Simmons v McCann & Bosch [SC Civ (Bda)]

• Jurisdiction: Bermuda
• Judgment Date: 22 October 2014
• Neutral Citation: [2014] SC Bda 81 Civ
• Date: 22 October 2014
• Docket Number: CIVIL JURISDICTION 2012: No. 260
• Court: Supreme Court (Bermuda)

[2014] SC (Bda) 81 Civ

In the Supreme Court of Bermuda

CIVIL JURISDICTION 2012: No. 260

Between:

Judith Ethel Ann Simmons (as Executor of the Estate of Gladstone W.C. Trott)

Plaintiff

and

(1) David Garth McCann

(2) Carlos Bosch

Defendants

Ms. Stephanie Hanson, Conyers Dill and Pearman Limited, for the Plaintiff

Mr. Paul Harshaw, Canterbury Law Limited, for the 2 ^nd Defendant

RULING

(in Chambers)

Introductory

1 The 2 ^nd Defendant applies by Summons dated May 13, 2014 to set aside a Judgment in Default of Defence entered in favour of the Plaintiff on January 8, 2014. The Plaintiff's Specially Indorsed Writ was issued on July 25, 2012 and the 2 ^nd Defendant entered an unconditional appearance on August 27, 2012.

2 The action was originally commenced in the name of the now deceased Gladstone Trott. His executor was named Plaintiff in place of the deceased by consent on October 10, 2013. Until this juncture, the 1 ^st and 2 ^nd Defendant were jointly represented by Wakefield Quin Limited. The 2 ^nd Defendant's present attorneys filed a Notice of Change of Attorneys on his behalf on April 10, 2014, in response to the Plaintiff's attempt to execute the Default Judgment.

3 On May 8, 2014, Hellman J ordered as follows:

‘ 1. execution of the judgment herein against the second-named Defendant, Carlos Bosch, be stayed until the first instance determination of his application to set aside the judgment or further order of the Court; and

2. the costs of and occasioned by this order are reserved to the determination of the second-named Defendant's application to set aside Judgment.’

4 It was common ground that the primary consideration in determining whether or not to set aside the Judgment was whether the 2 ^nd Defendant was able to ‘ show that he has a defence which has a real prospect of success’: Alpine Bulk Transport Co. Inc. v Saudi Eagle Shipping Co. Inc [1986] 2 Lloyd's Rep 221 at 223 (Sir Roger Ormrod). This approach has been approved in a variety of local cases to which the Plaintiff's counsel referred: Dobie v Interinvest (Bermuda) Ltd and Black [2009] Bda LR 31; Wakefield and Accardo v Marshall et al [2010] Bda LR 53; M& M Construction Ltd v Vigilante [2012] Bda LR 6 (also cited by Mr. Harshaw). The 2 ^nd Defendant's counsel additionally referred to Ball v Lambert [2001] Bda LR 81.

5 Ms. Hanson invited the Court to have regard to the manner in which the 2 ^nd Defendant has defended the present claim and to refuse the application to set aside judgment in any event following the approach adopted in Wakefield and Accardo v Marshall et al [2010] Bda LR 53, where Wade-Miller J held:

‘ Additionally, in arriving at a decision the court is entitled to look at the First Defendant's conduct and statements and ascertain if in the circumstances it should disentitle him from proceeding. Delay in itself is not a bar to proceedings but the nature of the delay and any disadvantage to the other side caused by the delay can be taken into account.’

6 It was also common ground that the Default Judgment should be varied as the 2 ^nd Defendant's liability rested upon, if anything, one promissory note which he signed jointly with the 1 ^st Defendant. Under the first note dated 19 ^th November 2006, the Defendants promised to pay $500,000 together with interest at the rate of 10% (‘the Note’). The Plaintiff also sought to vary the quantum of the Judgment under the Note as against both Defendants, even though no challenge was made by the 1 ^st Defendant to the Judgment at all. This was in part because, as a result of queries on quantum raised by the 2 ^nd Defendant, the original Plaintiff's executor had reviewed the deceased records, compiled while the original Plaintiff (‘Mr. Trott’) was of a very advanced age, and ascertained that credit should be given for extra payments totalling $ 24,139.19.

