Cedrus Investments Ltd v Abidin and Tata Artha Group

JurisdictionCayman Islands
Judge(Richards, J.)
Judgment Date04 January 2019
CourtGrand Court (Cayman Islands)
Date04 January 2019
CEDRUS INVESTMENTS LIMITED
and
ABIDIN and TATA ARTHA GROUP

(Richards, J.)

Grand Court, Civil Division (Cayman Islands)

Civil Procedure — judgments and orders — setting aside — default judgment — default judgment following defendants’ failure to comply with unless order not set aside some 16 months later — no compelling reason to excuse failure and plaintiff had acted on judgment

Held, refusing the application:

(1) The present case was not an appeal against the making of the unless order. It must therefore have been accepted that the unless order was properly made in the exercise of the court’s discretion. The court was being asked to exercise a discretion as to whether relief should be granted from the sanction imposed by the order. The power to grant extensions of time where there had been a failure to comply with unless orders should be exercised cautiously and automatic extensions of time should not be granted except on stringent terms either as to payment of costs or bringing more money into court. English case law indicated that a litigant who failed to comply with a peremptory order of the court would not normally be permitted to continue to litigate either that or any other actions based on the claim or defence. Where there was a failure to comply with an unless order, the relevant question was whether such failure was intentional and contumelious. English case law also indicated that there should be proportionality between the failure to comply with an order and the punishment imposed (paras. 74–91).

(2) The failure to comply with the unless order resulted in the imposition of the sanction of entry of the default judgment. That sanction was necessary in the interests of the administration of justice and should remain in place unless the most compelling reason was given to exempt the failure. In the present case, there was every indication that the first defendant was aware of the unless order through his attorneys. In the usual course, no distinction would be made between the knowledge of a litigant and his attorney, and there was nothing in the present case which provided a basis for treating it as anything other than the ordinary case. The first defendant had not shown that the failure to comply with the court’s orders was due to circumstances beyond his control. Even if the first defendant were given the benefit of the doubt and his account accepted that he had no knowledge of the unless order and the default judgment until August 2018, he gave as his reason for the delay in following up on the matter that he had been waiting to hear from his attorneys and that he had been unaware that his attorneys had ceased to act. The first defendant had plainly not been diligent in pursuing the matter, in which he had filed a counterclaim. The discretion to be exercised as to whether to excuse the failure had to consider the facts and circumstances of the case. The interests of justice required that justice be shown to the plaintiff for the procedural inefficiencies caused by the delay and wasted costs. In carrying out the balancing exercise, the court bore in mind that any injustice to the defendants, though not to be ignored, was substantially less important than that to the plaintiff. The possible injustice to the defendants would be in not having their case decided on the merits, as against the plaintiff who had proceeded on the basis of the default judgment properly obtained and who would have a further delay in respect of a claim filed as long ago as December 2015. The factors against the court exercising its discretion in favour of relief included the following: (i) the judgment was properly obtained; (ii) it was a result of the failure of the defendants to comply with the directions order and the unless order, so there was history of some delay; (iii) it was the responsibility of the first defendant to maintain contact with his attorneys and to ensure that he was advised as to the progress of his case, which he did not do, and there was personal fault in addition to any fault which he may seek to attribute to his attorneys; (iv) the delay following the making of the unless order in respect of which an extension of time would have to be granted if the judgment were set aside was lengthy; (v) the explanation for the delay was poor and showed at the very least that the first defendant was slow to act; and (vi) in the period which had elapsed since the judgment was obtained the plaintiff had acted on it and registered it overseas. In the defendants’ favour there was the fact that the matter had proceeded to some significant degree and that the unless order was made at a time of transition in respect of the first defendant’s attorneys. A defence had been filed, further and better particulars had been provided and a draft amended defence was on the papers. Although there had been occasions when the defendants sought extensions of time to file materials, there was no history of repeated failures on thepart of the defendants to comply with court orders. While no single factor was determinative and the matter must be looked at as a whole, if those were the entirety of the considerations to be applied they would lead inexorably to refusing the application to set aside. The delay had been significant and the first defendant’s excuses were weak. However, the court had carefully to consider whether the sanction was proportionate, i.e. whether the totality of the defendants’ conduct in light of all the material now before the court justified the ultimate punishment. There had been a reasonable period of time between the making of the February order (of which the first defendant was aware through his attorneys) and the unless order, during which there could have been compliance or an application for extension. There had also been a reasonable period between the making of the unless order and the entry of the default judgment. The first defendant effectively abandoned the matter. That was the added factor which made his conduct so egregious. In all the circumstances, the court did not consider that an alternative, lesser punishment could be imposed. The plaintiff had acted on the judgment and it was at the enforcement stage. Costs would not be adequate compensation in the circumstances, nor a just result for the plaintiff (para. 98; paras. 105–106; paras. 114–129).

(3) There was a distinction between the considerations in respect of an application to set aside a default judgment under GCR O.19, r.9 where no defence had been filed and there had been delay, and those where a sanction had been imposed following breaches of orders of the court. In respect of the latter it was the conduct and the reasons for the conduct of the defaulting party which were the focus for examination and not the merits of the defence. While the justice of the case must be considered as a whole including whether there was a meritorious defence, any injustice to the defaulting party was not to be ignored but was of secondary consideration. In the present case, there might well be technical issues between the parties which might require expert evidence from a commercial aspect as to how the calculations were arrived at which resulted in shares of a value of US$12m. (on the plaintiff’s case) or US$20m. (on the defendants’ case) not being sufficient to repay a loan of some $2m., as well as to the methods of application and calculation of fees and interest payments. In forming a provisional view as to the outcome if the case were to be fought at trial in order to arrive at a reasoned assessment of the justice of the case, the court was not able to conclude on the whole that the defendants’ case was hopeless. Indeed, having considered all the circumstances the court was of the view that there was on the face of the papers some merit in the defendants’ case and the threshold had been met of a real prospect that the defendants would likely succeed in challenging the amount claimed. It followed that were this matter to be approached in respect of GCR O.19, this aspect would have weighed in favour of granting the application to set aside the default judgment in order to secure a just determination of the matter for the defendants. The court concluded that in considering whether a litigant should be excused fromsanctions, the merits of the case were to be considered as part of the overall circumstances but were not determinative. The applicable principle was that any injustice to the defaulting party, though not to be ignored, came a long way behind delay and wasted costs. The court had therefore to consider the injustice to the plaintiff and give that pre-eminence. This was a high value claim, the disposition of which had serious consequences for both parties. In all the circumstances of the present case, considering the inadequacy of the explanation given by the first defendant, his conduct was not excusable. Further, the sanction imposed was not disproportionate to that conduct and the balance of justice required that the application for relief from the entry of the default judgment be refused (paras. 131–142; paras. 150–152).

(4) The Grand Court Rules O.62, r.4(11) stated that the court could make an inter partes order for costs to be taxed on the indemnity basis only if it was satisfied that the paying party had conducted the proceedings, or that part of the proceedings to which the order related, improperly, unreasonably or negligently. The long-established practice was that costs on the indemnity basis should only be awarded in exceptional cases, such as where the paying party’s conduct was considered to have been wholly unmeritorious or oppressive or in contempt of court. The conduct would need to be unreasonable to a high degree, rather than merely wrong or misguided. In the present case, the court was not persuaded that the conduct of the defendants justified an award of costs on an indemnity basis. The defendants had taken steps to...

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