Harshaw v Lowe

• Jurisdiction: Bermuda
• Judgment Date: 29 January 2016
• Neutral Citation: [2016] SC Bda 10 Civ
• Date: 29 January 2016
• Docket Number: Appellate Jurisdiction 2015 No 28,APPELLATE JURISDICTION 2015: CIVIL APPEAL NO: 28
• Court: Supreme Court (Bermuda)

[2016] SC (Bda) 10 Civ

In The Supreme Court of Bermuda

APPELLATE JURISDICTION 2015: CIVIL APPEAL NO: 28

Paul Harshaw

Appellant

and

Keetha Lowe

Respondent

The Appellant appeared in person

Mr. Javone Rogers, Mussenden Subair Limited, for the Respondent

(In Court) 1

Introductory

1 The Appellant appeals against the decision of the Magistrates' Court (Wor. Tyrone Chin) dated July 21, 2015 setting aside the default judgment obtained by the Appellant against the Respondent on May 31, 2013 in the amount of $13,095. The underlying claim was in respect of legal fees.

2 He complains that the Learned Magistrate erred in law by applying the wrong test in deciding to set aside judgment and in doing so in the absence of any evidence filed in support of the application to set aside supporting the merits of the proposed defence.

The proceedings in the Magistrates' Court

3 The Appellant issued an Ordinary Summons in the Magistrates' Court for $12,090 together with standard filing charges of $175 against the Respondent in Case No. 13CV00808. The Summons was issued returnable for May 31, 2013. According the Service Endorsement on the back of the Summons, the Respondent was personally served on April 12, 2013. She failed to appear on May 31, 2013 and judgment was entered in favour of the Appellant in default.

4 The Appellant thereafter issued two Judgment Summonses. The first was returnable on October 30, 2013 and the second was returnable on December 10, 2014. The Respondent failed to appear in either case, although personal service was never carried out on the second occasion. In between these two Summonses being issued, the Respondent's initial application to set aside the Default Judgment was apparently dismissed on or about September 12, 2014 when she failed to appear. The Respondent appeared before the Senior Magistrate on February 23, 2015 and stated that she was making a complaint to the Bermuda Bar Council against the Appellant and, apparently, that she wished to apply to set aside the Default Judgment. The Court directed her to file and serve a Defence within 14 days and adjourned the matter until May 13, 2015 to, inter alia, fix a date for the application to set aside.

5 On May 13, 2015, the Appellant and the Respondent (now represented by counsel) appeared before the Wor Nicole Stoneham. Mr Harshaw understandably initially believed, based on the contents of the Notice of Hearing issued by the Court on or about February 24, 2015, that the May 13, 2015 hearing only concerned the status of a “Complaint to Bar Council”. The Respondent's counsel however stated that a Defence had already been filed and requested a hearing date for the application to set aside the Default Judgment. The Appeal Record confirms that the Respondent's Defence and Counterclaim was filed in the Magistrates' Court on May 12, 2015. The matter was further adjourned until June 17, 2015 when the parties appeared before Wor Tyrone Chin, with the Appellant being represented by Ms Alsha Wilson. The Appellant was ordered to produce copies of the bills which supported his claim within seven days. The matter was set down for hearing on July 21, 2015.

The Supreme Court Bankruptcy Proceedings

6 The Appellant apparently responded to receipt of the February 24, 2015 Notice of Hearing issued by the Magistrates' Court ‘ Mention Re: Complaint to Bar Council’ by issuing a Bankruptcy Notice in this Court on or about March 6, 2015. The Respondent made abortive attempts to retain counsel to deal with the Bankruptcy Notice but ended up filing an Affidavit in support of a stay of the Bankruptcy Proceedings herself on May 6, 2015. In this Affidavit, she explained that she appeared before the Senior Magistrate in February 2015 on her own initiative and explained that her failure to appear had been due to the illness of two family members (her daughter-in-law and mother), both of whom had since died. She sought a stay of the Bankruptcy Proceedings in order to be able to pursue her application to set aside judgment which was due to be mentioned on May 13, 2015.

