Conticorp SA & Ors v. The Central Bank of Ecuador & Ors (The Bahamas ) [2007] UKPC 40 (20 June 2007)

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1 Conticorp SA & Ors v. The Central Bank of Ecuador & Ors (The Bahamas ) [2007] UKPC 40 (20 June 2007) Privy Council Appeal No 43 of 2006 (1) Conticorp S.A. (2) Leonidas Ortega Trujillo (3) Luis A. Ortega (4) Jaime Ortega Appellants v. (1) The Central Bank of Ecuador (2) Banco Continental S.A. (3) Banco Continental Overseas N.V. (4) Interamerican Asset Management Fund Limited Respondents FROM THE COURT OF APPEAL OF THE BAHAMAS JUDGMENT OF THE LORDS OF THE JUDICIAL COMMITTEE OF THE PRIVY COUNCIL Delivered the 20th June Present at the hearing:- Lord Hoffmann Lord Hope of Craighead Lord Scott of Foscote Lord Neuberger of Abbotsbury Sir Paul Kennedy [Delivered by Lord Neuberger of Abbotsbury] 1. This is an appeal brought by four defendants ("the appellants") against a decision of the Court of Appeal of the Bahamas (Rt Hon. Mrs Justice Sawyer, P, Hon. Mr Justice Churaman, J A and Hon Mr Justice Ganpatsingh, J A) on an appeal from Hon Mr Justice Lyons: a. dismissing the appellants' appeal against the Judge's refusal to strike out these proceedings for want of prosecution; b. dismissing the appellants' appeal against the Judge's refusal to strike out any part of the reamended statement of claim on the ground that there was no properly pleaded course of action; and c. allowing the plaintiffs' appeal against the Judge's refusal to permit them to re-re-amend the statement claim in the light of the expiry of the relevant limitation period. The parties and the basic facts 2. The plaintiffs in these proceedings, who are the respondents to this appeal, are (1) the Central Bank of Ecuador ("Central Bank"), (2) a company now called Banco Del Pacifico (but at the time relevant to these proceedings called "Banco Continental"), (3) Banco Continental Overseas NV ("BCO"), and (4) Interamerican Asset Management Fund Ltd ("IAMF"). The first two defendants, Ansbacher (Bahamas) Ltd ("Ansbachers") and Lex Holdings Ltd ("Lex") were parties to the instant applications before the Judge and in the Court of Appeal, but they played no part in this appeal save to instruct counsel to appear on a watching brief. The remaining defendants, who are the appellants in this appeal, are three members of a well known Ecuadorian family, Leonidas Ortega Trujillo, Luis Ortega and Jaime Ortega ("the Ortegas"), and a company they have at all times owned and controlled, Conticorp SA ("Conticorp"). 3. Banco Continental is an Ecuadorian bank, which until March 1996 was controlled and 75% owned by a company called Grupo Financiero Conticorp SA ("GFC"), which itself was wholly owned and controlled by the Ortegas. BCO was Banco Continental's Curacao subsidiary, and it effectively

2 controlled IAMF, a Bahamas mutual fund. Lex is another company which was at all material times controlled by the Ortegas. Ansbachers provided financial services to Banco Continental and BCO until March In 1995, Banco Continental started suffering from liquidity problems, and, in March 1996, it was rescued with the assistance of a loan of US $150 million from Central Bank. Banco Continental thereby came under the control of Central Bank, which then discovered the facts that give rise to these proceedings. 5. In very summary terms, the plaintiffs' substantive case against the appellants is as follows. Up to 1994, Banco Continental channelled much of its lending through BCO, and a large proportion of this lending was to members of the Ortega family or to individuals and companies connected with the Ortega family, including Conticorp. Thereafter, BCO assigned its portfolio of loans ("the loans"), via a Bahamian company, to IAMF. Around the end of 1995, Conticorp reached an agreement with IAMF whereby the loans would be assigned to Conticorp in return for "Global Depositary Receipts" ("GDRs") which effectively represented shares in GFC, which, as mentioned, was an Ortega company which owned 75% of Banco Continental. By this transaction (hereafter "the transaction"), the liability of the Ortega family, and the individuals and companies associated with them, under the loans was transferred to Conticorp, a company owned and controlled by the Ortegas. 6. In these proceedings, the plaintiffs challenge the genuineness of at least some of the loans, but a central issue, and possibly the central issue, is whether the transaction was genuine and, if so, whether it should be set aside. The plaintiffs contend that the GDRs were virtually worthless, that this was or must have been appreciated by those responsible for the transaction, and that the purpose of the transaction was to evade the Ortega family's exposure under the loans. Accordingly, the plaintiffs contend that the effect of the transaction, if genuine and not set aside, would be to enable the Ortegas wrongly to avoid liability under the loans. Although the basic nature of the claim therefore appears comparatively simple, both the nature of the relief the plaintiffs seek and the formulation of the legal basis of their claim against the defendants, appear to have given those advising the plaintiffs difficulties. It should also be mentioned that, apart from contending that the transaction was genuine and entered into in good faith, the defendants have raised a number of defences, including a challenge to the locus standi of the plaintiffs, and the appellants have raised a counter claim. The procedural history 7. The plaintiffs filed their writ on 26 June 1996, with only Ansbachers and Lex as defendants; they served the statement of claim on 28 February 1997, very shortly after joining the appellants as defendants. The appellants served their defence and a request for further and better particulars on 5 May 1997, and Ansbachers filed their defence some three months later. The remainder of 1997 appears to have been spent somewhat dilatorily on seeking and obtaining further and better particulars. 