Foster J
```html <table> <tr> <td>IN THE GRAND COURT OF THE CAYMAN ISLANDS</td> <td>CAUSE NO ： 568 OF 2008</td> </tr> <tr> <td>BETWEEN：</td> <td>(1) PAUL MYERS</td> </tr> <tr> <td>(2) CAROLYN MYERS</td> </tr> <tr> <td>AND：</td> <td>(1) ROBERTSON DESIGN BUILD LIMITED</td> </tr> <tr> <td>(2) JAMES ROBERTSON</td> </tr> <tr> <td>(3) SUSAN ROBERTSON</td> </tr> <tr> <td>DEFENDANTS</td> </tr> <tr> <td>Coram：</td> <td>The Hon. Mr. Justice Foster， QC</td> </tr> <tr> <td>Appearances：</td> <td>Mr. Colm Flanagan of Nelson & Co. for the Plaintiffs and Mr. Nicholas Fox of Harneys for the 2nd and 3rd Defendants</td> </tr> <tr> <td>Heard：</td> <td>22nd February 2010</td> </tr> <tr> <td>RULING</td> </tr> <tr> <td>1.</td> <td>This an application by the 2nd and 3rd Defendants to set aside a default judgment</td> </tr> <tr> <td>dated 25th March 2009 giving judgment for the Plaintiffs against the 2nd and 3rd</td> </tr> <tr> <td>Defendants jointly and severally for damages and interest to be assessed， together</td> </tr> <tr> <td>with costs. The Plaintiffs' claim arises out of an agreement ("the Purchase</td> </tr> <tr> <td>condominium， garage and associated facilities in a development to be built at</td> </tr> <tr> <td>Pedro， Savannah， Grand Cayman for a total purchase price of US$1，472，750. In</td> </tr> </table> ```
```html <table> <tr> <td>1</td> <td>according with the Purchase Agreement the Plaintiffs made payments in April</td> </tr> <tr> <td>2</td> <td>and May 2007 totalling US$220， 912.50 as down payments towards the purchase</td> </tr> <tr> <td>3</td> <td>price (together "the Down Payment"). The Down Payment equalled 15% of the</td> </tr> <tr> <td>4</td> <td>purchase price.</td> </tr> <tr> <td>5</td> <td>62.</td> <td>The Purchase Agreement provided inter alia that in the event that construction of</td> </tr> <tr> <td>7</td> <td>the development had not commenced by 30th June 2007 either party could rescind</td> </tr> <tr> <td>8</td> <td>the Purchase Agreement by giving notice to the other and in that event the</td> </tr> <tr> <td>9</td> <td>Plaintiffs， were entitled to return of the Down Payment together with interest.</td> </tr> <tr> <td>10</td> <td>The Purchase Agreement also provided by Clause 24 that：</td> </tr> <tr> <td>11</td> <td>12</td> <td>"The down payment shall be used by the vendor solely for the purpose of</td> </tr> <tr> <td>13</td> <td>constructing the development".</td> </tr> <tr> <td>14</td> <td>15</td> </tr> <tr> <td>16</td> <td>3.</td> <td>The 2nd and 3rd Defendants failed to serve a defence to the Plaintiffs's Writ and</td> </tr> <tr> <td>17</td> <td>Statement of Claim timely in accordance with the Grand Court Rules (GCR).</td> </tr> <tr> <td>18</td> <td>Reasons for the delay are contained in the affidavit evidence which exhibit</td> </tr> <tr> <td>19</td> <td>various email exchanges between the 2nd and 3rd Defendant's then attorneys and</td> </tr> <tr> <td>20</td> <td>then the 2nd Defendant personally on the one hand and the Plaintiffs' attorneys on</td> </tr> <tr> <td>21</td> <td>the other hand. I do not propose to go into the detail of these exchanges in this</td> </tr> <tr> <td>22</td> <td>Ruling， suffice it to say that extensions of time were requested of the Plaintiffs'</td> </tr> <tr> <td>23</td> <td>attorn beha of</td> <td>24</td> <td>ant time in t of seekin thants， whom</td> <td>sequently</td> </tr> <tr> <td>24</td> <td>ng t 3rd Defeo ws and co</td> </tr> <tr> <td>25</td> <td>evs by or o the 2nd a</td> <td>am time in the process of seeking and</td> <td>nd</td> <td>o changever for s</td> </tr> <tr> <td>26</td> <td>for a period they were for practical purposes party litigants. It seems to me that</td> </tr> <tr> <td>the Plaintiffs' attorneys did not always take that sufficiently into account. It also</td> </tr> </table> ```
It seems to me that while they were strictly entitled to apply for default judgment pursuant to the GCR, the Plaintiffs or their attorneys could have done more to bring to their intention to so apply and the consequences thereof to the attention of the 2nd and 3rd Defendants at the time. Furthermore, having obtained the default judgment there was then a significant delay of some 2 months on the part of the Plaintiffs' attorneys in bringing the fact that a default judgment had been granted to the attention of the 2nd and 3rd Defendants. However, there was then a delay of almost 3 months on the part of the 2nd and 3rd Defendants and/or their present attorneys in filing their application to set aside the default judgment, which first came before the Court in August 2009, at the same time as the Plaintiffs' application for assessment of damages pursuant to the default judgment.
