Court name
Court of Appeal of Turks and Caicos Islands
Case number
CL-AP 26 of 2005

Standard Star Insurance Ltd and Others v. Morris Cottingham Associates Ltd (CL-AP 26 of 2005) [2007] TCACA 8 (05 February 2007);

Law report citations
Media neutral citation
[2007] TCACA 8
Coram
Zacca, P
Mottley, JA
Ground, JA

IN THE COURT OF APPEAL OF TURKS AND CAICOS ISLAND

CL-AP 26/05

BETWEEN:

STANDARD STAR INSURANCE LIMITED

SOUTHWESTERN FIRE AND CASUALTY LIMITED

DUDLEY S. BEST LIMITED

TITAN HOLDING LIMITED                                                                           APPELLANTS

AND

MORRIS COTTINGHAM ASSOCIATES LIMITED

                                                                                                                      RESPONDENT

BEFORE:

The Rt. Hon Edward Zacca                              -            President

The Hon Elliott D. Mottley                                -            Justice of Appeal

The Hon Richard Ground                                 -            Justice of Appeal

Mr. Carlos Simons QC and Andrew Clutterbuck for the Appellants

Mr. Ariel Misick QC for the Respondents

4th September 2006, 5th February 2007

Mottley J.A.

1.             In May 2001, Standard Star Insurance Company Limited (SSIC), South Western Fire & Casualty Limited (SWFC) Dudley S Best Limited (DSB) and Titan Holdings Ltd. (THC) instituted proceedings against Morris Cottingham Associates Limited (MCA), Rashid Bodhanya (Bodhanya) and Turks & Caicos Provident Limited (TCP). As against the MCA, the plaintiffs, now appellants, allege that it was vicariously liable for the breach of fiduciary duty by Bodhanya, its managing director, and conversion by him of the assets of the appellants. In addition, the appellants claimed that MCA breached the term of its contract to provide corporate management services for each of the appellants by failing sufficiently or at all to supervise Bodhanya whose conduct, it is alleged, was dishonest. The final claim against MCA was that it knowingly assisted Bodhanya in his dishonest misappropriation of the appellants’ assets. As against Bodhanya, the appellants claimed an account and payment of such sums which may be found due and owing to each of the appellants on the taking of the accounts. They also claimed equitable compensation and or damages. As against TCP, the appellants claimed repayment of the sum amounting to $2,939,750 less such sums that may have been repaid.

Plaintiff’s Claim

2.             SSIC, SWFC and THC are companies incorporated in Turks and Caicos under the Companies Ordinance and registered as exempt companies. DSB is incorporated in Bermuda and registered in the Turks & Caicos as a foreign company. Pursuant to agreements between the appellants and MCA and its predecessor Morris Cottingham & Co., MCA agreed to provide trust and corporate management services. These corporate management services included provision of directors and company secretary. Bodhanya was at the material time the resident partner of MCA and managing director and the person designated by MCA to be director of the appellant’s companies and signatory to their bank accounts.

3.             Pursuant to these agreements it would appear MCA was authorized to debit the respective bank accounts of the appellants with periodic charges or fees charged by MCA. In addition it was alleged that Bodhanya, as a director of MCA and a director of each of the appellants was authorized “to and did from time to time procure each of the appellants to make proper payments to third parties”.

4.             The appellants allege that between February 1996 and October 1997 Bodhanya misappropriated from SSIC various sums amounting to US$1,231,750 by procuring SSIC to make loans to TCP, a company owned and/or controlled by Bodhanya. In respect to SWFC, Bodhanya misappropriated US$1,418,000 by procuring SWFC to make loans totaling that sum to TCPL. The sum allegedly misappropriated from DSB, using similar methodology, was $270,000; the amount taken from THC and given to TCP was US$20,000. The appellants alleged that all these payments were made by Bodhanya, not for the purposes of the appellants, but were improperly and dishonestly made by him for his own benefit and, inter alia, in breach of his fiduciary duty owed to the appellants.

Defence of MCA

5.             In its defence, MCA admitted that it provided certain services for SSIC, SWFC and THC including:

(a)           incorporation;

(b)           the provision of registered office facilities;

(c)           the provision of nominee shareholders;

(d)           the provision of nominee directors and           officers;

(e)           the filing of statutory7 returns and;

(f)            in the case of exempted companies the provision of representative.

In performing these tasks, MCA alleged that it acted exclusively on instructions received from the beneficial owner of the appellants, Paul Smith, now deceased or his agent William Gregory (Gregory). However, MCA denied that it managed these companies. It is conceded by MCA that Bodhanya was a nominee director of SSIC and THC the other director being an associated company of MCA. Bodhanya was the sole nomiee director of SWFC.

6.             In relation to the management of the appellants, MCA stated that all arrangement for the provision of services to SSIC, SWFC and THC were made between MCA and Gregory as agent of the beneficial owner of each of the appellants. Under these arrangements, MCA alleged that Bodhanya was not permitted to exercise any independent judgment or to make any decision regarding the affairs of SSIC, SWFC and THC. MCA asserted that Bodhanya was required to act solely on the instructions coming from Gregory. MCA further asserted that it had no authority to give any directions to Bodhanya concerning the manner in which he was to conduct the affairs of the appellants. Such directions could only be given by Gregory who MCA said was the defacto director and “the directing mind and guiding light of SSIC, SWFC and THC”, MCA further alleged that Gregory “had and exercised control over Bodhanya” to the exclusion of MCA. MCA also alleged that it was not permitted to instruct or direct Bodhanya on the manner in which he should exercise his powers as director of the companies. Bodhanya was one of three persons who, acting alone, was a signatory on the account of the appellants which were maintained at Barclays Bank plc. While it is admitted that Bodhanya owed a fiduciary duty to each of the appellants. MCA, however contend that those duties were owed personally by Bodhanya and not by MCA. In relation to payment to third parties on behalf of the plaintiffs, MCA admitted that Bodhanya did, from time to time, receive instructions from Gregory to effect such payments. However, MCA denied that, in effecting such payments Bodhanya was acting as its director or employee. MCA asserted that, in performing such tasks Bodhanya, was acting in his personal capacity as a director and signatory on the account of each of the appellants. MCA specifically denied that it either authorised or procured any payment to third parties. It averred that any payment made by Bodhanya was on the prior expressed authorization of Gregory. Finally, in this regard, MCA insisted that it had no say as to what payments were to be made from any of the appellants’ accounts and were never consulted on the making of such payments.

