Cheryl Hamersmith-Stewart v Cromwell Trust Company Ltd

• Jurisdiction: Bahamas
• Judge: Charles Snr. J
• Judgment Date: 01 November 2022
• Court: Supreme Court (Bahamas)
• Docket Number: 2021/CLE/gen/01043

In the Matter of the trusts of the Declaration of Trust dated 23 ^rd February 2001 and designated as the “X” Trust and of the trusts of the Declaration of Trust dated 23 ^rd February 2001 and designated as The “Y” Trust.

And in the Matter of an application under Section 3 of the Judicial Trustees Act and/or under the inherent jurisdiction of the Court.

Between:

Cheryl Hamersmith-Stewart

Plaintiff

and

Cromwell Trust Company Limited

First Defendant

Adam Stewart

(acting in his capacity as the Enforcer, a member of the Advisory Board and personal capacity)

Second Defendant

Jaime Stewart-McConnell

(acting in her capacity as a member of the Advisory Board and personal capacity)

Third Defendant

Brian Jardim

Fourth Defendant

Gordon Stewart

Fifth Defendant

Kelly Stewart

Sixth Defendant

Sabrina Stewart

Seventh Defendant

(Names Redacted)

Eighth Defendant

Robert Stewart

Ninth Defendant

BS 2022 SC 143

Before:

The Honourable Madam Senior Justice Indra H. Charles

2021/CLE/gen/01043

REDACTED RULING PENDING APPEAL

IN THE SUPREME COURT

Common Law & Equity Division

Practice and Procedure — Administration of Trusts — Striking Out of Defence or Unless Order — Whether co-defendants have “standing” to strike out the ‘holding’ defence of another co-defendant — Whether co-defendants can apply for other co-defendants to file their defence or counterclaim or be debarred from defending and participating in the proceedings — Whether co-defendants should await determination of ‘No Contest’ Application before hearing of ‘No Contest’ Application — Prejudice (if any)

By a Ruling delivered on 30 May 2022, the First through Fourth Defendants were ordered to file and serve their respective defences. They have all complied with the Order of the Court. By Order dated 20 July 2022, the Fifth through Seventh Defendants and the Ninth Defendant were ordered to file and serve their respective Defences by 5 September 2022. The Ninth Defendant has filed a ‘holding” Defence and the Fifth through Seventh Defendants have not filed their Defence.

As a result, the Second through Fourth Defendants made an application seeking: (i) an order to strike out the Defence of the Ninth Defendant and/or an unless order requiring him to file and serve his amended Defence which pleads his full case and/or be debarred from pleading any allegation against any other Defendant and (ii) an order debarring the Fifth through Seventh Defendants from filing a Defence and Counterclaim or alternatively, an unless order requiring them to file any Defence or Counterclaim failing which they be debarred from participating in the proceedings.

The Fifth through Seventh Defendants opposed the application, contending that they were not non-compliant with the order dated 20 July 2022 since they were given leave to file their defence but they cannot be compelled to do so since they have no intention of doing so. They also argued that it would be unfair to bar them from participating in the proceedings.

The Ninth Defendant also opposed the application, contending that the Second through Fourth Defendants would not be prejudiced by reserving his true defence until after the determination of the ‘No Contest’ Application and as these Defendants are not opposing parties to the Ninth Defendant, they do not have the standing to complain about his Defence. The Ninth Defendant further alleged that only the Plaintiff can do so and she has not.

HELD: The Summons filed on 3 October 2022 by the Second to Fourth Defendants is dismissed with costs to the successful parties to be taxed if not agreed.

• 1. RSC O. 18 r. 2(1) is plain. The only party that could complain and seek relief against D9 for the filing of a ‘holding’ Defence is the Plaintiff. To make a defendant an ‘opposite party’ to a co-defendant such as to give him standing to complain about that defendant's defence, that defendant will have to make a claim against him. But a defendant can only do so by either making a counterclaim against him: RSC O. 15 r 3(1) or serving a notice on him under O. 16 r. 8(1)(b). D9 has done neither.

• 2. RSC O. 18 r. (8)(1) is also plain. It speaks to matters which must be specifically pleaded by a defendant so as not to take the ‘opposite party’ by surprise; that is, the Plaintiff.

• 3. The law is so long as a defendant files and serves a document which purports to be a defence within the requisite time limits, he will avoid judgment in default being entered against him. However, if justified, the plaintiff can apply for the defence to be struck out and for judgment to be entered or for summary judgment. Evidently, the court can also strike out a defence on its own initiative.

• 4. It is difficult to see how D2-D4 are being prejudiced by D9 not filing a fully formulated Defence before the hearing of the ‘No Contest’ Application.

