SCHULTZ v. REYNOLDS and NEWPORT LIMITED 15-April-1992
[1992–93 CILR 59]
SCHULTZ v. REYNOLDS and NEWPORT LIMITED
COURT OF APPEAL (Zacca, P., Georges and Kerr, JJ.A.): April 15th, 1992
Companies—minority shareholders—right to bring action—entitled to bring action on behalf of company against directors fraudulently or negligently benefiting themselves at company’s expense—no action by beneficial owner unless registered shareholder
Companies—shares—beneficial owner—joint beneficial owners—beneficial owner bringing proceedings must join co-owner in proceedings
Civil Procedure—pleading—amendment—amendment of statement of claim to introduce new cause of action may be allowed by Court of Appeal even though statement of claim already struck out by Grand Court
  The appellant brought an action against the first respondent in the Grand Court for breach of trust.
  The appellant alleged that D had agreed to pay her US$500,000 for certain business services she had performed for him. A company (the second respondent) was formed and the money deposited in an account in its name at the Canadian Imperial Bank of Commerce (“CIBC”). The shares in the company were held by a nominee shareholder, Commerce Management Services (“CMS”), jointly for the benefit of the appellant and D. CMS, a wholly-owned subsidiary of CIBC, managed the affairs of the new company, the directors of which were the first respondent (a trust officer with CIBC) and four other local employees of CIBC. They were also the subscribers to its memorandum of association. The first respondent explained that the purpose of this arrangement was to ensure that, should the appellant predecease D, any sums to the credit of the account would accrue to him but as long as she was alive the funds would be hers and under her control. Nonetheless, the printed nominee agreement form allowed “any one/all of the beneficial owners” to authorize the transfer of the shares.
  The appellant suspected that the money was no longer in the account and discovered that the first respondent, acting on instructions from D, had transferred the money to another account in D’s name. She brought the present proceedings on behalf of the company against the first respondent for breach of trust and, since it was a derivative action, she also named the company as a defendant.
  The first respondent applied for the action to be struck out on the grounds that the appellant had no locus standi and her statement of claim disclosed no cause of action. The Grand Court (Malone, C.J.)

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held that there was an arguable case that she was entitled to sue on the company’s behalf but nevertheless struck out the statement of claim for disclosing no cause of action.
  The appellant appealed but first sought an amendment to the statement of claim to include an allegation of conspiracy. The application for the amendment was heard in the course of the appeal.
  The appellant submitted that (a) as a beneficial owner of the shares in the second respondent she was entitled to bring the action in her own name; (b) to bring a derivative action she needed to prove only that a fraud had been committed by the first respondent and that he was legally in control of the second respondent. She was not required to prove that he had personally benefited from the fraud; (c) his fraud stemmed from the fact that he knew that the money had been deposited in the account for her own use and had transferred it without her knowledge; (d) the action had been properly brought against the first respondent since in his capacity as one of the directors of the second respondent, all of whom were employees of the bank that ultimately controlled that company, he was in fact and law in control of it; and (e) there had been a conspiracy between the first respondent, the bank and the other beneficial owner of the shares to commit a breach of trust against the second respondent by unlawfully utilizing its funds against its interest.
  The first respondent submitted in reply that (a) under the Companies Law (Revised), s.37 the appellant, being neither a member nor a shareholder of the second respondent, had no locus standi to bring or sustain an action on its behalf; (b) any wrong allegedly suffered would have been suffered by the company, which alone could sue; (c) even if the appellant were entitled to bring an action on behalf of the second respondent, she had failed in essence to establish a cause of action because it was clear that he did not control the second respondent and no facts had been pleaded to support a claim of fraud or negligent breach of trust nor to show what benefit he had derived from the act complained of; (d) it was essential to establish in a derivative action that the alleged wrongdoer was not only in control of the company on whose behalf the suit was brought but that the act complained of was committed with the intention of bringing some benefit to himself; and (e) the court had no jurisdiction on an appeal to grant the amendment sought since the appellant’s defective statement of claim had already been struck out and, accordingly, there was no document which could be amended.
  Held, dismissing the appeal:
  (1) It was the general rule that the proper plaintiff in an action in respect of a wrong alleged to be done to a company was prima facie the company itself and, as an exception, a minority shareholder might bring a derivative action on behalf of the company against the wrongdoers if they used their controlling powers either fraudulently or negligently with the intention of benefiting themselves at the expense of the company. Accordingly, the appellant would have been able to bring a

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derivative action if she had been a minority shareholder, but as she was not (being only the beneficial owner of shares in the company), she could not sue on its behalf and it was only the subsidiary company of the bank, in which name all the shares of the second respondent were registered, that could do so. In any case, as one of two joint beneficial owners, the appellant also lacked the capacity to sue on her own but would have had to join her co-owner. It would have been more appropriate to bring a different type of action naming her co-owner and the nominee shareholding company as defendants (page 63, line 40 – page 64, line 4; page 67, lines 3–7; page 69, lines 27–38; page 77, lines 1–15).
  (2) Moreover, there seemed to be no justification for bringing proceedings against the first respondent. The first respondent was a director but not a shareholder of the second respondent, which was legally controlled by a nominee shareholding company, a subsidiary of the bank employing the first respondent and other directors of the second respondent. However, it did not follow from this that the first respondent controlled the second respondent. On the contrary, he was under a legal obligation to act independently in the interests of the second respondent and was under no obligation to heed the wishes of his employer, the bank. There was also nothing pleaded to establish fraud or that the first respondent had gained any benefit from his alleged breach of trust or wrongful exercise of authority vis-a-vis the second respondent and proof of improper benefit was essential—whether the act complained of was fraudulent or negligent—for the appellant to succeed. Accordingly, on the statement of claim as it stood, no cause of action had been established and it had been properly struck out (page 72, line 12 – page 73, line 8; page 79, line 17 – page 80, line 11).
  (3) Since the Grand Court would certainly have been able to allow an amendment to the appellant’s statement of claim to bring in a plea of conspiracy, the Court of Appeal, because it had all of the powers of the Grand Court, had the jurisdiction to entertain such an application, in spite of the striking out of the statement of claim. However, it would be unfair to the respondents to allow the amendment at such a stage of the proceedings and since, in any case, there were other courses of action open to the appellant by which she could more appropriately seek redress for the wrongs suffered, the application for amendment would be dismissed (page 73, lines 18–29; page 80, line 40 – page 81, line 16).
Cases cited:
  (1)    Bagshaw v. Eastern Union Ry. Co. (1849), 7 Hare 114; 68 E.R. 46, considered.
  (2)    Birch v. Sullivan, [1957] 1 W.L.R. 1247; [1958] 1 All E.R. 56, dicta of Harman, J. considered.
  (3)    Burland v. Earle, [1902] A.C. 83; (1902), 71 L.J.P.C. 1, dicta of Lord Davey applied.

