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In HSBC v Vigilante et al [2024] SC (Bda) 74, the Supreme Court of Bermuda struck out proceedings for delay, in what appears to be the first reported (or otherwise electronically available) civil case in Bermuda struck out because of the contumelious conduct of the claiming party.
Commencement of proceedings in 2013
Following the failure of affiliated businesses in the restaurant trade, HSBC issued a number of writ actions against various defendants who had allegedly guaranteed or otherwise assured HSBC’s loans to the restaurant businesses.
In August 2013, one of the defendants issued a third party notice. Just over a week later, the third party entered an appearance in the proceedings. The Court’s rules require a defendant who issues a third party notice to apply for directions if the third party enters an appearance, but the defendant failed to do so until February 2023, some 9½ years later.
In 2010, the third party had signed what HSBC named a “Letter of Undertaking” whereby the third party had agreed to cover any shortfalls in loan payments by one of the restaurant businesses. In his third party notice, the defendant claimed contribution and indemnity from the third party for any amounts the defendant was found liable to compensate HSBC in the main action, alleging that the letter of undertaking signed by the third party in 2010 constituted “further security” for the loan which the defendant had guaranteed. Whilst not expressly pleaded by the defendant, it appears his claim against the third party was premised on the assumption that they were co-sureties for the same loan.
Progress of the main action
Between 2015 and 2022, HSBC pursued the main action against the defendant, including filing at least two notices of intention to proceed, and obtaining court orders for amended pleadings, discovery procedures, setting the main action down for trial, and various pre-trial procedures including the exchange of witness statements. The third party was not copied or notified in respect of any of these steps.
In 2022, shortly before the trial, the defendant applied to strike out the main action on the basis of HSBC’s purported delay since commencing it 2013. The Court dismissed the defendant’s application, finding that HSBC had pursued the claim diligently, notwithstanding the slow progress towards trial, and that the defendant had not been prejudiced by the delay. The defendant and HSBC settled the main action on the proverbial courthouse steps on the morning the trial was scheduled to commence in November 2022.
The third party’s strike-out application
In February 2023, the defendant sought to proceed on the third party notice by applying to the Court for directions for the procedural steps leading up to a trial of the defendant’s claim against the third party.
Given the passage of 9½ years during which the third party had heard nothing further about the claim, the third party applied to strike out the third party notice on the basis of delay. At the hearing, the defendant sought to blame HSBC for the delay in the progress of the third party proceedings, which he said was caused by HSBC’s delay in pursuing the main action.
On 6 December 2024, Mrs Justice Wheatley granted the third party’s application to strike out the third party notice. She found that, given the Court’s reasons for rejecting the defendant’s strike-out application against HSBC, the defendant was foreclosed from being able to blame HSBC for the delay in the third party proceedings.
In addition, the defendant had given sworn evidence in response to the third party’s application that, with little more than notices of intention to proceed filed by HSBC in progressing the main action, “it seemed prudent and indeed reasonable to let sleeping dogs lie” in respect of the third party. Justice Wheatley found that ‘letting sleeping dogs lie’ for 9½ years, including in the context of the defendant having failed to notify the third party of the directions and trial listing in the main action, was intentional delay by the defendant which was “contumelious” and amounted to an abuse of process.
Case comment
HSBC v Vigilante appears to be the first civil case in Bermuda struck out for intentional and contumelious delay caused by the claiming party, at least in the case-law authorities searchable electronically.[1]
“Contumelious” is an archaic adjective which is now a legal term of art.[2] The Oxford English Dictionary notes its use as far back as 1483, with its various meanings including spiteful, insolent, abusive, and humiliating.[3] Contumelious is related to the noun “contumacy”, which is defined by Black’s Law Dictionary as “contempt of court; the refusal of a person to follow a court’s order or direction.”[4]
In Law v Whelan [2012] ONSC 1023, [2012] CarswellOnt 1390, Mr Justice Corbett of Ontario’s Superior Court noted at [62] that contumelious delay connotes “disdain for due process or the interests of the other parties to the case.”[5]
A finding of contumelious conduct is therefore no small beer, as it is a finding that the conduct was contemptuous of the court, whether of a specific order or more generally of the court’s processes, or disdainful of the interests of other litigants.
In HSBC v Vigilante, it was the defendant’s failure, over many years, to pursue his third party claim so that it would be conducted in alignment with the progress of the main action which resulted in the finding of contumelious delay.
The lesson for litigants pursuing claims, whether by writ action or third party notice or otherwise, is clear: letting sleeping dogs lie instead of diligently prosecuting those claims risks not only the claims being struck out but also an adverse finding that such conduct is contumelious.
Justice Wheatley awarded the third party his costs on a standard basis, without having asked the parties for submissions on costs. An interesting question therefore left open by HSBC v Vigilante is whether a finding of contumelious delay should attract an award of costs on an indemnity basis.
Kennedys acted for the third party in this matter, with special counsel Erik Penz conducting the advocacy.
[1] In Hofer v The Bermuda Hospitals Board [2015] Bda LR 75, Kawaley J (as he then was) struck-out an action which had been commenced 18½ years before for abuse of the process of the Court given the way the proceedings had been conducted (at [52]), not for contumelious delay; there was no suggestion that the delay in Hofer was intentional. Similarly, in Bailey v Wm E Meyer & Co Ltd [2017] Bda LR 5, Kawaley CJ (as he then was) struck-out an action as an abuse of process for a delay of over ten years; there was no finding of the delay being intentional or contumelious.
[2] “‘Contumelious’ is one of those lovely words that does not appear to be used any more, except in the law”: per Corbett J in Law v Whelan [2012] ONSC 1023, [2012] CarswellOnt 1390 at [59].
[3] The Shorter Oxford English Dictionary, C.T. Onions (ed) (3rd edn, Clarendon Press: Oxford, 1933), p.386.
[4] Black’s Law Dictionary, supra. The OED, supra, provides a legal definition of contumacy from Middle English of, “Wilful disobedience to the summons or order of a court”. Similarly, The Dictionary of English Law (2nd edn, Sweet & Maxwell: London, 1965), p.482 notes the writ of de contumace capiendo was issued by the ecclesiastical courts to arrest a contumacious person who had neglected or refused to appear when summoned, or disobeyed an order of an ecclesiastical court, or committed a contempt in the face of the court. That said, it is important to note that a finding of contumelious conduct is not as grave as a finding of contempt of court, the latter being a quasi-criminal finding in civil proceedings which must be made on the criminal standard of proof (i.e. beyond a reasonable doubt) rather than the civil standard (i.e. a balance of probabilities) and may result in penal sanctions.
[5] See also Culbert v Steven G Westwell & Co Ltd [1993] PIQR P54 at P65-P66 per Parker LJ.
Banking and finance
Bermuda