Dojap Investments Ltd, Donald Panton and Janet Panton v Financial Institutions Services Ltd

• Jurisdiction: Jamaica
• Judge: RATTRAY, P: , DOWNER, J.A. , PANTON, J.A:
• Judgment Date: 19 November 1999
• Neutral Citation: JM 1999 CA 65
• Judgment citation (vLex): [1999] 11 JJC 1901
• Court: Court of Appeal (Jamaica)
• Date: 19 November 1999

IN THE COURT OF APPEAL

BEFORE:

THE HON. MR. JUSTICE RATTRAY, P THE HON. MR. JUSTICE DOWNER, J.A THE HON. MR. JUSTICE PANTON, J.A

BETWEEN

DOJAP INVESTMENTS LIMITED

AND

DONALD PANTON

AND

JANET PANTON

DEFENDANTS/APPELLANTS

AND

FINANCIAL INSTITUTIONS SERVICES LIMITED

PLAINTIFF/RESPONDENT

R. N. A. Henriques. Q.C. and L. G. S. Broderick , instructed by L G. S. Broderick & Company, for the appellants

Dennis Goffe. Q.C. and Mrs. Sandra Minott-Phillips , instructed by Myers, Fletcher & Gordon, for the respondent

CIVIL PROCEDURE - Summary judgment - Appeal against judgment - Whether appellants had a good and arguable defence to the claim - Guarantee - Whether guarantee a valid one

RATTRAY, P:

1 This matter comes before the Court of Appeal on appeal by the defendants/appellants from the summary judgment of Wolfe, C.J., delivered on April 3, 1998, whereby he ordered that judgment be entered against the defendants/appellants in the sum of US$1.077M or the Jamaican dollar equivalent with costs to the plaintiff/respondent.

2 The history is as follows: A Writ of Summons was filed in the Supreme Court on June 13, 1997, by the plaintiff/respondent against the defendants/appellants claiming the sum stated above with interest, as a contribution due from the defendants/appellants as co-sureties in respect of money paid by the plaintiff as surety and/or for the use of the defendants. Interest on this sum was also claimed.

3 On July 16, 1997, appearance was entered on behalf of the defendants. No defence was filed.

4 On February 4, 1998, the defendants filed a summons to dismiss the action pursuant to section 238 of the Civil Procedure Code. It does not appear that this summons was pursued.

5 On July 25, 1997, the plaintiff/respondent filed a summons for summary judgment.

6 On April 3, 1998, the Chief Justice, in a contested hearing, ordered summary judgment in the terms already stated and which judgment is the subject-matter of this appeal.

7 The appellants maintained that they had a good and arguable defence to the claim of the plaintiff/respondent. The respondent has filed a Respondent's Notice in which it seeks alternatively to uphold the Chief Justice's determination on the basis:

• (a) That the transaction between the parties related not to the making of a loan but to subscriptions for ordinary shares of Blaise Trust Company and Merchant Bank Limited, alternatively;

• • (b) (i) even if it related to a loan, the law governing the agreement was that of the Cayman Islands and the Moneylending Act of Jamaica would not apply;

  • (ii) the provisions of the Bank of Jamaica Act section 22A(3) would not apply since the transaction did not involve a payment of Jamaican dollars;

  • (iii) the second defendant in any event is precluded from relying on his own wrongdoing to escape the duty to contribute as co-guarantors;

• (c) the guarantee is a valid one.

8 Further, by way of a cross-appeal, the respondent challenges the Chief Justice's determination in not granting interest on the judgment. What are the facts disclosed on the affidavits filed? The affidavit of Patrick Hilton, Managing Director of the plaintiff company alleged:

• (1) That Blaise Trust Company and Merchant Bank (BTMB), Consolidated Holdings Limited (Consolidated) and Dojap Investments Limited (Dojap) were owned and controlled by the second and third defendants (the Pantons).

• (2) In April 1994 BTMB being in breach of several provisions of the Financial Institutions Act gave a written undertaking to the Bank of Jamaica (BOJ) for strict compliance with certain management and operational guidelines given to them by BOJ. The undertakings were joint and several and signed by the Pantons and the other directors of BTMB.

• (3) The financial situation of BTMB deteriorated and in July 1994 Donald Panton undertook to BOJ that BTMB would be re-structured and a new investor found to inject capital of US$1M in BTMB and acquire the control of the Bank and its Board.

9 Consequently, in July 1994 Donald Panton entered discussions with one James Eroncig, an American businessman who controlled a Company called Continental Petroleum Corporation Limited; a Bahamian Corporation, and West-Euro Equities Limited, a Cayman Corporation. They concluded an agreement whereby:

• (1) Continental Petroleum would subscribe US$1M redeemable preference shares with a fixed monthly dividend of US$20,000 in the share capital of West-Euro. This would enable West-Euro to invest the said US$1M in the capital of BTMB.

