SGL Holdings Inc. v Aiham Shammas

• Jurisdiction: Grenada
• Judge: GEORGE-CREQUE, J.A.,Justice of Appeal,Chief Justice,Janice George-Creque,Hugh A. Rawlins,Clare Henry,Justice of Appeal [Ag.]
• Judgment Date: 13 August 2010
• Judgment citation (vLex): [2010] ECSC J0813-2
• Court: Court of Appeal (Grenada)
• Docket Number: HCVAP 2010/002
• Date: 13 August 2010

[2010] ECSC J0813-2

IN THE COURT OF APPEAL

Before:

The Hon. Mr. Hugh A. Rawlins Chief Justice

The Hon. Mde. Janice George-Creque Justice of Appeal

The Hon. Mde. Clare Henry Justice of Appeal [Ag.]

HCVAP 2010/002

Between:

SGL Holdings Inc.

Appellant

and

Aiham Shammas

Respondent

Appearances:

Ms. Celia Edwards, QC and Ms. Karina Johnson for the Appellant

Dr. Francis Alexis, QC and Mr. Anselm Clouden for the Respondent

Civil Appeal — Procedural Appeal — summary judgment — breach of contract — reasonable prospect of successfully defending claim — whether admissions of breach of contract — exclusion clauses in contract — their effect — use of witness statements — costs —

The respondent, a businessman, pursuant to an investment agreement made between him and the appellant company, SGL Holdings Inc. ("SGL"), made an investment with SGL with the intention of receiving high returns. SGL is a company registered in the State of Grenada and carries on the business of trading in foreign currency. SGL would collect funds from its clients and place those funds with another company called Olint Trading Exchange Company ("Olint") based in the Turks & Caicos Islands. Olint then traded the funds on the Forex market. In another document called "HOW IT WORKS" SGL stated that returns on investments as high as 13% and as low as 4% over the past two years with an average of 8% monthly over that same period had been realized. The agreement contained limitation of liability clauses as well as others indicating that a measure of risk was involved. Clause 7 of the agreement provided however that the respondent could, on giving 7 days' notice request encashment of his investment. Olint ran into problems and the High Court in the Turks and Caicos Islands issued a freezing order against Olint and its principals. As a result no trading could be conducted and no monies could be repaid or returns paid out. The respondent invoked Clause 7 of the agreement. SGL was unable to comply with the request for encashment, as the funds were with Olint whose accounts were frozen by the court order. The respondent filed a claim alleging breach of the agreement seeking the return of his initial investment as well as interest on that sum at a rate of 8% per month. After defences were filed, the respondent applied for summary judgment. The master, notwithstanding ruling that the limitation clauses raised substantive defences, held that SGL had no real prospects of successfully defending the claim having treated certain statements contained in the witness statements of the appellant as admissions of breach of the agreement. She also concluded that the agreement was not to be construed as a whole. It is from this decision that SGL appealed.

Held: allowing the appeal and setting aside the order for summary judgment made by the learned master and directing that the matter proceed to trial and awarding costs in the sum of $10,000.00 in the court below and also on the appeal:

• 1. To preclude a judge or master from a consideration of witness statements where they have been filed, in determining whether to grant summary judgment, merely because the witness statements are not sworn affidavits but statements of the witness which will be tendered as evidence in the trial, would be to adopt too rigid an approach. The witness statements, which under the more modern approach are seen as an amplification of one's pleaded case, is perhaps the best source, coupled with the pleadings, from which the judge or master may be better placed to determine whether, a trial is necessary since he/she is able to assess what evidence will be led at the trial and whether on the strength of that evidence, a party has any real prospect of succeeding either on his claim or defence.

• 2. The master misinterpreted what was stated at paragraph 41 of Mr. Clyne's witness statement by treating it as an admission, which then led her to conclude that there was no issue for trial on the question whether the appellant was in breach of contract.

• 3. Whether SGL was liable for breach, was very much a live issue for determination particularly having regard to the exclusion clause contained in Clauses 6, the "Force Majure" Clause in Clause 8, having regard to Clauses 2 and 4 of the agreement — all of which SGL pleaded in its defence.

• 4. The master, in deciding that the agreement was not to be construed as a whole and thus placing reliance on Clause 7 only, fell into error particularly having recognised, at least that Clauses 4 and 6 of the agreement afforded substantive defences. On this basis alone she ought to have rejected the respondent's application for summary judgment.

GEORGE-CREQUE, J.A.

