Bank of Butterfield (Cayman) Ltd v Crang

• Jurisdiction: Cayman Islands
• Judge: (Smellie, Ag. J.)
• Judgment Date: 19 July 1993
• Court: Grand Court (Cayman Islands)
• Date: 19 July 1993

Grand Court

(Smellie, Ag. J.)

BANK OF BUTTERFIELD (CAYMAN) LIMITED

and

N. CRANG and D. CRANG

Mrs. E. Messer for the plaintiff;

A. Turner for the defendants.

Cases cited:

(1) Barnett Ltd. v. Kerr-Jarrett, 1980–83 CILR N–1, applied.

(2) Cayman National Bank Ltd. v. Smith, 1992–93 CILR 235, dicta of Malone, C.J. applied.

(3) Cuckmere Brick Co. Ltd. v. Mutual Finance Ltd., [1971] Ch. 949; [1971] 2 All E.R. 633, applied.

(4) Fieldrank Ltd. v. E. Stein, [1961] 1 W.L.R. 1287; [1961] 3 All E.R. 681, observations of Devlin, L.J. applied.

(5) Greenhalgh v. Mallard, [1947] 2 All E.R. 255.

(6) Paradise Manor Ltd. v. Bank of Nova Scotia, 1984–85 CILR 437.

(7) Spring Grove Servs. Ltd. v. Deane(1972), 116 Sol. Jo. 844.

(8) Stephenson v. Garrett, [1898] 1 Q.B. 677.

(9) Tse Kwong Lam v. Wong Chit Sen, [1983] 1 W.L.R. 1349; [1983] 3 All E.R. 54, applied.

(10) Wing v. ThurlowUNK(1893), 10 T.L.R. 53.

(11) Yat Tung Inv. Co. Ltd. v. Dao Heng Bank Ltd., [1975] A.C. 581.

(12) Yorke (M.V.) Motors v. Edwards, [1982] 1 W.L.R. 444; [1982] 1 All E.R. 1024, observations of Diplock, L.J. applied.

Legislation construed:

Grand Court (Civil Procedure) Rules, r.23(1):

‘Where the defendant has appeared to a writ of summons which is specially indorsed, the plaintiff may, on affidavit made by himself or any other person who can swear positively to the facts, verifying the cause of action and the amount claimed (if any) and stating that in his belief there is no defence to the action, apply to the Court for leave to enter final judgment for the amount so indorsed, together with interest (if any) . . . and costs.’

r.23(6): The relevant terms of this sub-rule are set out at page 424, lines 35–37.

r.41: The relevant terms of this sub-rule are set out at page 416, lines 9–21.

Registered Land Law (Revised) (Law 21 of 1971, revised 1976), s.77:

‘The provisions of sections 70(2) and (3), 72, 73, 74 and 75 may in their application to a charge be varied or added to in the charge;

Provided that any such variation or addition shall not be acted upon unless the court, having regard to the proceedings and conduct of the parties and to the circumstances of the case, so orders.’

Civil Procedure-pleading-striking out-court refusing to strike out defence and counterclaim to specially indorsed writ under Grand Court (Civil Procedure) Rules, r.41 can nevertheless give final judgment under r.23-different principles apply to applications under rr. 23 and 41

Civil Procedure-pleading-striking out-no evidence admissible on application to strike out pleadings allegedly disclosing no cause of action under Grand Court (Civil Procedure) Rules, r.41(1)(a)-application merely to show no reasonable cause of action, i.e. cause without likelihood of success and disclosing no legal basis for remedy sought

Civil Procedure-pleading-striking out-if defence pleadings have merit, defendant”s deliberate procrastination insufficient to justify striking out under Grand Court (Civil Procedure) Rules, r.41(1)(c) unless pleadings basically at fault, e.g. if unnecessary, imprecise or fail to specify extent to which plaintiff”s statement of claim admitted, or likely per se to delay trial

Land Law-charges-power of sale-mode of exercise-chargee not trustee for chargor-entitled to prefer own interests if in conflict, e.g. over timing of sale-duty to act honestly without reckless disregard of mortgagor”s interest-to take reasonable care to obtain true market value by seeking expert advice on method of sale, reasonable steps to achieve success and size of reserve

Estoppel-res judicata-issues available in previous proceedings-no re-litigation of issues which could or should have been raised in previous proceedings-not applicable if supervisory nature of court”s role in previous proceedings excludes final or comprehensive consideration of issues

Civil Procedure-judgments and orders-summary judgment-requirement of application under Grand Court (Civil Procedure) Rules, r.23(1) for final judgment that plaintiff deposes to belief that no defence, may not be met if defence already filed when application made

The plaintiff brought an action against the defendants by specially indorsed writ to recover mortgage arrears and interest.

The plaintiff bank provided mortgage financing in the sum of US$250,000 for property purchased by the defendants in August 1987. The defendants met the repayments on the loan for the first two years but thereafter consistently failed to do so and after several demands, the plaintiff exercised its rights as chargee. The property was advertised for sale at a public auction held in December 1990 but there were no bids at or above the reserve price.

The plaintiff then applied to the court pursuant to s.77 of the Registered Land Law (Revised) for leave to sell by private treaty at a reserve price of US$235,000. The defendants, who resided in Australia, were served with notice of these proceedings and of the proposed reserve price but did not contest the proceedings. The property was sold at this price.

As the defendants” failure to make repayments had resulted in the accumulation of interest, there was a substantial amount outstanding after deduction from the sale price of the sale proceeds and other outstanding debts incurred by the defendants; these had been paid off by the plaintiff before title to the property could be transferred to the new owners. Accordingly, in October 1992 the plaintiff filed a specially indorsed writ claiming the outstanding amount.

In response, but not until March 1993, the defendants filed a defence and counterclaim in which they denied liability for the amount claimed on the grounds, inter alia, that the plaintiff had failed adequately to advertise the property for sale before selling by private treaty, had failed to obtain a proper valuation of fair market value and had therefore failed in its common law duty to them as mortgagors. They therefore counterclaimed for consequential costs and damages resulting from the failure to secure the best available price and also claimed that they were entitled to set off any amounts so due to them as damages against the liquidated claim in the plaintiff”s writ.

The plaintiff filed separate summonses in April 1993 under the Grand Court (Civil Procedure) Rules, rr. 41 and 23 seeking respectively orders to strike out the defence and counterclaim and for the entering of final judgment in its favour. It submitted inter alia that (a) the grounds for striking out under r.41(1) were all applicable but in particular r.41(1)(c) and (d). The defendants were deliberately stalling and seeking to frustrate the claim by their tardiness, as evidenced by the fact that it took them almost a year after the sale of the property to file the defence and counterclaim and although the defendants could have appealed the order for sale at the time, they had chosen not to do so. As that was their proper recourse, they should not now be allowed to proceed on their present pleadings. In the second instance, since it was implicit in

that order that the court deemed the sale to be proper and fair at the reserve price sought, any claim based on an allegation of negligence and unfairness would raise the same issues already decided by the court and would therefore be an abuse of process and a breach of the doctrine of res judicata; and (b) since the defendants had waited until they were sued before challenging issues that had already been resolved, this was a sufficient indication that they had no faith in and did not earnestly intend to pursue their claims and would not otherwise have bothered to make them. As such they had failed to show any good defence on the merits or that they were entitled to defend such claims as they had made. Accordingly, it would be proper and fair to enter final judgment against them pursuant to r.23.

In reply, the defendants submitted inter alia that (a) the plaintiff was obliged to obtain the fair market value of the property and in order to do so should have obtained a proper valuation of the property which it had failed to do; (b) as the sanction of the court was given without a proper valuation, it was an open issue whether the plaintiff had fulfilled its common law duties as mortgagee exercising a power of sale and those duties were owed notwithstanding the sanction of the sale by the court as there was no issue joined before the court in that regard; (c) that as the dispute over whether the mortgagee had fulfilled its duties was not in issue before the court on the s.77 application, estoppel by virtue of the doctrine of res judicata should not be invoked to bar their claim; and (d) the court”s function on a s.77 application was supervisory and the order of the court given in that capacity could in no manner relieve the plaintiff of its common law duties owed to them as mortgagors. In any event, at that stage, they were entitled to sit back and require and expect the plaintiff to fulfil its duties as mortgagees.

Held, giving judgment for the defendants:

(1) As the principles which applied to the Grand Court (Civil Procedure) Rules, r.23 (applications for final judgment on a specially indorsed writ) and r.41 (applications to strike out pleadings) were distinctly separate and since it was possible that a defence and counterclaim which might be free from criticism under r.23 could at the same time be struck out under r.41, or vice versa, the applications by the plaintiff which sought orders under these provisions had each to be considered against each set of principles (page 416, line 41 – page 417, line 7).

(2) Since under r.41(1)(a) no evidence was admissible on an application to strike out pleadings allegedly disclosing no cause of action or defence, such an application could only succeed if it could be said that the pleadings to be struck out disclosed no reasonable cause of action. By reasonable cause of action is meant one with...