7 The 1 ^st Defendant was also liable under a second promissory note.

8 Subsidiary issues were (a) whether the 2 ^nd Defendant had been properly served with the Writ, and (b) whether, if all other issues were resolved against the 2 ^nd Defendant, he should be given leave to defend with respect to the amount of approximately $37,371.22 which he contended might be revealed, through discovery of corporate records under the control of the 1 ^st Defendant, had also been repaid.

Findings: has the 2nd Defendant shown a case with real prospects of success for denying liability on the Note altogether?

Factual findings

9 I approach the present application by assuming in the 2 ^nd Defendant's favour that:

• (a) at all material times only the 1 ^st Defendant was both a director of and shareholder of the Company;

• (b) the $500,000 advanced by Mr. Trott in return for the Note was remitted to the Company, as Mr. Trott knew or ought to have known, for its benefit and use;

• (c) the 2 ^nd Defendant received no direct benefit from the borrowing, as Mr. Trott knew or ought to have known; and

• (d) the 1 ^st Defendant in or about 2007 became the 100% beneficial shareholder of the Company.

10 However, the 2 ^nd Defendant admits that when he executed the Note he was both a director and shareholder of the Company which he formed jointly with the 1 ^st Defendant in 2003. He was advised to dispose of his shares due to Immigration law changes which were introduced in 2007, and he did so by assigning his shares to the 1 ^st Defendant. He also resigned as a director.

11 The 2 ^nd Defendant in paragraph 6 of his First Affidavit avers that the money referred to in the Note was provided to the Company without suggesting that this was inconsistent with the basis on which he signed the Note. On the contrary, his positive case is that he understood the transaction to have been for the benefit of the Company.

12 The Note headed ‘PROMISSORY NOTE’ was issued on terms that 10 % interest would be payable when the Note was called on six months' notice. The body of the Note described the parties and the core obligations as follows:

‘ We, DAVID GARTH MCCANN of 29 Middle Road in Southampton in the Islands of Bermuda and CARLOS BOSCH of Queens Cove in Pembroke Parish in the said Islands (hereinafter together called “the Obligors”) are HEREBY JOINTLY AND SEVERALLY OBLIGED INDEBTED and firmly bound unto GLADSTONE W.C. TROTT of Trott Manor. St Georges Parish in the said Islands (hereinafter called “the Obligee” shall where the context so admits include his heirs and assigns) IN THE SUM OF Five hundred thousand dollars ($500,000.00)…’

Liability of 2 ^nd Defendant on the Note as principal

13 In the draft Defence, it is averred that the 2 ^nd Defendant ‘ agreed as an agent of the Company, to a loan from the Plaintiff….the Note was prepared by…a lawyer…and the second-named Defendant did not question the 2006 Note at that time. He simply signed the document in the belief that he was agreeing to the loan for the benefit of the Company as an agent of the Company. It now appears that the words “for and on behalf of the Company” or similar words were inadvertently omitted from the 2006 Note.’

14 Mr. Harshaw advanced this beguiling argument with more conviction than this limb of the Defence actually possesses. The submission implies that the only question raised in construing the instrument is whether the director/shareholders when signing their names did so as principals or ‘for and on behalf of the company’. It ignores the fact that the obligors are expressly defined in the body of the Note as well. It is an argument which might have been tenable if the obligors were simply described in the body of the Note as ‘we, the undersigned’.

15 If the drafter of the Note had intended to make the Company the borrower, the Company could easily have been named as such. There would be no need to mention the agents (with their names in capital letters described as ‘jointly and severally obliged’) at all. That language, as Ms. Hanson, pointed out, was wholly inconsistent with the notion of a single corporate obligor.

16 Ms. Hanson advanced more fundamental legal policy grounds for firmly rejecting the construction of the Note the 2 ^nd Defendant contended for. I accept her submissions in this regard. The following provision of the Bills of Exchange Act 1934 (applied to promissory notes by section 81 of the Act) are pivotal:

‘ Person signing as agent or in a representative capacity25 (1) Where a person signs a bill as...