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  (4)    Daniels v. Daniels , [1978] Ch. 406; [1978] 2 All E.R. 89, dicta of Templeman, J. applied.
  (5)    Edwards v. Halliwell, [1950] 2 All E.R. 1064; (1950), 94 Sol. Jo. 803, dicta of Jenkins, L.J. applied.
  (6)    Estmanco (Kilner House) Ltd. v. G.L.C., [1982] 1 W.L.R. 2; [1982] 1 All E.R. 437, dicta of Megarry, V.-C. applied.
  (7)    Exchange Travel (Holdings) Ltd., Re, [1991] BCLC 728, dictum of Harman, J. applied.
  (8)    Fargro Ltd. v. Godfroy, [1986] 1 W.L.R. 1134; [1986] 3 All E.R. 279; [1986] BCLC 370, considered.
  (9)    Foss v. Harbottle (1843), 2 Hare 461; 67 E.R. 189, applied.
(10)    Great W. Ry. Co. v. Rushout (1852), 5 De G. & Sm. 290; 64 E.R. 1121, distinguished.
(11)    Kuwait Asia Bank E.C. v. National Mutual Life Nominees Ltd., [1991] 1 A.C. 187; [1990] 3 All E.R. 404; [1990] 2 Lloyd’s Rep. 95, considered.
(12)    Lonrho PLC v. Fayed, [1992] 1 A.C. 448; [1991] 3 All E.R. 303; [1991] BCLC 779.
(13)    Lonhro Ltd. v. Shell Petroleum Co. Ltd., [1982] A.C. 173; [1981] 2 All E.R. 456.
(14)    Metall & Rohstoff AG v. Donaldson, Lufkin & Jenrette Inc., [1990] 1 Q.B. 391; [1989] 3 All E.R. 14.
(15)    Prudential Assur. Co. Ltd. v. Newman Indus. Ltd. (No. 2), [1981] Ch. 257; [1980] 2 All E.R. 841; on appeal, [1982] Ch. 204; [1982] 1 All E.R. 354, applied.
(16)    Stena Fin. BV v. Sea Containers Ltd., [1989] LRC (Comm.) 641, considered.
(17)    Telecommunications of Jamaica Ltd. v. Bernard, Court of Appeal of Jamaica, Case No. 88 of 1990, unreported, applied.
(18)    Wallersteiner v. Moir (No. 2), [1975] Q.B. 373; [1975] 1 All E.R. 847, dicta of Lord Denning, M.R. applied.
(19)    Williams v. British Gas Corp. (1980), 41 P. & C.R. 106; 257 E.G. 833.
Legislation construed:
Companies Law (Revised) (Laws of the Cayman Islands, 1963, cap. 22, revised 1990), s.37:
  “The subscribers of the memorandum of association of any company shall be deemed to have agreed to become members of the company whose memorandum they have subscribed, and upon the registration of the company shall be entered as members on the Register of members hereinafter mentioned, and every other person who has agreed to become a member of a company and whose name is entered on the register of members, shall be deemed to be a member of the company.”
P. Lamontagne, Q.C. and D. Bannon for the appellant;
R.D. Alberga, Q.C. and N. Clifford for the first respondent.
The second respondent did not appear and was not represented.

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               ZACCA, P.: This is an appeal against the order of the Grand 
  Court Judge striking out a writ of summons and statement of 
  claim filed by the appellant on the ground that she had no locus 
  standi. The appellant in her statement of claim and in her affidavit 
alleged that she performed certain services for one Robert Dupre 
  and that he agreed to pay her US$500,000. 
    A meeting was arranged between the first respondent, herself 
  and Dupre at the Canadian Imperial Bank of Commerce 
  (“CIBC”). The first respondent was a senior trust officer with the 
10  bank. It was agreed that a company was to be formed and the 
  money was to be deposited to the account of that company. 
  Newport Ltd., a Cayman company, was incorporated for the 
  purpose. Another Cayman company called Commerce Manage- 
  ment Sevices Ltd. (“CMS”) was a subscriber to the memorandum 
15  of association of Newport Ltd. Five persons, all employees of 
  CIBC, were appointed directors of Newport Ltd. The respon- 
  dent, Anthony Reynolds, was one of the directors so appointed. 
  The same five directors were also directors of CMS. 
    100 shares in Newport Ltd. were issued to CMS. A nominee 
20  agreement was executed in which CMS was to hold the 100 shares 
  it had as nominee for the appellant and Robert DuPre. The 
  agreement records that all the 100 shares are the joint property of 
  the appellant and Dupre. The appellant and Dupre were 
  therefore the beneficial owners of the shares. 
25    It was also alleged that subsequent to the money being 
  deposited in the account of Newport Ltd., it was transferred with 
  the knowledge of the respondent to an account at CIBC in the 
  name of Robert Dupre at his request. The transfer was done as if 
  in repayment of a loan made by Dupre. No action has been 
30  commenced against any of the alleged wrongdoers other than the 
  respondent Reynolds. Dupre was not joined as a defendant. 
    It is not in dispute that the appellant has brought this claim on 
  behalf of the second respondent, Newport Ltd. Nor is it in 
  dispute that the appellant is bringing a derivative action for the 
35  second respondent, Newport Ltd., and not on behalf of herself. It 
  is well established that a minority shareholder can bring a 
  derivative action on behalf of the company against wrongdoers 
  who have committed a fraud on the company and who are in 
  control of the company. 
40    The general principle established in Foss v. Harbottle (9) is that 
  where a wrong has been done to a company, prima facie the only 

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         proper plaintiff is the company itself and that an action by a 
  shareholder claiming relief for the company is not available. The 
  plaintiff may only bring a derivative action if it falls within the 
  exceptions to the rule in Foss v. Harbottle
  In Edwards v. Halliwell (5) the rule in Foss v. Harbottle was 
  considered. Jenkins, L.J. stated ([1950] 2 All E.R. at 1067): 
        “The cases falling within the general ambit of the rule are 
      subject to certain exceptions. It has been noted in the course 
      of argument that in cases where the act complained of is 
10      wholly ultra vires the company or association the rule has no 
      application because there is no question of the transaction 
      being confirmed by any majority. It has been further pointed 
      out that where what has been done amounts to what is 
      generally called in these cases a fraud on the minority and 
15      the wrongdoers are themselves in charge of the company, the 
      rule is relaxed in favour of the aggrieved minority who are 
      allowed to bring what is known as a minority shareholders’ 
      action on behalf of themselves and all others. The reason for 
      this is that, if they were denied that right, their grievance 
20      could never reach the court because the wrongdoers them- 
      selves, being in control, would not allow the company to sue. 
      Those exceptions are not directly in point in this case, but 
      they show, especially the last one, that the rule is not an 
      inflexible rule and it will be relaxed where necessary in the 
25      interests of justice.” 
    In Prudential Assur. Co. Ltd. v. Newman Indus. Ltd. (No. 2) 
  (15) the court, comprising Cumming-Bruce, Templeman and 
  Brightman, L.JJ. stated ([1982] 1 All E.R. at 357–358): 
        “The classic definition of the rule in Foss v. Harbottle is 
30      stated in the judgment of Jenkins, L.J. in Edwards v. 
      Halliwell [1950] 2 All E.R. 1064 at 1066–1067 as follows. (1) 
      The proper plaintiff in an action in respect of a wrong alleged 
      to be done to a corporation is, prima facie, the corporation. 
      (2) Where the alleged wrong is a transaction which might be 
35      made binding on the corporation and on all its members by a 
      simple majority of the members, no individual member of 
      the corporation is allowed to maintain an action in respect of 
      the matter because, if the majority confirms the transaction, 
      cadit quaestio; or, if the majority challenges the transaction, 
40      there is no valid reason why the company should not sue. (3) 
      There is no room for the operation of the rule if the alleged 

