Michael Witter v Cox Lumber Ltd - Judgment

¶ IN THE GRAND COURT OF THE CAYMAN ISLANDS CIVIL DIVISION Cause No: G 104/2015 BETWEEN: MICHAEL WITTER APPELLANT/DEFENDANT AND: COX LUMBER LIMITED RESPONDENT/PLAINTIFF Appearances: Mr. Clyde Allen for the Appellant Ms. Sarah-Jane Allison of HSM for the Respondent Mr. Justice Alastair Malcolm Q.C. (Actg.) Before: Mr. Justice Alastair Malcolm Q.C. (Actg.) Heard: 23rd February 2016 JUDGMENT

¶ [1] This is an application for leave to appeal and, if granted, an appeal against the decision of Acting Magistrate Angelyn Hernandez on 12th June 2014 to refuse an application to set aside a default judgment in this case.

¶ [2] The facts in this case are as follows.

¶ [3] The Appellant is the owner of a construction company called M&R Construction and the Respondent, amongst other goods, supplies building materials.

¶ [4] Some years before 2009 the Respondent granted the Appellant a credit account. According to the affidavit sworn by the Appellant, Mr. Witter, the three people who were authorised to sign for goods on credit were Washbourne Lawrence, Treverine Ebanks and himself. At no stage, he claims, was anybody else authorised to sign for goods. That is disputed by the Respondent and, in an affidavit, one of the Respondent’s sales representatives, Michael Taylor, swears that a number of the Appellant’s employees had general authority from the Appellant to sign for goods. Mr. Taylor avers that he had pressed the Appellant to come in to Cox Lumber and update the authorised signatories.

¶ [5] Mr. Taylor also says that every invoice sent to charge account customers has terms on the reverse which include: "Buyer agrees to notify seller within 10 days of receipt of monthly statement of any discrepancy in billing. Failure to so notify Cox Lumber signifies acceptance and responsibility for prompt payment". Mr. Taylor avers that no such notifications of discrepancies were received by the Respondent.

¶ [6] Julie Hydes, a credit manager for the Respondent, in her affidavit, says that it was in 2009 that the Appellant’s company began defaulting on the payments and no payment was made for two years: She says that the Respondent asked the Appellant to come in and sign a Promissory Note. She says she told him that unless he started periodic payments and signed the Promissory Note the Respondent would commence proceedings.

¶ [7] It is agreed that the Appellant signed the Note on the 20th May 2011. The terms of the note included: a. The Appellant promised to pay CI$9,015.29 (the principal amount) plus interest at 18% per annum; b. The Appellant was to pay CI$300 on the 4th June 2011 and similar and like payments on the 4th day of each successive month thereafter until the Note is paid in full; c. The principal amount of this Note represents an aggregate of amounts of existing indebtedness that the (Appellant) freely admits are due and owing; d. The occurrence of any of the following shall constitute an event of default under this Note: The failure of the Appellant to make any payment when due under this note (time being of the essence of this note).

¶ [8] A payment of CI$1,300 was made in June 2011 and a further payment of CI$300 was made in July 2011. No further payments were made after the July 2011 payment.

¶ [9] The Respondent filed a suit in the Summary Court on the 29th July 2013. On the 18th October 2013 a Default Judgment was entered against the Appellant for him to pay the Respondent: a. CI$8,691.42 – being the principal sum due; b. CI$8,408.76 – pre-judgment interest calculated from 1st January 2010 to 27th September 2013 at the rate of 18% per annum in accordance with the terms of the credit agreement. c. Post judgment interest from the 28th September 2013 at the rate of 18% per annum in accordance with the terms of the credit agreement.

¶ [10] On 11th April 2014 the Appellant filed a Summons to set aside the default judgment on the basis that he had a good defence to the claim.

¶ [11] The Appellant’s Draft defence filed with the Summons asserted the following: a. The Appellant had not acquired the goods and materials from the Respondent; b. The goods and materials were obtained without the Appellant’s authority and contrary to the credit agreement between the Appellant and the Respondent; c. The goods and materials had been obtained and used by Christopher Brown in the course of a building contract between Christopher Brown and Fame Verona and Carlos Sandoval; d. Christopher Brown was not an approved signatory and the goods and materials had been obtained without the Appellant’s knowledge or consent; e. On the 10th December 2009 the Appellant entered into an agreement to complete the contract that Christopher Brown had not fulfilled.

¶ [12] In relation to the Promissory Note, the draft defence asserted that the Appellant agreed to sign the note subject to being provided with documents to support the items purchased for use on the property, but no such documents were provided by the Respondent.

¶ [13] The summons to set aside was supported by an affidavit sworn by the Appellant on the 11th April 2014 and two documents. The first is dated 10th December 2009 and is said to be evidence of the Appellant and M & R Construction taking over the contract that Christopher Brown had failed to complete. The second is an undated typed letter addressed to the Appellant’s Attorney. The first paragraph of the letter states: "I Christopher Brown ask (sic) Barrington Parker to get some material from Cox Lumber for a project that I was working on. The materials were credited on the account of M & R Construction Ltd without the knowledge of Michael Witter". The letter ends: "I gave monies to Mr Barrington Parker a co-worker of the same company to pay the bill at Cox Lumber, due to the fact that he was the one that credited the material from Cox". The name Christopher Brown is typed at the end and there is a signature which could be C Brown.

¶ [14] Prior to the hearing of the Summons on the 11th June 2014 the Respondent served affidavits which included one sworn by Christopher Brown on the 10th June 2014 in which he swears that the Appellant was fully aware of the project to construct the house for Farne Verona and Carlos Sandoval and that the Appellant authorized him to sign documents on behalf of the company. Christopher Brown further asserts that he was authorized by the Appellant to purchase materials and charge them to the Company's account generally and, specifically, in relation to the construction of the house. Finally, Christopher Brown says that he paid the amount due for the materials and goods obtained from the Respondent to the Appellant.