7 Without formally granting a stay, I adjourned the Bankruptcy Proceedings on May 8, 2015 until June 12, 2015 and invited counsel to further adjourn the matter by consent if the application to set aside was still pending before the Magistrates' Court on June 12, 2015.

The impugned Magistrates' Court Decision of July 21, 2015

8 It was common ground before the Magistrates' Court that the same test applicable to setting aside a judgment in default in the Supreme Court applied to the equivalent application in the Magistrates' Court: Bridgewater v Bermuda Accounting and Management Services [2015] SC (Bda) 2 App (13 January 2015); [2014] Bda LR 2. Mr Rogers for the Respondent cited this authority for this proposition. Mr Harshaw further cited Alpine Bulk Transport Co. Inc. v Saudi Eagle Shipping Co. Inc [1986] 2 Lloyd's LR 221, and two Bermudian cases applying this English court of decision: Ball v Lambert [2001] Bda LR 81; M & M Construction Ltd v Vigilante [2012] Bda LR 6.

9 The primary defence was that the relevant account to which the Default Judgment related had been paid in full. The Counterclaim asserted that interest was payable in respect of the proceeds of the sale of a property which ought to have been paid into an interest-bearing account. It asserted without particularity that the Respondent had been overcharged and had overpaid and sought, in effect, an accounting from the Appellant. Mr Harshaw submitted that there was no satisfactory explanation for the default and related highly prejudicial delay, and no evidence in support of the merits of the Defence, which was now only being pursued merely to defeat the Supreme Court Bankruptcy Proceedings. The Counterclaim raised issues which were not justiciable in the Magistrates' Court.

10 The Learned Magistrate after summarising the various arguments made concluded as follows:

‘ The Court is somewhat satisfied as to the explanation for Ms. Lowe failing to appear on 31 ^st May 2013 and on 12 ^th September 2014. This Court is quite satisfied that its major consideration has been attained in that the Court deems that the Defendant has a Defence and a Counterclaim which both have prospects of success.’

Findings: merits of the appeal

The Legal Test for setting aside a regular default judgment

11 Mr Harshaw rightly submitted that the Learned Magistrate erred in law in failing to accurately record the correct legal test for setting aside the Default Judgment. The test is higher than ‘ prospects for success’. In Burgess v Burgess-Salina and Williams [2016] SC (Bda) 7 Civ (25 January 2016), I recently summarised the principles which were also common ground in the present case as follows:

‘ 14. There was no controversy as to the governing principles applicable to an application to set aside a default judgment which has been regularly obtained. Mr Durham relied upon the leading English Court of Appeal authority ofAlpine Bulk Transport Co. Inc. v Saudi Eagle Shipping Co. Inc [1986] 2 Lloyd's Rep 221. I most recently applied the guidance provided by that case inS Smith v N Stoneham et al [2015] SC (Bda) 42 Civ(29 June 2015) where I stated:

“ 8. The relevant principles are set out at in the judgment of Sir Roger Ormrod at page 223 where he says this:

“ The following “general indications to help the Court in exercising the discretion’ (per Lord Wright at page 488) can be extracted from the speeches inEvans v Bartlam (1937) A.C. 473, bearing in mind that “in matters of discretion no one case can be authority for another” (ibid, page 488):

(i) a judgment signed in default is a regular judgment from which, subject to (ii) below, the plaintiff derives rights of property;

(ii) the Rules of Court give to the judge a discretionary power to set aside the default judgment which is in terms “unconditional” and the court should not “lay down rigid rules which deprive it of jurisdiction” (per Lord Atkin at page 486);

(iii) the purpose of this discretionary power is to avoid the injustice which might be caused if judgment followed automatically on default;

(iv) the primary consideration is whether the defendant “has merits to which the Court should pay heed” (per Lord Wright at page 489), not as a rule of law hut as a matter of common sense, since there is no point in setting aside a judgment if the defendant has no defence and if he has shown “merits” the Court will not, prima facie, desire to let a judgment pass on which there has “been no proper adjudication” (ibid. page 489 and per Lord Russell of Killowen at page 482).

(v) Again as a matter of common sense, though not making it a condition precedent, the court will take into account the explanation as to how it came about that the defendant “found himself bound by a judgment regularly obtained to which he could...