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             wrong is ultra vires the corporation, because the majority of 
      members cannot confirm the transaction. (4) There is also no 
      room for the operation of the rule if the transaction 
      complained of could be validly done or sanctioned only by a 
    special resolution or the like, because a simple majority 
      cannot confirm a transaction which requires the concurrence 
      of a greater majority. (5) There is an exception to the rule 
      where what has been done amounts to fraud and the 
      wrongdoers are themselves in control of the company. In this 
10      case the rule is relaxed in favour of the aggrieved minority, 
      who are allowed to bring a minority shareholders’ action on 
      behalf of themselves and all others. The reason for this is 
      that, if they were denied that right, their grievance could 
      never reach the court because the wrongdoers themselves, 
15      being in control, would not allow the company to sue.” 
    In Wallersteiner v. Moir (No. 2) Lord Denning, M.R. stated 
  ([1975] 1 All E.R. at 858): 
        “To avoid that circuity, Lord Hatherley, L.C. held that the 
      minority shareholders themselves could bring an action in 
20      their own names (but in truth on behalf of the company) 
      against the wrongdoing directors for the damage done by 
      them to the company, provided always that it was impossible 
      to get the company itself to sue them. He ordered the 
      fraudulent directors in that case to repay the sums to the 
25      company, be it noted, with interest. His decision was 
      emphatically approved by this court in Menier v. Hoopers’ 
      Telegraph Works; and Mason v. Harris. The form of the 
      action is always ‘AB (a minority shareholder) on behalf of 
      himself and all other shareholders of the Company’ against 
30      the wrongdoing directors and the company. That form of 
      action was said by Lord Davey to be a ‘mere matter of 
      procedure in order to give a remedy for a wrong which would 
      otherwise escape redress’; see Burland v. Earle. Stripped of 
      mere procedure, the principle is that, where the wrongdoers 
35      themselves control the company, an action can be brought 
      on behalf of the company by the minority shareholders, on 
      the footing that they are its representatives, to obtain redress 
      on its behalf. I am glad to find this principle well stated by 
      Professor Gower in his book on companies in words which I 
40      would gratefully adopt: 
            ‘Where such an action is allowed the member is not 

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                 really suing on his own behalf nor on behalf of the 
          members generally, but on behalf of the company itself. 
          Although . . . he will have to frame his action as a 
          representative one on behalf of himself and all the 
        members other than the wrongdoers, this gives a 
          misleading impression of what really occurs. The plain- 
          tiff shareholder is not acting as a representative of the 
          other shareholders but as a representative of the 
          company . . . in the United States . . . this type of 
10          action has been given the distinctive name of a 
          “derivative action,” recognising that its true nature is 
          that the individual member sues on behalf of the 
          company to enforce rights derived from it.’ ” 
    Mr. Alberga, Q.C. for the respondent submitted that unless 
15  the appellant can show that she is a shareholder of Newport Ltd., 
  she has no locus standi and cannot sustain the action. Mr 
  Lamontagne, Q.C. for the appellant submitted that she is a 
  beneficial owner of the shares and as such is entitled to bring the 
  action in her name. 
20    CMS became the nominee of the appellant and Dupre under a 
  nominee agreement of September 4th, 1989, which provides in 
  part: 
      “The shares of the company will be transferred to the 
      beneficial owners or their nominees in accordance with such 
25      directions as any one/all of the beneficial owners may give 
      and for the aforesaid purposes the corporate nominee hereby 
      authorizes any one/all of the beneficial owners to sign all 
      such transfers or other forms as may be necessary for 
      registration of the shares of the company in the name of the 
30      beneficial owners or that of their nominees.” 
  The register of Newport Ltd. shows CMS to be the sole member 
  of Newport Ltd. 
    Section 37 of the Companies Law (Revised) defines those who 
  are members of a company. The section provides as follows: 
35      “The subscribers of the memorandum of association of any 
      company shall be deemed to have agreed to become 
      members of the company whose memorandum they have 
      subscribed, and upon the registration of the company shall 
      be entered as members on the Register of members herein- 
40      after mentioned, and every other person who has agreed to 
      become a member of a company and whose name is entered 

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             on the register of members, shall be deemed to be a member 
      of the company.” 
  The appellant is therefore not a member of the company in 
  accordance with s.37 of the Companies Law (Revised). Can it 
therefore be said that the appellant is a shareholder of Newport 
  Ltd.? In the alternative, if she is not a shareholder, can she as 
  beneficial owner of the shares maintain this action? 
    In Birch v. Sullivan (2) the action was stayed because the 
  plaintiff at the time of trial was not registered as a shareholder. 
10  The plaintiff was adjudged a bankrupt and the trustee in 
  bankruptcy was regarded as the shareholder. Harman, J. stated 
  ([1958] 1 All E.R. at 58): 
      “The circumstances are well settled in which a shareholder, if 
      he be in the minority, may bring such an action in his own 
15      name. Supposing that all the conditions were satisfied and 
      that the registered shareholder was in a position, if he were 
      not bankrupt, to bring an action because of the wrongful act 
      of the director in not paying money to the company, I am not 
      satisfied that he could not maintain such an action as long as 
20      he remained registered. However that may be, he certainly 
      can no longer maintain the action when he has ceased to be a 
      registered holder. Therefore, on that part of the claim, I 
      should certainly stay the action as long as the plaintiff alone 
      remains the plaintiff, giving a reasonable opportunity to the 
25      trustee to put the matter right if he is minded to adopt the 
      action.” 
    In Fargro Ltd. v. Godfroy (8) it was held that the plaintiff could 
  not bring a minority shareholder’s action because the company 
  was in liquidation. If the company had not been in liquidation the 
30  plaintiff, being a shareholder of the company, would have been 
  entitled to bring the action. Mr. Lamontagne submits that the 
  appellant as a beneficial owner of the shares was entitled to bring 
  this action. In support of his proposition he relies on the case of 
  Stena Fin. BV v. Sea Containers Ltd. (16). In that case, a 
35  preliminary point was taken that the plaintiff, Temple, was not a 
  registered holder of shares when the action was brought and 
  therefore had no locus standi. However, it was pointed out that 
  Temple had been registered as the owner of the shares at the time 
  of trial. It was in these circumstances that Astwood, C.J. stated 
40  ([1989] LRC (Comm.) at 666): 
      “In the instant case no harm is done since I hold, on 