8. On 20 February 1998, the Ortegas filed an action against Central Bank in the US District Court for the Southern District of Florida ("the Florida Court") seeking damages for defamation arising out of allegations of fraud made against them. Those allegations were effectively the same as those made in the statement of claim in these proceedings. On 19 May 1998, Central Bank filed a defence, asserting that the fraud allegations were true, and a counterclaim ("the Florida counterclaim") seeking damages as a result of the alleged fraud, and bringing in Ansbachers as parties. The Ortegas and Ansbachers then applied to have the Florida counterclaim dismissed on grounds of forum non conveniens. 9. In a declaration in support of that application, Mr Fredrick Smith (who has acted throughout for the appellants, and who appeared for them on this appeal) stated that in the instant proceedings, it was: "alleged that Conticorp was used by the Ortegas for the purpose of taking fraudulent assignments of [the] loans and fraudulently replacing them with worthless assets. It is alleged that the loans, assignments, dispositions and transfers of money were made between a web of companies and/or controlled by the Ortegas for the predominant purpose of perpetrating a complex scheme of fraud."

3 Mr Smith further stated that "the core allegation in support of the allegation of a 'fraudulent scheme' is that [the GDRs] exchanged for forgiveness of the debt owed by IAMF by Conticorp were in effect worthless." At the end of his declaration, Mr Smith said that "all issues have been joined between the parties and the Bahamian action that had to be litigated in the US action", and that "trial of the Bahamian action requires an examination of all factual issues raised in the US action". He concluded by saying that therefore, if the Florida counterclaim proceeded, the Ortegas would have to fight the same issues in two jurisdictions. 10. A memorandum filed on behalf of Central Bank in the Florida Court in opposition to the motion made the point that "the Bahamian proceedings do not address claims pertaining to the numerous fraudulent transactions detailed in the counterclaim which did not take place in the Bahamas", because they were "beyond the subject matter jurisdiction of the Bahamian Court". However, in a judgment given on 3 December 1998, the Florida Court Judge rejected those submissions and dismissed the Florida counterclaim. In his judgement, he said that, in both proceedings, Central Bank "alleges fraudulent loans of approximately $150,000,000 made to Ortega-run enterprises", and that each set of proceedings "demands restitution in the amount of $150,000,000 damages". 11. Central Bank's appeal against that decision was dismissed on 23 August Meanwhile, on 3 March 1999, on the Florida Court's initiative, the Ortegas' libel action was stayed pending the resolution of these proceedings, on terms that the parties provided regular "status reports" as to the progress of these proceedings. However, on 11 August 2000, Central Bank's appeal against the stay succeeded. Thereafter, Central Bank's further application to reinstate the Florida counterclaim was dismissed on 19 March Shortly after that, on 28 March 2001, the Ortegas discontinued their libel claim. Despite this, Central Bank appealed against the refusal to reinstate the Florida counterclaim, but that appeal was dismissed on 29 August A re-hearing was denied to Central Bank on 22 November 2002, and a mandate was issued on 2 December 2002 effectively putting an end to any further appeals. Meanwhile on 1 November 2002, the Florida Court awarded Central Bank costs in excess of US $720,000 against the Ortegas. 12. Although the instant proceedings had not lain dormant during the currency of the proceedings in Florida, they had continued at a relatively leisurely pace. An application by Ansbachers to strike out the statement of claim was dismissed on 25 January 2000, but only on the basis that the plaintiffs amend, and the plaintiffs duly served an amended statement of claim on 10 February Ansbachers nonetheless appealed against the refusal to strike out, but their appeal was dismissed on 27 November An application by the appellants to strike out parts of the claim for failure to give particulars came before Osadebay J on 2 March 2000, and the hearing resulted in an order which unfortunately has never been drawn up. However, it appears that the Judge was unhappy with the way in which part of the amended statement of claim was drafted, and the contemporaneous documents record him as having given leave to the plaintiffs to re-amend the statement of claim and to provide further particulars. This was done on 20 April 2000, when the plaintiffs filed a re-amended statement of claim, supported by new particulars. 13. The re-amended statement of claim was a somewhat long and complex document, but, as it is the re-amendments and the relief claimed against the appellants which are of primary importance for present purposes, its effect can be summarised relatively shortly. Paragraphs 1 to 28 (which were as in the original pleading) identified the various parties and, albeit in fairly general terms, their roles so far as relevant to the proceedings. Paragraph 29 (which was unchanged from the amended statement of claim) summarised the plaintiffs' claims as being to "void and set aside" "certain specified transfers effected during the period of December 1994 to January 1996 at the instigation of the Ortegas acting in conspiracy and in the form of false and illusory investments", as well as various loans, on the basis that they were 'dispositions' within the meaning of section 2 of the Fraudulent Dispositions Act 1991 [('the 1991 Act')]". 