Insurer ordered to pay more than $7 million in Windsor Village matter
The largest payout in a civil trial in the history of the Cayman Islands was awarded to Hurlstone Ltd. and several other plaintiffs after a successful countersuit worth more than $7 million against Sagicor General Insurance, now Cayman First Insurance, in relation to a Hurricane Ivan claim involving the Windsor Village condominiums.
Hurlstone Ltd., Crawford Adjusters (Cayman) Ltd., Bould Paterson Ltd., Alastair Paterson, Hurlstone General Contractors Ltd., John Hurlstone and Robert Hurlstone counter-sued the insurer for abuse of process and malicious prosecution after an initial writ against the plaintiffs filed by Cayman General Insurance Company Ltd. in February 2006.
At the time of Hurricane Ivan, Cayman General was a wholly owned subsidiary of Cayman National Corporation. In 2005, Cayman National gave approximately 24 per cent of its shares to the Cayman Islands Government as part of a negotiated settlement for the government’s Hurricane Ivan claim. Later that year, it sold a controlling 51 per cent interest in the insurance company to the Sagicor Group. The company rebranded to Sagicor General Insurance in September 2006. The following year, Cayman National sold the remainder of its shares to Sagicor, and in 2010 Sagicor sold all of its shares to the Bahamas First Group, which subsequently rebranded the insurer as Cayman First Insurance.
The original writ filed against the plaintiffs in 2006 alleged fraud and conspiracy but could not be sustained and was abandoned on the verge of trial in December 2008.
Indemnity costs awarded
As a result, indemnity costs were awarded to the parties by Justice Alexander Henderson in the amount of $930,000. Justice Henderson said he did so “because of the serious nature of the allegations, which had been made but not proved.”
A separate enquiry into damages was undertaken in the following months.
During these proceedings, lawyers for the seven plaintiffs argued that their clients’ characters and business affairs had suffered greatly because of the allegations brought by the insurer, whose senior vice president at the time, Frank Delessio – who is now deceased – sought to have the action started after suggesting that the figures on work done at the Windsor Village site had been inflated. His findings were based on a report produced by Alan Purbrick of Capital Consulting. The report was later found to be erroneous at best and not inclusive of all relevant costs for work done, including an expensive cleanup before work could commence on the complex.
During the enquiry into damages, lawyers for the Hurlstones said a Mareva injunction – which froze their assets – was secured against the firm by Cayman General before the first trial out of fear that they would dissipate funds prior to the proceedings. The lawyers said the injunction was extremely detrimental to their clients. A separate Mareva injunction attempt against Mr. Paterson was unsuccessful.
The attorneys listed their causes of action for Mr. Paterson during the enquiry as malicious prosecution, abuse of process and defamation. The Hurlstones’ cause of action was listed as loss of earnings.
During proceedings, it was established that the relationship between Mr. Paterson and Mr. Delessio was strained due to interaction the two had before Mr. Delessio was retained by Cayman General after Hurricane Ivan. In exploring the insurer’s mindset at the time of the accusations that led to the first trial, Justice Henderson said it was his view that, “Mr. Delessio was the directing mind and will of Sagicor with respect to the initial suit.”
Regarding Mr. Paterson and his companies’ case, he said, “In a proceeding of malicious prosecution, the prior proceedings must have been determined in favour of the plaintiff. The Crawford parties were wholly successful in the original proceeding so this element is established. The prior proceedings must have been instituted without reasonable and probable cause…Sagicor has never possessed a body of evidence capable of proving it was defrauded or was the victim of a conspiracy.”
However, Mr. Henderson added that though it was his view that, “Mr. Delessio’s resentment of and dislike of Paterson was a substantial motivating factor in his putting forward the case of fraud and conspiracy,” he could not say that it was his sole reason, as Mr. Delessio told his attorneys that the scope sheet done by a reputable company, which he had inspected, had led him to believe Sagicor General had been overcharged. Justice Henderson said it was essentially impossible to tell if, “Mr. Delessio held a genuine but entirely mistaken view”.
Mr. Henderson added that the tort of malicious prosecution/abuse of process of a civil action is not a part of civil law and essentially, the law does not make provisions for someone to claim he has been maliciously prosecuted in a civil action. Further, though he agreed with the Crawford party’s facts, there was no basis in law to extend the tort to civil proceedings.
Regarding the plea of defamation by Mr. Paterson or Crawford parties, as referred to in the judgment, Mr. Henderson said he accepted that the filing of the statement of claim in the original matter was a part of the judicial process and as such, it was an absolute privilege of Sagicor General’s at the time, which negates any claim of defamation.
As a result, Mr. Paterson and the Crawford parties will receive only the indemnity costs that were awarded to them in them initial proceedings.
Because of the Mareva injunction against John Hurlstone, Robert Hurlstone and their companies, they sought loss of damages. Mr. Henderson said, “To obtain the Mareva injunction, Sagicor gave its promise that it would compensate the Hurlstone parties for any loss caused by the order if it was discharged.” He said such damages are to be on the same basis as breach of contract.
As a result of the Mareva injunction, Mr. Henderson ruled they were entitled to extra damages. However, Mr. Paterson was not directly affected by the Mareva injunction. Sagicor had argued that any loss the Hurlstone parties suffered was a result of the proceedings and not the Mareva injunction. However, Justice Henderson ruled that, “If a plaintiff obtains an injunction fraudulently or maliciously, the court should hold that person responsible for all loss caused directly by the injunction.”
He awarded $6,938,064 plus interest for loss of profit and loss of market share to Hurlstone Construction, in addition to $35,000 in general damages for loss of personal reputation and $50,000 as general damages to John Hurlstone.
Robert Hurlstone received $35,000 in general damages for loss of personal reputation, as well as $50,000 as aggravated damages and $128,250 for containers provided to Windsor Village from 2 December, 2005, to 1 December, 2008.
Parties in the matter have been advised that they are also at liberty to apply for costs.
The question of who pays the awarded sum remains unanswered. The Cayman Islands Government still owns approximately 24 per cent of the shares of Cayman First.
During court proceedings in the matter in 2009, it was revealed that Cayman National Corporation had capped indemnity to Sagicor relating to the Hurricane Ivan claim at Windsor Village at $8 million and that $3 million of that indemnity remained.
In a written response to the judgment, Cayman First Insurance noted the “matter remains subject to possible appeal”.
The insurer, however, confirmed its “commitment to meet any legal obligations related to the legal proceedings, once finalized”.
“Notwithstanding the fact that the matters at issue in the proceedings predate the involvement of the new majority owners, definitive steps have been taken to ensure that policyholder and other stakeholder interests are adequately protected,” the statement said. “Further, the ultimate parent company of [Cayman First] has provided assurances that it will take appropriate and timely steps to ensure that the capital base of the company is maintained at a level to meet the requirements mandated by the Cayman Islands Monetary Authority.”
Cayman First said it has determined, based on existing information, that the company’s capital and ability to operate will not be impaired by the developments associated with the judgment.
The Hurlstones were represented by Thomas Lowe QC, who was instructed by Christopher McDuff of Thorp Alberga, while Mr. Paterson was represented by Anthony Bueno, who was instructed by Graham Hampson. Sagicor was represented by Michael Roberts, who was instructed by Nick Dunne of Walkers.
Compass journalist Alan Markoff contributed to this article.