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             reviewing the pleadings and having considered the submis- 
      sions of counsel, that Temple has locus since they were 
      absolute beneficial owners of the shares when the action was 
      started and Stena can maintain the action in its own right as a 
    member of the company.” 
    Mr. Lamontagne also relied on the case of Great W. Ry. Co. v. 
  Rushout (10). In that case, the Great Western Railway Co. 
  became shareholders holding 3,600 shares in the company 
  standing in the name of 4 persons who were defendants in the 
10  suit, upon certain trusts in an indenture dated March 23rd, 1948. 
  It was contended that the plaintiffs had no right to sustain the suit 
  because its object was to affect the internal management of the 
  company, and the plaintiffs did not appear in the share list as 
  shareholders. In his judgment, Parker, V.-C. stated (5 De G. & 
15  Sm. at 306–307; 64 E.R. at 1129): 
        “It appears by the bill, and upon the affidavits, that the 
      Plaintiffs are not shareholders in their own name in this 
      company; but the bill states, and it is proved by affidavit, that 
      they have got a large number of shares that are standing in 
20      the names of four persons, who are trustees for the Plaintiffs, 
      and who are named as Defendants to this record; and in that 
      state of matters it was contended that the company had no 
      such interest as enabled them to maintain this suit, suing on 
      behalf of themselves and all other the shareholders. 
25        With reference to that question, I think they have an 
      interest to maintain this suit. There is a valid trust, beyond 
      all doubt valid, on which these shares are held for the Great 
      Western Railway Company, they are the only persons who, 
      under that trust, are interested in the shares. They have 
30      therefore an interest in what is sought by this bill to protect 
      the property and concerns of this company. 
        It is very true that, for many purposes, the company are 
      only bound to regard the legal title. One of the clauses of the 
      Act is that the company shall not be bound to see to the 
35      execution of any trust. Now, they are not asked here to see 
      to the execution of any trust, they are only asked to act on a 
      title, which is a trust executed, and is an equitable not a legal 
      title; and enabling these parties to maintain this suit does not 
      in any way change the jurisdiction on the subject-matter: so 
40      that I must assume for this purpose that the legal share- 
      holders themselves could maintain this bill. It is not like 

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             those cases in which the cestui que trust suing in this Court, 
      and making the trustee a Defendant, asserts a right against 
      another party, which is a right to be asserted by the trustee in 
      a Court of law. The trustee, or cestui que trust, can sue in this 
    Court, and therefore that objection cannot apply; and, when 
      it is added to this that the trustees themselves, the persons 
      who are the legal owners of the shares, are parties to the suit, 
      and bound by the proceedings, I confess I do not see any 
      objection to the frame of the suit. Moreover, the Act of 
10      Parliament itself assumes that the Great Western Railway 
      Company may have an equitable title in these shares; for it 
      provides, in the 12th section, that, having taken these shares, 
      they may guarantee interest on the money necessary to be 
      raised to enable them to take the shares, on such conditions 
15      as the holders for the time being of the shares, or the parties 
      in whose hands they may be placed as security, may agree 
      upon. It appears that these shares are, in fact, placed in the 
      hands of the trustees, subject to certain guarantees, and 
      pursuant to that clause; so that we have the Great Western 
20      Railway Company here precisely in the position which the 
      Act of Parliament regulating the Oxford, Worcester and 
      Wolverhampton Railway Company contemplated, namely, 
      having an equitable title in these shares, but subject to those 
      guarantees held by the persons who are the owners of the 
25      shares. For these reasons, I think the suit is properly 
      constituted as to its frame.” 
    The Companies Law (Revised) recognizes only members who 
  are registered. The appellant has no voting rights and as a 
  beneficial owner of the shares has no rights under the Law. The 
30  instant case can therefore be distinguished from the Great W. 
  Railway case. 
    In my view it is only CMS, the registered shareholder of 
  Newport Ltd., who can institute an action against Newport Ltd. 
  The appellant, as a beneficial owner of the shares, is not entitled 
35  to bring a derivative action against Newport Ltd. 
    Another hurdle for the appellant is that she is a joint beneficial 
  holder of the shares with Dupre. She must therefore act jointly 
  with Dupre and cannot pursue the action on her own. In Williams 
  v. British Gas Corp. (19) it was held that one of two joint tenants 
40  cannot commence proceedings without the aid of the other. 
  Again, in Re Exchange Travel (Holdings) Ltd. (7) it was held that 

1992–93 CILR 70

         joint shareholders could only act together. Both Dupre and CMS 
  would have to be joined as plaintiffs or as defendants. Obviously 
  they would not consent to be joined as plaintiffs. The learned 
  Chief Justice was therefore in error in holding that there was an 
arguable case as to the appellant’s right to bring this action. No 
  reliance should have been placed on the case of Bagshaw v. 
  Eastern Union Ry. Co. (1). 
    The Chief Justice in his judgment concluded that wrongdoers 
  cannot be held to have committed a “fraud upon the minority” 
10  unless it can be shown that the wrongdoers have obtained a 
  benefit as a result of their actions. This was necessary to bring the 
  case within the exception to the rule in Foss v. Harbottle (9). Mr. 
  Lamontagne submitted that where fraud was proved, the element 
  of personal gain from the fraud need not be established. It is not 
15  contended that the respondent received any personal benefit by 
  paying out the money from the accounts of Newport Ltd. to 
  Dupre. It was, however, argued by Mr. Lamontagne that his 
  action amounted to fraud as a result of the misappropriation of 
  the company’s funds. 
20    In Burland v. Earle (3) Lord Davey stated ([1902] A.C. at 93): 
      “Again, it is clear law that in order to redress a wrong done 
      to the company or to recover moneys or damages alleged to 
      be due to the company, the action should primâ facie be 
      brought by the company itself. These cardinal principles are 
25      laid down in the well-known cases of Foss v. Harbottle . . . 
      and Mozley v. Alston . . . and in numerous later cases which 
      it is unnecesary to cite. But an exception is made to the 
      second rule, where the persons against whom the relief is 
      sought themselves hold and control the majority of the 
30      shares in the company, and will not permit an action to be 
      brought in the name of the company. In that case the Courts 
      allow the shareholders complaining to bring an action in 
      their own names. This, however, is mere matter of pro- 
      cedure in order to give a remedy for a wrong which would 
35      otherwise escape redress, and it is obvious that in such an 
      action the plaintiffs cannot have a larger right to relief than 
      the company itself would have if it were the plaintiff, and 
      cannot complain of acts which are valid if done with the 
      approval of the majority of the shareholders, or are capable 
40      of being confirmed by the majority. The cases in which the 
      minority can maintain such an action are, therefore, confined 