14. Paragraph 30 set out in some detail the "background particulars of the fraudulent scheme of the Ortegas", and included reference to all the loans (i.e. all the loans made to the Ortega-related interests which had been exchanged for the GDRs pursuant to the transaction) and stated that they "amounted to approximately US$ 150,000,000". Paragraph 31 (which, like paragraph 30, remained in its original pleaded form) referred to "those parts of the Ortegas' fraudulent scheme which took place in the jurisdiction of the Commonwealth of the Bahamas" and identified the amount involved as being approximately $115million. Paragraph 32 was also in the same terms that it had been in the original statement of claim, although it had been amended to describe the loans as "fictitious". It

4 particularised in some detail each of the fifteen loans which had been the sole subject matter of the original proceedings. 15. Paragraph 33 repeated the "averments of fraud as pleaded in paragraph 30", and claimed a right to "lift the corporate veils behind which the [Ortegas] sheltered". More importantly for present purposes, paragraph 33 was re-amended in two respects. First, it changed the allegation that "The above fifteen purported loan transactions were illusory" to "All of these purported loan transactions were illusory". Secondly, it had a more extensive addition. That addition began with the statement that the plaintiffs were "entitled to claim damages for common law fraud in respect of the entirety of the approximately 100 loans and additionally and in the alternative the plaintiffs are entitled in particular to claim relief in respect of the aforesaid fifteen loans as contravening the provisions of section 2 of the [1991 Act]". The paragraph then went on to state that "the remainder of the aforesaid loans are set forth in the separate schedule entitled 'Schedule A', a schedule which does indeed contain details of approximately 100 loans. 16. The prayer for relief against Conticorp (which was unchanged from the amended statement of claim) sought declarations that "each purported assignment, transfer or exchange" of the loans for the GDRs was "null and void" either "for failure for consideration" or as "having been made with the intention to defraud", and an account and an order for payment, as well as "such tracing and/or proprietary remedies and/or other equitable remedies against Conticorp as constructive trustees as shall to the court seem just and equitable". Against the Ortegas, similar relief was sought on the basis that they or any of them were the "majority shareholders" in Banco Continental and "in effective control and management" of BCO and/or IAMF (on the basis that instructions given to IAMF and Ansbacher "were faithfully and punctiliously obeyed and carried out without question"), a declaration that the plaintiff should be entitled to "lift the corporate veil of IAMF behind which the Ortegas sheltered", a declaration that Conticorp was a "sham and fictitious trust established by or on behalf of the Ortegas in consequence whereof the plaintiffs are entitled to claim relief against the [Ortegas]" either in their own right or on the basis that "Conticorp is beneficially being controlled by the Ortegas and that by consequence whereof the plaintiffs were entitled to lift the corporate veil", as well as "such tracing and/or proprietary remedies and/or other equitable remedies against [the Ortegas] as constructive trustees [as] shall to the court seem just and equitable". 17. It will be recalled that the Florida Court, when imposing the stay, had required status reports to be filed. There had been time for one set of status reports before the stay was lifted. In the status report filed on their behalf on 2 August 2000, the Ortegas said: "In the re-amended statement of claim, the Central Bank has significantly expanded the number of loans being challenged pursuant to its modification to paragraph 33 of the same. Instead of restricting its claims to the fifteen loan transactions which allegedly occurred in the Bahamas the Central Bank has now particularised an additional 100 loan transactions and claimed it is entitled to seek damages against Conticorp and the Ortegas on the basis of common law fraud. This expansion of the Bahamian action only serves to overlap it even more with the action before this court." In their status report filed three days later, Central Bank referred to the fact that the re-amended statement of claim had been filed "pursuant to leave granted by Justice Osadebay on March ". 18. On 16 October 2002, there was a hearing before Lyons J (to whom these proceedings were assigned following the promotion of Osadebay J to the Court of Appeal) in relation to a number of applications and cross-applications. On the day prior to the hearing, there was an agreement under which the appellants withdrew their application to strike out paragraphs 30 to 32 of the re-amended statement of claim, and the plaintiffs withdrew their application to strike out the appellants' defence and counterclaim. At the hearing, Lyons J was told that "all interlocutory matters being concluded, the matter can proceed to a trial as soon as possible". As Ansbachers were not represented, it was nonetheless agreed that the matter should be adjourned. The Judge was told by the plaintiffs that "discovery in this matter is horrific" and that it would "take us months to complete" although the appellants indicated that they thought that these were overstatements. The Judge indicated he would adjourn the matter to 29 October and he would be prepared to fix the trial for the first three weeks during July 2003.

