Cayman Hotel v Resort Gems Ltd

JurisdictionCayman Islands
Judge(Smellie, Ag. J.)
Judgment Date06 July 1993
Date06 July 1993
CourtGrand Court (Cayman Islands)
Grand Court

(Smellie, Ag. J.)

CAYMAN HOTEL AND GOLF INCORPORATED
and
RESORT GEMS LIMITED

M. Parkinson for the plaintiff;

P. Lamontagne, Q.C. and P. Boni for the defendant.

Cases cited:

(1) Baker (G.L.) Ltd. v. Medway Building & Supplies Ltd., [1958] 1 W.L.R. 1216; [1958] 3 All E.R. 540, observations of Jenkins, L.J. applied.

(2) Bank of Nova Scotia v. Becker, 1988–89 CILR 12, applied.

(3) Cayman Arms (1982) Ltd. v. English Shoppe Ltd., 1988–89 CILR 383; on appeal, Cause No. 16 of 1989, September 20th, 1989, unreported.

(4) Clarapede v. Commercial Union Assn.(1883), 32 W.R. 262, observations of Brett, M.R. applied.

(5) Executive Air Servs. Ltd. v. MacDonald, 1990–91 CILR N–4.

(6) Empire Clothing Serv. & Sales Ltd. v. Hillgate House Ltd., [1986] Ch. 340; [1985] 2 All E.R. 998, dicta of Slade, L.J. applied.

(7) Iorgulescu v. Swiss Bank & Trust Corp. Ltd., 1990–91 CILR 163.

(8) Jones v.Hughes, [1905] 1 Ch. 180, observations of Vaughan Williams, L.J. applied.

(9) Ketteman v. Hansel Properties Ltd, [1987] A.C. 189; [1988] 1 All E.R. 38, observations of Lord Griffiths applied.

(10) Kurtz v. SpenceELR(1887), 36 Ch. D. 770.

(11) Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 R.C.S. 574, applied.

(12) Molnlycke AB v. Procter & Gamble Ltd., [1992] 1 W.L.R. 1112; [1992] 4 All E.R. 47, distinguished.

(13) Norwich Pharmacal Co. v. Customs & Excise Commrs., [1974] A.C. 133; [1973] 2 All E.R. 943.

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

(15) Raleigh v. Goschen, [1898] 1 Ch. 73.

(16) Salomon v. A. Salomon & Co. Ltd., [1897] A.C. 22; [1895–99] All E.R. Rep. 33, considered.

(17) Tai Hing Cotton Mill Ltd. v. Liu Chong Hing Bank Ltd., [1986] A.C. 519; [1985] 2 All E.R. 947; [1985] 2 Lloyd”s Rep. 313, followed.

(18) Tildesley v. HarperELR(1878), 10 Ch. D. 393, observations of Bramwell, L.J. applied.

(19) Tito v. Waddell (No.2), [1977] Ch. 106; [1977] 3 All E.R. 129, dicta of Megarry, V.-C. applied.

Legislation construed:

Grand Court (Civil Procedure) Rules, r.25: The relevant terms of this rule are set out at page 380, lines 29–34.

r.26: The relevant terms of this rule are set out at page 380, line 35 – page 381, line 9.

Registered Land Law (Revised) (Law 21 of 1971, revised 1976), s.37(1): The relevant terms of this section are set out at page 392, lines 25–27.

s.55(1):

‘Subject to the provisions of section 57 and to any provision to the contrary in the lease, the lessor shall have the right to forfeit the lease if the lessee-

(a) commits any breach of, or omits to perform any agreement or condition on his part expressed or implied in the lease. . . .’

s.56:

‘Notwithstanding anything to the contrary contained in the lease, no lessor shall be entitled to exercise the right of forfeiture for the breach of any agreement or condition in the lease whether expressed or implied, until the lessor has served on the lessee a notice-

(a) specifying the particular breach complained of; and

(b) if the breach is capable of remedy, requiring the lessee to remedy the breach within such reasonable period as is specified in the notice; and

(c) in any case other than non-payment of rent, requiring the lessee to make compensation in money for the breach,

and the lessee has failed to remedy the breach within a reasonable time thereafter, if it is capable of remedy, and to make reasonable compensation in money.’

Rules of the Supreme Court, O.20, r.5:

‘Subject to Order 15, rules 6, 7 and 8 and the following provisions of this rule, the Court may at any stage of the proceedings allow the plaintiff to amend his writ, or any party to

amend his pleading, on such terms as to costs or otherwise as may be just and in such manner (if any) as it may direct.’

