[1] Marty Steinberg, Receiver (in his capacity as Receiver of Lancer Offshore, Inc. and The Omnifund, Ltd Appointed by the United States District Court for the Southern District of Florida) [2] Lancer Offshore, Inc. [3] The Omnifund Ltd Appellants v [1] Swisstor & Company [2] Wise Global Fund Ltd Respondents

• Jurisdiction: British Virgin Islands
• Judge: MITCHELL, J.A. [AG.]
• Judgment Date: 12 March 2012
• Neutral Citation: VG 2012 CA 2,[2012] ECSC J0312-1
• Court: Court of Appeal (British Virgin Islands)
• Docket Number: HCVAP 2011/012
• Date: 12 March 2012

[2012] ECSC J0312-1

IN THE COURT OF APPEAL

Before:

The Hon. Mde. Ola Mae Edwards Justice of Appeal

The Hon. Mr. Davidson Kelvin Baptiste Justice of Appeal

The Hon. Mr. Don Mitchell Justice of Appeal [Ag.]

HCVAP 2011/012

Between:

[1] Marty Steinberg, Receiver (In his capacity as Receiver of Lancer Offshore, Inc. and The Omnifund, Limited Appointed by the United States District Court for the Southern District of Florida)

[2] Lancer Offshore, Inc.

[3] The Omnifund Limited

Appellants

and

[1] Swisstor & Co.

[2] Wise Global Fund Limited

Respondents

Appearances:

Mr. Martin Mann QC, Ms. Susan V. Demers of Price Demers & Co with him, for the Appellants

Mr. Robert Nader of Forbes Hare for the First Respondent

Mr. Paul Girolami QC, for the Second Respondent

Interlocutory appeal -Whether claim statute barred under the Limitation Act - Qualification for applying for permission to serve proceedings out of the jurisdiction - Extension of time within which to serve a claim form - Limitation Act Cap. 43 of the Virgin Islands - CPR 7.3(3)(b) - CPR 8.13

The claim was essentially one for repayment of money mistakenly paid in respect of a contract. The respondents, Swisstor and Wise Global and others, had invested in funds held by Lancer and Omnifund, but which were operated as a Ponzi scheme. A fraudulent investment manager of both funds had for his own ends dishonestly calculated the net asset values for the purpose of paying out on redeemed shares. The last redemption by Swisstor had occurred on 1 ^st August 2001, while that of Wise Global had been in July 2002. The directors of Lancer and Ominifund had become aware of the mistaken payments by August 2002 at the latest when they resigned. Subsequently, it became apparent that some 91% of the funds' portfolio would require write-downs of hundreds of millions of dollars. Swisstor and Wise Global had benefitted from the dishonestly calculated redemptions by several million dollars each. Swisstor was a Canadian company, while Wise Global was a BVI company with its principal place of business in Hong Kong.

On 10 ^th July 2003, the Receiver of Lancer and Omnifund was appointed by a court in Florida. On 9 ^th July 2004, he commenced proceedings in Florida against Swisstor and Wise Global and some 44 others for recovery. The Florida proceedings against Swisstor and Wise Global were dismissed for want of forum. On 9 ^th July 2009, 6 years less one day after his appointment, the Receiver began proceedings in the BVI seeking restitution in essentially the same terms as the Florida proceedings. The claim form expired for the purpose of service on the respondents on 8 ^th January 2010.

On 11 ^th May 2010, the Receiver applied for an extension of the validity of the claim form and permission to serve the claim form on the respondents out of the jurisdiction. On 25 ^th May 2010, the judge made the order sought, extending the validity of the claim form for service to 8 ^th July 2010. On 9 ^th June 2010, the appellants filed an amended claim form and on 10 ^th June applied for a variation of the 25 ^th May order so as to allow service by any permissible method in the jurisdiction in which a defendant was served and for a further 6 month extension of the validity of the claim form to 8 ^th January 2011. On 16 ^th June, the court ordered accordingly. Swisstor was served in Canada on 26 ^th November and Wise Global in Hong Kong on 29 ^th November 2010, both under the Hague Convention. Wise Global and Swisstor applied to set aside service on them and for other relief. They claimed, among other things, that the claim was statute barred; that no claim had been made under the subscription agreement and that rule 7.3(3) Civil Procedure Rules 2000 ("CPR") was not engaged; and that no special reason had been given why time for service should be extended. The judge found that the Funds could have discovered the wrongful over valuations even before the Receiver had been appointed, using no more than reasonable diligence. Any claims for recovery of money allegedly overpaid had become statute barred under section 4 of the Limitation Act 6 years after the payment. Section 25, which provides for the limitation period to run from the date when the claimant could with reasonable diligence have discovered any mistake, did not apply. He set aside service of the claims on both respondents. The appellants appealed.