GCR O.13, r.9 provides that "the Court may, on such terms as it thinks just, set aside or vary any judgment entered in pursuance of this Order", [i.e. a default judgment]. The provisions of the former RSC in England are in precisely the same terms. It is accepted that these provisions give the Court a wide discretion to set aside or vary a default judgment in appropriate circumstances. A default judgment is clearly not a judgment on the merits of the case or made by consent of the parties but is a judgment granted purely in consequence of the breach of the procedural rules by the defendant. It is an "exercise of the Court's coercive power" (see Evans v Bartlam [1937] AC 473).
In my view, although expressed from time to time in slightly different language, the test, as set out both the English and Cayman Islands cases, to be applied in an application like this is reasonably clear. It has been expressed both negatively and positively; negatively in that the Court should only refuse to set aside a default judgment if the defendant has “no real prospect of success” in his proposed defence to the action; positively in that the Court should only set aside a default judgment if the defendant can show that he has real prospect of success in his proposed defence. In the Cayman Islands case of **Default Judgment** [1990] 2 CI Law Bulletin, Collett C.J. stated that the most important element in considering an application to set aside is whether the defendant has shown a “triable issue of law or fact” and the proposed defence must be “fairly arguable”. That approach was also followed by Smellie J. (as he then was) in **Fiduciary Management Services Ltd. v Intermediate Securities Limited** [1992–1993] CILR 1 in which he determined that there was a triable issue and that it would therefore be unjust to let the matter go by default.
The Plaintiffs claim that construction of the development had not commenced by 30th June 2007 in accordance with paragraph 4 of the Purchase Agreement, that the First Defendant has failed to return to them the Down Payment with interest and the Defendant breach of contract. The First is therefore claim to the 2nd is also a Agreement and accordingly in breach of contract himself. Alternatively, the Plaintiffs claim that the 2nd and 3rd
Defendants, as the sole directors of the First Defendant, induced or caused the breach of contract by the First Defendant.
The Plaintiffs also claim that by virtue of Clause 24 of the Purchase Agreement the First Defendant was a trustee for the Plaintiffs in respect of the Down Payment and that the First Defendant holds the Down Payment monies on a Quistclose trust. They contend that the Plaintiffs remain the sole beneficial owners of the Down Payment monies. They allege that the First Defendant did not use the Down Payment monies solely for the purpose of constructing the development as required and that the First Defendant is therefore in breach of trust. The Plaintiffs further claim that the 2nd and 3rd Defendants, as sole directors of the First Defendant (and in the case of the 2nd Defendant as a party to the Purchase Agreement), were aware of the terms of the Quistclose trust and that they accordingly knowingly assisted the First Defendant in its breach of trust. Finally, the Plaintiffs claim that they are entitled in the circumstances to pierce the corporate veil of the First Defendant and to compensation by the 2nd and 3rd Defendants personally in respect of the Down Payment monies, which they contend have been misappropriated by one or other or all of the Defendants.
Together with their affidavits in support of their application to set aside the default the 2nd and 3rd Defendants’ statement of claim. For the exhibited evidence of the Plaintiffs’ claim, I refer me (the) to the hearing before the Court. Each party submitted a lengthy principal skeleton argument and also a lengthy
supplementary skeleton argument, all of which I have now read twice. The hearing before me took a whole day.