¶ [15] Mr Allen on behalf of the Appellant raises two matters in relation to the service of this and the other affidavits by the Respondent. The first is that the affidavits did not reach the Appellant until the day of the hearing. The second is that, despite the Respondent having the letter purporting to come from Christopher Brown since 11th April, nowhere in his affidavit does Christopher Brown deal with it. He neither denies sending it nor explains its contents. In relation to the former I have some sympathy for the Appellant but it is the latter that is of more importance for this appeal.

¶ [16] The Appellant raises three main grounds of Appeal: a. The learned Acting Magistrate erred, in that, she failed to properly consider the tests to be applied. b. The learned Acting Magistrate placed too much emphasis on the delay in applying to set aside the judgment rather than whether there was an arguable case for the defence. c. There was a triable issue on the face of the documents, namely the letter purporting to come from Mr. Brown as against the contents of Mr. Brown’s affidavit with which the learned Acting Magistrate did not deal in her judgment.

¶ [17] There is sufficient substance in those grounds for me to grant leave to appeal.

¶ [18] The test I have to consider is that contained in Alpine Bulk Transport Co Inc v Saudi Eagle Shipping Co Inc1 in which Sir Roger Ormrod having reviewed Evans v Bartlam2 said at p: 223 "In our opinion therefore to arrive at a reasoned assessment of the justice of the case the Court must form a provisional view of the probable outcome if the judgment were to be set aside and the defence developed. The arguable defence must carry some degree of conviction."

¶ [19] It must not be forgotten that this is an action on the Promissory Note and the primary defence put forward is that it was conditional on the provision of documents supporting the alleged debt. The circumstances in which the debt occurred are only relevant in as much they are evidence to support the cases of the Appellant and Respondent as whether it was conditional or not.

¶ [20] What is the evidence that the Appellant signed the Promissory Note conditionally?

¶ [21] It comes solely from the affidavit sworn by the Appellant. The Appellant never raised the issue in writing at the time of signing or at any stage thereafter until the action had been started, judgment entered and enforcement proceedings had commenced. 1 Lloyds Report [1986] Vol2 221 2 [1937] AC 473

¶ [22] Mr. Allen, counsel for the Appellant, is correct when he submits that delay, *per se*, cannot be a reason for not setting aside a judgment when there is an arguable defence. However, the fact that the defence was not raised until very late in the proceedings is a factor I am entitled to consider when deciding if the defence carries "some degree of conviction".

¶ [23] Before I do take the delay into account I must consider any explanation for the delay. Mr Allen submits that the Appellant did not seek any legal advice until the enforcement proceedings had commenced, and that the Appellant is a builder and paperwork is not his forte.

¶ [24] The Appellant asserts that he signed the Promissory Note on condition that he was provided with the supporting paperwork. It was a term of the Note that he should pay CI$300 on the 4th June 2011 and similar payments on the 4th day of each month thereafter. Despite not receiving any paperwork the Appellant paid CI$1,300 in June and a further CI$300 in July. That is over 5 months' worth of payments paid *without* chasing the Respondent for the missing paperwork. In his affidavit the Appellant does not explain those payments.

¶ [25] The Respondent's case is contained in the Affidavit of their Credit Manager, Julie Hydes, who swears that: "prior to signing the promissory note I showed him all the invoices that amounted to the sum owed on the note in the amount of CI$9,015.29."

¶ [26] As to the background, the Appellant’s case is contained in his affidavit, supported he says by the two documents I have referred to above. The document dated the 10th December 2009 has nothing in it to indicate that the house building project was a frolic of Christopher Brown which the Appellant was taking over on that date. It states that it is a contract between Fame Verona and Carlos Sandoval on the one part, and M & R Construction on the other, concerning the payment of the balance of US$16,597.13 on completion by 16th December 2009. The only explanation for the contract is contained in the final paragraph which says: “This is due to complications and timeframes set by M & R Construction given to the client and the bank which has not been met on their part over the last few months. This is the final contract.”

¶ [27] The only support for the assertion that this was Christopher Brown’s project of which the Appellant was not aware is the undated letter addressed to Mr. Allen purporting to come from M.r Brown. It is a letter that can only have come into existence after Mr. Allen was instructed in 2014. There is, neither evidence of its provenance, nor any explanation in the Appellant’s affidavit.

¶ [28] The Respondent’s case is supported by affidavits which assert that the Appellant knew Mr. Brown was signing for goods and materials for this house building project and agreed to it being done.

¶ [29] In my judgment it is inconceivable that the Appellant did not question the monthly invoices when they came in, especially as he states in his affidavit: "M & R would only purchase goods on credit if it had been awarded a contract to develop a property and the funds were to be paid by way of draw-down at some later stage, otherwise I would never acquire such goods as we would not have the funds and thus could not pay for them"

¶ [30] Further it is inconceivable if he was only signing the Promissory Note conditionally, and that he would pay CI$1,600 without receiving the documentation or, at the very least, without chasing the Respondent for the documentation.

¶ [31] For those reasons, in my judgment, the defence put forward by the Appellant does not, in Sir Roger Ormrod's words "carry some degree of conviction."

¶ [32] It follows therefore that this appeal is dismissed. Dated this the 3rd June 2016 Mr. Justice Alastair Malcolm Q.C. (Actg.) Acting Judge of the Grand Court This page is completely blank. There is no visible content, text, or images to transcribe.