• 5. Once the ‘No Contest’ Application is heard and determined, whichever way it goes, will bring certainty to these proceedings. Undoubtedly, a fully reasoned judgment will be issued which will clearly set out the legal metes and bounds of the ‘No Contest’ Clauses. At this stage, there is no substantive claim to be met. There is no real need for case preparation to begin until after the ‘No Contest Application’ has been resolved. In any event, without D9's properly formulated Defence, D2-D4 are not prevented from their document gathering exercise.

• 6. As a matter of basic justice and fairness, it is more sensible to permit D9 to file his properly formulated Defence following the resolution of the ‘No Contest’ Application and no real prejudice is caused to D2-D4 by permitting that approach.

• 7. In accordance with RSC O. 18 r.2 (1), a defendant does not have to file a Defence and no Court could compel that defendant to do so but, as beneficiaries in a trust action, it would be extraordinary that since they have been joined by the Plaintiff in this action, that they would be debarred from participating in these proceedings because they have not filed a defence opposing the claim. I am not aware of any law which gives the Court the power to prevent a beneficiary from participating in the action, making legal submissions or stating a position concerning the administration of the Trusts. As Mr. John Wilson KC puts it “ it simply cannot be right that only beneficiaries who oppose the relief sought are permitted to be heard”.

Appearances:

Mr. John Wilson KC with him Mrs. Vanessa Smith of McKinney Bancroft & Hughes for the Plaintiff

Mr. Brian Simms KC with him Mr. Marco Turnquest and Mr. Wilfred P. Ferguson Jr. of Lennox Paton for the First Defendant

Mr. Richard Wilson KC with him Mr. Sean McWeeney KC and Mr. John Minns of Graham Thompson for the Second, Third and Fourth Defendants

Mr. Nicholas LePoidevin KC with him Mr. Terry North, Ms. Wynsome Carey and Mr. Darzhon Rolle of Alexiou Knowles for the Fifth, Sixth and Seventh Defendants

Mr. John Delaney KC with him Mrs. Lena Bonaby of Delaney Partners for the Eighth Defendant

Mrs. Courtney Pearce-Hanna with Ms. Raven Rolle of Callendars & Co. for the Ninth Defendant

RULING

Charles Snr. J

Introduction

1 By Summons filed on 3 October 2022 and supported by an affidavit of Gabriel K. Brown filed on 3 October 2022, the Second to Fourth Defendants (“D2-D4”) seek an order:

• 1. to strike out the Defence dated 5 September 2022 of the Ninth Defendant (“D9's Defence”) or, alternatively, to strike out the second and third paragraphs of D9's Defence and debarring him from pleading any allegation against any other Defendant in these proceedings on the basis of facts and matters of which he is currently aware or could, upon reasonable enquiry, have found out; or, alternatively, an unless order requiring D9 to file and serve an amended Defence which pleads his full case, failing which his Defence be struck out and/or be debarred from pleading any allegation against any other Defendant in these proceedings on the basis of facts and matters of which he is currently aware or could, upon reasonable enquiry, have found out; and

• 2. to debar each of the Fifth to Seventh Defendants (“D5-D7”) from filing any Defence or Counterclaim in these proceedings and debarring them from participating in the proceedings, or alternatively; an unless order requiring them to file any Defence or Counterclaim, failing which they be debarred from defending and participating in the proceedings.

2 D2-D4 make this application pursuant to RSC O. 18 r.19(a), (b), (c) and/or (d), O. 31A, r.18(2)(j) and/or (s), and/or O. 31A, r. 20(1)(a), (b) and/or (d) and/or O. 31A, r.21(1) and/or the inherent jurisdiction of the Court.

3 The Plaintiff, D5-D7 and D9 oppose the application made by D2-D4. The First Defendant (“D1”) and the Eighth Defendant (“D8”) did not make submissions. However, on 1 November 2022, the Court received the Fifth Affidavit of Steven Carey for use in the hearing of the Strike Out application. D1 states that it remains neutral neither supporting nor opposing D2-D4's application. At paragraph 35 of Mr. Carey's affidavit, he emphasized D1's neutrality as between competing beneficiaries.

Salient facts

4 The facts are outlined in the previous Rulings of this Court. However, some salient facts are necessary for a better understanding of this Ruling.

5 The Plaintiff, who is the common law widow of the Founder of two Trusts, of which she is a beneficiary, seeks the replacement of D1 as the sole Trustee of the Trusts. She alleges various conflicts of interest against D1 and its failure to carry out the Founder's wishes and that she has been wrongfully deprived of and prevented from using certain assets to which she claims to be entitled.

6 Both Trusts contain ‘No Contest’ Clauses empowering D1 to exclude any beneficiary and so deprive him/her of any benefits from the Trusts if that beneficiary brings any claim against the Trusts.

7 The Plaintiff denies that her claims engage the ‘No Contest’ Clauses but in order...