Darien Investments Ltd v National Commercial Bank Jamaica Ltd

• Jurisdiction: Jamaica
• Judge: BROOKS J
• Judgment Date: 07 April 2011
• Judgment citation (vLex): [2011] 4 JJC 0701
• Date: 07 April 2011
• Court: Supreme Court (Jamaica)
• Docket Number: CLAIM NO. 2011 CD 00007

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

CLAIM NO. 2011 CD 00007

IN CHAMBERS

BETWEEN

DARIEN INVESTMENTS LTD.

CLAIMANT/APPLICANT

AND

NATIONAL COMMERCIAL BANK JAMAICA LTD

DEFENDANT/RESPONDENT

Mr Ransford Braham, Mrs Suzanne Risden-Foster and Mr Miguel Palmer instructed by Grant Stewart Phillips and Co. for the Claimant/Applicant.

Mr Michael Hylton Q.C., and Mr Kevin Powell instructed by Michael Hylton and Associates for the Defendant/Respondent.

Civil Procedure - Application for injunction – Application to prevent mortgagee from exercising powers of sale contained in a mortgage – Mortgage granted to secure guarantee – Mortgagor alleging no longer bound by guarantee - Whether damages are an adequate remedy - Whether mortgagee should be restrained

BROOKS J

1 This is an application by the claimant Darien Investments Ltd to restrain the defendant National Commercial Bank (NCB) from exercising, in respect of Darien's real property, the powers of sale given to NCB under a mortgage. According to Darien, NCB has lost any right to sell the property because:

• a. Darien has satisfied all debts due to NCB in respect of the loan which originally gave rise to the mortgage, and,

• b. NCB is prohibited from enforcing a guarantee (which was secured by the mortgage) given to it by Darien, in respect of loans given by NCB to the principal debtor, Tikal Ltd. This is because NCB, subsequent to receiving the guarantee, treated with Tikal in such a manner, and without the consent of Darien, that the guarantee has been discharged.

2 NCB denies that it acted improperly in dealing with Tikal, and asserts that, in any event, Darien was made aware of, and assented to, the transactions with Tikal. This is because Darien and Tikal had a common director who participated in Tikal's dealings with NCB. As Tikal still owes substantial amounts of money to NCB, the latter asserts that it is entitled to enforce the guarantee, given to it as security for the loans to Tikal.

3 The question for the court to decide is whether the dispute between the parties concerns the validity of the mortgage document or whether it is a dispute as to whether there is any money due thereunder. In the first instance the court may grant an injunction, with or without conditions, to stay any sale by NCB. In the latter case the court is unlikely to prevent an exercise of the power of sale without, at least, a payment into court by Darien of the sum which NCB claims.

4 Analysis

5 Although significant effort was made by counsel on both sides in researching and advocating the positions of each party, I regret that time does not permit a full exposition of the reasoning leading to the conclusion to which the court has arrived. The reasoning has proceeded in accordance with the guidance provided in the case of American Cyanamid Co. v Ethicon [1975] 1 All E.R. 504, for considering injunctive relief. I shall address each of the points set out in that case for the guidance of courts and thereafter consider the case as a whole. I trust that I shall not be guilty of ‘box-ticking’ (see National Commercial Bank Jamaica Ltd v Olint Corp. Ltd PCA 61 of 2008 (delivered 28 April 2009)

6 Is there a serious question to be tried?

7 The first question to be answered, in following the guide provided in American Cyanamid , is whether the applicant for that relief has established that there is a serious issue to be tried. In the instant case, the issue of whether or not a guarantor is discharged, in certain circumstances, looms large.

8 Counsel for Darien, Mr Braham, submitted that NCB acted improperly when it allowed Tikal to use the proceeds of sale of some of Tikal's assets, not to reduce Tikal's debt to NCB, but instead to:

• a. discharge debts to other parties, including trade creditors, and,

• b. pay redundancy payments to staff members, which Tikal had laid off.

9 Another improper step taken by NCB, submitted Mr Braham, was that NCB varied the terms of the guarantees ‘when it permitted [Tikal] to use the loan proceeds to discharge the debts of May Pen City Centre Limited’. May Pen City Centre Ltd was a company connected to Tikal by virtue of common control. According to Mr Braham, NCB's action ‘was unlawful as on the documentary evidence, at no time did [Darien] undertake to guarantee the indebtedness of any company other than Tikal’. The result of these improper actions would, on learned counsel's submission, be that Darien would be discharged from liability under the guarantee.

10 Although the questions of fact are not numerous, the issue involves significant questions of law. Mr Braham cited a number of authorities to demonstrate the point that a guarantor will be discharged where the creditor agrees with the principal debtor to vary the principal contract, without the guarantor's permission. On the other hand Mr Hylton Q.C., on behalf of NCB advanced, that the terms of the guarantee allowed NCB to make the...