Dennis Atkinson v Development Bank of Jamaica Ltd

• Jurisdiction: Jamaica
• Judge: Phillips JA
• Judgment Date: 20 October 2015
• Neutral Citation: JM 2015 CA 109
• Docket Number: SUPREME COURT CIVIL APPEAL NO 90/2015 APPLICATION NO 151/2015
• Court: Court of Appeal (Jamaica)
• Date: 20 October 2015

Bewteen

Dennis Atkinson

Applicant

and

Development Bank of Jamaica Limited

Respondent

[2015] JMCA App 40

SUPREME COURT CIVIL APPEAL NO 90/2015

APPLICATION NO 151/2015

JAMAICA

IN THE COURT OF APPEAL

CIVIL PROCEDURE - Stay of judgment - Application for - Property law - Mortgagee - Power of sale - Whether the property was sold at a gross undervalue - Whether mortgagee can legitimately accept the highest bid below the forced sale value of property - Whether mortgagee a trustee for mortgagor or merely a trustee of the surplus in a sale

Joseph Jarrett instructed by Joseph Jarrett & Co for the applicant

Mrs Sandra Minott Phillips QC and Miss Rachel McLarty instructed by Myers, Fletcher & Gordon for the respondent

IN CHAMBERS

Phillips JA

1 This is an application for a stay of execution pending appeal of the judgment of E Brown J delivered on 31 July 2015.

Background

2 The facts stated herein are gleaned from the affidavit of the applicant in support of a fixed date claim form, both filed on 16 October 2013, and the affidavits of Sheron Henry filed on 11 November 2013 and Kenneth Tomlinson filed 10 December 2013, both in response to the applicant's fixed date claim form filed on 15 October 2013.

3 The applicant is a businessman, hotelier and 2 ^nd mortgagee of Ocean Sands Resorts Limited situated at 14 James Avenue, Ocho Rios in the parish of Saint Ann and registered at Volume 1269 Folio 97 of the Registered Book of Titles (the property).

4 The respondent is a company duly incorporated with offices at 11a-15 Oxford Road, Kingston 5 in the parish of Saint Andrew and the 1 ^st mortgagee of the property.

5 By an agreement dated 30 March 1998, the applicant obtained a loan of US$308,106.00 from the respondent to expand and upgrade the property, which was then owned by the applicant. The respondent's interest was registered on the certificate of title to the property. The loan fell into arrears, and with the respondent's approval, the applicant sold his interest in the property to Cash Plus Development Limited (Cash Plus) for US$1,000,000.00 by way of cash and a vendor's mortgage of US$668,116.28. The transfer was effected by an instrument dated 9 July 2007 and was registered on the title to the property on 4 September 2007. Cash Plus thereby became the registered owner of the property.

6 The respondent was a party to the transfer dated 9 July 2007 and, under that transfer, Cash Plus assumed liability for the payment of the total sum outstanding to the respondent, thereby making Cash Plus the mortgagor, the respondent the 1 ^st mortgagee and the applicant the 2 ^nd mortgagee. A lump sum of US$250,000.00 was paid by Cash Plus to the respondent to be followed by monthly installments, but Cash Plus defaulted on payments on the debt.

7 When Cash Plus defaulted on its payments to the respondent, the applicant served a statutory notice on Cash Plus and began to occupy the property. The applicant attempted to obtain revenue from the property by renting rooms and effecting renovations in an attempt to attract visitors, but these efforts proved futile and the loan fell into further arrears.

8 Cash Plus later became bankrupt and the Trustee in Bankruptcy obtained an injunction prohibiting registration of any dealings in the property until further order of the court. That order was noted on the title of the property on 2 May 2009 by the Registrar of Titles. However, this injunction was later discharged on an application made by the respondent, at the applicant's request, which was noted on the certificate of title on 12 May 2009.

9 To realize its mortgage security, the respondent decided to sell the property pursuant to its instrument of mortgage and on 30 September 2010, engaged the services of Kenneth Tomlinson, managing consultant and managing director of Business Recovery Services Limited with offices at 11 Connolley Avenue, Kingston 4 in the parish of Saint Andrew to assist in this endeavour.

10 The property was first advertised for sale on 3 December 2010 at a value of US$1,900,000.00 and was subsequently advertised for sale 12 other times in various newspapers. The best offer received was US$1,300,000.00 but it was rejected when the attorney making the offer refused to disclose the identity of his client. The other offers received were low, ranging from JA$3,000,000.00 to JA$15,500,000.00. Then Digiorder (Jamaica) Limited made an offer of JA$50,000,000.00 which was ultimately accepted by the respondent. By letter dated 9 October 2013, the applicant was advised that the property would be sold for JA$50,000,000.00 to Digiorder (Jamaica) Limited.

