Flexnon Ltd v Constantine Michell

• Jurisdiction: Jamaica
• Judge: McDonald-Bishop JA
• Judgment Date: 23 October 2015
• Neutral Citation: [2015] JMCA App 55
• Docket Number: APPLICATION NO 51/2015
• Court: Court of Appeal (Jamaica)
• Date: 23 October 2015

Between

Flexnon Limited

Applicant

and

Constantine Michell

1st Respondent

and

Maria Michell Caras

2nd Respondent

and

Theodore Michell

3rd Respondent

and

Lazarus Kirifides

4th Respondent

and

TLC Investment Associates Ltd

5th Respondent

[2015] JMCA App 55

Before:

The Hon Mr Justice Morrison P (AG)

The Hon Mrs Justice McDonald-Bishop JA

The Hon Mrs Justice P Williams JA (AG)

APPLICATION NO 51/2015

IN THE COURT OF APPEAL

JAMAICA

Bryan Moodie and Miss Danielle Chai instructed by Samuda & Johnson for the applicant

Ms Georgia Hamilton and Miss Anna Gracie instructed by Rattray, Patterson, Rattray for the respondents

ORAL JUDGMENT

McDonald-Bishop JA

1 This is an application brought by Flexnon Limited, the applicant, for (1) permission to appeal the decision of Laing J made on 2 March 2015 refusing its application to set aside a default judgment entered against it by George J on 28 February 2012; (2) stay of execution of the said judgment; and (3) stay of execution of a subsequent order of Sinclair-Haynes J made on 17 April 2013 compelling its directors to comply with the judgment pending the hearing of the appeal.

Grounds for the application

2 The grounds on which the applicant is seeking permission to appeal the decision of Laing J and for the stay of execution of the default judgment and the order of Sinclair-Haynes J are set out in the notice of application for court orders as follows:

• “1. The learned judge erred when he found that the Applicant had no real prospect of defending the claim;

• 2. The learned judge erred when he placed undue weight on the Applicant's delay and not sufficient weight on the Applicant's prospects of success;

• 3. The learned judge incorrectly found that the explanation proferred by the Applicant for the delay, namely, that the parties were engaged in good faith settlement negotiations, was not a good explanation;

• 4. The Applicant's Attorneys-at-Law applied orally to the learned judge for permission to appeal on the 2 ^nd March 2015 but permission was refused;

• 5. The appeal has a real chance of success because the Applicant has a good defence on the merits and a reasonable explanation for the delay in applying to set aside the default judgment;

• 6. In all the circumstances Justice Laing wrongly exercised his discretion.”

3 In relation to the application for stay of execution the grounds are:

• “1. The Honourable Mrs Justice George ordered default judgment on the 28 ^th February 2012 against the Applicant and ordered that the Applicant render an independently audited account of all sums due to the Claimants in respect of gross room revenue for the period December 1, 1999 to the date of the account and that the Applicant pays to the Claimants all sums due upon the taking of said account.

• 2. On the 17 ^th day of April 2013 the Honourable Mrs Justice Sinclair-Haynes made an order compelling the Applicant, its directors and officers or servants to comply with the order of Mrs Justice George dated 28 ^th February 2012 failing which the Claimants be at liberty to institute contempt proceedings against the Applicant, its directors and/or officers.

• 3. The Applicant would be ruined if a stay of execution of the orders is not granted as it would be forced to pay out a significant sum of money in damages, interest and costs to the Claimants despite having an appeal with a real prospect of success and there is no guarantee that it would be refunded its money if the appeal is successful.”

The factual background

4 For the sake of expediency, the facts as summarized in paragraphs 1–8 of the speaking notes of counsel for the respondents are accepted, with slight modification, as accurately presenting the background to these proceedings. Those facts are as follows: The respondents in separate co-ownership arrangements are the registered proprietors of three properties comprised in certificates of title registered at Volume 1084 Folios 821, 830 and 922 of the Register Book of Titles. These units were in turn comprised in strata lots numbered 130, 139 and 231 of Strata Plan No 11, Seawind Towers, Montego Bay in the parish of St James. For several years, the respondents had an agreement with Montego Freeport Limited (MFL) (previously the 1 ^st defendant but which is no longer a party to the proceedings) whereby these properties, as originally constituted, were operated as part of MFL's hotel known as “Seawind Beach Resort”. The respondents and MFL agreed that, in exchange for MFL's use of the properties, the respondents would be paid a commission of the gross revenue earned. The hotel was later sold to the applicant.