5 19. Thereafter, on 28 January 2003, the plaintiffs filed a substantial list of documents. Meanwhile, a number of summonses had been taken out by various parties, including an application by Ansbachers to strike out the claim for want of prosecution, and a lengthy application by the appellants complaining about the discovery afforded by the plaintiffs. These applications came before Lyons J on 12 March 2003 together with other applications. The Judge gave a ruling on 21 March 2003, which envisaged the case proceeding to trial. However, although he said that he was not satisfied that the plaintiffs had been guilty of delay which was "inordinate or inexcusable", he permitted Ansbachers to raise that issue after the plaintiffs had provided further and better particulars. 20. The appellants then served a request for further and better particulars, which the plaintiffs answered on 29 May Four weeks later, at the end of June 2003, the appellants applied to strike out the re-amended statement of claim on the ground raised in Ansbachers' outstanding application, i.e. for want of prosecution, and also pursuant to order 18 rule 19 of the Bahamian Supreme Court Rules ("the Rules"), on the ground that it disclosed no cause of action, particularly in relation to the 100 loans. In an affidavit sworn on behalf of the appellants on 15 July 2003, it was stated that, following the service of the amended statement of claim on 10 February 2000 "the plaintiffs sought and obtained leave to re-amend their statement of claim and the re-amended statement of claim was filed on 20 April The amendments purported substantially to expand the ambit of the claim". The affidavit went on to mention the appellants' subsequent summons of 6 June 2000 which sought to strike out paragraph 30, 31 and 32 of the re-amended statement of claim on the grounds that they "failed to make clear the nature of the claim" and "failed to give proper particulars". However, the affidavit accepted that the plaintiffs had then provided voluntary particulars. 21. On 2 March 2004, the plaintiff applied to re-re-amend the statement of claim, and two weeks later they served further voluntary particulars. The proposed re-re-amendment involved the addition of four new paragraphs, 33A to 33D. Paragraph 33A explained that relief was sought against the Ortegas on the basis that, by reason of their effective control over, and their instructions to the officers of, the companies concerned, they "dishonestly assisted in" the loans and the transaction. Paragraph 33B alleged that the Ortegas were in those circumstances "liable to pay damages and/or equitable compensation and/or to account as constructive trustees", and paragraph 33C gave particulars, by reference to earlier parts of the pleading, of the nature of the Ortegas' "effective control over the companies concerned" and identified those companies as including Conticorp, BCO and IAMF. Paragraph 33D explained why some particulars of these new allegations could not be given. The re-re-amended statement of claim involved no other changes; thus, the relief sought was unchanged. 22. The various applications then came before Lyons J and he dismissed the applications by the appellants and Ansbachers to strike out the claim for want of prosecution, and to strike out any part of the re-amended statement of claim on the ground that it disclosed no cause of action. However, he refused to allow the plaintiffs to re-re-amend. This was on the basis that the re-re-amendment would have involved adding a new cause of action outside the limitation period. The Court of Appeal agreed with the Judge on the first two issues, and so dismissed the appellants' and Ansbachers' appeals, but they disagreed with him on the third issue, and so allowed the plaintiffs' cross-appeal. The refusal to strike out for want of prosecution 23. Their Lordships turn first to the appellants' contention that the Judge was wrong not to strike out the action for want of prosecution, and that the Court of Appeal was similarly wrong to have upheld that decision. The principles of law applicable to an application to strike out for want of prosecution are not in doubt. In Birkett v James [1978] AC 297 at 318 F-G, Lord Diplock said that the power should be exercised only where the court was satisfied either that "the default has been intentional and contumelious", or that the delay was "inordinate and inexcusable" and had given rise to "a substantial risk that it is not possible to have a fair trial". 24. In pursuing an appeal against a decision not to strike out a claim for want of prosecution, any appellant takes on, at least on the face of it, an uphill task. First, while the decision does not involve the exercise of a discretion, it does require the carrying out of a balancing exercise by the judge, and, on an appeal, it is not the function of an appellate court to carry out its own balancing exercise. It is only if the judge took into account the irrelevant factors, failed to take into account relevant

