(1) Pentium (BVI) Ltd; (2) Landcleve Corporation v (1) KPMG (British Virgin Islands) (A Firm); (2) The Bank of Bermuda Ltd; (3) Credit Suisse AG

• Jurisdiction: British Virgin Islands
• Judge: RAWLINS, J
• Judgment Date: 30 April 2003
• Docket Number: CLAIM NO. BVIHCV 2002/0122
• Court: High Court (British Virgin Islands)
• Date: 30 April 2003

IN THE HIGH COURT OF JUSTICE

CLAIM NO. BVIHCV 2002/0122

BETWEEN

(1) Pentium (BVI) Limited

(2) Landcleve Corporation

Claimants

and

(1) KPMG (British Virgin Islands) (a firm)

(2) The Bank of Bermuda Limited

(3) Credit Suisse AG

Defendants

Appearances:

Mr. Stephen Moverley-Smith Q.C., Mr. Michael Fay with him for the Claimants

Mr. Jeffrey Elkinson, Ms. Dawn Smith with him for the Second named Defendant

KEY WORDS

Civil Practice and Procedure — Application for summary judgment against the Second Defendant — Part 15 of the Eastern Caribbean Civil Procedure Rules 2000 — Claimants allege that the Bank permitted their accounts to be debited by the forgery of a designated signature — Whether breach of mandate — The implied contractual duties of customers to Banks.

Express term in the contract on the accounts that the Claimants will review their monthly statements and make written objections within a specified time — Whether this term permits the Bank to avoid liability — Whether the Bank may avoid liability under an express indemnity clause.

Whether a trial is necessary on the issue of estoppel by representation, or to prove forgery.

RAWLINS, J

1 The Claimants, Pentium and Landcleve, applied to have summary judgment entered against the Second named Defendant (‘the Bank’), for the whole of their claims in this case. The application was brought under Part 15 of the Eastern Caribbean Supreme Court Civil Procedure Rules 2000 (‘the Rules’). The Bank opposes the application. It says that it has a real prospect of successfully defending the claim.

2 Part 15 of the Rules provides a procedure by which the court may decide a claim or a particular issue without a trial. Part 15.2 of the Rules states that the court may give summary judgment on a claim or an issue if it considers that the Defendant has no real prospect of successfully defending a claim or issue. Part 15.3 of the Rules exempts admiralty proceedings in rem, probate and fixed date claim proceedings. It also exempts from the process of summary judgment proceedings against the Crown, defamation, false imprisonment, malicious imprisonment and constitutional proceedings. Under Part 15.4 of the Rules, summary judgment may be entered upon application by a party, or by the court on its own volition at a case management conference.

3 The use of the word ‘may’ in Part 15.2 of the Rules does not confer an unlimited discretion upon the court. The approach to be taken is aptly illustrated in Swain v. Hillman and Another [2001] 1 All E.R. 91, in which the English Court of Appeal considered Rule 24.2 of the new English Civil Practice Rules, which is similar to Part 15.2 of our Rules. At page 92j of the judgment, Lord Woolf MR, said that the salutary power of the Rule is to enable the court to dispose summarily of claims or defences, which have no real prospect of being successful. He said that the word “real” is used to direct the court to determine whether there is a “realistic” as opposed to a “fanciful” prospect of success. He said, further, at page 95b, that the Rule does not require the conduct of a mini-trial. We note, of course, that under Part 15.5 of the Rules, the evidence for the purpose of an application for summary judgment is to be presented in the form of affidavits in support of and in opposition to the application.

4 In theSwaincase, the statement of Judge L.J., at page 96b—c, is also instructive. He said:

‘If there is a real prospect of success, the discretion to give summary judgment does not arise merely because the court concludes that success is improbable. It that were the court's conclusion, then it is provided with a different discretion, which is that the case should proceed but subject to appropriate conditions imposed by the court.’

In our case, the Defendant does not have to prove that he will probably succeed at the trial.

5 The court should be cautious, however, since it is a serious step to enter summary judgment. It provides finality without the opportunity for trial on the merits with evidence tested on cross-examination. Yet, a Claimant is entitled to summary judgment if the Defendant does not have a good or viable Defence to a claim. This is in keeping with the overriding objective stated in Part 1 of the Rules, which enjoins the court to deal with cases justly, by, inter alia, saving unnecessary expense and ensuring that cases are dealt with expeditiously. A Defendant cannot be permitted to continue a case on a defence which offers no real prospect of successfully defending the claim.

