American Jewellry Company Ltd v Khemlani and Others

• Jurisdiction: Jamaica
• Judge: DOWNER, J.A. , BINGHAM, J.A :, PANTON, 3.A. (dissenting)
• Judgment Date: 02 December 2004
• Neutral Citation: JM 2004 CA 38
• Judgment citation (vLex): [2004] 12 JJC 0201
• Court: Court of Appeal (Jamaica)
• Date: 02 December 2004

IN THE COURT OF APPEAL

BEFORE:

THE HON. MR. JUSTICE DOWNER, J.A THE HON. MR. JUSTICE BINGHAM, J.A THE HON. MR. JUSTICE PANTON, J.A

SUPREME COURT CIVIL APPEALS NOS. 155 & 156 OF 2001

BETWEEN:

AMERICAN JEWELLERY COMPANY LIMITED

1 ^ST APPELLANT/PLAINTIFF

AND:

INDRU KHEMLANI

2ND APPELLANT/PLAINTIFF

AND:

COMMERCIAL CORPORA-TION JAMAICA LIMITED

1 ^ST RESPONDENT/DEFENDANT

AND:

TEWANI LIMITED

2 ^ND RESPONDENT/DEFENDANT

AND:

GORDON TEWANI

3 ^RD RESPONDENT/DEFENDANT

BETWEEN:

INDRU KHEMLANI

APPELLANT/DEFENDANT

AND:

TEWANI LIMITED

RESPONDENT/PLAINTIFF

Hilary Phillips, Q.C. and Denise Kitson instructed by Grant Stewart, Phillips and Co., for the Appellants

John Graham and Carol Davis instructed by Jennifer Messado & Co. for the Respondents

REAL PROPERTY - Contract for sale - Breach - Recovery of possession - Summary judgment - Whether granting of summary judgment correct - Whether property acquired through breach of contract of sale of another property - Interlocutory injunction - Whether refusal of injunction correct

DOWNER, J.A.

1 It is necessary to summarise the transactions between the Appellants, American Jewellery Company Ltd. Indru Khemlani ("Khemlani") and the Respondents commercial Corporation Jamaica Limited, Tewani Limited and Gordon Tewani ("Tewani"), in order to delineate the difficult points of law raised in these interlocutory proceedings. The proceedings in the Court below were a summons for an Interlocutory Injunction instituted by "Khemlani" and a summons for Summary Judgment instituted by "Tewani". Both summonses were heard before Glen Brown, J. (actg.) and he granted the summons for Summary Judgment and refused the prayer for an Interlocutory Injunction. Both appeals therefore are "Khemlani's" appeals. Equally, whatever "façade" is relied on "Tewani" is the respondent. For clarity it should be stated that the Interlocutory Injunction sought to prevent any dealings with respect to 70A King Street and the Summons For Summary Judgment was to recover possession of the said premises.

2 The initial transaction in this narrative was the contract between American Jewellery Company Limited, "Khemlani," and Gordon Tewani or his nominee for the sale of No. 3 Tropical Plaza for J$17m. The terms of payment are of sufficient importance to be fully stated. They are at pages 33-34 of Volume I of the Record which deals with Appeal No. 156 of 2001 against the order for summary judgment.

3 As the vendors' attorneys-at-law Clough Long and Co. had the carriage of sale presumably they drafted the contract. The clause adverted to reads:

"How Payable: A deposit/earnest money of TEN PERCENT (10%) of the sale price shall be payable to the Vendor's Attorneys-at-Law as stakeholder thereof, on the execution of this Agreement.

A further payment of TEN PERCENT (10%) of the sale price shall also be payable to the Vendor's Attorneys-at-Law as stakeholder thereof, on the execution of this Agreement.

The entire balance of the Sale Price shall be payable on or before the 30th September 1999 or secured and payable by an undertaking from the National Commercial Bank Jamaica Limited, Bank of Nova Scotia Jamaica Limited or CIBC Jamaica Limited in a form acceptable to the Vendor's Attorneys-at-Law.

There shall be no interest accruable due or payable to the Vendor or the Purchaser on any monies paid hereunder to the agent."

4 If the transfer was not effected because of failure to pay, the deposit would have been forfeited. So no interest would be due to "Tewani" as purchaser. On the other hand as Attorney-at-Law for "Khemlani" interest may be due to him. This is a matter for resolution at a trial.

5 Clough Long and Co. play an important role in this transaction. One role is that of stakeholder. In this role the stakeholder holds the sum deposited by the purchaser "Tewani" as between the two parties. The firm is the agent for the vendor. Equally the firm is the agent for the purchaser. The agent as Attorney-at-Law must be Clough Long & Co. The longer the monies are held by the Agent the greater the interest earned. Also there was a fiduciary relationship between Mr. Clough and "Khemlani" and Mr. Clough could be asked to give an account of interest earned when the money was retained by him beyond a reasonable time.