7.             In relation to the appellants allegations that MCA was vicariously liable for the conduct of Bodhanya in breaching his fiduciary duty owed to them, MCA denied that any alleged wrongful acts or dishonesty on the part of Bodhanya was committed by him in his capacity as a director or employee of MCA. MCA however asserted that any wrongful act or dishonesty by Bodhanya was committed by him in his capacity as an employee or director of the appellants. In any event, MCA alleged that it was Gregory, not MCA, who exercised absolute control over Bodhanya in relation to the appellants affairs and therefore any alleged misappropriation was not done in his capacity as an employee or director of MCA.

8.             In so far as the allegations of breach of contract are concerned, this was denied by MCA. It is admitted drat MCA, in providing tire services stated above, had a duty to take reasonable care in the provision of such service. MCA however contended that it took the necessary precautions in providing these services. MCA denied that it knowingly assisted Bodhanya in the alleged misappropriation of the asset of the plaintiff. Finally, MCA further averred that, even if Bodhanya did in fact commit the acts of dishonesty, he did not do so in his capacity as an employee of MCA but in his capacity as a director of the plaintiff and as a signatory on the bank accounts of the appellants. MCA indicated that it intended to contend that, in view of the arrangements for dealing with affairs of the appellants as agreed between Gregory and Bodhanya in his capacity as a director of the appellants, Bodhanya reported directly and exclusively to Gregory on all matters relating to the administration of the affairs of the appellants. In these circumstances, MCA stated that the appellants assumed any risk of Bodhanya acting dishonesdy.

9.             In respect of the claim made by the appellants, MCA denied that any fiduciary relationship which was capable of giving rise to equitable compensation existed between the appellants and MCA. Alternatively, even if such fiduciary relationships existed, MCA denied that it breached any such duty. MCA denied that the appellants suffered any loss as a result of any alleged breaches.

10.          No defence was filed on behalf of Bodhanya TCPL and conscquently judgment in default was entered against them.

Strikeout Application by MCA

11.          On 13 August 2005, MCA filed a Summons by which it sought an Order, pursuant to Order 18 Rule 19 of the Civil Rules and the inherent jurisdiction of the court, to strike out the Writ of Summons and Statement of Claim.

12.          An affidavit in support of this application was filed by Ervine Quelch a director of MCA. This affidavit showed that Bodhanya was a director of all four of the appellants with MCA being secretary to three and Dudley Cottingham, director and secretary of DSB. Quelch stated that as a director of the appellants, Bodhanya reported to Gregory the agent of the beneficial owner. Bodhanya did not report to MCA. In addition, it is stated that MCA never gave any instructions to Bodhanya as to the manner in which he should exercise his powers or carry out his duties as director of the appellants. MCA never interfered with the manner in which the appellants affairs were being conducted by Bodhanya. It was pointed out that MCA at no time held any of the assets or funds of the appellants in its custody. In addition, no funds were ever paid into any of the accounts in the name of MCA. Quelch pointed out that each of the appellants had their separate corporate account and it was the appellants not MCA that nominated the persons who were signatories to these accounts. He asserted that the documentation showed that Bodhanya was appointed as a signatory on the appellants’ bank accounts in capacity as a director of the appellants. When therefore Bodhanya gave instructions to debit an account of the appellants he did this in his capacity as a director of the appellants and not as an employee of the MCA. Quelch took issue with the assertion that MCA had debited the appellants bank accounts with periodic charges for its fees. This did not take place because, as stated earlier, MCA was never a signatory to the appellants bank accounts. He pointed out that fee notes from MCA were sent to Gregory and it was Bodhanya as a director and signatory on the appellants’ bank accounts who effected payments to MCA. Quelch also took issue with the assertion that MCA had warranted that Bodhanya would be an honest director of the appellants. He denied that MCA was under any duty to protect and preserve the assets of the appellants. Quelch stated that there was no basis for the statement that MCA was aware that Bodhanya made improper payments to himself out of the money belonging to the plaintiffs. Quelch asserted that there was no legal or factual basis for the allegation that MCA had converted funds belonging to the appellants to its own use. Further, it was stated that no factual or legal basis existed showing that MCA had breached any contract. It was pointed out that in respect to the breaches of which complaint was made i.e.. Bodhnaya dishonesty and MCA failure to supervise Bodhanya, there was no factual or legal basis to support the assertions. Quelch reached this conclusion on the basis that MCA had no authority to direct Bodhanya how to discharge his duties as a director of the appellants and consequently there was no duty to supervise him. Based on this affidavit, MCA asserted that the appellants’ claims against it did not disclose any reasonable cause of action and in the circumstances is frivolous and vexatious and amounted to an abuse of process of the Court and had no prospect of success. Consequently he said the action should be dismissed.

Affidavit in Opposition

13.          William Gregory, an attorney-at-law in practice in the state of Florida swore an affidavit in opposition to the strike out application. He pointed out that MCA designated Bodhanya “as its main point of contact in Grand Turk for the purposes of conducting its contractual relationship with the plaintiff’. A letter dated 1 July 1986, produced by Gregory, showed that Bodhanya was the then resident partner of Morris, Cottingham & Co., the predecessors of MCA. In this letter, Bodhanya writing on behalf of Morris, Cottingham & Co., informed Gregory that he had given instructions for the withdrawls which are detailed in that letter to be made from SSICH SWFC and DSBL. Gregory stated that this letter informed him of withdrawal that Bodhanya had already made of the account of SWFC, SSIC and DSB. Gregory proffered this letter as an example of the situation which existed whereby withdrawals to pay the fees and charges due to Morris, Cottingham & Co. were made by Morris Cottingham without prior reference to anyone. Gregory asserted that MCA and its predecessor provided the appellants with nominee shareholders, directors and essential corporate services including bank account and signatures on those accounts. He indicated that decisions, as to who of the employees of MCA were to be nominee shareholders directors and signatories on the bank accounts were made solely by MCA. In arriving at these decisions, no consultations were held by MCA with anyone. MCA appointed such persons to be nominee shareholders, or directors as it found convenient having regard to its own internal administration. He pointed out that in relation to Declaration of Trust in relation to the shares in SSIC, no specific instructions had been given for the shares to be held by Bodhanya or any other person. Reference was made to the historical Register of Members of SSIC and SWFC which showed that the holders of the shares in these companies included various corporate entities under the control of MCA all of whom were selected by MCA. In providing the services to the appellants, MCA charged and was paid fees. Gregory pointed to tire fact that MCA charged fees based on the time costs of its employees which, in some cases, were substantial e.g. in 1999 US$27,848.75 and in 1995, US$32,512.50. Reference was also made to an invoice dated 4 October 1993 on which is written a note which Gregory asserted was intended for Bodhanya. This note sought to ascertain from Bodhanya the source of tire figures stated in the invoice. In the reply which Gregory confirmed was written by Bodhanya, Bodhanya stated that the figure represents the sum which he considered that MCA could bill SWFC and be paid without any problem. Bodhanya went out to point out that those figures helped to counter the write offs that MCA incurred when dealing with other clients. Gregory expressed the view that this note “cast a dubious light on the honesty of Mr. Bodhanya’s invoicing on behalf of MCA.” Gregory insisted that the majority of his dealing were with Bodhanya who was the main point of contact with MCA being the person in charge of its office in Grand Turk as resident partner and then managing director. He produced a number of exhibits which were to show Bodhanya was accustomed to reporting on the stationery of MCA. Gregory reiterated that the appellants’ case against MCA was based on vicarious liability for the conduct of Bodhanya, breach of contractual duty of case to provide its services honestly and with due care and finally of knowingly assisted Bodhanya in his dishonest misappropriations.

Decision of the Chief Justice

14.          The Chief Justice accepted that “it is a very serious step to find against a party on paper without permitting him to advance his case at trial”. He reminded himself of the need for caution and that the court should not deny the appellants the right of a full hearing of their case unless it is satisfied that the case if tried as pleaded could not succeed. He pointed out that if “the Court was able to say with confidence that the factual basis for the claim was fanciful” in the sense that it was entirely without substance, then the court should strike out the pleading. He was applying the test laid down in Three Rivers District Council v. Bank of England [2001] 2 ALL ER 513.

15.          The Chief Justice determined that:

“…….this application hinges upon the capacity or capacities in which B was acting when he misappropriated the companies’ monies. If he was acting as a director of the companies, then he must have been in breach of his fiduciary duties owed to the plaintiffs as a director. This is precisely what has been alleged against him in paragraphs 7 and 13 of the statement of claim, in respect of which a default judgment has been entered, and I can therefore conclude for the purpose of this application an acceptance by the plaintiffs’ that he was so acting.”

16.          Having concluded that Bodhanya must have been in breach of his fiduciary duty which he owed to the appellants as director, the Chief Justice considered that the question which he was required to answer was if as alleged Bodhanya was acting in breach of his fiduciary duty, could his employer MCA be vicariously liable for his acts if those acts could also have been “performed in the course of his employment founding an alternative basis for vicariously liability, and an implied term to supervise”.

17.          The Chief Justice considered Paget-Brown & Company Limited v Ommi Securities Limited [1999] CILR 18 as authority for the proposition that when Bodhanya was acting as a director of the appellants, MCA was not vicariously liable for his actions. He accepted “that there is no evidence to contradict the documentary evidence which established that B was appointed as a director by the shareholders of the companies and the directors of the companies appointed him as a signatory of the accounts”. He indicated that even though MCA had nominated Bodhanya to be a director of the plaintiffs and may have received payment for Bodhanya carry out his task, he nonetheless did not consider that that gave rise to an implied term that MCA would supervise him when performing this task. The Chief Justice pointed out that he had accepted counsel’s submission that the personal duties owed by Badhanya were fiduciary duties as a director of the appellants and cannot at the same time be duties of an employee. He concluded that to hold other wise would be to fly in face of the decision in Paget-Brown’s case. He did not consider that in the circumstances the plaintiffs had any prospect of succeeding. He accordingly struck out the plaintiffs claim against MCA stating that he did not consider that he had any alternative on the law and on the facts and allegations as pleaded.

The Appeal

18.          The plaintiffs sought and obtained leave to appeal against the decision. The plaintiffs are seeking an order that the decision of the Chief Justice be set aside.

The Grounds of Appeal are:

(i)            The Learned Chief Justice erred in law and in fact in striking out the Appellants’ claim that the Respondent is vicariously liable for its employee, Mr. Bodhanya’s (a) breaches of fiduciary duty to the Appellants and (b) conversion of the Appellants’ property.

(ii)           The learned Chief Justice wrongly considered Paget-Brown and Company Ltd. v Omni Securities Ltd. [1999] CILR 184 an authority for his decision on vicarious liability. Paget-Brown was wrongly decided. Alternatively, if Paget-Brown was rightly decided:

(a)           It was distinguishable on the facts.

(b)           It was no authority against the Appellants’ claim that the Respondent was vicariously liable for Mr. Bodhanya’s conversion of the Appellants’ property.

(iii)          The learned Chief Justice wholly overlooked the Appellants’ claim that the Respondent was vicariously liable for Mr. Bodhanya’s conversion of the Appellants’ property. Alternatively, if he did consider it he erred in treating it as indistinguishable for the purposes of his decision from the claim in respect of Mr. Bodhanya’s breach of fiduciary duty.

(iv)          The learned Chief Justice misinterpreted the evidence in treating Mr. Bodhanya’s actions as actions performed by Mr. Bodhanya as a director of the Appellants.

(v)           The Learned Chief Justice considered that he was entitled to conclude that the Appellants accepted that Mr. Bodhanya was acting, when he misappropriated the Appellants’ property, as their director. The learned Judge had no grounds or entitlement to reach such a conclusion. The Appellants’ case, both as based in those acts being breaches of fiduciary duty and as based on those acts amounting to conversion, is and was to the contrary.

(vi)          The learned Chief Justice further erred in law and in fact in striking out the claim that the Respondent breached its contractual duties to the Appellants.

(vii)         The learned Chief Justice erred in finding that the term pleaded at paragraph 6.2 of the Statement of Claim to the effect that the Respondent would provide its services honestly could not be implied into the contracts between the Respondent and the Appellants. He further erred in not considering that the issue of the existence of such a term should at least proceed to trial. Contrary to paragraph 10 of the Judgment, Morris v. C.W. Martin and Sons [1965] 2 All ER 725 provides no support for the learned Judge’s findings in this respect.

(viii)        Contrary to paragraph 10 of the Judgment the Appellants made no concession in relation to the implied term issue addressed in the preceding Ground (vii). Alternatively, if any such concession was made, the Appellants will seek on appeal to withdraw it to the extent that it may have contributed to the error there set out.

(ix)          The learned Chief Justice erred in considering as part of the Appellants’ case that there was a specific duty on the Respondent to monitor Mr. Bodhanya.

(x)           It was the Appellants’ case that there was a contractual duty on the Respondent to provide its services with due care and to protect and preserve each respective Appellant’s assets (Statement of Claim paragraph 6.2). The Respondent moreover admitted that it owed a contractual duty to use reasonable care in the provision of services to the Appellants. The learned Chief Justice failed to consider whether the admitted failure by the Respondent to monitor or in any way supervise Mr. Bodhanya amounted to a breach of the contractual duty of care alleged by the Appellants or of the duty admitted by the Respondent. Alternatively, if the learned Chief Justice did consider that question, he erred in concluding that it did not amount to such a breach and that the issue as to whether it did ought not at least proceed to trial. On the evidence such a conclusion was not open to him.