6 factors, or has reached the conclusion that no reasonable judge could have reached, that his decision can be interfered with on appeal - see per Lord Diplock in Birkett at 317 E-G. That point has particular force here as this is a second appeal against the decision upholding a refusal to strike out. In Department of Transport v Chris Smaller Limited [1989] 1 WLR 1197 at 1120C, Lord Griffiths said that the Judicial Committee of the House of Lords "will only re-examine" a decision not to strike out for want of prosecution upheld by the Court of Appeal "in exceptional circumstances". 25. Secondly, the decision whether or not to strike out a claim for want of prosecution normally involves, at least to some extent, case management issues, which are very much for the first instance judge. That is particularly true in this case, where Lyons J had already had the conduct of the case for nearly three years. Further, the issue whether a claim has been pursued in a manner which involved contumelious, inexcusable or inordinate delay must be judged by reference to the practice of the particular court in which the claim has been brought; Lyons J and the Court of Appeal were far more familiar with what would be expected of litigants in the Bahamas than are their Lordships. Accordingly, while it would be wrong to characterise the prospects of the appeal on the first point succeeding as hopeless, the appellants' prospects of success are, in principle at least, unpromising. 26. That assessment is reinforced here when one turns to the first instance judgment. Lyons J carefully described the history of these proceedings and directed himself in accordance with the principles laid down in Birkett. He then concluded that the delay of some six and a half years between the issue of proceedings and the taking out of the appellant's summons to strike out was not "contumelious", and, while he considered that it was "arguable" that the delay was "inordinate", he did not consider that it was "inexcusable". If the delay was inexcusable, he was doubtful whether it had given rise to a substantial risk that there could not be a fair trial. Although the Court of Appeal appear to have thought that their reasons for dismissing the appeal on this ground were different from those of the Judge, their grounds were very similar. They considered that there had been "undue delay in bringing the action to trial", but that, once one apportioned the blame for this delay between the plaintiffs and the defendants, the delay for which the plaintiffs were responsible was insufficiently great to be characterised as "inordinate and inexcusable", and in any event, the defendants had failed to establish that any delay that had occurred had resulted in any unfair prejudice to them. 27. In their Lordships' judgment, these views were ones which, to put it at its lowest, Lyons J and the Court of Appeal were entitled to reach. The only ground on which the appellants challenge the Judge's conclusion that there was no contumelious delay is that the plaintiffs were wrongly "warehousing" these proceedings, on the basis that they hoped that all the issues that would be determined would be in Florida. The implication is that the plaintiffs were therefore treating these proceedings as something of a "fallback". This is not, however, a case where the plaintiffs began and maintained proceedings in one jurisdiction (the Bahamas) either with a view to putting unfair pressure on the defendants through claiming similar or the same relief in another jurisdiction (Florida), or to protect their position in case proceedings in the other jurisdiction failed. This is a case where the plaintiffs began proceedings in the Bahamas, and some of the defendants in those proceedings subsequently brought a claim in Florida which they must have appreciated inevitably would raise all, or at least many, of the same issues as were raised in the Bahamian proceedings. They must have foreseen that the plaintiffs would defend the allegation of libel on the basis of justification, which would involve making out their case as pleaded in these proceedings. On no view was it unreasonable for the plaintiffs in those circumstances to counterclaim for substantive relief in Florida. 28. Mr Smith relied on the fact that the plaintiffs pursued the Florida counterclaim even after it was dismissed at first instance. The fact that they did so does not justify any criticism of them: it was a far from unreasonable course, even if it was unsuccessful. Apart from anything else, there were transactions which were the subject matter of the Florida counterclaim which were not included in these proceedings even after the re-amendment to the statement of claim. It is also pertinent to note that it was the Ortegas who began the Florida proceedings, and that they discontinued them little more than three years after they were begun, and were ordered to pay Central Bank's substantial costs. It is therefore difficult for the Ortegas to contend with any conviction that it was Central Bank which was using the Florida proceedings for tactical purposes in connection with these proceedings. 29. Furthermore, it is not as if nothing happened during the currency of these proceedings while the Florida proceedings were on foot (namely between 20 February 1998 and 2 December 2002). Summonses were taken out by the defendant which inevitably held up these proceedings, most

