Embassy Invs v Houston Casualty

• Jurisdiction: Cayman Islands
• Judge: (Chadwick, P., Mottley and Campbell, JJ.A.)
• Judgment Date: 31 July 2013
• Court: Court of Appeal (Cayman Islands)
• Date: 31 July 2013

Court of Appeal

(Chadwick, P., Mottley and Campbell, JJ.A.)

EMBASSY INVESTMENTS LIMITED

and

HOUSTON CASUALTY COMPANY

M. Nicklin and T. Richards for the appellant;

M. Barca, Q.C., J. Walton and S. Tracey for the respondent.

Cases cited:

(1) Ahmad Hamad Algosaibi & Bros. Co. v. Saad Invs. Co. Ltd., Grand Ct., December 2nd, 2011, unreported, referred to.

(2) Alpine Bulk Transport Co. Inc. v. Saudi Eagle Shipping Co. Inc. (‘The Saudi Eagle’), [1986] 2 Lloyd”s Rep. 221, followed.

(3) Basham v. Gregory, English C.A., February 21st, 1996, unreported, referred to.

(4) Day v. R.A.C. Motoring Servs. Ltd., [1999] 1 W.L.R. 2150; [1999] 1 All E.R. 1007, referred to.

(5) Douglas v. Hello! Ltd. (No. 3), [2003] E.M.L.R. 29; (2003), 100(11) L.S.G. 34; [2003] EWHC 55 (Ch); noted at [2003] 1 All E.R. 1087, referred to.

(6) ED&F Man Liquid Prods. Ltd. v. Patel, [2003] C.P. Rep. 51; [2003] C.P.L.R. 384; [2003] EWCA Civ 472, referred to.

(7) Evans v. Bartlam, [1937] A.C. 473; [1937] 2 All E.R. 646, referred to.

(8) McKenzie v. Business Magazines (UK) Ltd., English C.A., January 18th, 1996, unreported, referred to.

(9) Mortgage Corp. Ltd. v. Sandoes, [1997] P.N.L.R. 263; (1997), 94(3) L.S.G. 28; 141 S.J.L.B. 30, referred to.

(10) Slim v. Daily Telegraph, [1968] 2 Q.B. 157; [1968] 2 W.L.R. 599; [1968] 1 All E.R. 497, referred to.

(11) Three Rivers District Council v. Bank of England (No. 3), [2003] 2 A.C. 1; [2000] 2 W.L.R. 1220; [2000] 3 All E.R. 1; [2000] Lloyd”s Rep. Bank. 235; [2000] 3 C.M.L.R. 205, referred to.

Tort-defamation-fair comment-defence for defamatory statements of opinion or inference of fact when based on true facts and within ‘generous ambit’ for expression of opinions-not affected by whether views prejudiced, exaggerated or obstinate or whether jury would agree if genuine expression by maker of statement

Tort-defamation-justification-defence for defamatory statements when substance of words substantially true-defendant not required to show that every statement true, provided ‘defamatory sting’ not increased by unproved statement

Tort-defamation-qualified privilege-reply to attack-available when defendant responding to defamatory responses made by plaintiff-allows defamatory statements relating to attacker”s credibility and motives-not available when ambit of defendant”s statements exceeds original attack

The appellant brought an action in the Grand Court against the respondent, which brought a counterclaim for defamation and applied for judgment in default of defence.

The appellant, a company incorporated in Jersey, owned a hotel in Cayman which was insured with, inter alios, the respondent and five others but, after the hotel was heavily damaged by Hurricane Ivan, the insurers attempted to resist payment under the policy. The appellant brought proceedings against them in the Grand Court (‘the original proceedings’) and further notified the respondent that it intended to bring

a claim for punitive damages in Texas-where the respondent was domiciled-on the ground of bad faith. The respondent sought an anti-suit injunction to prevent it from doing so, which was adjourned by consent upon an agreement between the parties that neither would commence any new proceedings arising out of, or relating to, the original proceedings or the Texan claim until the original proceedings were concluded (‘the standstill agreement’).

The respondent made an offer to settle the original proceedings on the condition that the appellant would not pursue any extra-contractual or bad-faith claims against it. After the appellant rejected this, the respondent made a second offer which did not seek to restrict the appellant”s ability to bring the Texan claim. The appellant purported to have accepted this offer and began proceedings in Texas against the respondent. The respondent, however, did not accept that the offer had actually been accepted and alleged that the appellant was in violation of the standstill agreement. It therefore purported to withdraw the offer and referred the dispute to an arbitrator, who found that the offer had not been agreed upon and that the appellant had breached the standstill agreement by bringing proceedings in Texas.