6 The prior provision for summary judgment was Order 14 of the 1970 Civil Procedure Rules. Cases that were decided on that order are not now helpful for two reasons. First, the test under Order 14 is not the same as that for Part 15 of the Rules. Under Order 14, the court determined whether there was a serious issue to be tried. Second, we should heed the admonition of Lord Woolf MR, in Biguzzi v. Rank Leisure plc [1999] 4 All E. R. 934, at pages 939–941, that under the new dispensation, a court should not use cases that were decided on the old Rules as authoritative. The merits of the application will be considered on these principles. First, however, the background to the case.

The Background

7 Pentium was incorporated in the British Virgin Islands, and carried on business as a foreign exchange trading company. It was a client of Cavendish Services Limited (‘CSL’), a company incorporated in Bermuda, under an investment advisory agreement which came into effect in 1994. CSL carried on the business of making computer analyses of foreign exchange rates. Another company that was incorporated in Monaco, Cavendish S.A.M., acted for CSL. It conducted foreign exchange trading on behalf of Pentium through Morgan Stanley International, London (‘MISIL’). Landcleve is a company that was incorporated in Panama. Its principal place of business is in Bermuda.

8 The First named Defendant, ‘KPMG’, is a firm of chartered accountants. They were engaged by Pentium to be its auditors. Under their agreement, KPMG were Pentium's auditors for the financial periods ending the 31 ^st day of December 1994; the 30 ^th day of June 1995; the 31 ^st day of December 1995, and, thereafter for each six monthly period unless that was changed by mutual agreement. The Bank is, and was, at all material times, engaged in the business of banking. The Third named Defendant, ‘Credit Suisse’, was incorporated in Switzerland. It is also engaged in the business of banking.

9 Pentium opened an account (‘the Pentium Account’) with the Bank in September 1994, according to the Bank. The mandate that it gave to the Bank permitted withdrawals to be made from that account only on the signed authority of Pentium's managing director, Matheson Trust Company (BVI) Limited (‘Matheson’), and one of either Norman Gibson, Harold McCormick or David Harvey. Gibson and McCormick were directors of CSL, Landcleve, Pentium and Cavendish S.A.M. Harvey was a former director of Pentium. Pentium also maintained a collateral account with MISIL to enable it to trade on margins.

10 Landcleve opened an account (‘the Landcleve Account’) with the Bank. According to the Bank it was opened in 1989, but became operative in February 1992. The mandate permitted withdrawals from this account, only on the signed authority of any one of Norman Gibson, Harold McCormick or David Rowe-Beddoe. The latter was a director of Landcleve and a former director of CSL and Cavendish S.A.M. Roberto G.A. D'Osvualdo, the principle employee of Cavendish S.A.M. was not a signatory on either the Pentium or Landcleve Accounts under these mandates.

11 The Claimants allege that in breach of the mandates, the Bank permitted withdrawals from the accounts on forged signatures. Pentium alleges that, between 1996 and 1998, D'Osvualdo perpetrated thefts from its account by forging the signature of Mr. Gibson on faxed wire transfer instructions to the Bank and MISIL, and stole some US$3,137,940.00 from the account. Pentium also alleges that it was an implied term in the contract between it and the Bank, that if facts on matters came to the attention of the Bank which indicated that it (Pentium) was being or might be defrauded, the Bank owed a duty to draw such matters to the attention of the directors of Pentium. Pentium says, further, that the Bank failed to do so, thus occasioning the loss, and has failed to re-credit the amount to its Account although it was informed of the thefts.

12 Landcleve alleges that between October 1997 and June 1998, D'Osvualdo forged the signature of Gibson on wire transfer instructions to the Bank on the Landcleve Account. He thereby stole US$1,791,000.00 from the account. Landcleve states that since Gibson did not sign the instructions as authorized under the mandate, the Bank was in breach of the mandate which occasioned the loss. Alternatively, it alleges, that the Bank was in breach of its duty to inform it (Landcleve) that it was being defrauded.

13 With respect to KPMG, Pentium alleges that the firm failed to carry out any audits after the 31 ^st day of December 1995, in breach of their contract. It insists that had the firm carried out audits, the fraudulent transactions that occurred after this date would have come to the attention of its (Pentium's) directors, who would have taken steps to prevent them.

14 With respect to Credit Suisse, the Claimants allege that it knowingly received and assisted in the fraud by permitting D'Osvualdo to open accounts at its offices in Zurich, without establishing his bona fides. They also allege that employees of Credit Suisse actively assisted D'Osvualdo to open the Accounts and to launder the proceeds of the frauds.

15 The Claimants claim damages and interest against KPMG and the Bank. They also seek an order that Credit Suisse do account to them (the Claimants) for the alleged thefts as...