Ribaroff v Williams & Others
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In January this year we acted for the Plaintiff against five Defendants in a claim for damages for breach of a Sale & Purchase Agreement of a Bermudian fund management company. The Defendants were directors and shareholders of the fund management company and had negotiated a staged management buyout from the Plaintiff vendor. The Plaintiff alleged that the Defendants entered into an agreement with another fund manager to conduct business from their platform in an attempt to evade liability for ongoing payment of the staged purchase trailer fees (“the impugned transaction”).
One shareholder of the Bermudian fund management company did not participate in the alleged impugned transaction and was brought into proceedings by the Defendants who sought an indemnity from the shareholder as a third party. A preliminary question arose as to whether the five Defendants could force the Plaintiff to join the Third Party as a defendant pursuant to Rules of the Supreme Court Order 15 Rule 4(3) on the basis that the Third Party was jointly liable for any damages that the Plaintiff could establish against the Defendants.
RSC Ord 15 r4(3) was created to protect a Defendant against the rule of release by judgment which would otherwise prevent the Defendants making a subsequent claim against the Third Party in proceedings following a successful judgment for the Plaintiff. This was the first time that the issue had been considered by the Court in Bermuda and is an important issue bearing in mind that Civil Liability Contribution Act 1978 (UK) does not apply in Bermuda.
Following an extensive consideration of authorities by the Plaintiff and the Defendants the Chief Justice decisively rejected the Defendants suggestion that the discretion of the Court in exercising its powers under Order 15 Rule 4(3) was fettered by guideline cases to such an extent that it excluded altogether the court’s ability to consider the practical ramifications of the decision proposed to be made.
In this case the mischief of release through judgment had already been avoided by an agreement to list the third party proceedings together with the principle claim and for the third party to be bound by any findings made against the defendants.
The Court adopted the more modern post-CPR approach to the exercise of the rules and found that Order 15 Rule 4(3) does not create a mandatory right for defendants to compel plaintiffs to join third parties without regard to ordinary case management considerations. Accordingly, the Plaintiff did not have to join a third party who was considered by the Plaintiff to be blameless in the impugned transaction simply because there was a potential joint liability between the Third party and the Defendants.