1992–93 CILR 71

             to those in which the acts complained of are of a fraudulent 
      character or beyond the powers of the company. A familiar 
      example is where the majority are endeavouring directly or 
      indirectly to appropriate to themselves money, property, or 
    advantages which belong to the company, or in which the 
      other shareholders are entitled to participate, as was alleged 
      in the case of Menier v. Hooper’s Telegraph Works. . . .” 
    In considering the exception to the rule in Foss v. Harbottle (9) 
  which requires the plaintiff in a minority shareholder’s action to 
10  establish fraud on the part of the wrongdoer and that the 
  wrongdoers were in control of the company, Vinelott, J. in 
  Prudential Assur. Co. Ltd. v. Newman Indus. Ltd. (No. 2) (15) 
  stated ([1980] 2 All E.R. at 869): 
        “Thus the authorities show that the exception applies not 
15      only where the allegation is that directors who control a com- 
      pany have improperly appropriated to themselves money, 
      property or advantages which belong to the company or, in 
      breach of their duty to the company, have diverted business 
      to themselves which ought to have been given to the 
20      company, but more generally where it is alleged that 
      directors though acting ‘in the belief that they were doing 
      nothing wrong’ (per Lord Lindley, M.R. in Alexander v. 
      Automatic Telephone Co., [1900] 2 Ch. 56 at 65) are guilty of 
      a breach of duty to the company (including their duty to 
25      exercise proper care) and as a result of that breach obtain 
      some benefit. In the latter case it must be unnecessary to 
      allege and prove that the directors in breaking their duty to 
      the company acted with a view to benefiting themselves at 
      the expense of the company; for such an allegation would be 
30      an allegation of misappropriation of the company’s property. 
      On the other hand, the exception does not apply if all that is 
      alleged is that directors who control a company are liable to 
      the company for damages for negligence it not being shown 
      that the transaction was one in which they were interested or 
35      that they have in fact obtained any benefit from it.” 
  In Daniels v. Daniels (4) Templeman, J. said ([1978] 2 All E.R. at 
  96): 
      “The principle which may be gleaned from Alexander v. 
      Automatic Telephone Co. (directors benefiting themselves) 
40      from Cook v. Deeks (directors diverting business in their 
      own favour) and from dicta in Pavlides v. Jensen (directors 

1992–93 CILR 72

             appropriating assets of the company) is that a minority 
      shareholder who has no other remedy may sue where 
      directors use their powers intentionally or unintentionally, 
      fraudulently or negligently in a manner which benefits 
    themselves at the expense of the company. This principle is 
      not contrary to Turquand v. Marshal because in that case the 
      powers of the directors were effectively wielded not by the 
      director who benefited but by the majority of independent 
      directors who were acting bona fide and did not benefit.” 
10  In Estmanco (Kilner House) Ltd. v. G.L.C. (6) Megarry, V.-C. 
  accepted the principle laid down by Templeman, J. in Daniels v. 
  Daniels. The Court of Appeal in Jamaica in the case of 
  Telecommunications of Jamaica Ltd. v. Bernard (17) was also of 
  the view that it must be shown that there was a benefit to the 
15  directors whose wrongdoing is the subject of the complaint. I see 
  no reason for departing from this conclusion and would hold that 
  the decision was a correct one. 
    The only person against whom wrongdoing is alleged is the 
  respondent Reynolds. No evidence has been established to 
20  suggest that Reynolds received any benefit from his actions in 
  having the money transferred from Newport’s account to Dupre. 
  The facts do not fall within the exception to the rule in Foss v. 
  Harbottle (9). The appellant has not established the essential 
  element of fraud which is necessary to bring the claim within the 
25  exception to the rule in Foss v. Harbottle
    Another issue was whether the alleged wrongdoer controls 
  Newport Ltd. The appellant must show not only that there was 
  fraud on the part of Reynolds but that he controlled Newport 
  Ltd. This is necessary to bring the claim within the exception to 
30  the rule in Foss v. Harbottle. The evidence does not disclose that 
  Reynolds is in control of the company. He is not a shareholder in 
  the company. He is one of five directors and has no voting rights. 
  The shares in the company are held by CMS. The register of 
  Newport Ltd. shows this to be so. It has been suggested by Mr. 
35  Lamontagne that CMS is a subsidiary of CIBC and since all the 
  directors of Newport Ltd. and CMS are employees of CIBC, that 
  consequently CIBC controls the board of Newport Ltd. and 
  CMS. This submission cannot be accepted as a correct one. 
    Mr. Lamontagne referred the court to Kuwait Asia Bank E.C. 
40  v. National Mutual Life Nominees Ltd. (11). In that case the Privy 
  Council held that nominee directors of a company were under a 

1992–93 CILR 73

         duty to exercise such diligence and skill as may be required of 
  them in the interest of the company of which they were directors. 
  However, they were bound to ignore the interests of their 
  employer. The directors of Newport Ltd. have a duty to act in the 
best interest of the company regardless of the wishes of CIBC. 
    There can be no legal control of Newport Ltd. by CIBC. It 
  cannot therefore be said that Reynolds controls Newport Ltd. 
  Such legal control is vested in CMS. 
    In order to cure the defect of the appellant’s claim against 
10  Reynolds for fraud, the appellant sought to amend the statement 
  of claim by adding a new para. 27 as follows: 
        “Further and in the alternative, Reynolds, CIBC, and 
      Dupre have conspired together and with each other to 
      deprive Newport Ltd., by the unlawful means set out in 
15      paras. 20, 21, 22, 23, 25 and 26 hereof, of the funds held in its 
      account with CIBC and to transfer the said funds to Dupre 
      by the said unlawful means.” 
  Mr Alberga argued that the court had no jurisdiction to entertain 
  the amendment. This court has all the powers of the Grand Court 
20  and there is no doubt that had the application been made to the 
  Grand Court, the court would have had the jurisdiction to 
  entertain the application. The reasons given by the appellant for 
  not including the claim of conspiracy in the original pleadings are 
  no longer applicable having regard to the decision in the House of 
25  Lords in Lonrho PLC v. Fayed (12). 
    Having regard to the circumstances of the instant case, I would 
  not allow the application for the amendment. The appellant may 
  yet be able to bring a new action for the wrong alleged to be 
  suffered by her. 
30    I would, for the reasons stated above, dismiss the appeal with 
  costs to the respondent to be taxed or agreed. 
        GEORGES, J.A.: The dispute in this case arises from a 
  promise alleged to have been made by an American businessman, 
35  Robert Dupre, to the appellant, Kirsten Schultz, to pay her 
  US$500,000 for services rendered with respect to certain projects. 
  The money was to have been deposited into a bank account in 
  Grand Cayman in her name. No such deposit was ever made, but 
  on September 4th, 1989 the appellant and Dupre met at the office 
40  of the Canadian Imperial Bank of Commerce (“CIBC”) in Grand 
  Cayman. Dupre was a customer of CIBC and it would appear 