1 This is a procedural appeal which was heard by the full court. It arises from the decision of the learned master made on 25^th January 2010 in which she granted summary judgment in favour of the respondent ("Mr. Shammas") on his claim against the appellant ("SGL") for breach of contract on the ground that the respondent had no reasonable prospect of successfully defending the claim. At the time of hearing the application to strike out, witness statements had already been filed in the action.

The background

2 Mr. Shammas is a businessman. SGL is a company registered in the State of Grenada and carries on the business of trading in foreign currency. SGL in carrying on its business in turn did business with a company based in the Turks & Caicos Islands, called Olint Trading Exchange Company ("OLINT"). OLINT traded on the Forex Market. SGL would collect funds from its clients and forward the funds to OLINT. OLINT would trade with the funds on the Forex Market with the prospect of yielding high returns for the client.

3 In a document called "HOW IT WORKS"1 SGL stated the basis of the investment as Forex Trading. It also stated that their traders have paid as high as 13% and as low as 4% over the past two years and that their average was approximately 8% monthly, over that period. An example was also set out for illustrative purposes. This document also stated: "The down side and there is always a down side to risk, is in any given month 80% of your investment is protected and there is a 20% risk".

4 Mr. Shammas, undoubtedly attracted by the high returns to be had, entered into an agreement with SGL on 15^th February 2008 ("the Agreement") and opened an

investment account with SGL with his initial investment being $91,000.00.2 The funds were forwarded by SGL to OLINT.

5 OLINT ran into problems in the Turks & Caicos Islands. The High Court there, issued a freezing order against OLINT and its principals. The result was that all accounts of OLINT were frozen. No trading could be conducted and no monies could be repaid, or returns paid out.

6 Clause 7 of the Agreement stated as follows:

"This agreement can be terminated at any time by either of the parties. Seven working days however is required to encash margins."

7 Mr. Shammas invoked Clause 7 of the Agreement. SGL failed to return the investment and Mr. Shammas filed a claim against SGL and its principal Lester Clyne, alleging breach of the Agreement. Among the relief sought was the return of his initial investment as well as interest on that sum at the rate of 8% per month.

The Pleadings

8 Mr. Shammas, in his statement of claim ("s/c") pleaded, among other things, that:

• (1) On 21^st July 2008, he demanded that SGL close the account and pay him the sum of $90,000.00 and $1,000.00 [para. 13 of S/C];

• (2) Notwithstanding the demand SGL failed to repay the sums [para. 15 S/C]

• (3) He was entitled to contractual interest of 8% on the said sum from the date of the deposit [para. 16 S/C]

9 SGL in its defence pleaded among other things that:

• (1) in June 2008 the trader had notified SGL that its accounts and thus SGL's client funds had been frozen; [para. 10 defence]

• (2) explained that assets of SGL and its clients had not been returned as a result of the freezing order and that the trader had undertaken to return the assets immediately upon the lifting of the freezing order.

• (3) denied having failed or neglected to account to Mr. Shammas; [para.14]

• (4) denied that any contractual interest was due to Mr. Shammas;

• (5) Mr. Shammas was informed and knew that his investments were a risk which by investing he was willing to take;

• (6) relied on clauses 2, 4, 6 and 8 of the Agreement.

The Agreement

10 Clauses 4, 6 and 8 of the Agreement also warrant setting out:

"Clause 4 — Warranties and Guarantees

The Company makes no express or implied warranties save and except for those contained in this Agreement regarding the service provided by it subject to article 6 hereafter. Neither the Company nor its representatives shall be liable for any interruption, inaccuracy, error or omission, regardless of cause in the service provided.

Clause 6 — Liability

The Customer agrees to waive all liability of the Company which arise as a result of this Agreement, save and except for any actions or inactions of the Company which amount to fraud with intent to deceive or gross negligence.

Clause 8 — Force Majure

Neither party shall be liable for any failure in the performance of any of its obligations under this agreement caused by factors outside its control."

11 It is also necessary to recite portions of the witness statement of Mr. Clyne. He stated, among other things, why the funds had not been returned. Critically, at paragraph 36 he stated thus:

"I should point out because of the nature of what we were doing which is forex trading which is a high risk trading and because the funds are not going to remain in our hands we in the agreement with the client always had the client acknowledge that there was a risk and therefore as usualwith these things we had the clients sign an agreement that we would not be liable for the funds without gross negligence on our part."

Then at paragraph 37...