Bella Group, LLC v Marco Caruso

• Jurisdiction: Belize
• Judge: Madam Chief Justice Michelle Arana (Ag.)
• Judgment Date: 12 April 2022
• Court: Supreme Court (Belize)
• Docket Number: CLAIM NO. 625 OF 2020

Between:

Bella Group, LLC

1 ^st Claimant

Brent Borland

2 ^nd Claimant

Alana Latorra Borland

3 ^rd Claimant

Copper Leaf, LLC

4 ^th Claimant

and

Marco Caruso

1 ^st Defendant

Michela Bardini

2 ^nd Defendant

Amsouth Investments Ltd

3 ^rd Defendant

Rendezvous Island Ltd

4 ^th Defendant

Registrar of Companies

1 ^st Interested Party

Registrar of Lands

2 ^nd Interested Party

Before

The Honourable Madam Chief Justice Michelle Arana (Ag.)

CLAIM NO. 625 OF 2020

IN THE SUPREME COURT OF BELIZE, A. D. 2020

Mr. Dean O. Barrow, S.C., along with Mr. Adler Waight of Barrow & Williams for the Defendants/Applicants

Mr. Edmund Marshalleck, S.C., of Barrow & Co. and Mr. Alistair Jenkins of Magali Marin Young and Co for the Claimants/Respondents

1 This is an Application to Strike out a Claim. The substantive claim is for declarations and other relief brought by the Second and Third Claimants as former Directors of the Fourth Defendant Company on the basis of fraud. The Defendants have brought the present Application seeking to strike out the substantive claim on the basis that the statement of case is prolix, and on the basis of the absence of a legal nexus between the Fourth Claimant company and the Defendants. The Claimants resist the Application saying that the Statement of Case is not prolix, it is detailed in an effort to provide context to the allegations of fraud levied against the Defendants and even if it were prolix, the court should not strike out this claim as that is a draconian measure of last resort. The court should instead give the Defendant leave to amend their pleadings. The court now considers the arguments for and against this application and gives its decision.

Legal Submissions on behalf of the Defendants/Applicants

2 These submissions are made in support of the Defendants' Notice of Application to Strike Out a Statement of Case filed on March 3 ^rd, 2021. Principally, the Defendants seek to have the entire claim struck out as against them.

Defendants, in summary, submit that:

• a. the Statement of Claim ( Statement) is prolix;

• b. the Statement lacks “particulars” on the unlawful conspiracy and dishonest assistance alleged;

• c. the Statement discloses no cause of action known to law between Copper Leaf LLC and Rendezvous Island Ltd;

• d. the claim by Bella Group is one for reflexive loss; and

• e. the Statement discloses no cause of action known to law between Copper Leaf LLC, Marco Caruso, Michela Caruso, and AMSouth Investments Ltd.

Pursuant to Rule 11.8(3), the Defendants have not filed any affidavit in support of their application to strike out seeking only to make legal submissions in support of the application.

3 It is fundamental to frame the narrow case before the Court.

The 1 ^st Claimant ( Bella Group) as a “former” member of the 4 ^th Defendant ( RIL) seeks, on behalf of RIL, the cancellation of a conveyance dated July 31 ^st, 2019 between RIL and the 3 ^rd Defendant ( AMSOUTH) LTU-201901228. The net effect of this would be that the property ( Rendezvous Island) transferred on July 31 ^st, 2019 from RIL to AMSOUTH would revert to RIL. This is accounted for in paragraph 4 of the reliefs claimed. Bella Group also seeks the cancellation of the forfeiture of its shares in RIL. This is accounted for in paragraph 2 of the reliefs claimed.

The 2 ^nd Claimant ( Brent) and 3 ^rd Claimant ( Alana) as former directors of RIL, allege that they had not resigned as directors of RIL and seek a declaration avoiding the notices of resignation. This is accounted for in paragraph 1 of the reliefs claimed. In the round, Bella Group and Brent and Alana seek to be restored as shareholder and directors of RIL, respectively. This is accounted for in paragraph 3 of the reliefs claimed.

Bella Group's, Brent's, and Alana's claims are succinctly expressed as follows:

The 4 ^th Claimant ( Copper Leaf) alleges in an unstructured way that there was some conspiracy to harm it.

• a. “ the case against Marco and Michela is for fraud, breach of fiduciary duty in relation to Rendezvous [Island Ltd.], the unlawful removal of Brent and Alana as directors, and the unlawful forfeiture of Bella Group's shares…[in Rendezvous Island Ltd.]

• b. The case against AMSOUTH is for fraud and a declaration that AMSOUTH holds Rendezvous Caye in constructive trust for Rendezvous [Island Ltd.]” 1.