9. In the end of the day the issue between Counsel was whether the 2nd and 3rd Defendants' draft defence and their affidavits filed in support of their set aside application disclose no real prospects of success in defending the action on their part, or no real likelihood that the proposed defence will succeed or that there is or is not a triable issue of law or fact on which the proposed defence is founded.
Counsel for the Plaintiffs argued also that the 2nd and 3rd Defendants affidavit evidence did not support the facts which they plead in their proposed defence, which accordingly does not meet the requisite degree of conviction.
10. In the course of argument each Counsel went into considerable detail in analyzing and, in the case of Counsel for the 2nd and 3rd Defendants, seeking to undermine and, in the case of Counsel for the Plaintiffs, seeking to support, the various grounds, which I have outlined, on which the Plaintiffs' claims are based and the pleading of those grounds in their statement of claim.
11. It is well established that an application of this nature is not intended to be and should not be in effect a trial of the issues. I do not think it necessary for me to go into all of the arguments at this stage. Suffice it to say that there is a clear dispute in particular as to whether the purchase in the context of the Agreement to the Purchase Agreement for these purposes, what is meant by the term "construction" in the context, whether construction, however defined, had or had not started by the due
```html <table> <tr> <td>1</td> <td>date and whether the Down Payment had or had not been utilized solely for the</td> </tr> <tr> <td>2</td> <td>purpose of construction. There is also considerable argument about what</td> </tr> <tr> <td>3</td> <td>constitutes a Quistclose trust and whether the Down Payment is held by the First</td> </tr> <tr> <td>4</td> <td>Defendant on such a trust for the benefit of the Plaintiffs. There are also</td> </tr> <tr> <td>5</td> <td>contested issues concerning the alleged personal liability of the 2nd and 3rd</td> </tr> <tr> <td>6</td> <td>Defendants as directors of the First Defendant, amongst other issues. In my view,</td> </tr> <tr> <td>7</td> <td>unless satisfied that the 2nd and 3rd Defendants case in respect of these issues</td> </tr> <tr> <td>8</td> <td>clearly has no real prospect of success, choosing between the parties respective</td> </tr> <tr> <td>9</td> <td>arguments in relation to those issues is the function of a trial judge. None of these</td> </tr> <tr> <td>10</td> <td>issues are straightforward or are easily resolved in the circumstances of this case</td> </tr> <tr> <td>11</td> <td>and to my mind they are eminently triable.</td> </tr> <tr> <td>12</td> <td>12. Having heard the extensive arguments of both Counsel and having considered</td> </tr> <tr> <td>14</td> <td>again their principal and supplementary skeleton arguments I am satisfied that the</td> </tr> <tr> <td>15</td> <td>2nd and 3rd Defendants have demonstrated a sufficiently persuasive arguable case</td> </tr> <tr> <td>16</td> <td>which has a sufficient degree of conviction that it cannot be said that their</td> </tr> <tr> <td>17</td> <td>proposed defence has no real prospect of success or is not triable. Without in any</td> </tr> <tr> <td>18</td> <td>way seeking to reach a concluded view on any of the arguments, I did find the</td> </tr> <tr> <td>19</td> <td>submissions of Counsel for the 2nd and 3rd Defendants sufficiently convincing that</td> </tr> <tr> <td>20</td> <td>in myt of the juse the defa</td> </tr> <tr> <td>21</td> <td>ult judgment</td> </tr> <tr> <td>22</td> <td>assessment of the n should</td> </tr> <tr> <td>23</td> <td>13. However, as I have already pointed out GCR 0.13, r.9 does empower the Court,</td> </tr> <tr> <td>24</td> <td>in its discretion, to set aside such a judgment on such terms as it thinks fit. While</td> </tr> </table> ```
```html <table> <tr> <td>1</td> <td>I do not consider the delay in bringing on the application to set aside the default</td> </tr> <tr> <td>judgment is entirely attributable to the 2nd and 3rd Defendants, nonetheless I am</td> </tr> <tr> <td>concerned that there appears to me to have been a degree of failure on their part to</td> </tr> <tr> <td>co-operate in bringing the Plaintiffs’ claims to trial as expeditiously as they</td> </tr> <tr> <td>should and an inclination by them to seek to avoid the matter for as long as</td> </tr> <tr> <td>possible. Whether this is entirely due to the 2nd and 3rd Defendants personally</td> </tr> <tr> <td>themselves or due to the conduct of their previous and present attorneys is hard to</td> </tr> <tr> <td>assess and is perhaps not relevant. I do not consider this delay in itself to be a</td> </tr> <tr> <td>sufficient reason to change my view that in all the circumstances the matter</td> </tr> <tr> <td>should go to trial and 2nd and 3rd Defendants should be entitled to defend the</td> </tr> <tr> <td>action. However, in my opinion this should only be on the basis that the matter is</td> </tr> <tr> <td>now brought to trial as soon as possible but also on the condition that the 2nd and</td> </tr> <tr> <td>3rd Defendants should make a significant payment into Court, which bears some</td> </tr> <tr> <td>relation to the sum sued for; this to be a pre-condition of the default judgment</td> </tr> <tr> <td>being set aside.</td> </tr> <tr> <td>14.</td> <td>In all the circumstances therefore and in the exercise of my discretion I order that,</td> </tr> <tr> <td>18</td> <td>subject to my comment below, the default judgment dated 25th March 2009</td> </tr> <tr> <td>19</td> <td>should be set aside and the 2nd and 3rd Defendants should have leave to file and</td> </tr> <tr> <td>serve draft defencethis shall b</td> </tr> <tr> <td>and their de. Howeverion that no</td> <td>ar</td> </tr> <tr> <td>or, later</td> <td>pay into</td> </tr> <tr> <td>21</td> <td>Friday 26th</td> <td>0 the 2ndfer</td> </tr> <tr> <td>22</td> <td>total sum of US$110，450，being approximately one half of the Down Payment in</td> </tr> <tr> <td>23</td> <td>issue，and notice of such payment in shall be served expeditiously on the</td> </tr> </table> ```
```html <table> <tr> <td>1</td> <td>Plaintiffs’ attorneys. The 2nd and 3rd Defendants’ proposed defence as exhibited</td> </tr> <tr> <td>2</td> <td>to the 2nd Defendants’ affidavit shall be filed and served within 3 working days</td> </tr> <tr> <td>3</td> <td>after such payment into Court and the Plaintiffs shall file and serve any Reply to</td> </tr> <tr> <td>4</td> <td>the Defence within 14 days after service if it. Counsel for the parties should apply</td> </tr> <tr> <td>5</td> <td>as soon as possible for further appropriate directions in order to bring this matter</td> </tr> <tr> <td>6</td> <td>on for trial expeditiously. There shall anyway be general liberty to apply. The 2nd</td> </tr> <tr> <td>7</td> <td>and 3rd Defendants shall pay the Plaintiffs’ costs of and incidental to the</td> </tr> <tr> <td>8</td> <td>application to set aside the default judgment in any event, such costs to be taxed if</td> </tr> <tr> <td>9</td> <td>not agreed.</td> </tr> <tr> <td>10</td> </tr> <tr> <td>11</td> </tr> <tr> <td>12</td> </tr> <tr> <td>13</td> </tr> <tr> <td>14</td> <td>Dated 23rd February 2010</td> </tr> <tr> <td>15</td> </tr> <tr> <td>16</td> </tr> <tr> <td>17</td> </tr> </table> ``` ```latex \documentclass{article} \usepackage{geometry} \usepackage{graphicx} \usepackage{hyperref} \begin{table}[h] \centering \begin{tabular}{|p{0.4\textwidth}|p{0.6\textwidth}|} \hline 1 & Plaintiffs’ attorneys. The 2nd and 3rd Defendants’ proposed defence as exhibited \\ 2 & to the 2nd Defendants’ affidavit shall be filed and served within 3 working days \\ 3 & after such payment into Court and the Plaintiffs shall file and serve any Reply to \\ 4 & the Defence within 14 days after service if it. Counsel for the parties should apply \\ 5 & as soon as possible for further appropriate directions in order to bring this matter \\ 6 & on for trial expeditiously. There shall anyway be general liberty to apply. The 2nd \\ 7 & and 3rd Defendants shall pay the Plaintiffs’ costs of and incidental to the \\ 8 & application to set aside the default judgment in any event, such costs to be taxed if \\ 9 & not agreed. \\ 10 & \\ 11 & \\ 12 & \\ 13 & \\ 14 & Dated 23rd February 2010 \\ 15 & \\ 16 & \\ 17 & \\ \hline \end{tabular} \end{table} \begin{figure}[h] \centering \includegraphics[width=0.5\textwidth]{image.png} \caption{Judge's signature and stamp} \end{figure}