11 The two most recent valuation reports in respect of the property had been effected by CD Alexander Company Realty Limited and Mr Theo Dixon. CD Alexander in an appraisal of the property dated 30 March 2012, that was attached to the affidavit of Kenneth Tomlinson filed 10 December 2013, stated the value of the property at JA$149,000,000.00 and the forced sale value at JA$105,000,000.00. The valuation report by Mr Theo Dixon dated 13 October 2013, attached to the affidavit of Dennis Atkinson filed 15 October 2013 stated the market value of the property at JA$207,088,000.00 and the forced sale value at JA$150,000,000.00.

12 Aggrieved at, among other things, the low sale price of the property, the applicant brought a claim against the respondent, Business Recovery Services Limited, Kenneth Tomlinson and Digiorder (Jamaica) Limited. This claim was filed on 16 October 2013 by fixed date claim form which was later amended and filed on 7 February 2014, in which he sought the following orders:

• ‘1. A declaration that the Claimant (the [applicant]) is a mortgagee in possession of the property known as 14 James Avenue, Ocho Rios, in the parish of St. Ann, registered at Volume 1269 Folio 97 of The Registered Book of Titles, whose mortgage is registered as No. 1486323 on the 4 ^th day of September, 2007 for the sum of Six Hundred and Sixty Eight Thousand One Hundred and Sixteen Dollars and Twenty Eight Cents United States Currency (US$668,116.28) .

• 2. A declaration that any sale of the property registered at Volume 1269 Folio 97 must be at a price, which takes into account the claimant's interest as a mortgagee and must be at the market value not less than the forced sale value .

• 3. A declaration that the proposed sale of the property registered at Volume 1269 Folio 97 by the 1st Defendant (the respondent) to the 4 ^th Defendant (Digiorder (Jamaica) Limited) for a consideration of $50,000,000.00 Jamaican Dollars was below the forced sale value and a breach of the 1st Defendants obligations as a trustee for the Claimant and the mortgagor/s .

• 4. A declaration that the proposed sale of the property registered at Volume 1269 Folio 97 by the 1st Defendant to the 4 ^th Defendant for a consideration of $50,000,000.00 Jamaican Dollars was fraudulent .

• 5. A declaration that the 2 ^nd and 3 ^rd Defendants (Business Recovery Services Limited and Kenneth Tomlinson respectively) as the agents of the 1 ^st Defendant) are under an obligation to ensure that the property registered at Volume 1269 Folio 97 is sold at the market value or not below the forced sale value and that any prospective purchaser/s recommended by them meets the relevant criteria of being able to purchase at the market value or forced sale value .

• 6. An Order setting aside the sale of 14 James Avenue, Ocho Rios, St. Ann to the 4 ^th Defendant who was at all material times the tenant of the Claimant and was aware that the sale to them was at a gross under value and fraudulent.

• 7. In the alternative, Damages jointly and severally for negligence and/or breach of fiduciary duty and/or breach of statutory duty that occurred when 14 James Avenue, Ocho Rios, St. Ann was sold at a gross undervalue by the 1 ^st , 2 ^nd and 3 ^rd Defendants, acting in concert with each other, to the 4 ^th Defendant for a consideration of $50 million Jamaican dollars.

• 8. Alternatively, the sum of $157,000,000.00 being the difference between the sale price and the true market value at the time of the sale against the 1 ^st , 2 ^nd and/or 3 ^rd Defendants jointly and severally, less the amount owing by the Claimant to the 1 ^st Defendant.

• 9. Interest on the said sums at the commercial rate of 30% per annum or such reasonable commercial rate assessed by the court.

• 10. Costs.

• 11. Such other remedies deemed appropriate by this Honourable Court.

• 12. Liberty to Apply.’

13 The claim was later discontinued against Business Recovery Services Limited, Kenneth Tomlinson and Digiorder (Jamaica) Limited. The orders sought numbered 4–9 of the amended fixed date claim form listed in paragraph 12 herein were abandoned, so only orders 1–3, 10–12 remained, and were pursued.

14 The claim was heard by E Brown J on 9 July 2015 and he delivered a judgment on 31 July 2015. He considered three main issues: (i) whether the applicant was a mortgagee in possession; (ii) at what price should the property be sold; and (iii) whether the respondent was a trustee for the applicant as 2 ^nd mortgagee.

15 In considering whether the applicant was a mortgagee in possession, the learned judge examined the claim made by the applicant that because he, inter alia, had served a statutory notice of possession on Cash Plus, had tried to rehabilitate the property and had rented the property, he had proved that he was in physical possession of the property. E Brown J also relied on cases such as Sunshine Dorothy Thomas v Winsome Blossom Thompson et al [2015] JMCA Civ 22 , section 109 of the Registration of Titles Act and various texts from learned authors to outline the ways in which a mortgagee can take possession of a property and when a 2 ^nd mortgagee may enter into possession of the property. He then found that...