Windsor case probes CNC’s liability

Justice Alexander Henderson made an order of discovery last week into whether Cayman National Corporation gave an indemnity to Sagicor General Insurance (Cayman) Ltd. with regard to the lawsuit involving the Windsor Village matter.

Sagicor, which bought a little more than 75 per cent of the stock in the insurance company from CNC, had its name as the plaintiff in an action that alleged fraud and conspiracy against seven defendants. The matter dealt the agreement to repair damage done to the Windsor Village condominium complex by Hurricane Ivan.

Attorney’s for Sagicor last week announced they would not proceed on that action. However, a counterclaim did proceed and Hurlstone Ltd. was award damages and interest amounting to some $943,000. In addition, costs were awarded for all seven of the original defendants, which include Hurlstone Ltd., Hurlstone General Contractors Ltd., John Hurlstone, Robert Hurlstone, Alastair Paterson, Bould Paterson Ltd, and Crawford Adjuster (Cayman) Ltd. The costs are expected to amount to ‘several million dollars’ according to one of the attorneys involved.

The Hurlstone’s and Mr. Paterson have now indicated they will bring separate abuse of process claims and Crawford Adjusters is also claiming hundreds of thousands of dollars in unpaid fees from Sagicor.

QC Thomas Lowe, who represents the Hurlstones and their companies through the instructions of Myers and Alberga, told Justice Henderson that it was strongly suspected that when CNC sold shares of Cayman General Insurance to Sagicor, the sales agreement contained an indemnity. Such an indemnity agreement could negate Sagicor’s liability in the matter involving the Hurlstones and the other defendants.

Justice Henderson gave his reasoning for issuing the order of discovery.

‘If [Sagicor] were being indemnified, it would suggest we have the wrong plaintiff,’ he said. ‘The existence of any indemnity would be relevant. I contemplate an order which directs disclosure to be made.’

Separate action

The Hurlstones’ abuse of process claim will be filed as a separate action and Mr. Lowe said he hoped it could come to court by May 2009.

Attorney Michael Todd QC, who represents Mr. Patterson, Bould Paterson and Crawford Adjusters (Cayman) Ltd. through the instructions of attorney Graham Hampson, attempted to have his clients’ claims for outstanding fees and abuse of process heard as part of the current proceedings. Mr. Henderson was willing to entertain the possibility of allowing the claim for the outstanding fees – which have been owed for more than three years – heard as part of the current proceedings.

Sagicor Attorney Hector Robinson noted that the original counterclaim only included and amount of $72,000 of fees due in relation to the Windsor Village project only. An amended counterclaim filed recently included fees of $399,000 allegedly owed by Sagicor to Crawford Adjustors for work relating to other projects and an amount of $79,000 owed to Bould Paterson for works done on other projects.

The liability for legal action could escalate substantially if the abuse of process claims is successful.

At the time the Hurlstones were locked out of the Windsor Village jobsite, in July 2005, Cayman National Corporation owned a little more than 75 per cent of the shares in Cayman General and the Cayman Islands Government owned the rest of the shares. The Government received its shares as part of the negotiated settlement with Cayman General with respect to its damage claim from Hurricane Ivan.

Sagicor completed the purchase of 51 per cent of Cayman General in November 2005. The lawsuit concerning the Windsor Village matter was filed in February 2006. The insurance company changed its name from Cayman General to Sagicor in September 2006.

Sagicor purchased the remainder of Cayman National Corporation’s shares in October 2007.

The Cayman Islands Government still owns 24 per cent of the shares in Sagicor General. It is unknown what liability, if any, it has in the matter.

Landmark costs awarded

In addition to the indemnity costs awarded to the Hurlstones and their companies, Justice Henderson awarded indemnity costs to Mr. Paterson, Crawford Adjustors and Bould Paterson.

Mr. Robinson argued that, under Grand Court rules, Mr. Paterson should not be entitled to the costs of overseas attorneys before they had been admitted to the Cayman Islands Bar.

However, the Grand Court rules only apply to ordinary costs and not indemnity costs.

In any event, Mr. Paterson attempted to find representation locally through 10 different law firms, but they all declined to act, mainly because they wanted large retainers up front. Mr. Paterson stated he wasn’t in the position to pay a large retainer because the allegations of fraud and conspiracy had negatively affected his business to the point that he had to travel off island to get work.

Mr. Hampson eventually took the case, but, as a single attorney practice, he wasn’t able to shoulder the workload alone on such a complex matter. He enlisted the help of Mr. Todd and his junior, even though they had not yet been called to the Cayman Islands Bar.

Justice Henderson agreed that it seemed like an unwarranted expense to fly people to the Cayman Islands simply to be called to the bar. He noted that the Grand Court rule was designed to prevent the duplication of work by local and overseas attorneys, which was not the case in this matter.

In issuing his order for indemnity costs, Justice Henderson admonished the attorneys who brought the claim, saying they had a responsibility not to pursue cases that alleged fraud and conspiracy unless they were reasonably sure of the facts.

‘From the failure of prosecution, I infer they have never been in possession of ample evidence for fraud and conspiracy.’

Justice Henderson ordered indemnity costs so the defendants would not be out of pocket ‘for these ill-considered and unmeritorious allegations of fraud and conspiracy’.

Mr. Hampson later said he was pleased with the ruling of Justice Henderson on legal costs.

‘I think it sends a firm message to all litigants that proceedings in this jurisdiction should not be commenced lightly, especially proceedings, which are not backed up by evidence, which is sufficiently strong enough to support the allegations made,’ he said. ‘The more serious the allegations, the greater the care, which must be taken.’

Mr. Hampson noted that reputations could be made and lost instantaneously. He noted that in the era of the Internet, articles published in the press could be read all over the world

‘The article, which appeared in the Caymanian Compass in March of 2006 about this case, which labeled the defendants as dishonest, merely repeated the allegations made by the plaintiffs, so my client cannot and does not criticise the Compass for printing it. However, the publication of the article, which quoted extensively from the Plaintiffs’ statement of claim, was read by people far and wide.

‘The fact that the claims have now been dismissed does not take away the years of misery suffered by all these defendants while the allegations were maintained and publicly known. Inevitably many people rushed to judgment about the defendants. I am instructed by my client that people in other jurisdictions who employed Mr. Paterson’s services read this newspaper article. The effects have been devastating. The Plaintiffs allegations were maintained from February 2006 until the 3rd December 2008 and my client and indeed all the defendants have had to live in their shadow for almost three years.’

Mr. Hampson said the process of restoring Mr. Paterson’s professional reputation had at long last commenced.

‘However rebuilding his business to the level it was before will be a difficult road,’ he said. ‘I hope he is welcomed back into the community with open arms.’

Mr. Hampson said it was disappointing that the original plaintiffs in the case had not taken the time to apologise to the defendants.

‘I think this would be an obvious and appropriate gesture in aiding the rehabilitation of the defendants’ reputations.”