1992–93 CILR 74

         that the purpose of the meeting was to arrange the implementa- 
  tion of the promise. Present at the meeting was Anthony 
  Reynolds, the first respondent, then a senior trust officer on the 
  trust side of the operations of CIBC in Grand Cayman. The 
appellant states that Reynolds well knew that Dupre was to pay 
  to her for her own use the sum of $500,000. 
    She further states that Reynolds advised that the payment 
  should be arranged in the following way. A company would be 
  incorporated under the name Newport Ltd. The shares in that 
10  company would be held by a nominee shareholder, Commerce 
  Management Services (“CMS”), jointly for the benefit of the 
  appellant and Dupre. CMS, a wholly owned subsidiary of CIBC, 
  would manage Newport Ltd. The directors of Newport Ltd. 
  would be himself, Reynolds and four other employees of CIBC. 
15  Newport Ltd. would open an account with CIBC and the 
  $500,000 would be deposited into that account. Reynolds 
  explained that the purpose of the arrangement was to ensure that 
  should the appellant predecease Dupre any sums to the credit of 
  the account would accrue to Dupre, but so long as she was alive 
20  the funds to the credit of the account would be hers and under her 
  control. She knew nothing about the operation of offshore 
  accounts so she accepted Reynolds’ advice and relied on his 
  assurances. 
    The appellant and Dupre signed a nominee agreement, a 
25  printed form, appointing CMS, their nominee, to hold 100 shares 
  of Newport Ltd. for them as beneficial owners. The shares were 
  declared to be the joint property of the appellant and Dupre and 
  were held for the benefit of the survivor. The shares could be 
  transferred— 
30      “in accordance with such directions as any one/all of the 
      beneficial owners may give and for the aforesaid purposes 
      the corporate nominee hereby authorizes any one/all of the 
      beneficial owners . . . to sign such transfers. . . .” 
  There was clearly an intention that either “any one” or “all” 
35  should have been deleted but this was not done. 
    Newport Ltd., the second respondent, was in fact incor- 
  porated, the subscribers to the memorandum being Reynolds and 
  four other employees of CIBC. The first meeting was held. 
  Reynolds was appointed President. Share certificates were issued 
40  to CMS. Reynolds and the four other subscribers were named 
  directors. A resolution was passed appointing CIBC bankers. On 

1992–93 CILR 75

         September 4th, 1989 Dupre gave instructions for the transfer of 
  $500,000 to the account of Newport Ltd. when it was incor- 
  porated. 
    The appellant in the course of time became suspicious that the 
sum deposited in the account of Newport Ltd. might no longer be 
  there. Accompanied by her lawyer she went to see Reynolds at 
  the offices of CIBC in Grand Cayman on August 23rd, 1990. He 
  told her that in January 1990 he had transferred money from the 
  account of Newport Ltd. on the verbal instructions of Dupre 
10  without informing her. She instructed Reynolds to transfer the 
  Newport Ltd. shares held by CMS to another management 
  company. She received a letter from CIBC dated September 6th, 
  1990 stating her instructions were ineffective. 
    The statement of claim was filed in February 1991. The 
15  appellant was the plaintiff and it is not in dispute that it was a 
  “derivative” action filed by the appellant not to obtain remedies 
  for herself but rather for the company Newport Ltd. in which she 
  held shares beneficially through the nominee CMS jointly with 
  Dupre. Newport Ltd. was named as a defendant. 
20    An application was filed on behalf of Reynolds to have the 
  statement of claim struck out on the ground that it disclosed no 
  cause of action. In effect, the contention was that the wrong 
  allegedly suffered had been suffered by Newport Ltd. which 
  alone could sue and that the plaintiff could not file a claim on 
25  behalf of Newport Ltd. unless it could be shown that the case fell 
  within one of the exceptions to the rule in Foss v. Harbottle (9). 
    In Edwards v. Halliwell (5) Jenkins, L.J. restated that rule thus 
  ([1950] 2 All E.R. at 1066): 
        “The rule in Foss v. Harbottle . . . as I understand it, 
30      comes to no more than this. First, the proper plaintiff in an 
      action in respect of a wrong alleged to be done to a company 
      or association of persons is prima facie the company or the 
      association of persons itself. Secondly, where the alleged 
      wrong is a transaction which might be made binding on the 
35      company or association and on all its members by a simple 
      majority of the members, no indivudual member of the 
      company is allowed to maintain an action in respect of that 
      matter for the simple reason that, if a mere majority of the 
      members of the company or association is in favour of what 
40      has been done, then cadit quaestio. No wrong had been done 
      to the company or association and there is nothing in respect 

1992–93 CILR 76

             of which anyone can sue. If, on the other hand, a simple 
      majority of members of the company or association is against 
      what has been done, then there is no valid reason why the 
      company or association itself should not sue.” 
  It was also contended that even before the rule itself came to be 
  considered, the appellant lacked the status to sue because she was 
  not a member of the company, Newport Ltd. The register of 
  shareholders showed that all the shares in that company were 
  held by CMS. Section 37 of the Companies Law (Revised) 
10  identified as members of a company those persons whose names 
  appeared in the register. In Birch v. Sullivan (2) the plaintiff had 
  been adjudicated a bankrupt and a trustee in bankruptcy had 
  been appointed. His name still appeared on the register of 
  members of a company in which he held shares. He issued a writ 
15  against Sullivan who was a director of the defendant company 
  claiming declarations for misfeasance as a director. The action 
  was stayed so long as the plaintiff remained on the record as the 
  plaintiff. Liberty was granted to have the action dismissed if the 
  trustee in bankruptcy did not apply to be substituted as plaintiff 
20  within a fixed time. 
    The Chief Justice rejected the submission that the appellant 
  had no locus standi. He relied on a statement in Bagshaw v. 
  Eastern Union Ry. Co. (1) that the holder of a “scrip” in a 
  company had an “inchoate right to become a registered holder of 
25  the perpetual stock” and for that reason could sue on its behalf. It 
  was emphasized in that case (7 Hare at 130; 68 E.R. at 53) that it 
  was not argued that— 
      “the holders of scrip certificates in the perpetual stock had 
      not such an interest in the application of the capital of the 
30      company as was necessary to enable them to maintain a bill 
      properly framed, to prevent a misapplication of the capital of 
      the company.” 
  The only issue was whether such persons could represent both 
  scrip holders and holders of regular stock. The statement was, 
35  therefore, obiter and was made without the benefit of argument. 
    There is some further support in Stena Fin. BV v. Sea 
  Containers Ltd. (16). In that case, however, the plaintiff had 
  become a registered shareholder by the date of hearing. The 
  authority cited, Great W. Ry. Co. v. Rushout (10), had decided 
40  that the beneficial owner of shares could sue if he joined the 
  registered shareholder as a defendant. 