Held: dismissing the appeal and affirming the decision of the trial judge, with prescribed costs to both respondents; and dismissing the respondent's notice with no order as to costs, that:

• 1. Section 25 of the Limitation Act is unavailable to the appellants because, in making his case, the Receiver's evidence does not identify any point in time when he says he first discovered the mistake. His evidence makes no attempt properly to grapple with the equally important and separate question when he could reasonably have discovered it. On 9 ^th July 2004, within about a year after his appointment on 10 ^th July 2003, he commenced proceedings against the respondents in the USA making the same claims as he now brings in the BVI. If the court were to be expected to act upon a case that the Receiver only discovered the mistake at some point after his appointment and prior to his US proceedings, then not only must that point in time be identified and explained, but a detailed account would perforce need to be given of the period between his appointment and that point in time, in order to show that he could not have reasonably discovered it before.

• 2. On the service out of the jurisdiction issue and CPR 7.3(3), with all respect to the learned trial judge, there is no good reason to give a narrower construction to the words in our Rules "otherwise to affect" than was given to the words "in respect of" in the UK Rules. It is difficult to follow the reasoning whereby the judge concluded that the claim in this case did not "affect" a contract. The claim is for restitution where a contractual term has not been performed. The primary allegation is that both respondents are withholding monies which they should not have received under the contract had the formula been correctly applied. This claim clearly affects a contract, the interpretation, the meaning, and the implications that arise from the contract.

  E.F. Hutton & Co (London) Ltd. v Mofarrij [1989] 1 W.L.R. 488 applied.

• 3. The power in CPR 8.13 to extend the validity of the claim form is only to be exercised for "good reason" for the failure to serve the claim during the period of its validity. In this case, the appellants had given no reason at all why they had failed to apply in good time to serve the respondents in the manner they had previously served the US proceedings, but had instead waited to apply for permission to serve out and for an extension of time until two months after the period for service had passed. The judge had therefore been entitled to set aside the extensions for service of the claim form.

  Hoddinott v Persimmon Homes [2008] 1 W.L.R. 806; [2007] EWCA Civ 1203 applied; Hashtroodi v Hancock [2004] EWCA Civ 652; [2004] 1 W.L.R. 3206; [2004] 3 All E.R. 530 cited.

• 4. The respondents had a right to be sued by means of a claim issued within the statutory period of limitation and served within the period of its validity. Once the respondents could show, as they have, that they might be deprived of a defence of limitation if time for service of the claim form was extended it was enough for the extension to have been set aside. The statutory limitation period should not be made elastic at the whim or sloppiness of a litigant. Public interest requires that claimants adhere strictly to the time limit for service or else provide a good reason for dispensation. That not having been done here, the learned trial judge was entitled to exercise his discretion to set aside the extension of time.

  Dagnell and Another v J.L. Freedman & Co. (a firm) and others [1993] 1 W.L.R. 388 cited; City & General (Holborn) Ltd. v Royal & Sun Alliance plc [2010] 131 ConLR; [2010] BLR 639; [2010] EWCA Civ 911 applied.

MITCHELL, J.A. [AG.]

1 This is what used to be called a procedural appeal under the Civil Procedure Rules 2000 ("CPR") prior to their amendment on 1 ^st October 2011. It is now an interlocutory appeal against an order of the High Court setting aside permission to serve the proceedings on the two respondents out of the jurisdiction and for an extension of time.

2 The claim is one for repayment of money mistakenly believed to have been due in respect of a contract, with an additional claim in restitution coupled with another for an equitable remedy.

3 There is also a respondent's Notice by Wise Global contending that the decision of the learned judge should be affirmed on grounds additional to those contained in the judgment.

Background

4 Marty Steinberg is the Receiver of Lancer Offshore, Inc. and the Omnifund Limited. Lancer and Omnifund carried on the business of mutual funds in the United States ("the Funds"). Swisstor is a Canadian company with its principal place of business in Ontario. Wise Global is a BVI company with its principal place of business in Hong Kong. Both Swisstor and Wise Global were investors in Lancer.

5 The background to the claim is that the respondents and a number of other defendants to the action had entered into agreements by which they had acquired shares in the Funds. These agreements are the private placement memoranda of the Funds, investors' subscription agreements whereby the investors submitted to the jurisdiction of the BVI court and its processes, and the Funds' articles of association which contain formulae for the calculation of the respective shareholders net asset values ("NAV") together with provisions governing redemption and payment. From time to time the respondents and other defendants had redeemed their shares in the Funds on the basis of the...