(xi)          The learned Chief Justice erred in interpreting Paget-Brown as authority for the existence or not of any relevant contractual duty on the part of the Respondent, let alone for the existence of a duty of care as alleged by the Appellants. Paget-Brown is to the extent of this issue a decision on a pleading point relating to its own facts and has no bearing on the different pleadings and different facts in this case.

(xii)         The learned Chief Justice further erred in law in striking out the Appellants’ claim that the Respondent knowingly assisted in Mr. Bodhanya’s misappropriation of the Appellants’ assets.

(xiii)        Contrary to paragraph 10 of the Judgment the Appellants made no concession in relation to the knowing assistance claim save to the extent that it was not part of their pleaded case that any individual at the Respondent other than Mr. Bodhanya was dishonest. Alternatively, if any such concession was made, the Appellants will seek on appeal to withdraw it to the extent that it may have contributed to the error set out at Ground (xii).

(xiv)        Alternatively the learned Chief Justice erred in not giving the Appellants an opportunity to investigate the evidence that came to light shortly prior to the hearing suggesting that an individual other than Mr. Bodhanya within the Respondents organization knew or had turned a blind eye to Mr. Bodhanya willfully overcharging the Appellants and, if thought appropriate, to amend the Statement of Claim to plead the same.

In essence the appeal raises three issues viz:

(i)            is MCA vicariously liable for the wrongful conduct of Bodhanya committed by him (a) when he breached his duty as a director in dishonestly misappropriating the assets of the appellants and (b) in converting the property and money of the appellants?

(ii)           is MCA liable to the appellants for breach of its contractual duty to provide its agreed services honestly and with due care?

(iii)          did MCA knowingly assist Bodhany in dishonestly misappropriating the appellants’ assets.

19.          Before embarking on an analysis of these issues it is necessary to examine the circumstances under which a court is entitled to strike out an action under Order 18 rule 19 and the inherent jurisdiction of the Court.

20.          Order 18 Rule 19 of the Rules of Supreme Court 2000 provides as follows:

(1) The Court may at any stage of the proceedings order to be struck out or amended any pleading or the endorsement of any writ in the action, or anything in any pleading or in the endorsement, on the ground that:

(a)           it discloses no reasonable cause of action or defence, as the case may be; or

(b)           it is scandalous, frivolous or vexatious; or

(c)           it may prejudice, embarrass or delay the fair trial of the action; or

(d)           it is otherwise an abuse of the process of the Court and may order the action be stayed or dismissed or judgment to be entered according as the case may be.

(2) No evidence shall be admissible on an application under paragraph (1) (a).

21.          The circumstances under which a court is entitled to exercise the power under Order 18 Rule 19 recently engaged the attention of the House of Lords in Three Rivers District Council v. Bank of England [2003] 2AC1. In his judgment Lord Hutton said at paragraph 117:

“117 The 1999, White Book stated at 18/19/10 with reference to r 19 (1)(a)

“A reasonable cause of action means a course of action with some chance of success when only the allegations in the pleading are considered (per Lord Pearson in Drummond-Jackson v British Medical Association [1970] 1 WLR 688, [1970] 1 ALL ER 1094 CA). So long as the statement of claim or the particulars (Davey v Bentick [1893] 1 QB 185) disclose some cause of action or raise some question fit to be decided by a judge or jury, the mere fact that the case is weak and not likely to succeed, is no ground for striking it out (Moore v Lawson [1915] 31 TLR 418, CA, Wenlock v Moloney [1965] 1 WLR 1238; [1965] 2 ALL ER 871, CA)...”

Therefore if a plaintiff would be entitled to judgment if he were successful in proving the matters alleged in his pleadings, the statement of claim could not be struck out under rule 19(1)(a) on the ground that he had no prospect of adducing evidence to prove the matter which he alleged. If a defendant wished to strike out a statement of claim and to obtain an order for the dismissal of the action on the ground that the plaintiff had no prospect of proving the case which he alleged in his statement of claim he had to do so under rule 19(1) (b) and/or (d).”

22.          In deciding the issue whether the pleadings disclose a reasonable cause of action under Order 18 Rule 19(1) (a), the Court is not entitled to consider any of the affidavits filed either in support of or in opposition to the application. The court is required to look at the pleadings as they stand and to decide whether the pleadings disclose a reasonable cause of action in the sense that it has some chance of success. Even though the cause of action may appear to be weak and unlikely to succeed this does not entitle the court to strike out the pleading. If at a trial, the plaintiff were to prove the allegations contained in statement of claim and judgment would be entered on behalf, then the court is not entitled to strike out the claim under Rule 19(1) (a).

23.          Different considerations apply where the application to strike out is made under the provisions of Rule 19(1)(b) and/or (d). Where an application is made to strike out the writ and statement of claim on the ground that it is an abuse of process of the court under rule 19(1) (d) or under the inherent jurisdiction of the court, evidence is admissible. See McDonald Corporation & Another v Steel & Another [1995] 3 ALL ER 615. In those circumstances the court is entitled to look at all the affidavits filed on behalf of the parties. However the court should be mindful that it is not entitled to embark on “a minute and protracted examination of documents.”

24.          In Wenlock v Moloney [1965] 1 WLR 1238 Dankwerts LJ in dealing with the inherent power of the Court to strike out, said at p 1244 B.C.:

“But this summary jurisdiction of the court was never intended to be exercised by a minute and protracted examination of the documents and facts of the case, in order to see whether the plaintiff really has a cause of action. To do that is to usurp the position of the trial judge, and to produce a trial of the case in chambers, in affidavits only, with discovery and without oral evidence tested by cross-examination in the ordinary way. This seems to me to be an abuse of the inherent power of the court and not a proper exercise of that power.”

25.          In Williams & Humbert Ltd. v. W & H Trade Marks (Jersey) Ltd. [1986] AC 368 at p. 435, Lord Templeman stated the general rule in this way:

“My Lords, if an application to strike out involved a prolonged and serious argument, the judge should, as a general rule, decline to proceed the argument unless he not only harbors doubts about the soundness of the pleadings but, in addition, is satisfied that the striking out will obviate the necessity for a trial or the burden of preparing for trial or the burden of the trial itself.”

26.          In dealing with this appeal, it will be necessary to consider the application of the law stated above to the appellants claims as set out in their statement of claim. The appellants claim against MCA equitable compensation and/or damages based on (a) the breach of Bodhanya’s fiduciary duty and (b) conversion of the plaintiffs’ assets and (c) breach of contract and (d) knowingly assisted in the dishonest misappropriate of the plaintiffs’ assets by Bodhanya.

Vicarious Liability

27.          Vicarious liability arises under the pleadings in respect of the breach of fiduciary duty by Bodhanya in the performances of his duties as director of the appellants. The allegations are, that in the performance of the duties owed to the appellants, Bodhanya was acting as an employee of MCA and therefore MCA was vicariously liable for the breach by him of his fiduciary duties.

28.          Fiduciary duties are owed by a director to the company. These duties are owed personally by him. In the performance of these duties, he is not subject to the direction or control of any other person. As a director, he is trustee for the company and, to that extent, owes a fiduciary duty.

29.          In Kuwait Bank v National Nominees Ltd. [1991] 1 AC 187 the statement of claim alleged that Kuwait Bank was liable to contribute to the loss suffered by National Nominees Ltd. in settling the claims of depositor. The plaintiff based its case on the following ground: (1) that the directors, House and August who were appointed to the Board of Directors of a company called AICS by the bank, were employees of the bank and carried out their duties as directors in the course of their employment by the bank; (2) House and August were, as directors of AICS, the agents of the bank which was the principal. The two other grounds against the bank are not relevant to this case.

30.          Lord Lowry, in delivering the judgment of the Privy Council, pointed out that it did “not make any difference if the directors appointed by a shareholder arc employed by the shareholder and are allowed to carry out their duties as directors while in the shareholders employment”. His Lordship identified three separate duties as being owed by House and August. His Lordship stated at p. 221:

“They owed in the first place to AICS the duty to perform their duties as director without gross negligence. They owed a duty to the plaintiff to use reasonable care to sec that the certificates complied with the requirements of the trust deed. Finally, they owed a duty to their employer the bank, to exercise reasonable diligence and skill in the performance of their duties as directors of AICS.

If House and August did not exercise reasonable care to see that the quarterly certificate were accurate, they committed a breach of the duty they owed to the plaintiff and may have committed a breach of the duty they owed to AICS and a breach of the duty they owed to the bank to exercise reasonable diligence and skill. But these duties were separate and distinct and different in scope and nature. The bank was not responsible for a breach of the duties owed by House and August to AICS or to the plaintiff any more than AICS or the plaintiffs were responsible for a breach of duty by House and August.”

Lord Lowny went on to point out that if House and August had committed any breach of duty imposed on them as directors of AICS they did so as individuals and directors of AICS and not as employees of the bank. His Lordship concluded that:

“In the performance of their duties as directors and in the performance of their duties imposed by the trust deed, House and August were bound to ignore the interest and wishes of their employer, the bank.”

31.          In Paget Brown & Co. Ltd. v. Omni Securities Limited [1999] CILR 194, the appellant offered the respondent an overseas company certain corporate services including the provision of a registered office, to act as company secretary and the provisions of a person to act as company director. Following the winding up of the respondent, the liquidators issued proceedings in respect of a transaction which had taken place prior to the resignation of the director. The statement of claim alleged, that appellant had been negligent in failing to exercise reasonable skill and care monitoring the performance if its employee. An application by the appellant to strike the proceedings was dismissed by the Grand Court. On appeal the appellant submitted that the director had not acted in his capacity as an employee of the appellant but as agent for the respondent. The Court adopted the reasoning of the Privy Council in Kuwait Asia Bank EC v National Mutual Life Nominee Ltd. [1991] 1 AC 187. In delivering the judgment of the court Zacca P said at p. 193:

“We can see no reason for distinguishing the Kuwait case from the present one Mr. Coleman was nominated by the appellant. He was appointed a director by the shareholders of the respondent and could have been removed by the shareholders. He was answerable to the respondent and its shareholders. There was no control by the appellant over Mr. Coleman’s performance. The respondent has not pleaded bad faith or fraud on the part of the appellant. The pleading did not disclose that any instructions or direction were given to Mr. Coleman by the appellant in the performance of his dudes or that any interference with his activities occurred. The appellant would owe no duty of care to the respondent unless it interfered with the affairs of the respondent. The acts or omissions of Mr. Coleman arc acts or omissions in his individual capacity as a director of the respondent. They are not acts or omissions by him as an employee of the appellant. It is our view that the appellant, in the circumstances of the present case, owed no duty of care to the respondent. The appellant cannot be held to be vicariously liable to the respondent.”

Zacca P went on to point out that the fact that the appellant had offered management services did not, in the opinion of the court, affect the legal principal as set out in the Kuwait case. The President concluded that no personal duty of care was owed by the appellant to the respondent to monitor the conduct of Mr. Coleman as director of the respondent.

32.          It is alleged in paragraph 7 of the statement of claim that Bodhanya, being a director of the appellants owed each of them fiduciary duties. These duties, it is stated, included inter alia to act only in the company’s interest, to use the company’s assets only for the company’s purposes and not to make any secret profits. Bodhanya owed fiduciary duties to each of the appellants. He owed these duties personally and not in his capacity as an employee of MCA.

33.          In my view, the appellants allegation that MCA is vicariously liable to the appellants in respect of the breach of the fiduciary duties owed by Bodhanya to the appellants, cannot in law be maintained. As stated earlier these duties were owed by him personally and not as servants or agents of MCA. MCA could not in law have any vicarious liability in respect of Bodhanya in so far as his fiduciary duties which he owed personally to the appellants. To the extent that the Chief Justice held that when Bodhanya was acting as a director of the appellants, no vicarious liability could be attached to MCA. However the claim by the appellants that MCA is vicariously liable for the breach of fiduciary duties by Bodhanya is only one aspect of the plaintiffs claim against MCA.

34.          It is clear from the reasoning of Lord Lowry that an employee such as Bodhanya may owe different duties to his employer and the company for which he had been designated to act as a director. I now turn to consider the appellants’ claim that MCA is vicariously liable to the appellants’ for the conversion by Bodhanya of the appellants’ assets. The issue that arises on the pleading is whether, in law, MCA could be vicariously liable for the deliberate dishonesty of Bodhanya. In considering that matter it is necessary to review a number of cases dealing with vicarious liability for intentional wrong.

35.          I accept that Paget-Brown’s case was correctly determined by the Court of Appeal of the Cayman Islands. I endorse and accept the reasoning of the Court.

36.          In Morris v C W Martin & Sons Ltd. [1965] 2 All ER 725, woman delivered her mink to the defendants to have it cleaned. An employee who took charge of the mink stole it. Diplock L J in delivering judgment in the Court of Appeal said at p. 738:

“If the principle laid down in Lloyd v Grace, Smith & Co. [1912] AC 716 is applied to the facts of the present case, the defendants cannot in my view escape liability for the conversion of the plaintiff's fur by their servant Morrissey. They accepted the fur as bailee for reward in order to clean it. They put Morrissey as their agent in their place to clean the fur and to take charge of it while doing so. The manner in which he concluded himself in doing that work was to convert it. What he was doing albeit dishonestly, he was doing in the scope of his employment is the technical sense of that infelicitous but time-honored phrase. The defendants as his masters are responsible for his tortuous acts.”