7 notably for applications to strike out the claim. It is true that some of these applications were justified, in the sense that they resulted in the plaintiffs amending the statement of claim, but others were not, including Ansbachers' unsuccessful appeal against Osadebay J's refusal to strike out the claim. There was also a delay for much of 2002, which was beyond control of any of the parties, as, after Osadebay J was promoted to the Court of Appeal, there was a hiatus before Lyons J was assigned to this case. 30. Having said that, Mr Smith made a fair point when he contended that the mere existence and continuance of the Florida proceedings did not of itself discharge the plaintiffs from pursuing the instant proceedings, or indeed from complying with the Rules and court orders. However, it appears to their Lordships that the question of whether the delay for which the plaintiffs were responsible can be described as "inordinate and inexcusable" in this particular case largely depends on one's assessment of the effect of the initiation and continuation of the Florida proceedings, assessed in the context of what actually was happening in these proceedings. It seems to their Lordships quite impossible to argue that Lyons J, as the judge best placed to assess that question, was not entitled to conclude that the delay in these proceedings, while the Florida proceedings were being pursued, was not "inordinate and inexcusable". 31. Both before and after the Florida proceedings were being pursued, the plaintiffs had to face applications to strike out the whole or part of their claim. As Mr Smith says, the existence of such applications does not, of itself, justify the plaintiffs doing nothing in connection with the claim, particularly when the plaintiffs had to amend or to provide particulars to meet the criticisms of their pleaded case. However, it is wholly unrealistic to criticise the Judge for taking these applications into account when deciding that the delay in progressing the claim was not inexcusable. The weight to be given to the effect of such applications when relied on to justify delay in proceeding with the substantive action depends very much on the facts of the particular case, and is classically a matter for the first instance judge. 32. Given that their Lordships are of the view that, to put it at its lowest, Lyons J and the Court of Appeal were entitled to reject the contention that the claimants had been guilty of inordinate and inexcusable delay, the question of prejudice does not arise. However, it is right to record that, on the basis of the evidence and the arguments that they have heard, their Lordships would not have been disposed to interfere with the Court of Appeal's conclusion that the appellants had failed to establish prejudice, at least to any significant degree, to justify the claim being struck out for want of prosecution, even if inordinate and inexcusable delay had been established against the plaintiffs. 33. In connection with this issue of prejudice, it is worth noting that the appellants attended hearings on 16 October 2002 and on 12 March 2003, at which they indicated (expressly at the first hearing, and by asking for particulars at the second hearing) that they were expecting to go to trial. There is no evidence to suggest that anything occurred after those hearings, and before they issued their summons to strike out for want of prosecution at the end of June 2003, which would have deprived the appellants of the opportunity to have a fair trial. Indeed, it can be said that this point goes more widely to the question of delay. The appellants attended those hearings on the basis that the claim was proceeding to trial, and it has not been suggested that there was inexcusable delay on the part of the plaintiffs between 16 March 2002 or 12 March 2003 and the end of June The refusal to strike out the re-amended statement of claim 34. It is appropriate now to turn to the second issue raised on this appeal, namely the appellants' contention that the Judge and the Court of Appeal were wrong not to strike out the claim, in its reamended form, on the grounds that it disclosed no cause of action. This application was ultimately limited to the re-amendments affected to paragraph 33 of the statement of claim, i.e. to the allegations relating to, and claims based on, the 100 loans, in addition to the fifteen loans to which the amended claim was limited. (In the light of the history of the proceedings as set out above, it would scarcely have been open to the appellants to say that any other part of the re-amended statement of claim, reflecting, as it substantially did, both the original and the amended statement of claim, was objectionable). 35. The Judge held that the passages added to paragraph 33 for the first time in the re-amended statement of claim, and in particular the allegations of fraud, were sufficiently pleaded (particularly

8 when read together with the particulars which have been provided), as did the Court of Appeal. The Judge also stated that it would be "decidedly unfair" to strike out the claim insofar that it was based on fraud. In their Lordships' opinion, the Judge's conclusions on the second issue were also entirely justified. 36. Once it had become apparent to the plaintiffs that their counterclaim for relief in the Florida proceedings in relation to the 100 loans might well not be allowed to proceed (as a result of the first instance dismissal of the counterclaim in its entirety in December 1998 on the grounds of forum non conveniens), it is by no means surprising that they sought to amend the claim in these proceedings so to extend it beyond the fifteen specifically pleaded transactions to the 100 loans. The Ortegas could scarcely complain about this, given that it had been their contention in the Florida Court that the issues raised in the Florida counterclaim were effectively identical to those raised in these proceedings. That point is reinforced by the fact that the basis upon which their application succeeded was the Florida Court Judge's opinion that the Florida counterclaim sought relief in respect of the same transactions as was sought in these proceedings. 