As the proceedings against the other insurers had been settled, the appellant began a media campaign designed to pressure the respondent into settling. The campaign began shortly before the arbitrator issued his findings and continued for almost five months, alleging, inter alia, that the respondent was failing to comply with a settlement agreement which it had made and which had been ordered by the courts; that it had attempted to void the insurance policy on false pretences; that it was particularly reprehensible for an insurance company to refuse to pay out for hurricane damage given that it was a significant issue of public concern; that, believing Henderson, J. was favourable to its claim, it had taken unfair advantage of his unlawful arrest and subsequent release by altering the conditions of the settlement offers at those times; that it alone was refusing to honour its obligations under the various insurance agreements which the appellant had made; and that it was deliberately misleading the press. The publications further implied that the respondent had been improperly communicating with a Texan judge in an attempt to manipulate the US proceedings.

After the end of this campaign, the appellant”s attorneys obtained leave to come off of the record, but the appellant did not appoint new attorneys for 11 months. During this period, the respondent obtained leave to amend its defence by including a counterclaim for damages for libel, a claim for exemplary damages, and for an injunction preventing the appellant from making any similar comments. As the appellant did not respond to this amended defence or file a defence to the counterclaim within the time limit given by the Grand Court Rules, O.18, r.3(4), the respondent applied for judgment in default of defence. The appellant subsequently appointed new attorneys, who attempted to file a defence to the counterclaim-claiming justification, fair comment and right-to-attack privilege-but did

not seek the leave of the court to do so. The Grand Court (Quin, J.) found that the appellant had deliberately chosen not to submit a defence within the prescribed time limit and, as it had not made any application to serve a defence out of time (or even put the contents of the defence before the judge), granted summary judgment against it.

The appellant applied for the default judgment to be set aside and for permission to amend its reply with a defence to the counterclaim. The Grand Court (Quin, J.) dismissed the application. It found that the claims made in the media campaign had been false and that, as the appellant had no hope of raising any of the defences claimed, it had not demonstrated that it had any real conviction in its draft defence, or that there was a real likelihood that it could succeed.

On appeal, the appellant submitted that the Grand Court had failed to apply the overriding principle that justice must be done and had therefore set the threshold for setting aside the default judgment too high. The test should have been whether the defences had ‘no real prospect of succeeding,’ and that, when considering this, the court should not have taken the appellant”s conduct, or the absence of substantive evidence in support of its defence, into account. Moreover, the Grand Court had misunderstood the nature of the defences which the appellant had wished to raise. Although it had correctly identified the defences in law, it had failed to ‘understand, analyse and apply the defences’ appropriately. The finding that the defences would have failed had therefore been erroneous. Further, the court had failed to consider that the issues in the appellant”s proposed defence were also raised in the action for exemplary damages. It would therefore be perverse to not allow the appellant to raise the defence as this would prevent them from benefiting, in the counterclaim, from any findings in the exemplary damages action, particularly as many of the issues (e.g. findings of fact as to whether a settlement agreement had been made) would also be determined in the original proceedings.

The respondent submitted in reply that the Grand Court had used the correct test and so had been right to find that the appellant”s application failed to meet the threshold for setting aside the default judgment. Further, the Grand Court had been right in law when considering the defences which the appellant wished to utilize and had properly applied them. The fact that the appellant had not accepted the settlement offer meant that its claims in the media campaign had not been based on a truthful fact, or (in the case of fair comment) a truthful underlying fact. There could therefore be no chance that the appellant”s defence would succeed and the court had been right to dismiss its application. The respondent also submitted that, as the issues in the trial for exemplary damages were distinct from those in the proposed defence and the original proceedings, there could be no perversity. The exemplary damages proceedings only relied on the state of mind of the appellant”s spokesperson (i.e. whether he had known that the publications were false and had calculated that the appellant would earn more by making the statements than it would have to pay out in potential damages) and not on whether the allegations

themselves had been established as true or whether the appellant had actually accepted the settlement agreement.

Held, dismissing the appeal:

(1) The court had not set the threshold for setting aside the default judgment too high. The judgment had been obtained after a regular hearing in which both parties were represented and setting it aside would deprive the respondent of the substantive rights it had obtained in...