Salmon L. J, in agreeing with Lord Denning MR and Diplock L.J that the appeal should be dismissed pointed out that he was anxious to make it plain that the conclusion which he reached depended on Morrissey being the servant through whom the defendants chose to discharge their duty to take reasonable care of the plaintiff's fur.

37.          In Lister v Hesley Hall Ltd. [2002] 1 AC 215 Lord Steyn expressed the view that the “law no longer struggles with the concept of vicarious liability for intentional wrong doing”. His Lordship referred to the decision of the House of Lords in Raez v Home Office [1994] 2AC 45 as authority for the proposition, that an employee may be vicariously liable for the tort involving bad faith which has been committed by his employee.

38.          In delivering his judgment in Lister’s case, Lord Hobhouse of Woodborough referring to the duty of employers in certain circumstances at paragraph 55 said:

“55 If they (the employers) entrust the performance of that duty to an employee and that employee fails to perform the duty, they are still liable. The employee, because he has, through his obligations to his employers, adopted the same relationship towards and comes under the same duties to the plaintiff, is also liable to the Plaintiff, for his own breach of duty. The liability of the employers is a vicarious liability the actual breach of duty is that of the employee. The employee is a tort feasor. The employers are liable for the employee’s tortuous act or omission because it is to him that the employers have entrusted the performance of their duty. The employers’ liability to the plaintiff is also that of a tort feasor. The liability of the employers derives from their voluntary assumption of the relationship toward the plaintiff and the duties that arise from that relationship and choosing to entrust the performance of those duties to their servant. Where these conditions are satisfied, the motive of the employee and the fact that he is doing something expressly forbidden and is serving only own ends does not negative the vicarious liability for his breach of the “delegated” duty.”

Lord Hobhouse concluded at paragraph 60:

“…….the correct approach to answering the question whether the tortious act of the servant falls within or without the scope of the servant’s employment for the purposes of the principle of vicarious liability is to ask what was the duty of the servant toward the plaintiff which was broken by the servant and what was the contractual duty of the servant towards his employer.”

39.          Lord Millet considered that “attention should be directed to the closeness of the connection between the employee’s duties and his wrong doing”. His Lordship relied on a passage from Salmond, Law of Torts 1st Ed. [1907] at pp. 83-84 where it is stated:

“But a master, as opposed to the employer of an independent contractor, is liable even for acts which he has not authorized, provided they are so connected with acts which he has authorized, that they may rightly be regarded as modes — although improper modes — of doing them.”

His Lordship went on to indicate that vicarious liability could be imposed:

“Where the unauthorized act of the employee are so connected with the acts which the employer has authorized that they may be considered within the scope of his employment.”

40.          Lord Millet pointed out at paragraph 79:

“79 So it is no answer to say that the employee was guilty of intentional wrong doing or that his act was not merely tortuous but criminal, or that he was acting exclusively for his own benefit, or that he was acting contrary to express instructions, or that his conduct was the very negation of his employer’s duty. The cases show that where an employer undertakes the care of a client’s property and entrust the task to an employee who steals the property, the employer is vicariously liable. This is in accordance not only with principle but with the underlying rationale of Atiyah has correctly identified it. Experience shows that the risk of theft by an employee is inherent in a business which involves entrusting the custody of a customer’s property to employees. But the theft must be committed by the very employee to whom the custody of the property is entrusted. He does more than make the most of an opportunity presented by the fact of his employment. He takes advantage of his position in which the employer has placed him to enable the purposes of the employer’s to be achieved.”

41.          The issue of vicarious liability again engaged the attention of the House of Lords in Dubai Aluminum Co. Ltd. v Saloam [2003] 2AC 366. Lord Nicholls of Burkenhead expressed the view at paragraph 21:

“Whether an act or omission was done in the ordinary course of a firm’s business cannot be decided simply by considering whether the partner was authorised by his co-partner to do the very act he did. The reason for this has in the legal policy underlying vicarious liability. The underlying legal policy is based on the recognition that carrying on a business enterprise necessarily involves risk to others. It involves the risk that others will be harmed by wrongful acts committed by the agents through whom the business is carried on. When those risks ripen into loss, it is just that the business should be responsible for compensating the person who has been wronged.”

Lord Nicholls in supporting the judgment of Lord Millet in Lister’s case adopted tire test that the wrongful conduct must be so closely connected with the acts which tire person was authorised to perform, that the wrongful conduct may fairly and properly be regarded as being done by the employee while acting in the ordinary course of the employee’s employment.

42.          Lord Millet, in reiterating the “closeness of connection test” said at paragraph 129 of his judgment:

“An employer has been held to be vicariously liable for the intentional wrong doing of his employee in a wide variety of different circumstances. In some of the cases the employer has undertaken a duty towards the plaintiff and then delegated the performance of that duty to his employee. Morris v. C W Martin & Sons Ltd. [1966] 1QB 716; Photo Production Ltd. v. Securicor Transport Ltd. [1980] AC 827; Lister v Hesley Hall Ltd. [2002] 1AC 215. The decisive factor in Lloyd v Grace Smith & Co. [1912] AC 716 was that the employee who committed the fraud for his own benefit was the person to whom his employer invited the client to entrust her affairs. In all those cases the plaintiff was a client or customer of the employer. But that is not essential. It was not the case in Hamlyn v. John Houston & Co. [1903] 1 KB 81. The decisive feature in that case was that, in paying the bride, the partner was merely using an improper means of obtaining information for his firm which it was his job to obtain. But the circumstances in which an employee may be vicariously liable for his employee’s intentional misconduct arc not closed.

All depends on the closeness of the correction between the duties which, in broad terms, the employee was engaged to perform and his wrong doing.”

43.          Under the contracts between the appellants and MCA for corporate management, MCA was required to perform inter alia the services of directors and corporate secretary, debiting the appellants’ bank account with periodic charges for its fees. The appellants alleged that in performing its corporate management services, MCA agreed to provide such services honestly and with due care in particularly to protect and preserve the assets of each of the plaintiffs. That this duty existed is conceded by the attorneys-at-law for MCA in a letter dated 7 February 2005 to the attorney-at-law of the appellants in which it is stated that MCA accepted that it owed the plaintiffs a contractual duty to use reasonable care in the provision of those services. It was further accepted that the scope of that “duty extended to taking reasonable steps to ensure MCA employed honest, reliable and competent staff to provide the services”. MCA went on to point out that there was nothing to show that Bodhanya was dishonest or from which they could infer that he was dishonest.

44.          In his affidavit William Gregory stated that MCA provided the appellants with nominee shareholders, directors and essential corporate services. Question as to who would be signatories to the bank accounts and, how many, were determined solely by MCA without consultation with the appellants. It is significant that MCA had appointed and nominated Bodhanya to be a shareholder and director of the various companies. Bodhanya became the Managing Director of MCA and, as such, was the person whom MCA entrusted to look after the affairs of the appellants’. The invoices showed that MCA charged the appellants for “time costs”. However no particulars have been supplied to show the exact nature of the services for which MCA was performing for the appellant and for which MCA was billing. Nor did the invoice specified which of the employees of MCA spent time performing these unspecified functions for tire appellants. It should be noted that the item “time costs” is separate from charges made for providing directors.

45.          It will be necessary to determine whether any duty was owed by MCA to the appellants and, if so, the nature and extent of that duty. Was that duty breached in such a way that would give rise to tortious liability on the part of MCA? Did Bodhanya in any way commit any tort against the appellants? If Bodhanya did commit a tort, did it give rise to any vicarious liability on the part of MCA? In considering the issue of vicarious liability it will be necessary to decide whether what Bodhanya did was a “wrongful and unauthorized mode of doing” what he was authorised by MCA to perform; was the wrongful conduct of Bodhanya so closely connected with the acts which Bodhanya was authorised to perform? Was the wrongful conduct of Bodhanya fairly and properly as being done by Bodhanya while acting in the ordinary course of MCA business? MCA asserted that Bodhanya dishonesty was limited to withdrawal of funds from the appellants bank account. Were these acts of dishonesty closely connected to the acts which Bodhanya were lawfully authorised to perform? The duty would be separate and distinct from the fiduciary duty owed by Bodhanya to the appellants.

46.          These are all issues which will have to be determined in seeking to ascertain whether MCA is vicariously liable for the conduct of Bodhanya in respect of the allegations that he dishonestly misappropriated the assets of the appellants. These are issues to be determined by a judge after a trial in which the appellants have had the opportunity to inspect documents serve interrogatories and to lead viva voce evidence. It is not for this Court to determine whether MCA is in fact vicariously liable for the tortious conduct of Bodhanya.

47.          Having regard to the tesl laid down in the Three Rivers case, I am of the view that it is not possible to say at this stage without “a minute and protracted examination” of the documents tendered, and before full discovery, that the allegation that MCA is vicariously liable for the dishonest misappropriation of the assets of the plaintiffs is incapable of being proved at a full hearing of this matter. I am mindful that it is an extremely serious step for a court to take to deprive any litigant the opportunity of presenting his case for a full trial even though the defendants take the view that the plaintiff's case is weak. I am of the view that there are issues which are fit for a trial by a judge.

Breach of Contract

48.          The appellants allege that MCA agreed with the appellants to provide corporate management services including the services of directors and company secretary. The appellants alleged that the corporate management services would be provided honestly and with due care. In the provisions of these services, MCA was required to take due care and protect and preserve the assets of the appellants. MCA did not challenge the allegation of the existence of a contractual duty to use reasonable care in providing the services. In deed, this is conceded by MCA which accepted that the scope of that duty extended to taking reasonable steps to ensure that MCA engaged honest reliable and competent staff to perform the services to the appellants. MCA stated that Bodhanya dishonesty in mis- appropriating the assets of the appellants was limited to the withdrawal of funds from the appellants bank accounts which MCA alleged he did as a director of the appellants and not as its employee. MCA denied that it breached its contractual duty to the appellants. The appellants also alleged that MCA failed sufficiently or at all to supervise the activities of Bodhanya. The appellants stated that MCA was expected to provide its services honestly. Bodhanya was resident partner and managing director of MCA and, it would appear, was responsible for its office in Turks and Caicos. MCA has pointed out that the appellants did not complain about any lack of competence on the part of Bodhanya. In addition, MCA stated that no complaint had been made that it was guilty of any dishonesty or lack of care in the provision of the administrative and accounting or other services. Complaint, it is said, is limited to Bodhanya’s dishonesty in withdrawing funds from the bank accounts of the appellants. MCA however denied that it had any duty to supervise Bodhanya after he was appointed director of the appellants and, as such, owed a fiduciary duty to them and was not subject to the terms of any contract between the appellants and MCA. It is of note that the director’s fees, such as they were, were billed for by MCA and paid to MCA and not to Bodhanya personally. An example of this is to be found in invoice dated 16 December 1992 sent by MCA to SSIC. A fee of $500 is charged for the provision of a resident representative and $1000 for directors fees. This invoice showed Bodhanya as the Managing Director. In an invoice dated 7 June, MCA billed SSIV for the sum of $27,848.76 “per time costs for the year ended 31 December 1992”. No particulars are supplied in respect of this claim e.g. time spent by whom, what services were provided. Disbursements of $10,117.20 arc also claimed in that invoice. In the invoice dated 1 July 1996 to SSIC, MCA indicated that the “Time costs for the year ended 31 December 1995” was $32,512.50. Again, no particulars have been supplied. In its invoice dated 2 November 1995, MCA invoiced SWFC for $11,492.50 for “Time costs for the period 1 January 1995 — 30 September 1995”. Why was MCA billing the plaintiffs for “time costs”? What services were being performed? Why was MCA billing for directors fees? Why was MCA invoicing for directors fees and not Bodhanya? Why were the fees paid to MCA and not Bodhanya? What was the basis of the billing for directors fees? Were these fees and charges being paid pursuant to an agreement? Who were the parties to any such agreement? What was the nature and extent of the agreements? In particular, what was the basis of the agreement by which MCA was charging the plaintiff time costs? To answer these questions all parties would no doubt wish to lead additional evidence.

49.          It has been alleged that MCA had agreed to provide corporate management services to the appellants and to provide them honesty with due care. It has been conceded that MCA had to use reasonable care in the provision of such services. MCA has accepted that it was under a duty to take reasonable steps to ensure that MCA provided honest, reliable and competent staff while providing those services to the plaintiff. When Bodhanya dishonestly misappropriated the appellants’ assets was he at that stage performing his duty as an employee of MCA for which MCA charged and recovered money from the appellants on a “Time Costs” basis or was he performing his fiduciary duties. Again this question can only be answered after all parties have been given an opportunity to call on additional evidence.