37. That does not, of course, of itself mean that the incorporation in these proceedings of claims for relief in respect of the 100 loans, through the medium of a re-amendment of the statement of claim, would be justified irrespective of the adequacy of the pleading of the re-amendment. However, it does mean that the prospects of success for any objection to the re-amendment must be weak, especially as the nature of the plaintiffs' claims in relation to the 100 loans had been fully pleaded in the Florida counterclaim, which was, as Mr Smith said, well and clearly expressed. Quite apart from this, the basic facts upon which the plaintiffs' case in relation to the 100 loans rested were the same as those in relation to the fifteen loans, and there is no question, as already mentioned, of any complaint being realistically raised by the appellants against the case as pleaded against them in relation to the fifteen loans in the re-amended statement of claim. Mr Smith was under no misapprehension as to the nature of the plaintiffs' case in this connection as is clear from his declaration in support of the Ortegas' application to dismiss the Florida counterclaim. 38. It is worth bearing in mind that the ultimate purpose of one party's pleading is to inform the other party of the case that is being made out against him. Here, bearing in mind the basic nature of the facts relied on by the plaintiffs, namely the allegedly dishonest conversion of the loans made to the Ortega interests into GDRs at a time when those GDRs would or should have been known to the Ortega interest as being valueless, the basic case the plaintiffs were running against the appellants in relation to the 100 loans cannot have been in doubt. It is apparent that the appellants have never been in any doubt as to the nature of the plaintiffs' claim as pleaded in the re-amended statement of claim. The status report filed at the Florida Court on behalf of the Ortegas accurately, if very briefly, summarised the nature of the plaintiffs' claim in relation to the 100 loans. Indeed, it relied on the fact that the plaintiffs had pleaded the case in relation to the 100 loans in these proceedings as a ground for justifying the decision to dismiss Central Bank's counterclaim in the Florida proceedings. 39. The status reports are also important in connection with the Judge's view that it would have been unfair to strike out the re-amended statement of claim, pursuant to an application. The re-amended pleading was filed in April 2000, and it was subsequently treated as representing the plaintiffs' case by both parties in their status reports in August It was also treated as the plaintiffs' pleaded case in the appellants' summons to strike out paragraphs 30 to 32 (but not any part of paragraph 33) of the pleading, which summons was withdrawn at the hearing of 16 October Furthermore, following that hearing, the appellants sought further and better particulars of the re-amended statement of claim, which were duly provided by the plaintiffs. It is also relevant that, in early 2003, the appellants successfully asked the plaintiffs for further discovery following the substantial discovery already given by the plaintiffs during This brief summary makes it quite impossible to accept Mr Smith's suggestion that the plaintiffs never had leave to make the re-amendments. Not only does Osadebay J appear to have given general leave to re-amend on 2 March 2000, but thereafter the parties plainly treated the reamendments as effective from their inception, as was accepted in the plaintiffs' affidavit of 15 July 2003, in support of this very application. 41. The brief summary also explains the Judge's view that, even on the assumption that the plaintiffs had pleaded their claim in fraud in respect of the 100 loans "within time, albeit quite inadequately

9 and without any reference to the material particulars", the application to strike out should fail on grounds of procedural fairness. It may well be that, if they had done so promptly, the appellants could have applied to strike out the re-amendments, but they chose not do so; instead they sensibly sought particulars. After it was served in April 2000, the appellants treated the plaintiffs' re-amended claim as effective for some three years, save that they applied (within the limitation period) to strike out paragraphs 30 to 32, but not, it should be noted, the re-amended paragraph 33. Further, as already mentioned, the appellants attended the hearings of 16 October 2002 and 12 March 2003, which proceeded on the assumption that the claims against the appellants as pleaded in the reamended statement of claim would go to trial. There is therefore obvious force in the Judge's point that to accede to a summons to strike out the re-amendments to paragraph 33, brought at the end of June 2003, some three years after the re-amended pleading was served, and after the limitation period had expired, would simply be unjust in the light of the intervening procedural history. 