Between: (1) Christopher Carroll (2) Mallory Carroll Plaintiffs v (1) Roderick Harbeck (2) Cayman Islands Sotheby's International Realty Defendants; and Between: Roderick Harbeck Plaintiff to Counterclaim v (1) Christopher Carroll (2) Mallory Carroll Defendants to Counterclaim

• Jurisdiction: Cayman Islands
• Judge: Walters J.
• Judgment Date: 17 July 2023
• Docket Number: CAUSE G85 OF 2022
• Court: Grand Court (Cayman Islands)

Between:

(1) Christopher Carroll

(2) Mallory Carroll

Plaintiffs

and

(1) Roderick Harbeck

(2) Cayman Islands Sotheby's International Realty

Defendants

And Between:

Roderick Harbeck

Plaintiff to Counterclaim

and

(1) Christopher Carroll

(2) Mallory Carroll

Defendants to Counterclaim

Coram:

Walters J. (Acting)

CAUSE G85 OF 2022

IN THE GRAND COURT OF THE CAYMAN ISLANDS

CIVIL DIVISION

HEADNOTE

Application to strike out statement of claim for lack of particularization of allegation of fraud and lack of reasonable prospects of success. GCR O. 18, r. 19 (1) (a) (b), (c), (d) and inherent jurisdiction of the court. G.C.R. O. 14 — principles to apply.

Appearances:

Mr & Mrs Carroll in person

Ms Kate McClymont of Nelsons for the First Defendant

Mr Kyle Broadhurst and Mr Richard Parrish of Broadhurst LLC for the Second Defendant

IN CHAMBERS

Background

1 These proceedings relate to a claim by the Plaintiffs (husband and wife) arising from their occupation of an apartment in the Cayman Islands (the “Property”) that they rented from the First Defendant (a retired architect and building contractor) between 29 April 2019 and 26 January 2022. The Second Defendant is the employer of the rental agent (the “Agent” or “Ms Harris”) 1 who was acting for the First Defendant. The principal of the Second Defendant is Ms Sheena Conolly.

2 In essence, the claim relates to alleged fraudulent misrepresentations made by and alleged deceit of the First Defendant and the Second Defendant as the employer of the Agent in relation to the nature, functionality and maintenance of the air conditioning system (“AC System”) in the Property which, in turn, it is alleged induced the Plaintiffs to enter into a series of leases of the Property. The first two leases were for a term of 1 year each (“Lease 1” and “Lease 2” respectively), the third lease was for 2 years (“Lease 3”) (collectively the “Leases”). The monthly rent under the leases varied from US$4,817.17 to US$5,100.00. The Plaintiffs say that during the term of Lease 3 they became aware that, as they put it, the Property was “ not safe or fit for human habitation due to toxic mould caused by malfunctioning and unmaintained air conditioning appliances” 2. There is no dispute that the AC System was not maintained properly during the course of the Leases. The First Defendant says that the Plaintiff had a contractual liability under the terms of the Leases to maintain it. The Plaintiffs claim that it was the responsibility of the First Defendant or that he prevented them from maintaining it properly through his alleged fraudulent conduct.

3 The Plaintiffs say that when they found out about the state of the AC System during the term of Lease 3 they immediately moved out. They claim rescission of all the Leases and damages. The basis for the claim of damages and quantum is set out in the Plaintiff's letter before action dated 4 March 2022 (the “Letter Before Action”) 3.

They are as follows:

3.1 return of rent paid under the Leases	US$172,321.91
3.2 financial damage (approximate)	US$5,000
3.3 non-financial damage (pain and suffering and loss of amenity, physical inconvenience and discomfort and aggravated damages)	US$350,000
Total	US$527,321.91

4 The Statement of Claim also contains an unparticularized claim for exemplary damages to be assessed by the Court on the purported basis that “… the Defendants showed dangerously dishonest conduct motivated by the pursuit of profit that must be deterred in the future” 4.

5 The First Defendant served a Defence and Counterclaim dated 10 May 2022. He denies the allegation of fraud and deceit and specifically avers that under the terms of the Leases, it was the Plaintiffs' responsibility to maintain the AC System by keeping all filters free and clean from dirt and replacing them on a monthly basis. He relies on the fact that the Plaintiffs entered into Leases 2 and 3 without being induced to do so. He counterclaimed for:

• 5.1 the rent due under Lease 3 5;

• 5.2 for the cost of repairs to damage to the AC System that he alleges are the result of the failure by the Plaintiff to maintain it;

• 5.3 cleaning, painting, repair or replacement of fixtures and fittings 6; and

• 5.4 damages for libel resulting from the Plaintiff publishing videos on YouTube alleging that the First Defendant had threatened legal action against one of his contactors because they had not covered up the problems with the AC System. The First Defendant says that this could only mean that he had intimidated his contractor with an improper and possibly illegal threat of legal

  proceedings to cover up his own wrongdoing. The First Defendant claims that the words and the publication were seriously defamatory of him and were false 7.

6 In its Defence dated 31 October 2022, the Second Defendant denies that, via the Agent, any representations were made to the Plaintiffs about the AC System. To the extent that the AC System was discussed prior to Lease 1, it is averred that the Agent's statements were to the effect that the AC System was functional and that any questions about it would need to be directed to the First Defendant. It is further contended that if it is found that the Agent did make any representations to the Plaintiffs that the AC System was functional and/or maintained at the time in question, that representation was true. It is further contended that if it is found that the Agent did make a representation and it was false (which is denied) then such representation was made innocently by the Agent without any belief or reason to believe that it was false.

The Leases

7 The Leases were all in the same form. Much of the contents are what can be described as “boiler plate” clauses. In particular:

• 7.1 Clause 5 – “CONVEYANCE AND CONDITION OF PREMISES. … Lessor will supply photos and/or inspection report, and inventories taken beforehand, all of which will require Lessee's signed approval…. Lessee stipulates, represents and warrants that Lessee has examined the Premises, and that they are at the time of this Lease in good order, repair, and in a safe, clean and tenantable condition. Any problems with the condition of the premises unable to have been established at take-over will require notification. Lessee shall agree to submit a written report to the Lessor within Five (5) days of taking possession of the premises. Lessee agree [sic] that failure to file any written notice of defects will be legally binding proof that the premises are in good condition at the time of occupancy.

• 7.2 Clause 11 – “ MAINTENANCE AND REPAIR; RULES. Lessee will, at its sole expense, keep and maintain the Premises and appurtenances in good and sanitary condition and repair during the term of this Agreement and any renewal thereof. Without limiting the generality of the foregoing, Lessee shall:

  (a) be responsible for all required repairs to the furniture, plumbing, appliances, air conditioning, and electrical apparatus whenever damage thereto shall have

  resulted from the tenant's misuse, waste, or neglect or that of his family or a visitor. Major maintenance and repairs to the leased Premises, not accountable to the Lessee shall be the responsibility of the Lessor;

  …

  (c) keep all fixtures, chattels, windows, glass, window coverings, doors, locks and hardware in good, clean order and repair;

  …

  (g) keep all air conditioning filters clean and free from dirt – replace on a monthly basis;

  …”

• 7.3 Clause 22 – “INDEMNIFICATION. Lessor shall not be liable for any damage or injury of or to the Lessee, Lessee's family, guests, invitees, agents or employees or to any person entering the Premises or the building of which the Premises are apart or to goods or equipment, or in the structure or equipment of the structure of which the Premises are part, including any damage or loss to the Lessee's property. Lessee hereby agrees to indemnify, defend and hold Lessor harmless from any and all claims or assertions of every kind and nature.”

• 7.4 Clause 27 – “AGENTS. Lessee agrees to irrevocably release Cayman Islands – Sotheby's International Realty, agent for the Lessor, from any claim in respect to the performance and terms of this agreement.

• 7.5 Clause 38 – “MODIFICATION. The parties hereby agree that this document contains the entire Agreement between the parties and this Agreement shall not be modified, changed, altered or amended in any way except through a written amendment signed by all of the parties hereto.

8 In the Letter Before Action the Plaintiffs state:

“For the avoidance of doubt, this claim is tortious rather than contractual in nature. We are aware that relevant lease contracts contained limitation of liability clauses for both the Landlord and Landlord's Agent, but please note that pursuant to common law and public policy a party cannot limit liability for its own fraud (i.e. dishonesty).” 8

As they say, the reason that this action is based on the alleged fraud and deceit of the Defendants is to circumvent the contractual limitations on their ability to bring any proceedings against the Defendants as a matter of contract. In doing so, they have themselves set a high bar in terms of pleading and standard of proof.

The current summonses

9 There are 4 summonses currently outstanding:

• 9.1 The Plaintiffs' summons dated 30 November 2022 which seeks orders dismissing the First Defendant's counterclaim and entering summary judgment in their favour pursuant to GCR O. 14, r. 12 along with an order striking out various paragraphs of the First Defendant's Defence.

• 9.2 The Second Defendant's summons dated 25 January 2023 seeks orders under GCR O. 18, r. 19 (1) (a) (b), (c) and/or (d) striking out the Statement of Claim in its entirety in so far as it references the Second Defendant and under the inherent jurisdiction of the Court on the grounds that it discloses no reasonable cause of action...