5 The applicant converted the three strata units owned by the respondents into five hotel rooms and brought them within its operation under the “Sunset Beach Resort” Brand from 1999. The applicant has not accounted to the respondents for the room revenues it has earned from the use of their properties. Consequently, the respondents filed a claim against the applicant and MFL on 9 October 2009 for, among other things, damages for restitution, unjust enrichment and for an accounting of all sums due to the respondents in respect of the operation of the said units for the period to the date of judgment.

6 The applicant, having been served with the claim form, failed to file an acknowledgment of service and a defence and so judgment in default was entered against it on 28 February 2012 with an order made for, inter alia, an accounting as well as damages to be assessed. The default judgment was served on the applicant on 12 March 2012. Despite that, the applicant failed to comply with the order for the accounting.

7 As a result, the respondents filed another notice of application, which was served on the applicant, for enforcement of the order for the accounting. The application was heard by Sinclair-Haynes J and on all occasions when the matter came before the court, the applicant was represented. Sinclair-Haynes J made an order extending the time for the applicant and its officers to provide the accounting in accordance with the judgment in default. The respondents were also granted liberty to institute contempt proceedings against the applicant and its directors if the order of the court extending time was not complied with.

8 It was not until 1 October 2014 that the applicant filed its application in the court below to set aside the default judgment entered on 28 February 2012. The application was heard and refused by Laing J on 2 March 2015. His reasons for doing so was recorded by counsel in the following terms:

• “a. He was not convinced that there is a defence with a prospect of succeeding as the issues raised by the applicant in its draft defence, such as the claims for a proportionate share of maintenance and strata fees, are issues that will be dealt with on an accounting.

• b. Even if he had found that there was a defence with a real prospect of success, which is the paramount consideration, he would not be minded to grant the application, because parties cannot flout the Rules and turn around and ask for the court's assistance. He said he found the letter written by the applicant's representative and dated 8 October 2010 very telling, as the applicant dealt with the matter in a flippant way. On top of that, the applicant did not acknowledge service in a timely manner, did not defend the claim, did not treat with contempt proceedings but, instead, had come to court two years later.

• c. It was not shown that the application was made as soon as was reasonably practicable.

• d. He was concerned that if the defence was allowed to stand, that every party with a reasonable prospect of success would ignore the orders of the court and turn up years later to have the judgment set aside.

• e. The suggestion that “without prejudice” discussions provide a good explanation for the delay could not be accepted, as the judgment creditors, before the application to set aside was filed, had pursued contempt proceedings, which showed they were proceeding with their claim notwithstanding whatever discussions were taking place.”

9 Laing J also refused the applicant's application for leave to appeal. Consequently, the applicant was impelled to make this application before this court for permission to appeal with which we are now concerned.

The applicant's submissions

10 The main planks of the submissions made by Mr Moodie on the applicant's behalf are outlined as follows:

• (i) Laing J wrongly placed emphasis on the issue of delay rather than on the primary consideration, which is whether the applicant's defence had a real prospect of success. The learned judge was unable to get past the conduct of the applicant's representatives and as a result did not pay attention to the primary test, which is the real prospect of success of the defence.

• (ii) The respondents were asking for an accounting of all sums due from gross revenue but the learned judge failed to give due weight to the fact that when the claim was filed in 2009, it related to sums due from 1999. Accordingly, the learned judge did not take into account that when the claim was filed, a large part of the sums claimed was statute barred.

• (iii) The default judgment was entered for an amount greater than the claim. The respondents have claimed that they are entitled to a commission to be agreed over time equal to 20% of the gross room revenue received by the applicant from the bookings of the hotel rooms owned by the respondents. The documents relied on in support of the claim and which are exhibited to the claim form indicate, however, that an allowance is to be made for capital expenditure, being 15% of gross room revenue. The respondents are not entitled to gross room revenue without any allowance for expenditure by the applicant. An order that the respondents are to be paid on gross room revenue would result in them getting a windfall.

• (iv) The...