontinuance without leave involves, and in a proper case leave may be given to discontinue without paying costs.”

16

The relevant commentary in the White Book at 21/5/11 further states:

“The general rule that a defendant is entitled to costs when an action is discontinued may be departed from in a case where the discontinuance of the proceedings is due to the matter having become academic, rather than to any acknowledgment by the Plaintiff of likely defeat ( Barretts & Baird (Wholesale) Ltd v Institution of Professional Civil Servants, The Independent, December 9, 1988; (1988) New L.J. 357).”

17

Order 62, rule 10 states as follows:

“62/10 Misconduct or neglect in the conduct of any proceedings

10 — Where it appears to the Court in any proceedings that any thing has been done, or that any omission has been made, unreasonably or improperly by or on behalf of any party, the Court may order that the costs of that party in respect of the act or omission, as the case may be, shall not be allowed and that any costs occasioned by it to any other party shall be paid by him to that other party.”

18

In Binns v Burrows [2012] SC (Bda) 3 Civ at [6], the Bermuda Court set out the general principles with regard to the award of costs as follows:

“…unless...

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