Civil Procedure-joinder of parties-party who ‘ought to have been joined’-Grand Court (Civil Procedure) Rules, r.26 permits joinder of defendant who ought to have been joined at commencement of proceedings only if established link between original cause of action and that against party to be joined-joinder not permitted for purpose of expanding original cause, e.g. to join party not privy to contract forming subject of original cause

Civil Procedure-pleading-amendment-application to amend under Rules of Supreme Court, O.20, r.5 to be decided on merits and effect on action against original defendant-normally allowed unless applicant causing injury for which no compensation or acting mala fide-inconsistent, useless or futile claims or those constituting new cause of action not permitted

Landlord and Tenant-characteristics of relationship-exclusivity-if landlord/tenant relationship and remedy for breach comprehensively covered by lease agreement, court will not impose equitable or agency relationship-court will also not impose duties not strictly and necessarily incidental to relationship expressly created by parties

Landlord and Tenant-breach of covenant-forfeiture-notice-Registered Land Law (Revised), s.56 requirements for notice before forfeiture applicable only if breach capable of remedy

The plaintiff sought leave to amend its writ and statement of claim in an action against the defendant for breach of a lease.

The plaintiff leased premises to the defendant for the operation of its jewellery retail business. The form of lease was based on a Canadian model and provided for the payment of an annual basic rent and an annual percentage rent based on sales. The lease contained extensive provisions dealing with the defendant”s obligations to report and account to the plaintiff and specified the relief available in the event of breach of those provisions.

The defendant failed to keep full and faithful records and refused to comply with the directions of an independent auditor engaged by the plaintiff to obtain a reconstruction or compilation of those records. The plaintiff also obtained evidence of at least one sale of a valuable item which had not been recorded. The plaintiff claimed forfeiture of the lease and gave notice

to that effect. It brought proceedings for recovery of possession and for rent claiming that the defendant had repudiated the lease.

The plaintiff subsequently sought leave to amend its writ and statement of claim (a) to add four more defendants who it alleged conspired with and facilitated or assisted the defendant in its falsification of accounts and disclosures; (b) to plead claims against those defendants; and (c) to effect substantial amendments of the pleadings against the primary defendant to include inter alia a claim for an account from the defendant to ascertain the amount owed to it, a claim for a declaration that the lease was duly forfeited and a claim in the alternative for damages for breach of the covenant to pay rent.

The plaintiff submitted that (a) the joinder of the additional defendants was permitted under r.26 of the Grand Court (Civil Procedure) Rules because the proper test was whether they could have been joined in some way at the time the original action was brought irrespective of whether they could have been joined in the action as it was actually brought. Accordingly, though the original action sought recovery of possession and mesne profits from the defendant, it could have instituted proceedings in damages at the same time against the other parties for having procured and conspired with the defendant to breach the lease; (b) the justification for giving leave to amend to include a claim for an account from the defendant consisted in the fiduciary relationship of principal and agent which should be implied as existing between it and the defendant having regard to the lease agreement which demanded a duty of trust from the defendant as tenant; further, an action for an account was an established remedy available to a principal against his agent in lieu of damages; (d) it was entitled to forfeit the lease on the basis that the breach was incapable of being remedied; and (e) it was entitled to make an alternative claim for damages for breach of the covenant to pay rent.

The defendant submitted in reply that (a) the joinder of the proposed defendants under r.26 was not permissible as they were not party to any contract with the plaintiff; (b) the court had no jurisdiction to permit the plaintiff to amend its writ and statement of claim to include new causes of action or inconsistent or useless amendments; (c) no fiduciary relationship existed between itself and the plaintiff; theirs was strictly a relationship of landlord and tenant to be governed by the clearly express terms of the lease; and (d) the plaintiff”s application should be dismissed in its entirety for the most important reason that the cause of action was bound to fail, for though it might have breached the lease, that breach was not irremediable. Accordingly, by virtue of s.56 of the Registered Land Law (Revised) it was entitled to notice requiring it to remedy the breach. As there had been no such proper notice nor any proper demand to remedy, the forfeiture was wrong in law and the cause of action based on it, for recovery of possession, rent and, latterly, damages, could not succeed. Further, the lease was still intact despite the plaintiff”s claim to forfeiture.

Held, granting the application in part:

(1) The Grand Court (Civil Procedure) Rules, r.26 provided for the

joinder of defendants who ought to have been joined at the commencement of the proceedings where there was an established link between the original cause and the cause against those to be joined. It did not permit joinder for the purpose of expanding the original cause of action. Since the original action between the plaintiff and the defendant was based on the lease agreement between them as landlord and tenant and the plaintiff”s claim to recovery of possession and mesne profits arising from the defendant”s breach, there could have been no other parties to the action as...

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