The Claimant's Case — Prolix

4 Rule 8.7 enjoins the Claimants to include in the Statement all the facts on which they intend to rely in support of their claim; such facts must be relevant and shortly stated. In other words, the “fundamental rule is that pleadings must contain the statement of the material facts upon which the claim rests but not the evidence which is to be relied upon. Therefore, it can be discerned that only relevant facts

must be pleaded.” 2 Generalities, assumptions, scurrilous arguments, evidence, repetitions, and conclusions violate the fundamental rules of pleadings. The Defendants ought not be forced to deal with unwieldy arguments. The Defendants must only be called upon to respond to material facts. The Defendants attack the pleadings contained in paragraphs 11 to 68 of the Statement of Claim on several bases, including lack of relevancy to the Claim, matters of conclusion versus matters of fact, repetitive arguments, unnecessary matters of evidence, legal arguments versus material facts, and facts already pleaded.

Alleging and using pejorative language in a Statement of Claim does not strengthen or make a legal claim any clearer. In fact, it obscures and embarrasses a defendant responding to the claim. So too does repetition as is the case at bar.

Duty of the Claimant — Fraudulent Conduct — Pleading Conspiracy — Pleading Dishonest Assistance — Breach of Fiduciary Duty

5 A claim has a general duty to plead only material facts. That duty is heightened, as is the case at bar, where the Claimants allege fraudulent conduct 3. When pleading dishonest assistance, “the pleading[s] must be clear and unequivocal

and it is not enough to plead that the… [Defendant] was aware or ought to have been aware of actions to establish dishonest assistance.” 4

6 The Claimant must plead with particularity:

• a. What the particular defendant did to assist in the breaches of fiduciary duty or trust;

• b. How the assistance caused, contributed or resulted in the Claimants' loss; and

• c. How the defendant is alleged to have acted dishonestly in assisting the main perpetrator 5.

7 It is not enough to use a so-called ‘rolled-up plea’ and claim that the corporate defendant was or should have been aware of fraudulent actions by the main perpetrator to establish dishonest assistance; only the actual knowledge of the defendant will suffice 6. The Claimants must identify the particular officer within the corporate defendant that assists 7.

8 Similarly, a claimant alleging unlawful conspiracy must carefully and specifically plead the allegations 8. The Claimants must plead with particularity:

• d. That there was a combination;

• e. The combination must be to use unlawful means;

• f. there must be an intention to injure a claimant by the use of those unlawful means; and

• g. the use of the unlawful means must cause a claimant to suffer loss or damage as a result 9.

Director's Duties owed to Company and Reflexive Loss

9 It is trite law that the directors owe fiduciary duties to the company only and not individual shareholders 10 unless there are exceptional circumstances such as agency or some special relationship between the shareholder and directors 11. It is trite law that a shareholder “ cannot… recover damages merely because the company in which he is interested has suffered damage. [It] cannot recover a sum equal to the diminution in the market value of his shares, or equal to the likely diminution in dividend, because such a ‘loss’ is merely a reflection of the loss suffered by the company. The shareholder does not suffer any personal loss.” 12 Paragraphs 19, 31, 50, and 52, in so far as they suggest that the Bella Group has a freestanding claim, ought to be struck out as having no basis in law.

No Cause of Action between Copper Leaf LLC and the Defendants

10 Copper Leaf alleges that it has an interest in the assets of RIL on account of a default judgment it has against Brent. It is trite law that a shareholder is not entitled to treat the assets of the company as its own 13. It begs the following question on Copper's Leaf pleaded case : how can it, a stranger to RIL, claim to be interested in the assets of the RIL when not even RIL's directors and shareholders can make such a claim? Copper Leaf has no claim to Rendezvous Island. On these bases, the Defendants seek to have the pleadings as against them struck out.

Court's Approach to Striking-Out

11 The Defendants accept that the power to strike out is a matter of last resort. The Defendants also concede that the Court may grant any party faced with an application to strike out permission to amend its statement of case to cure any technical defects where that party makes such an application. However, it is submitted that where the defect is one of law the Court should not be so readily inclined to allow such an amendment. The Defendants submit that the case ought to be struck out as the Claimants had ample notice and opportunity to correct any defects and have failed to do so. The Claimants have made no application of any

sort to amend their Claim. In the premises, the Defendants pray that paragraphs identified above be struck out with costs. The Defendants further pray that, since the striking out of the multiple specified paragraphs would gut the Claim, the entire Claim be struck out

Legal Submissions on behalf of the Claimants/Applicants in Response

12 Rendezvous Island Ltd. (“ Rendezvous”) was incorporated on the 13 ^th April, 2007, and on the 15 ^th October, 2009, Brent Borland (“ Brent”), Alana Borland (“ Alana”),...