Indemnity clause details revealed

Windsor Village trial

Cayman National Corporation President and CEO Stuart Dack testified last week that the indemnity given to Sagicor General Insurance Company (Cayman) Ltd. as the result of its purchase of shares in Cayman General Insurance Company was capped at $8 million.

Details of the indemnity of costs clause in the contract between Cayman National Corporation and Sagicor were revealed during court proceedings concerning the award of damages to John and Robert Hurlstone, Hurlstone Ltd, Alastair Paterson, Bould Patterson Ltd, Crawford Adjusters (Cayman) Ltd. and Hurlstone General Contractors.

Windsor Village was severely damaged during Hurricane Ivan in September 2004 and after the Hurlstones and others began reconstruction work, they were locked off the building site and sued by Cayman General Insurance, who also alleged fraud.

Mr. Dack testified that Sagicor had received an indemnity of costs in the matter, which was capped at $8 million. He said there was three million left on that indemnity.

In last December’s trial, Justice Alexander Henderson made an order of discovery to determine whether Cayman National Corporation had given an indemnity to Sagicor General Insurance with regard to liabilities arising from the lawsuit.

However, it is still not clear through this point in the proceedings who will ultimately be liable for further damages, as the evidentiary document relating to possible exemption of any liability for Sagicor was apparently redacted.

Whether Cayman National Corporation, by way of its past ownership of Cayman General, is liable to any extent or whether Sagicor has essentially purchased this liability remains to be established. According to Thomas Lowe QC, attorney for the Hurlstones in the case, a totally separate proceeding could ensue as a result.

The Cayman Islands Government owns 24 percent of Sagicor, as a result of its negotiated Hurricane Ivan claim settlement and it is unknown at this point whether the government will have any liability with regard to damages.

During his testimony, Mr. Dack indicated that he wished to amend a date of a meeting on his witness statement. He said he had made a mistake and wanted his statement to reflect the correct order of events. However during cross examination, lawyers for the plaintiffs asked Dack when he had noticed this error to which he replied, ‘several weeks ago.’

They argued that if he was keen on maintaining an accurate witness statement, he should have informed his lawyers of the change as soon as it came to his attention and not from the witness box.

Mr. Dack was asked if he had read the testimony transcripts of Cayman General Insurance’s CEO Danny Scott, who now hold sthe position at Sagicor. Mr. Dack admitted doing so.

The attorneys then asserted that a particular board meeting in question was held before Alan Purbrick of Capital Consulting had been enlisted by Cayman General to do a valuation of the construction work done at Windsor Village. They said this would cause the inference to be made that the figures for money paid and corresponding work done that was alleged to not match, were offered up by Mr. Scott without any actual valuation having been carried out.

Mr. Scott’s witness statement’s date for the board meeting corresponded to the date changed by Mr. Dack on the stand.

Mr. Dack was also asked why he did not raise concerns about why reputable accountants from upstanding firms would sign off on $2.9 million worth of payments to the Hurlstones through Alastair Paterson if there were inconsistencies.

He said he was not aware of any concerns but was told there was gross overcharging taking place at Windsor Village and a disparity between money paid out and work done.

When asked if he had ever heard of an insurer firing a contractor, as Cayman General Senior Vice President at the time Frank Delessio is said to have done to the Hurlstones, Mr. Dack said he had not.

He added that legal counsel for Cayman General advised that the case be pleaded as a fraud and he trusted their advice. However, he said he was not aware of the conspiracy allegation.

Testimony was also given by former attorney general of the Cayman Islands Richard Coles, who as an owner, is a member of the Windsor Village Strata Plan. He told the court of a meeting held with the Strata and all other parties at Cayman General, during which it was agreed that the Hurlstones would remobilise on site, after they contend- they were locked out. However no minutes of that meeting were documented and the understanding that Hurlstone attorneys say their clients had, was that a memorandum would be signed before any such remobilisation took place.

This was evidenced to the court by Hurlstone attorneys in the form of correspondence sent to Mr. Coles and the Strata by Mr. Paterson shortly after the meeting.

Mr. Coles testified that he sent these letters to Cayman General but heard nothing.

He added that he was familiar with Mr. Paterson and the strata were pleased to have the Hurlstones on the job, as they had actually built phase one of Windsor Village, which he felt was built better than the other phases of Windsor Village.

He said the strata were disappointed to hear that Alastair Paterson was then fired from the project shortly after the meeting mentioned earlier.

The former attorney general went on to testify that neither he nor the strata were aware that lawyers, the police, or private investigators had been contacted; otherwise he would have wanted to know the purpose.

Mr. Coles told the court he only learned about proceedings after they had been issued and was angry to find out that Windsor Village was listed as a plaintiff in Grand Court proceedings without the knowledge of the strata.

He said it was difficult to obtain copies of proceedings, but once they were retrieved and he was aware of what cause of actions had been pleaded, he informed the strata that they needed to get out of the proceedings.

The strata then enlisted the services of the law firm Turner and Roulstone, who said they were prepared to go on record for the case, but at ‘the eleventh hour,’ Quin and Hampson dropped the Windsor Village Strata as a plaintiff in the initial proceeding.

There was also a letter from Quin and Hampson that stated that action could be taken against the strata for not supervising Paterson properly, to which Mr. Coles said he was astonished.

Through court proceedings, it has come to light that to date, Cayman General Insurance/Sagicor has spent more than $8 million on an initial insurance claim of $6.5 million; $1 million of which would have been paid by the Windsor Village Strata Committee.

From that original claim, $3 million was paid out through Alastair Paterson. This would have left Cayman General with only $2.5 million left outstanding.

However, two weeks after the arrival of Mr. Delessio, the court heard that Mr. Paterson and the Hurlstones were banned from the Windsor Village site.

Another contractor was then hired and paid on a cost-plus arrangement.

At the completion of work, M and J Contractors was paid $5.5 million, which was $3 million over the estimated $2.5 left on the claim.

Mr. Coles testified that the strata would not have signed off on any agreement with M and J had there not been total assurance from Mr. Scott that the Cayman General would cover any added costs.

Attorneys for both sides also explored an ex parte, Mareva injunction that was imposed against the Hurlstones, whose lawyers argued that no one from Cayman General or the Cayman National Corporation’s board considered to make sure allegations of fraud and conspiracy were absolutely factual.

However, attorneys for Sagicor said this was a necessary step due to concerns about dissipation of funds and in line with advice they were receiving.

At the end of the trial, several issues of house keeping arose. These included an application for a letter of request for the testimony of Andrew Moran and Mathew Morisson, who were Cayman General’s lead counsel at the time. They have declined to willingly testify.

Attorneys also sent a letter to Justice Charles Quin requesting his assistance in the matter as he was the managing partner of Quin and Hampson at the time the original law suit was filed against the Hurlstones and others.

Attorneys for the plaintiffs urged the court to consider the public’s interest in this regard and also asked the judge to consider the financial burden their clients had already undergone. They submitted that an adjournment for new evidence to be obtained was essentially futile at such a late juncture.

Justice Henderson declined the requests, citing the extensive evidence of attorney Simon Dickson, who also worked for Quinn and Hampson on the initial proceedings, adding that Sagicor’s attorneys had more than enough time to exhaust all efforts in retrieving the evidence requested, bringing the case which has lasted several weeks longer than scheduled to a close.

Attorneys will submit their closing arguments – partly in writing – before returning for oral submissions in late December.

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