Fiduciary Management Servs Ltd v Intermediate Secs Ltd

• Jurisdiction: Cayman Islands
• Judge: (Smellie, J.)
• Judgment Date: 09 September 1993
• Court: Grand Court (Cayman Islands)
• Date: 09 September 1993

Grand Court

(Smellie, J.)

FIDUCIARY MANAGEMENT SERVICES LIMITED

and

INTERMEDIATE SECURITIES LIMITED and GOLD

O. Watler for the plaintiff;

A. Turner for the defendants.

Cases cited:

(1) Ebanks v. Plain, 1988–89 CILR 421, considered.

(2) Gibbings v. StrongELR(1884), 26 Ch. D. 66.

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. . . .

(2) The Court may thereupon, unless the defendant by affidavit, or other evidence, satisfies it that he has a good defence on the merits or discloses such facts as may be deemed sufficient to entitle him to defend, make an order empowering the plaintiff to enter judgment accordingly.’

Rules of the Supreme Court, O.19, r.2:

‘Where the plaintiff”s claim against a defendant is for a liquidated demand only, then, if that defendant fails to serve a defence on the plaintiff, the plaintiff may, after the expiration of the period fixed by or under these rules for service of the defence, enter final judgment against that defendant for a sum not exceeding that claimed by the writ in respect of the demand and for costs, and proceed with the action against the other defendants, if any.’

Civil Procedure-judgments and orders-default judgment-judgment in default of defence invalid if signed after late service of defence

Civil Procedure-judgments and orders-default judgment-circumstances in which Rules of Supreme Court, O.19, r.2 and Grand Court (Civil Procedure) Rules, r.23 may be used

The plaintiff brought an action against the defendants for breach of contract.

The plaintiff and the defendants entered into a contract, partly oral and partly in writing, for the sale of a company. The first defendant, the purchaser, failed to complete its payments within the time allegedly agreed. After three years the plaintiff started proceedings claiming the outstanding amount. Judgment in default of defence was given ex parte under the Rules of the Supreme Court, O.19, r.2 after the defendant filed an appearance but failed to lodge a defence in time. On that same day the defence was served and it claimed in essence that the payments were governed by an unsatisfied condition which was part of the oral agreement and accordingly the defendants were not in breach of contract at all.

The first defendant sought to set aside the default judgment submitting inter alia that (a) it was irregularly obtained because the plaintiff should have proceeded by inter partes summons notwithstanding its reliance on O.19, r.2 and because, in the absence of evidence to the contrary from the plaintiff, the court should have accepted that the defence was served before the default judgment was signed by the judge; and (b) it had a good defence and the justice of the case required that it should be given an opportunity to present it. It also sought leave, further or in the alternative, to file the defence out of time.

The plaintiff submitted in reply that (a) there was no rule or practice requiring an application under O.19, r.2 to be made by inter partes summons; and (b) in any event, the defendant had no viable defence since, quite apart from its breach of the contract, a reasonable time for the completion of the payments had long expired and summary judgment was justified on this ground.

Held, striking out the default judgment:

(1) Had the defendant established that the late service of its defence preceded the signing of the default judgment, the default judgment would not have been validly entered, but it had failed to do so and there was no reason in principle why the plaintiff should not have obtained the judgment (page 546, lines 7–18).

(2) It was important to note the distinction between the two forms of procedure embodied in the Grand Court (Civil Procedure) Rules, r.23 and the Rules of the Supreme Court, O.19, r.2 which applied in the Cayman Islands in the absence of a local rule. An application under r.23 for final judgment on a specially indorsed writ, where the defendant has appeared but not filed a defence, would be made by inter partes summons and the making of an order was discretionary; whereas O.19, r.2 provided for a purely administrative procedure which allowed the court to give judgment in default of defence and without conducting a hearing after the expiry of the time for service of the defence. Cases involving liquidated demands and commenced by generally indorsed writ could only be proceeded with under O.19, r.2 but there were appropriate cases in which a plaintiff might elect to use either procedure. He might, however, prudently decide not to elect for the O.19, r.2 procedure since in many cases a defendant could have a default judgment set aside because his defence was one deserving of leave to file out of time. Accordingly, there was no irregularity in the procedure adopted by the plaintiff under O.19, r.2. But since the essential dispute between the parties arose out of a partly written agreement, the omissions from which were capable of competing interpretations, the issues either way would appear suitable for trial. It would therefore be unjust simply to let the matter go by default, and accordingly the judgment would be set aside and leave granted to the defendant to serve its defence out of time (page 547, lines 13–40).

SMELLIE, J.: By summons dated and filed on July 20th, 1993
20	and amended on August 2nd, 1993, the first defendant seeks to
set aside a judgment entered against it in default of defence, and
in favour of the

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