42. It is right to add this. The precise ambit of the relief sought in the re-amended statement of claim (and indeed the re-re-amended statement of claim) was briefly debated. It is unnecessary and inappropriate to determine at this stage and in this tribunal the precise meaning and effect of every aspect of what, it must be accepted, is not a happily drafted pleading, and, in particular, whether it actually claims all the relief which Mr William Blair QC, who appeared for the plaintiffs, contended. However, the fact that the precise ambit or extent of the relief sought may be a matter of argument does not alter the fact that the basic allegations made in relation to 100 loans, as contained in paragraph 33 of the re-amended statement of claim (as supported by the particulars) is sufficiently clear not to be struck out, particularly bearing in mind the procedural history of this case. It is not as if any lack of clarity in the prayer for relief has ever formed the basis of the appellants' case to strike out, and, even if it had done so, the Judge's point about unfairness would have defeated it. If there is any problem in that connection (as to which their Lordships make no finding either way), it could have been (and arguably still could be) put right by appropriate particulars being ordered and provided, or further voluntary particulars being provided. The re-re-amendment of the statement of claim 43. That leaves the final issue, namely whether the Court of Appeal was right to conclude that the plaintiffs should be allowed to re-re-amend the statement of claim by adding paragraphs 33A to 33D. These paragraphs added a claim against the Ortegas based on dishonest assistance. In that connection, Order 20, Rules 5 (2) and (5) of the Rules permit a plaintiff to add a claim against a defendant outside the limitation period even if the claim is based on a new cause of action, provided that it "arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action" against that defendant. 44. The plaintiffs correctly accept that, by the time they applied for leave to re-re-amend, the time for issuing fresh proceedings against the Ortegas based on dishonest assistance had passed, as any such claim would have been time-barred under the provisions of the Bahamian Limitation Act 1995 ("the 1995 Act"). As their Lordships understood it, the appellants correctly accept that (a) the cause of action of dishonest assistance raised in paragraphs 33 A to 33D arises out of substantially the same facts as the causes of action already pleaded, and (b) that, if the court properly could have exercised its discretion to allow those paragraphs to be added by amendment, the exercise of that discretion could not be challenged. The only point which is therefore at issue is whether, as the appellants contend and Lyons J effectively concluded, Order 20 Rule 5(5) is ultra vires because it contravenes the provisions of the 1995 Act (which has no equivalent to section 35 of the English and Welsh Limitation Act 1980, which statutorily permits an amendment such as that contemplated by Order 20 Rule 5 (5) as quoted above). 45. In their Lordships view, there is nothing in that contention of the appellants, at least in relation to the proposed re-re-amendment in this case. The cause of action sought to be raised in paragraph 33A to 33D of the re-re-amended statement of claim is ultimately nothing more than a variation or refinement of the legal basis upon which the plaintiffs seek the relief already claimed. All the facts upon which the plaintiffs rely, and all the heads of relief which they seek, were already pleaded in the re-amended statement of claim (and indeed almost all of them were pleaded in the amended and the original statement of claim), which was served well within the limitation period, as the Judge pointed out.

10 46. At least where, as here, the new cause of action is simply a fresh legal formulation of the plaintiffs' case, involving no factual allegation other than those already pleaded as founding the original causes of action, and involving no new head of relief other than those already pleaded, it appears to their Lordships that it cannot be said that permitting such a cause of action to be pleaded outside the limitation period infringes the provisions of the 1995 Act, even if it contains no specific provision mirroring Order 20 Rule 5 (5). This conclusion is plainly supported by the decision of the English Court of Appeal in Mitchell v Harris Engineering Co Ltd [1967] 2 QB 703. Although that was a case concerned with the addition of parties, the logic of the conclusion and reasoning of Lord Denning MR and Russell LJ must apply equally to the addition of a new cause of action: indeed this case appears to their Lordships to be a stronger case than Mitchell for holding that the amendment permitted by the Rules does not fall foul of the Statute. The decision and reasoning in Morris was more recently applied by the English Court of Appeal in Signet Group PLC v Hamilton UK Properties PLC (The Times, 15 December 1997). It is only right to record that Lyons J, who decided that the provisions of the Limitation Act precluded his permitting the re-re-amendment, was not referred to the latter case. Conclusion 47. In the light of these conclusions, their Lordships will humbly advise Her Majesty that this appeal should be dismissed and that the appellants should pay the costs of the plaintiffs. BAILII: Copyright Policy Disclaimers Privacy Policy Feedback Donate to BAILII URL: