Malcolm Maduro (DBA Sunshine Power Boat Rental) v Department of Customs

• Jurisdiction: British Virgin Islands
• Judge: Ventose JA
• Judgment Date: 19 June 2023
• Judgment citation (vLex): [2023] ECSC J0619-1
• Docket Number: BVIHCVAP2022/0001
• Court: Court of Appeal (British Virgin Islands)

Between:

Malcolm Maduro (DBA Sunshine Power Boat Rental)

Appellant

and

Department of Customs

Respondent

Before:

The Hon. Mr. Trevor Ward Justice of Appeal

The Hon. Mr. Paul Webster Justice of Appeal [Ag.]

The Hon. Mr. Eddy Ventose Justice of Appeal [Ag.]

BVIHCVAP2022/0001

THE EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Interlocutory appeal — Civil Appeal — Seizure and detention of vessel — Breach of statutory duty — Crown Proceedings Ordinance — Rules 13.2 and 13.3 of Civil Procedure Rules 2000 (“CPR”) — Return of goods — Natural justice — Default judgment — Whether the learned master was correct in finding that the default judgment was irregular on grounds that do not form part of CPR 13.2 — Damages — Exceptional circumstances — Whether the learned master was correct in finding that there were no exceptional circumstanc es to set aside the default judgment under CPR 13.3(2) — The use of Form 7 — Whether the learned master was correct in concluding that the use of Form 7 to request a default judgment for both a failure to acknowledge service and for a failure to file a def ence was irregular — Whether the appellant had to abandon his claim for any other relief other than a liquidated sum in order to obtain judgment in default of defence

On 20 ^th March 2020, the appellant filed a claim form and statement of claim seeking various remedies against the respondent in respect of the detention of his vessel. These remedies included: (i) a declaration that the seizure and/or continued detention of his vessel by the respondent is unlawful; (ii) a declaration that the respondent is in breach of its statutory duty; (iii) a declaration that the respondent is in breach of its statutory duty by failing to institute court proceedings for the condemnation of the vessel within a reasonable time, delivery of the vessel or the sum of US$130,000.00; (iv) the costs of import fees, shipping fees, customs and other duties for the importation of a new vessel, special damages at the rate of US$1,200.00 per day from 27 ^th October 2019 to today and continuing; and (v) damages, including aggravated damages, exemplary damages, further and/or other relief as the court may deem fit, interest, and costs.

The respondent did not file an acknowledgement of service or a defence. As a result, the appellant filed a request for default judgment against the respondent for failure to file an acknowledgement of service and defence. On 26 ^th October 2020, judgment in default of acknowledgement of service and defence was entered against the respondent by the first master and the assessment of damages was ordered to be set for a date to be fixed by the Registrar of the High Court.

The assessment of damages came up for consideration on 18 ^th May 2021 where directions for the filing of witness statements and submissions for the assessment of damages were given. Counsel for both parties were present. On 11 ^th June 2021, the second master agreed to the consent order of the parties to vary the directions previously given. The appellant's witness statements and submissions were duly filed in accordance with the amended directions of the second master. Another consent order was accepted by the second master on 14 ^th July 2021 at a hearing at which both parties and their counsel were present. The assessment was adjourned to 29 ^th September 2021. At the adjourned hearing, the Solicitor General requested time to review the file and to make submissions, if necessary. The second master gave further directions for the respondent to file Form 31 (Notice of Intention to be heard on the Assessment) and extended the time for the respondent to file its witness statement and submissions in respect of the assessment of damages. The matter was further adjourned to 1 ^st December 2021. The respondent filed a Form 31 on 7 ^th October 2021.

On 19 ^th November 2021, the respondent filed an application to set aside the default judgment on the basis that exceptional circumstances exist, including: (1) it was in the public interest that justice be done between the parties and considering the reputation of the Territory of the Virgin Islands as a financial services jurisdiction; (2) the respondent lawfully detained the appellant's vessel as a result of an international and inter-jurisdictional law enforcement operation which took place on 27 ^th October 2019 and that the vessel was subject to forfeiture under the Customs Management and Duties Act 2010 and the Drug Trafficking Offences Act 1992; and (3) the respondent has a good defence with a reasonable prospect of success.

The application to set aside the default judgment came before the learned master on 25 ^th January 2022 and in a judgment delivered on 22 ^nd February 2022, the learned master: (1) set aside the default judgment on the basis the default judgment was irregularly obtained; (2) granted permission to the respondent to file and serve its defence to the claim; and (3) made no order as to costs.

Being dissatisfied with the decision of the learned master, the appellant filed a notice of appeal on 2 ^nd May 2022 challenging several findings of the learned master's decision. On 12 ^th May 2022, the respondent filed a counter notice of appeal citing several grounds of appeal. The issues arising for this Court's determination are: (1) whether the learned master was correct in finding that there were no exceptional circumstances to set aside the default judgment under CPR 13.3(2); (2) whether the learned master was correct in finding that the default judgment was irregular on grounds that do not form part of CPR 13.2; (3) whether the learned master was correct in concluding that the use of Form 7 to request a default judgment for both a failure to acknowledge service and for a failure to file a defence was irregular; (4) whether the appellant had to abandon his claim for any other relief other than a liquidated sum in order to obtain judgment in default of defence and (5) whether the learned master erred in setting aside the default judgment on grounds not raised during the hearing without affording the parties an opportunity to make submissions before adjudicating upon those grounds.

Held: allowing the appeal and making the orders at paragraph 50 of this judgment that:

• 1. The general rule is that an applicant seeking to set aside a default judgment would have to satisfy the court of all the grounds set out in CPR 13.3(1). This Court has repeatedly stated that a failure to satisfy any one of the conditions set out in CPR 13.3(1) is fatal to the application. The only refuge for an applicant who cannot satisfy all the conditions in CPR 13.3(1) is to satisfy the court that there exist exceptional circumstances to justify the exercise of discretion to set aside the default judgment under CPR 13.3(2). There is nothing preventing an applicant who knows that they cannot satisfy all the conditions set out in CPR 13.3(1) from seeking to set aside a default judgment based solely on CPR 13.3(2). If an applicant decides that their application to set aside default judgment under CPR 13.3(1) is hopeless, they can apply to set aside the default judgment solely on the ground set out in CPR 13.3(2). In this case, the respondent's affidavit in support of the CPR 13.3(2) application did not have any evidence of the requirements set out in CPR 13.3(1) to enable the learned master to decide the application on that basis. The master was therefore wrong to conclude that the respondent could not ground its application under CPR 13.3(2) unless there was first a consideration of CPR 13.3(1).

  Rule 13. 3 (1) of the Civil Procedure Rules 2000 considered; Rule 13.3 (2) of the Civil Procedure Rules 2000 considered.

• 2. Exceptional circumstances cannot be equated to showing a realistic prospect of success. It should not be construed that providing evidence of exceptional circumstances under CPR 13.3(2) equates to demonstrating that the defence has a realistic prospect of success under CPR 13.3(1)(c). Once the master concluded that the respondent had not satisfied him that there existed any exceptional circumstances to justify setting aside the default judgment under CPR 13.3(2), there was no basis in CPR 13.2(1) on which the master could properly have held that the procedural irregularities that he found were sufficient to set aside the default judgment. Even if these were to be considered as irregularities, they were certainly not nullities that would form the basis on which the court must set aside the default judgment in accordance with CPR 13.2(1). The master therefore erred in setting aside the default judgment on grounds not set out in CPR 13.2(1).

  Carl Baynes v Ed Meyer ANUHCVAP2015/0026 (delivered 30th May 2016, unreported) followed; Tanzania Tobing Tanzil v Lindsay F.P. Grant et al SKBHCV2017/0391 (delivered 28th October 2019, unreported) considered.

• 3. CPR 12.3(1)(b) provides that a claimant who wishes to obtain a default judgment on any claim against a State, as defined in any relevant enactment relating to state immunity, must obtain the court's permission. A clear reading of CPR 12.3(1)(b) shows that the words ‘a State’ refers to a foreign State, not the Crown, the State or the government. Section 29(2)(c) of the Crown Proceedings Ordinance (the “Ordinance”) is an enabling one. It does not mandate that leave of the court must first be obtained before default judgment is entered against the Crown. All it simply does is to provide that rules of court shall be made to provide that default judgments shall not be entered against the Crown without the leave of the court. The court cannot read into the CPR or the Ordinance a requirement that does not exist. This is a matter for the consideration of the Rules Committee. Therefore, there is no lacuna in the CPR concerning service against the Crown. The position is, and remains, that default judgments can be entered against the Crown.

  Crown...