Eastern Caribbean Fertilizer Company (Barbados) Ltd v Uplands Cotton Inc.
| Jurisdiction | Barbados |
| Judge | Madam Justice Sonia L. Richards |
| Judgment Date | 11 October 2021 |
| Neutral Citation | BB 2021 HC 36 |
| Docket Number | CV No. 756 of 2018 |
| Court | High Court (Barbados) |
IN THE SUPREME COURT OF JUDICATURE
HIGH COURT
CIVIL JURISDICTION
Dr. The Hon. Madam Justice Sonia L. Richards, Judge of the High Court.
CV No. 756 of 2018
(In Receivership)
(Acting as the duly appointed Receiver and Manager of the First Claimant)
Ms. Maya Carrington in association with Mr. Graham Brathwaite, Attorneys-at-Law of Dentons Delany for the Claimants.
Ms. Paula S. Jemmott in association with Mrs. B. Franklyn-Brewer, Attorneys-at-Law for the Defendant.
The Court is considering an application by the Defendant to set aside a default judgment.
This case began with an urgent interlocutory application, prior to the filing of a Claim, by two Applicants who are now the First and Second Claimants. By a Notice of Application filed on 08 June 2018, the Applicants sought injunctive relief against three named Respondents.
The First Applicant is a wholly-owned subsidiary of the First Respondent named in the interlocutory application. The Second and Third Respondents in that application are Directors of the First Applicant and the First Respondent.
The Second Applicant to the interlocutory application is the Receiver/Manager of the First Applicant. He is now the Second Claimant in the Claim. Interestingly, the Second and Third Respondents named in the application are not defendants to the Claim.
The interlocutory application prayed for a freezing order against the Respondents, particularly in relation to a condominium at Unit No. 110, Sapphire Beach, St. Lawrence Gap, Christ Church. Other orders were sought including costs. A voluminous affidavit in support accompanied the application.
It is alleged that the First Applicant and First Respondent entered into an intercompany agreement, whereby the First Applicant advanced a loan of $777,081.00 to the First Respondent for the purchase of the condominium. The loan was increased to $839,829.15 to include property management, utilities and property taxes. The freezing order was required to stop the Respondents from dissipating assets that could be used to satisfy the debt.
The urgent application was first heard by this Court on 12 June 2018. An order was made for the Respondents to file and serve an affidavit in reply by 25 June 2018. Counsel for the Respondents also gave an undertaking to the Court that the Respondents would not sell or encumber the condominium.
On 27 June 2018, the Applicants as Claimants filed the Claim together with a Statement of Claim. As noted earlier, there is only one Defendant to the Claim, the previous First Respondent. The Claim alleges a total debt of $839,829.15 due and owing to the First Claimant, and calls for:
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1. payment of $839,829.15;
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2. interest pursuant to Section 35 of Cap. 117A; and
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3. costs.
On the following day, the Second Respondent to the urgent interlocutory application filed an application seeking the dismissal of the original application. The Second Respondent requested alternative relief under the Companies Act, Cap. 308, together with costs. A copious affidavit accompanied his application.
On 29 June 2018, the Court made various orders for the insuring of the property, and the registering of any existing agreement for the sale of the property. Then on 13 August 2018, counsel for the Respondents withdrew the undertaking not to sell or encumber the property. As a result, the First Respondent was enjoined by the Court against transferring or encumbering the property until further order of the Court. Further orders were made for written submissions by the parties.
It was on 17 August 2018 that the Claimants filed with the Registrar their request for a default judgment pursuant to Rule 12.7 (1) of the Supreme Court ( Civil Procedure) Rules, 2008, (“the CPR”). The basis for the request was the failure of the Defendant to file either an Acknowledgment of Service or a Defence within the prescribed time. The Claimants certified that the time for filing the Defence had expired; that no Defence or Counterclaim had been served; and that no monies were paid by the Defendant in settlement of the claim. Evidence of the service of the Claim Form and the Statement of Claim on counsel for the Defendant was provided.
The Court had no knowledge of this development. It appears that, after the filing of the request, counsel for the Claimants wrote to the Registrar of the Supreme Court on at least three occasions, between 02 November 2018 and 04 December 2019, to ask for updates on the status of the request for a default judgment.
