No delays for civil fraud claims – The rule in Smith v Selwyn is no longer good law in Bermuda
In the recent decision of Hiscox Services Ltd (HSL) and Others v Abraham, the Supreme Court of Bermuda has strengthened its modern approach to civil fraud claims, confirming that the rule in Smith v Selwyn is no longer good law in Bermuda.
The Court went further, however, allowing evidence gathered in New York under §1782 U.S.C., including Whatsapp messages, to ground the plaintiffs’ application for summary judgment.
The plaintiffs alleged that the defendant, formerly the CFO of HSL, had caused online transfers amounting to US$1,506,960 and CHF 334,000 in total to be made from the plaintiffs’ bank accounts to third parties. The defendant maintained that the sums were paid for consulting services and produced invoices which purported to evidence the services provided, which the plaintiffs alleged were forgeries contending instead that the third parties had, in fact, provided luxury watches to the defendant.
When faced with an application for summary judgment, the defendant declined to file any evidence instead filing a motion seeking a stay of the civil proceedings until the criminal investigation and any subsequent criminal proceedings were resolved. In doing so, the defendant relied on the rule in Smith v Selwyn, a peremptory rule of law which requires a stay of any civil proceedings where a felony has been alleged against the defendant. The Court considered the Privy Council decision in Panton v Financial Institutions Services Ltd [2003] UKPC 86, an appeal from Jamaica, noting the movement away from the rigid rule in Smith v Selwyn in the common law world and finding that in light of Panton , the “rule in Smith v Selwyn is no longer good law in Bermuda.” The Court, however, still retained a discretion as to whether to grant the stay. Having outlined the various considerations, including prejudice to any subsequent criminal proceedings, the Court declined to grant a stay in this case.
In considering the plaintiffs’ application for summary judgment, the Court noted the evidence obtained from one of the third parties by way of §1782 U.S.C. application, including “Whatsapp Correspondence” regarding the bank transfers. Leave was granted to enter judgment against the defendant with the Court noting that aside from general denials in his defence, the defendant had failed to challenge the evidence regarding the transfers.
With this decision, the Supreme Court has adopted the modern approach to stays reinforcing its reputation for providing speedy relief to the victims of fraud.
