The Supreme Court has struck out allegations of dishonesty made against the Government of Bermuda in a legal dispute with a trio of tech companies.

BPMS Ltd, InnoFund Ltd and InnoFund Innovation Incubator Ltd launched a case against the Government alleging breach of contract and misrepresentation by the Government over a proposal to develop software and a technology incubator.

However, in a ruling, Puisne Judge Andrew Martin struck out claims of deceit or fraudulent misrepresentation by the Government after finding that the facts presented could not support the claims.

Mr Justice Martin wrote in his September 30 decision that the allegations of dishonesty must contain “primary facts” connected to the relevant claim and the loss alleged to have been sustained as a result.

The judge said: “Dishonesty must be alleged against individuals with clear and distinct facts to support the allegation that a particular person’s conduct was dishonest.

“In this case, the pleaded claims that relate to the causes of action involving dishonesty do not meet these essential requirements.

“After several attempts at rectifying the deficiencies, it is clear that the plaintiffs have no prospect of being able to supply the relevant particulars of fact to justify the allegations of dishonesty on the part of any individuals.”

As a result, he ordered that allegations of “deceit, fraud, dishonesty, fraudulent misrepresentation, reckless or intentional misrepresentations and breach of fiduciary duty” should be struck out.

Mr Justice Martin further struck out claims for a “loss of opportunity” and ordered additional particulars be provided for some of the other claims before the matter goes to trial.

InnoFund Ltd launched the InnoFund Innovation Incubator to help technology start-ups achieve “hypergrowth” while supporting economic development in Bermuda.

However, the incubator suspended operations in 2022 after a dispute arose about government support for the project.

The plaintiffs launched legal action against the Government seeking general damages for the alleged breach of two service agreements signed in 2020 and a memorandum of understanding, which was allegedly to be supported by a government-guaranteed loan.

A later statement of claim from the plaintiffs alleged that the Government had entered into the agreements to develop a software application called “FastPass” but later denied that it had done so.

The companies argued that the denial amounted to misrepresentation, which had caused the plaintiffs loss because they had incurred costs and liabilities to third parties based on the strength of the contractual commitments made by the Government.

The plaintiffs sought $41.6 million in damages for the misrepresentations and a “loss of opportunity”, along with about $6.58 million for the Government’s failure to pay for invoices and services rendered under the agreements.

The Government, however, submitted a defence and a counterclaim, arguing that the services had not been rendered and that the Government did not proceed with the contract because the plaintiffs had not met its requirements for cybersecurity compliance.

The Government said it paid close to $1.18 million in fees in line with the first service agreement under a “mistake of fact”.

The Government sought restitution in the amount of $1.25 million for the return of fees paid and $2.5 million in respect of guarantee liability under a bank loan between InnoFund Ltd and Clarien Bank.

In a recent application, the Government sought to strike out paragraphs that claimed fraudulent and reckless misrepresentation and deceit, arguing that the plaintiffs had failed to provide facts that could be relied on to make such claims.

However, the companies argued that the particulars in the claims raised an array of issues of fact that could only be determined at trial.

Mr Justice Martin, in his ruling, said that it was not possible for the alleged “dishonest misrepresentation” to have caused the plaintiffs to enter into the service agreements as the agreements predated the statements.

He added: “It is not said what was false about these statements, nor whether the person making the statements knew they were false or how reliance on these statements led to a recoverable loss.”

The judge also found that not enough had been filed to support the claim of a loss of opportunity and the calculation of the amount of damages being sought had not been broken down or justified, stating: “It is just a very large number.”

Mr Justice Martin said that the basic claim originally brought to the court was a “relatively straightforward” matter of a breach of contract and consequential losses flowing from that breach, for which the Government denies liability.

He said those original claims and counterclaims were unaffected by the ruling, but ordered that the plaintiffs file a re-amended statement of claim removing the struck-out aspects.

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