Alexander House Ltd v Reliance Group of Companies Ltd
| Jurisdiction | Jamaica |
| Judge | McDonald-Bishop JA,F Williams JA,Straw JA |
| Judgment Date | 21 July 2018 |
| Neutral Citation | JM 2018 CA 81 |
| Docket Number | SUPREME COURT CIVIL APPEAL NO 77/2016 |
| Year | 2018 |
| Court | Court of Appeal (Jamaica) |
[2018] JMCA Civ 18
IN THE COURT OF APPEAL
THE HON Mrs Justice McDonald-Bishop JA
THE HON Mr Justice F Williams JA
THE HON Miss Justice Straw JA (AG)
SUPREME COURT CIVIL APPEAL NO 77/2016
Abraham Dabdoub and Mrs Karen Dabdoub-Harris instructed by Dabdoub Dabdoub and Company for the appellant
Patrick Foster QC and Mark-Paul Cowan instructed by Nunes, Scholefield, DeLeon & Co for the respondent
This is an appeal brought by Alexander House Limited (‘the appellant’) from an order of Batts J, which was made in the Commercial Division of the Supreme Court on 2 August 2016. By that order, Batts J acceded to the appellant's application for an injunction, pending the trial of the claim, which was brought by it to restrain Reliance Group of Companies Limited (“the respondent”) from exercising its power of sale contained in a mortgage. However, in granting the injunction, Batts J made an order, in keeping with the principle enunciated in SSI (Cayman) Limited, Dr Steve Laufer and FSI Financial Services US Inc v International Marbella Club SA (“Marbella”) (unreported), Court of Appeal, Jamaica, Supreme Court Civil Appeal No 57/1986, judgment delivered 6 February 1987 (“the Marbella principle”), that the appellant should pay into court the sum of US$747,908.51, as a condition for the grant of the injunction.
The appellant, being aggrieved by that order, filed a notice and grounds of appeal as well as a notice of application for court orders on 5 August 2016. By way of the notice and grounds of appeal, the appellant sought orders, inter alia, that there be a stay of the order of Batts J, pending the determination of the appeal; an interim injunction pending the determination of the appeal; discharge of the order of Batts J; and the grant of an injunction pending the determination of the claim in the Supreme Court.
By way of the notice of application of the same date, the appellant also sought, inter alia, an interim injunction restraining the exercise of the power of sale, as well as a stay of execution of the order of Batts J, pending the determination of the appeal.
Given the almost identical issues which arose for determination on the appeal and on the application, this court, with the concurrence of counsel on both sides, proceeded to hear the substantive appeal.
The appeal raises a number of issues, but the core issue is whether Batts J erred in applying the Marbella principle in granting the injunction to restrain the respondent in the exercise of its power of sale given the challenge to the legality, validity and enforceability of the mortgage raised by the appellant.
At the close of oral arguments on 21 July 2017, the court invited counsel to make further written submissions by 15 August 2017, in light of some relevant authorities brought to counsel's attention by the court. At the adjournment of the hearing, pending the filing of those submissions, the court granted an interim stay of execution of the impugned portion of the order of Batts J, until the determination of the appeal.
On 3 October 2017, after a consideration of all the arguments advanced by counsel for the parties, the court dismissed the appeal; discharged the interim stay of execution that was granted on 21 July 2017; and awarded costs to the respondent to be agreed or taxed. We promised then to produce our written reasons for the decision at a later date. This is in fulfilment of that promise.
In or around July 2014, the respondent loaned the appellant the sum of US$600,000.00, which was secured by an instrument of mortgage executed in relation to property located at 1 Waterloo Road in the parish of Saint Andrew and registered at Volume 1353 Folio 797 of the Register Book of Titles (“the property”). The loan was also secured by a guarantee given by the appellant's principal, Mr Christopher Moore. The particulars of the loan agreement were that the appellant would pay interest at a rate of 25% per annum, which was to be paid at a monthly instalment of US$12,000.00. The loan would be repayable at the end of 12 months.
The appellant fell in arrears with the repayment of the loan and despite the issuance to Mr Christopher Moore of the requisite statutory notices, it failed to make good its default. As a result, on 16 June 2016, the respondent sought to exercise its power of sale under the mortgage by way of public auction.
On the day that the auction for the sale of the property was to take place, the appellant successfully obtained from Batts J an ‘ ex parte injunction’ on a without notice application for court orders, restraining the respondent from exercising its power of sale with respect to the property until the inter partes hearing, which was scheduled for 22 June 2016. The interim injunction was granted on condition that the appellant paid into court on or before 24 June 2016, “or as any further order”, the amount of US$747,990.00.
On the same date of the application for the injunction, the appellant also filed a fixed date claim form, in which it sought, among other things, the following orders:
“1. That the [respondent] be restrained from exercising, or causing to be exercised, its power of sale with respect [sic] all that parcel of land known as No. 1 Waterloo Road (‘the Property’), in the parish of Saint Andrew being registered at Volume 1353 Folio 797 of the Register Book of Titles.
2. A declaration that the interest rate imposed by the [respondent] with respect to the loan for which the Property has been provided as security is unconscionable;
3. The costs of and incidental to this Claim to the [appellant] to be agreed or taxed.”
The appellant's contention in its application for injunction and in its claim was that the respondent is not an authorized dealer pursuant to the Bank of Jamaica Act 1960 (“the Act”), and that in contravention of the Act, it carried on the business of lending foreign currency to several persons over the years. Included among those persons and legal entities named by the appellant were: Ken's Sales & Marketing Limited (evidenced by the decision in Reliance Group of Companies Limited v Ken's Sales and Marketing Limited and another; Christopher Graham v Ken's Sales and Marketing Limited and another [2011] JMCA Civ 12); J Reitti; Foreign Options Limited; and Jack Fonseca Stuart and Pauline Stuart.
The argument of the appellant is that the mortgage is rendered void from the beginning and unenforceable as a result of illegality. The illegality, according to the appellant, is the granting of the loan to the appellant in the course of the respondent's dealing in foreign exchange in contravention of the Act. The appellant contended that the granting of these loans has been admitted by the respondent's affiant, Gordon Tewani, in his affidavit filed on 19 July 2016. In that affidavit, Mr Tewani deponed that he is a director of the respondent and that he “infrequently assisted friends and associates with loans over the years in emergency situations or as a personal courtesy”. His evidence is also that the “isolated and infrequent transactions do not form a part of the respondent's real estate business” and the respondent does not engage in the business of money lending.
The inter partes hearing came before Batts J on 2 August 2016, and after considering the evidence and the submissions of counsel for the parties, he made the following order:
“a) Upon the payment by [the appellant] into Court or into a joint interest bearing account, in the names of the attorneys on the record for the parties to this action, of the sum of US$ 747,908.51 on or before the 12 th day of August 2016, [the respondent] by itself, its servants and/or agents is restrained and an injunction granted restraining the exercise or causing to exercise its powers of sale with respect to the mortgage dated the 14 th July 2014 registered at Volume 1353 Folio 797 of the Register Book of Titles being all that parcel of land located 1 Waterloo Road in the parish of Saint Andrew, until the trial of this action.
b) [The appellant] through its counsel to give the usual undertaking as to damages.
c) Costs to [the respondent] to be taxed if not agreed.
d) Leave to appeal if necessary.
e) Application for Stay refused.”
The appellant challenged the decision of Batts J to apply the Marbella principle on four grounds. The grounds were as follows:
“(A) The Learned Judge having determined that (1) there were serious triable issues in respect of the legality and enforceability of the loan and in respect to the Mortgage entered into as security for the said loan (2) that damages were not an adequate remedy and that (3) the balance of convenience lay in favour of the Claimant, erred in law by failing to appreciate that as a matter of law the facts of the application were of such that they gave rise to an exception to the Marbella principle which did not and should not apply in this claim where, as a matter of law, the [appellant] was challenging the legality, validity, and enforceability of the loan and of the Mortgage Instrument entered into as security.
(B) That the Learned Judge misdirected himself by giving consideration and making a determination to matters which ought properly to be determined by the trial Judge and not on the hearing of an application for injunctive relief.
(C) That the Learned Judge erred in law in failing to appreciate that the Affidavit evidence was prima facie evidence that the [respondent] was in breach of Section 22A(2) of the Bank of Jamaica Act by carrying on the business of lending foreign currency without being an authorised dealer as a result whereby the loan to the [appellant]...
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