6 Clough Long and Co. styled themselves as stakeholder. The description stakeholder did not permit Clough Long and Co. to take directions from Mrs. Jennifer Messado to the prejudice of "Khemlani". A stakeholder is to pay the money over once "Khemlani" becomes entitled to it. See Hale v Burnell [1911] 2 Ch. 551 and Collins v Stimson (1883) 11 QBD 142 at 144.

7 A stakeholder as Harrington v Hoggart 109 E.R.902 or (1880) 1 B & Ad 577 at 586 and 587 illustrates is not liable for interest on the deposit. But how long can he retain the interest without accounting for it? Certainly he was in duty bound to pay to the vendor when the title was transferred to "Tewani". That date will be determined at a trial.

8 The provision regarding completion is of importance. It reads at page 34 of Volume 1 of the Record:

"Completion: On payment in full of the Sale Price and cash fees and costs of transfer and such other amounts payable by the Purchaser hereunder as hereinbefore provided and in exchange for the delivery of the duplicate Certificate of Title for the said land with a transfer executed by the Vendor, along with a cheque payable the Register of Titles for the registration fee payable herein on or before the 30 ^th September, 1999."

9 This clause suggests that, the duplicate Certificate of Title ought not to be handed over to the purchaser's Attorney-at-Law until there is payment in full as defined. The alternative to payment in full is the presentation of an undertaking by a named Bank.

10 Three of the special conditions to be noted are 6, 7 and 11 at page 37 of Volume 1 of the Record. They read as follows:

• "6. The Vendor shall not be obliged to register the Transfer to the purchaser until all moneys payable by the Purchaser herein have been paid or an undertaking suitable therefor has been received herein.

• 7. The stakeholder shall not be obliged to pay out any monies collected herein unless and until after the completion of the sale.

  ...

• 11. The Vendor HEREBY FURTHER AGREES to lease the one half section of the said premises being the shop now known as American Jewellery Company Limited for a period of three years from the date of completion hereof at the monthly rental of $25,000.00 per month such rent payable on the first day of each and every month."

11 Clause 7 needs some explanation. Once the deposit was paid there was a binding contract for sale, and even before transfer there is an immediate equitable interest in the property which accrues to the purchaser "Tewani". Moreover "Tewani" would be entitled to specific performance. Additionally, "Khemlani" is the trustee and "Tewani" the beneficiary. So the sale was completed when the deposit and balance of the purchase price was paid and the equitable interest passed to the purchaser. The obligation of Clough Long & Co, arose then.

12 Indru Khemlani signed on behalf of the American Jewellery Company Ltd. and Gordon Tewani signed as purchaser. It ought to be noted that although Gordon Tewani signed the contract for sale of Lot 3 Tropical Plaza, he stated in his affidavit supporting his summons for Summary Judgment at page 12 of Volume I of the Record:

"8. That I am also the principal of Commercial Corporation (Jamaica) Limited, which said company in an entirely different transaction purchased property at Tropical Plaza from American Jewellery Corporation Limited, which is a different entity from the Defendant herein. To my knowledge the two transactions are unconnected.

My company requested the Defendant to leave premises at King Street orally and by letter dated 24 ^th January, 2001 but despite this the Defendant remains in possession of same."

13 This paragraph raises questions. "Tewani" was a party to the contract as the opening paragraph of the Agreement for Sale and Purchase reads at page 32 of Volume I of the Record:

THIS AGREEMENT is made this 16 ^th day of August 1999 BETWEEN American Jewellery Company Limited a Company duly incorporated under the laws of Jamaica and having its registered office at 27 King Street, in the City and Parish of Kingston, holder of TRN No. (herein called "the Vendor") of the ONE PART AND Gordon Tewani of

or Nominee (hereinafter called "the Purchaser") of the OTHER PART WHEREBY the Vendor AGREES to sell and the Purchaser to purchase ALL THAT parcel of land more particularly described in the Schedule hereto (hereinafter called "the said land") upon the terms, conditions and stipulations set out therein."

14 Why then was Tewani stating that his company Commercial Corporation Jamaica Limited purchased No. 3 Tropical Plaza as a different transaction? Why is "Tewani" stating that "Khemlani" is entirely different from American Jewellery Co. Ltd? Why is "Tewani" so keen to sever connection between the purchase of Lot 3 Tropical Plaza and the Summary Judgment for possession of 70A King Street? It was submitted on behalf of "Khemlani" that despite paragraph 8 above of "Tewani's" affidavit that the contract to purchase Lot 3 Tropical Plaza was bound up with the property at 70A King Street: the monies from the sale of Lot 3 Tropical Plaza was to pay off the mortgage on 70A King Street.

15 Earlier in paragraph 6 of his affidavit Gordon Tewani stated at page 12 of the Record:

"6 That prior to the completion of the purchase of the property by me I was advised by the Bank of Nova Scotia (hereinafter the Bank) and verily believed that on 12 ^th September 2000 the Defendant herein had sought and obtained an ex parte order restraining the Bank from...