In the meantime, an Acknowledgement of Service was filed on behalf of the Defendant on 09 November 2018. It was not until 09 October 2020 that the Registrar granted a default judgment in the sum of $957,752.35 inclusive of interest, “together with court fees of $5,953.00, costs of $5,500.00 with interest on the sum of $838,829 at the rate of 6 percent per annum which accrues at $138.05 per diem commencing on the 10 th day of October, 2020 until the Judgment debt and interest have been fully satisfied”. The default judgment was granted because of the Defendant's failure to file the Acknowledgement of Service, and not because of its failure to file a Defence.
Counsel for the Defendant became aware of the default judgment, and its registration, as a result of being served with documents on 29 December 2020. Subsequently, on 23 March 2021, the Defendant filed an application to set aside the default judgment. The Defendant also sought leave to defend the Claim and costs.
The grounds of the application are, inter alia, that:
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1. the default judgment is irregular or improperly obtained as an acknowledgement of service was filed on 09 November 2018;
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2. the Defendant has a very real prospect of defending the Claim;
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3. interlocutory applications filed by both sides are before the Court and not yet disposed of or determined; therefore, a default judgment should not have been given on the substantive claim;
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4. the substantive claim is for a specified sum that was never formally demanded from the Defendant prior to the filing of the claim; and
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5. there may be no action for the Defendant to defend if the Court upholds its interlocutory application to strike out the [Claimants' application].
A draft defence is annexed to the Notice of Application. Counsel for the Defendant also filed an affidavit in support of the Notice. The Second Claimant then filed an affidavit responding to the Affidavit of counsel for the Defendant.
Counsel for the Defendant alleges that the Claim Form was served on her although the Defendant never authorised her to accept service on its behalf. In addition, counsel did not inform the Claimants in writing that she was so authorised. This constituted a breach of Rule 5.6 of the CPR. Therefore, the Claim Form was not served in compliance with the Rules, and the default judgment was wrongly entered against the Defendant. The Claimants did not prove service of the Claim Form and the Statement of Claim as required by Rule 12.4 (a) of the CPR. In the circumstances, the default judgment was obtained irregularly, and the Court has no discretion. The judgment must be set aside as of right under Rule 13.2 of the CPR.
If the Court finds that the Claim Form was not served properly on the Defendants, it is further submitted that the Defendant has no action to defend. The Claim Form was not served on the Defendant within the 12-month time limit required by Rule 8.10 (1) of the CPR. The Claim should be dismissed with costs to the Defendant.
If the Court does not set aside the default judgment as of right, the Defendant asks the Court to invoke its discretionary power under Rule 13.3 of the CPR The judgment should be set aside because the Defendant has five strong defences. First, the appointment of the Second Claimant as Receiver/Manager was irregular. His appointment was not registered in the Corporate Registry. Secondly, the Defendant never received a loan from the First Claimant. Thirdly, the First Claimant does not have a registered charge over the assets of the Defendant. Fourthly, no demand letter was ever properly or legally sent to or received by the Defendant. Fifthly, the default judgment is irregular because of confusion regarding different dates in the perfected order.
The Defendant further contends that it will be severely prejudiced if the default judgment is not set aside. The pre-existing interlocutory applications have not been disposed of or determined by the Court. The default judgment should not be upheld as there was no final adjudication of the interlocutory applications.
The Claimants argue that the Defendant filed its acknowledgment of service after the request for the default judgment. On the other hand, they satisfied all the procedural requirements of Rule 12.4 of the CPR. Therefore, the Defendant cannot rely on its late filing to avoid the default judgment.
The Claimants contend that counsel for the Defendant accepted service of the Claim and accompanying documents in a matter that was ongoing. The Claim was filed when the parties were already engaged in the interlocutory applications, prior to the service of the Claim. Defendant counsel's approval of a draft order is an indication that she was authorised to act on behalf of the Defendant. After receiving the documents, Defendant counsel did not return them or communicate that she was not authorised to accept them. The issue of her lack of authority is raised three years after accepting service of the Claim.
Having filed an acknowledgment of service, albeit late, the position taken by defence counsel is...
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