1992–93 CILR 77

           In this case, however, there is an additional complication. The 
  plaintiff, though a beneficial owner, is a joint beneficial owner 
  with Dupre. It is clear law that although as between themselves 
  joint tenants and joint owners had separate rights, as against 
everyone else they were in the position of a single owner. There 
  was absolute unity between them. Together they formed one 
  person and could not commence proceedings without the aid of 
  the other or others. As regards joint shareholders this principle 
  was recently restated by Harman, J. in Re Exchange Travel 
10  (Holdings) Ltd. (7) ([1991] BCLC at 735) to the effect that— 
  “joint tenants of a share are joint covenanters and can only act 
  together. . . .” This suit is, therefore, not properly constituted in 
  the absence of CMS and Dupre as plaintiffs. Neither would, of 
  course, consent to be joined as plaintiffs. Consequently, they 
15  should have been named as defendants. 
    The substantive issue in this appeal is the correctness of the 
  conclusion by the Chief Justice that wrongdoers cannot be held to 
  have committed a “fraud upon the minority” within the meaning 
  of the exception to the rule in Foss v. Harbottle (9) as stated 
20  above unless the wrongdoers have used their powers to benefit 
  themselves. Mr. Lamontagne’s submission was that where the 
  acts of wrongdoers which result in loss to the company were 
  merely negligent then personal gain to themselves must be 
  proved to make applicable the exception to the rule in Foss v. 
25  Harbottle. Where, however, fraud on the part of the wrongdoers 
  has been proved the element of personal gain from the fraud need 
  not be established. Whilst it was not contended that Reynolds 
  received any personal benefit from paying out money in the 
  account of Newport Ltd. to Dupre, it was urged that his act was 
30  plainly a misappropriation of the company’s funds which was 
  intentional and could be categorized as “fraud.” 
    Mr. Lamontagne’s submission, in my view, proposes an 
  extension of the principles enunciated in the authorities. In his 
  judgment in Prudential Assur. Co. Ltd. v. Newman Indus. Ltd. 
35  (No. 2) (15) Vinelott, J. summarized the authorities in these 
  words ([1980] 2 All E.R. at 869): 
        “Thus the authorities show that the exception applies not 
      only where the allegation is that directors who control a com- 
      pany have improperly appropriated to themselves money, 
40      property or advantages which belong to the company or, in 
      breach of their duty to the company, have diverted business 

1992–93 CILR 78

             to themselves which ought to have been given to the 
      company, but more generally where it is alleged that 
      directors, though ‘acting in the belief that they were doing 
      nothing wrong’ (per Lord Lindley, M.R. in Alexander v. 
    Automatic Telephone Co. [1900] 2 Ch. 56 at 65) are guilty of 
      a breach of duty to the company (including their duty to 
      exercise proper care) and as a result of that breach obtain 
      some benefit. In the latter case it must be unnecessary to 
      allege and prove that the directors in breaking their duty to 
10      the company acted with a view to benefiting themselves at 
      the expense of the company; for such an allegation would be 
      an allegation of misappropriation of the company’s property 
      [Emphasis supplied].” 
  It will be noted that the reference to “improper appropriation” is 
15  followed by the qualification “to themselves” and that the 
  distinction between negligence and fraud is based on proof of an 
  intention on the part of the directors to benefit themselves when 
  they acted in the negligent manner alleged. 
    In Estmanco (Kilner House) Ltd. v. G.L.C. (6) the company 
20  concerned was a non-profit company and no issue of monetary 
  gain arose. All but 12 of the shares in the company were owned 
  by the Greater London Council. The Council had set the 
  company up to manage a block of 60 flats, Kilner House, which it 
  owned. The Council intended to sell the flats on long lease to 
25  tenants. On the purchase of a flat, the purchaser would receive a 
  share in the company but the right to cast a vote in respect of that 
  share at meetings of the company would be exercisable only when 
  all the flats had been sold and all the shares issued. Under this 
  arrangement 12 flats had been sold and 12 shares issued when a 
30  change in control of the Council led to a change in policy. The 
  Council no longer wished to sell the flats. It wished to let them to 
  applicants on the housing list. The company, though controlled 
  by the Council, sued the Council to restrain it from disposing of 
  the unsold flats except on long lease in accordance with the 
35  agreement. The Council, using its voting power, ordered the 
  directors to discontinue the action. The holder of one of the 
  allotted shares sought leave to be substituted as a plaintiff suing 
  on behalf of the company and to have the company named as a 
  defendant. 
40    Megarry, V.-C. granted the order prayed. He accepted as 
  correct the principle formulated by Templeman, J. in Daniels v. 

1992–93 CILR 79

         Daniels (4) after an analysis of the case. He said ([1982] 1 All 
  E.R. at 445): 
      “The principle which he derived from the cases was that ‘a 
      minority shareholder who has no other remedy may sue 
    where directors use their powers, intentionally or uninten- 
      tionally, fraudulently or negligently, in a manner which 
      benefits themselves at the expense of the company’ (see 
      [1978] 2 All E.R. 89 at 96 . . . ). Apart from the benefit to 
      themselves at the company’s expense, the essence of the 
10      matter seems to be an abuse or misuse of power.” 
  Clearly the phrase “which benefits themselves at the expense of 
  the company” is intended to apply to action on the part of the 
  parties whether fraudulent or negligent. This was certainly the 
  view taken by the Court of Appeal for Jamaica in Tele 
15  communications of Jamaica Ltd. v. Bernard (17) which, with 
  respect, seems correct. 
    The facts of this case do not establish any personal advantage 
  to Reynolds in the payment out to Dupre of the funds in the 
  account of Newport Ltd. and accordingly the facts do not fit into 
20  the exception to the rule in Foss v. Harbottle (9). 
    There is the further issue as to whether the alleged “wrong- 
  doers” control Newport Ltd. The exceptions to Foss v. Harbottle 
  are based on the premise that the wrongdoers control the 
  company and use their power of control to prevent themselves 
25  being sued. Mr. Lamontagne concedes, as indeed he must, that it 
  cannot be contended that Reynolds controls Newport Ltd. He is 
  one of five directors and he holds no shares. All the shares are 
  held by CMS which has not been joined as a defendant. CMS 
  itself is a wholly-owned subsidiary of CIBC. 
30    In Kuwait Asia Bank E.C. v. National Mutual Life Nominees 
  Ltd. (11) the Privy Council decided that nominee directors, in the 
  exercise of their duties as directors, were bound to ignore the 
  interests of the persons who had nominated them or who 
  employed them. Their duty was to act in the best interests of their 
35  company. Reynolds would be under no obligation to heed the 
  wishes of CIBC in this matter. 
    The application of these established principles to “offshore” 
  companies managed by directors who have been appointed solely 
  for the purpose of carrying out the wishes of the beneficial owners 
40  to whom the company really belongs must inevitably result in 
  contradictions. The advantages of anonymity which beneficial 