50.          MCA submitted that if the case of Paget-Brown was rightly decided then MCA was not under any duty to monitor or supervise Bodhanya in his capacity as a director of the plaintiff. This may very well be correct. But it is no answer to tire allegations which have been made under this head. The invoices from MCA charged the appellant separately for the provision of directors which was a nominal fee and then for “time costs”. Did Bodhanya perform any of the time costs services on behalf of MCA and if so what were they? In relation to the allegation of a duty to protect preserve assets, MCA submitted that this allegation sought to elevate MCA to the position of a trustee which it was not. MCA pointed out that it never had any of the plaintiffs’ assets under its control. MCA alleged that the appellants have not pleaded any facts which would indicate that MCA knew or ought to have known that Bodhanya may be dishonest or that MCA undertook any special obligation as to how Bodhanya would exercise his position as director. The appellants alleged that, in providing the corporate management services honestly and with due care MCA was required to take due care, and to protect and preserve the appellants assets. The appellants submitted that they are not suggesting that MCA was like a trustee under an absolute obligation to protect and preserve their assets. They contend that the allegation is part of the general contractual duty of care to act with care and in so acting to protect and preserve the appellant assets.

51.          It is not for this Court to embark on a minute and protracted examination of all the relevant documents to ascertain whether or not in the circumstances any duty was owed by MCA to the appellants when Bodhanya dishonestly misappropriated the assets of the plaintiffs. The issues raised above including the circumstances relating to the items set out in the invoice are matters which require further investigation and ought to be determined by a judge at trial after discovery, interrogatories of full discovery and production and examination of all documents.

Knowing Assistance

52.          In paragraph 16.3 of the statement of claim, the appellants alleged that MCA knowingly assisted Bodhanya in his dishonest misappropriation of company assets. In its defence, MCA denied the allegation.

53.          The appellants submitted that, if the company law did not afford the appellants a claim, they would have to resort to equity. Bodhanya was the managing director of MCA in Turks & Caicos and for the purpose of this case the directing mind of MCA and, in the circumstances, they submitted equity should grant them a remedy.

54.          The appellants submitted that Bodhanya used his position within MCA’s organization and its facilities in the course of the fraud which he carried out against the appellants. They alleged that these facilities were provided by MCA in the knowledge that he was using them for his fraud. Reference is made to his conduct of the appellants’ affairs which showed his dishonesty. The appellants relied on an invoice dated 4 October 1993 which is exhibited to Gregory’s affidavit. Reference was earlier made to this invoice. This invoice is for US$5,732.46 for “time costs” due from SWFC for the period 1 January to 30 June 1993. A hand written notation is on this invoice. It is addressed to “Reg” a name by which Bodhanya is known. The writer is seeking to find out from Reg the source of the figures on the invoice. Bodhanya replied to the author of the note, one Jean Smith, stating “Jean, this is what I think could have been billed and received without any problem. Occasionally this situation helps to counter the write offs that we incur on other clients.” It is submitted that this exchange cast doubt on the honesty of invoicing by Bodhanya as far back as 1993. The appellant further submitted that this exchange showed that at least one other employee of MCA was privy to the method of billing by Bodhanya. It is from this that the Court is invited to say that MCA knew or ought to have known of the dishonest conduct of Bodhanya in so far as it relates to the affairs of the plaintiff. There is no evidence as to the position held by Jean Smith at MCA.

55.          MCA submitted that in order to succeed on its claim, the plaintiffs would have to show that MCA through one of its employees, other than Bodhanya gave material assistance to Bodhanya in breaching of his fiduciary duties and that the assistance was given dishonestly. Then stated that no facts were pleaded to show that such assistance was given. The appellants were requested to supply MCA with particulars showing the manner in which

MCA assisted Bodhanya. In their Reply to Request for Further and Better Particulars, they stated that MCA “in the person of its senior employees and director, Mr. Bodhanya, assisted in the dishonest misappropriation……..” Counsel for MCA submitted that this is an absurdity.

MCA pointed out that the alleged overcharging is not part of the plaintiffs claim and has no causal connection with the claim for misappropriation of assets.

56.          The requirements for the cause of action of knowing assistance were set out in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 in a speech of Lord Nicholls at p. 387 (I) - (F):

“Within defined limits proprietary rights, whether legal or equitable, ensure against third parties who were unaware of their existence. But accessory liability is concerned with the liability of a person who has not received any property. His liability is not property bases. His only sin is that he interfered with the dues performance by the trustee of the fiduciary obligations undertaken by the trustee. These arc personal obligations. They are, in this respect, analogous to the personal obligations undertaken by the parties to the contract. But ordinary, everyday business would become impossible if third parties were to be held liable for unknowingly interfering in the due performance of such personal obligations. Beneficiaries could not reasonably expect that third parties should deal with trustees at their peril, to the extent that they should become liable to the beneficiaries even when they received no trust property and even when the were unaware and had no reason to suppose that they were dealing with trustees.”

It is the dishonest assistance that gives rise to a cause of action. It will be necessary7 to show that the person assisting was acting dishonestly.

57.          While it may be correct that no causal connection with the claim for misappropriation it is certainly open to the appellants to argue that the conduct of Bodhanya which is evidenced by his response to Jean Smith, is such that ought to have made MCA aware that Bodhanya was less than straight forward in his dealing with the appellants. I say open to argument because it is not for this Court to determine whether that alone was sufficient. That is the responsibility of the judge before whom the trial is to take place.

58.          The gist of the complaint of knowingly assisted Bodhanya in his dishonesty is that MCA acting through its residence partner and managing director Bodhanya assisted Bodhanya to breach his fiduciary duties which he owed personally to the appellants. Counsel for the respondents submitted that this was an absurdity. That may very well be true but it is an absurdity which the law may recognizes. It must be remembered that Bodhanya owed a fiduciary duty to the company and that this was a personal duty. This does not and cannot mean that he does not owe any other duty to any other person. Certainly as the resident partner and managing director of MCA he owed a duty. The issue which will have to be determined at trial is whether acting as an employee of MCA and having regard to the duty owed to his employer he breached that duty and assisted the director of the company to breach his fiduciary duty which he owed to the appellants. As stated earlier it is for the judge at trial to decide whether the law does in fact recognize “this absurdity”.

Disposal of the Appeal

59.          For the reasons stated above I am of the view that there is a case fit for trial before a judge. I consider that a reasonable cause of action has been disclosed and that the proceedings do not amount to an abuse of process of the Court. I make no comment on the strength or weakness of the case as it is not required. However, I would say that I am not satisfied that the appellants have no prospect of succeeding at trial. In the circumstances I would allow the appeal and restore the cause of action. The order of the Chief Justice is discharged. The appellants arc therefore entitled to their costs of the appeal and in the court below.

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Mottley J.A

I agree.

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Zacca P.

I agree

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Ground J.A.