1992–93 CILR 80

         owners perceive as accruing from these arrangements may well 
  carry with them concealed problems. 
    While reality has to be taken into account in deciding control, 
  in the sense that a tally may have to be made of the votes held by 
the wrongdoers and the votes they may be able for one reason or 
  another to control, legal principles cannot be ignored. The shares 
  in Newport Ltd. were held by CMS. It controlled that company 
  by reason of its having the power to dismiss all the directors and 
  to replace them. Reynolds and his co-directors would be under a 
10  legal obligation to act independently in the interests of Newport 
  Ltd. No doubt if they sought to sue, CMS (like the Greater 
  London Council in the Kilner House case (6)) could use its power 
  to order discontinuance of any such action, though in this case 
  there might be difficulties if CMS gave due heed to the 
15  instructions of both joint beneficial shareholders. 
    The statement of claim as originally filed is thus defective in 
  three important respects, namely (a) the appellant, as plaintiff, 
  lacks the capacity as one of two joint shareholders to sue alone 
  and has not named her co-owner as a defendant; (b) there are no 
20  facts pleaded to establish that Reynolds gained any benefit from 
  his alleged breach of trust or wrongful exercise of authority vis-a- 
  vis the company; and (c) it erroneously avers that Reynolds and/or 
  the directors of Newport Ltd. control Newport Ltd. when in fact 
  legal control was vested in CMS which is not named as a defendant. 
25    The first defect is concerned solely with the failure to have 
  proper parties before the court. It could be remedied by an 
  amendment and would not justify striking out the action. 
    The second defect is more fundamental. Guarding against the 
  possibility that the submission might succeed, Mr. Lamontagne 
30  sought, before opening the appeal, to apply for an amendment, 
  the granting of which he contended would remedy the defect. The 
  amendment consisted of the addition of an entirely new para. 27 
  to the statement of claim which read: 
        “Further and in the alternative, Reynolds, CIBC and 
35      Dupre have conspired together and with each other to 
      deprive Newport, by the unlawful means set out in paras. 20, 
      21, 22, 23, 25 and 26 hereof, of the funds held in its account 
      with CIBC and to transfer the said funds to Dupre by the 
      said unlawful means.” 
40    Mr. Alberga submitted that the court had no jurisdiction to 
  grant the amendment prayed since the statement of claim had 

1992–93 CILR 81

         been struck out by the Chief Justice so that there was no 
  document which could be amended. That argument is, in my 
  view, misconceived. Once an appeal has been filed, the dispute 
  decided at the first instance hearing remains open for any action 
which the appellate tribunal thinks necessary in the proper 
  exercise of its powers. There is no basis for the distinction sought 
  to be made between an action dismissed on the merits and an 
  action which fails on the ground that the statement of claim 
  discloses no cause of action and is, for that reason, struck out. It 
10  is conceded that this court has all the powers of the Grand Court 
  in relation to amendments and the Grand Court could certainly 
  have granted the amendment sought had the application been 
  made there and had the court exercised its discretion favour- 
  ably. However, while the court does have the power, I see no 
15  good reason for exercising it in favour of the appellant in this 
  case. 
    The reason stated in the affidavit for not including the 
  conspiracy claim in the original pleading was the view held by 
  counsel that a claim for conspiracy could not succeed unless the 
20  sole or dominant purpose was to harm the plaintiff. This was 
  based on a decision of the Court of Appeal in Metall & Rohstoff 
  AG v. Donaldson, Lufkin & Jenrette Inc. (14) in which Slade, 
  L.J. so interpreted passages in a speech of Lord Diplock in 
  Lonhro Ltd. v. Shell Petroleum Co. Ltd. (13). There was no 
25  appeal in the Metall case but subsequent to the filing of the 
  statement of claim in this matter the House of Lords in Lonhro 
  PLC v. Fayed (12) held that this interpretation was not 
  acceptable. There seems to be no good reason why the 
  interpretation placed by the Court of Appeal on Lord Diplock’s 
30  judgment should not have been challenged in the courts of Grand 
  Cayman. 
    I have difficulty in quieting the suspicion that the plea of 
  conspiracy became important when it became clear that the need 
  to allege personal benefit to the wrongdoer might be accepted as 
35  crucial. The allegation of a conspiracy could arguably fulfil that 
  need. It would be correct also to say that the allegation raised in 
  the amendment is vague. Accordingly, I would refuse the 
  application to amend at this stage. In any event much recasting of 
  the statement of claim would be needed to cure the defect arising 
40  from the failure properly to identify the wrongdoers in control of 
  the company. 

1992–93 CILR 82

           Mr. Lamontagne stressed that the justice of the case required 
  that some method be found to facilitate Newport Ltd. in 
  remedying the wrong which it had suffered. The fact is that 
  Newport Ltd. was a mere shell. The person who in fact suffered, 
if the allegations are correct, would be the appellant. There 
  would appear to be far simpler courses of action open to her 
  should she wish to claim remedies for the wrongs suffered. 
    Accordingly, I would dismiss the appeal with costs to the 
  respondent to be agreed or taxed. 
        KERR, J.A.: I have had the benefit of reading the draft 
  judgment of Georges, J.A. and am in agreement with his 
  reasoning and his conclusion that the appeal should be dismissed 
  with costs to the respondent to be agreed or taxed. 
15    With respect to the application on behalf of the plaintiff/ 
  appellant to amend the statement of claim, I agree that having 
  regard to the nature of the amendment sought, it would be clearly 
  unfair to the respondent to entertain the application at this late 
  stage. I am in agreement with the observations of Zacca, P. in his 
20  judgment to the effect that the amendment sought to be 
  introduced by the application may be pursued by fresh and 
  independent proceedings. 
Appeal dismissed and amendment refused.
Attorneys: C.S. Gill & Co. for the plaintiff/appellant; Hunter & Hunter
for the first defendant/respondent.