• (2) Continental Petroleum would make a personal loan to Donald Panton of US$300,000 with interest at US$6,000 per month, on a guarantee by the defendants and Consolidated Holdings of the payment to Continental Petroleum of the fixed monthly dividend on its preference shares. On redemption of those shares at the end of one year Continental Petroleum would recover its investment of US$1M. Continental Petroleum and the defendants would further guarantee the repayment by Donald Panton of the interest and principal in respect of the personal loan within one year.

• (3) As security Consolidated Holdings would grant Continental Petroleum a mortgage over its premises at Blaise Industrial Park and Dojap would secure its guarantee by granting to Continental Petroleum a charge over certain deposits held by it with Jamaica Money Market Brokers Limited (JMMB Ltd.) and Dehring, Bunting and Golding Limited (DB & G Ltd.).

• (4) Control of BTMB would return to the Pantons for a nominal consideration after Continental Petroleum has recouped its investment at the end of one year.

10 Consequent on these agreements on August 10, 1994, West-Euro introduced US$1M of capital into BTMB as a subscription for a controlling share holding therein of 16,885,223 ordinary shares. Furthermore, the defendants and Consolidated Holdings, by an executed agreement dated August 10, 1994, jointly and severally guaranteed to Continental Petroleum the several matters listed at (2) on page 4 hereof. They further indemnified Continental Petroleum against loss or diminution in the value of its investment, and Consolidated Holdings further executed and delivered to Continental Petroleum a mortgage over the property at Blaise Industrial Park and the duplicate certificate of the title thereto. Dojap executed a letter of offer charging its deposits with JMMB Limited and DB & G Limited.

11 Despite these tortuous initiatives, in December 1994 the Minister of Finance assumed temporary management of BTMB and in April 1995 of Consolidated Holdings.

12 In October 1995 the Supreme Court sanctioned schemes of arrangement between Consolidated Holdings, BTMB, Blaise Building Society and their depositors whereby the assets of the institutions were pooled and transferred to the plaintiff/respondent which then assumed the liabilities of the institutions to the depositors and secured creditors.

13 On February 8, 1995, Continental Petroleum made written demand on Consolidated Holdings for payment of the entire sum secured under the mortgage, threatening to exercise its power of sale consequent on default in payment of the monthly instalments of dividend on the preference shares and interest on the personal loan to Donald Panton and consequent also on further stated breaches of the agreements between the parties.

14 Continental Holdings and the defendants then instituted Suit C. L. C. 069 of 1995 in the Supreme Court against Continental Petroleum et al and obtained interim injunctions restraining the sale of the premises or encashing of the Certificates of Deposits.

15 On December 9, 1996, the plaintiff/respondent, to whom the mortgaged premises and Consolidated Holdings' liability had passed under the guarantee and mortgage, paid to Continental Petroleum in settlement of the demand and in satisfaction of the liability the sum of US$1,436,000 as a negotiated sum.

16 The defendants on December 20, 1996, through their attorneys-at-law consented to an order in the Suit whereby Dojap's deposits with JMMB Ltd and/or DB & G Ltd were paid over to Continental Petroleum and/or James Eroncig and/or his nominee in respect of Dojap's guarantee of the personal loan by Continental Petroleum to Donald Panton.

17 Mr. Hylton alleged in his affidavit that FIS Ltd had paid more than its proportionate share under the joint and several guarantees and consequently a demand for contribution was made on the defendants in the sum of US$1,077,000 being the amount paid by FIS Ltd beyond its proportionate share of the liability. His affidavit was supported by the relevant exhibits.

18 No defence to the action having been filed the Chief Justice was moved in Chambers by counsel for FIS Ltd for the following relief:

• 1 . Payment of the sum of US$1,077,000 or the Jamaican dollar equivalent at the date of payment or judgment.

• 2 . Interest thereon at such commercial rate as the Honourable Court deems just from December 10, 1996, to date of judgment.

• 3 . Costs to the plaintiff to be agreed or taxed.

19 The Chief Justice's judgment set out in more summary form the facts which I have above cited. He heard submissions on behalf of both the plaintiff and the defendants. He pointed out that appearance was entered in this matter on July 16, 1997, but "to date no defence has been filed". Furthermore, he stated, "no application has been made to extend the time for the filing of a defence". He further pointed out as follows:

"The matter came on for hearing on July 31, 1997, and was adjourned at the instance of the defendants to afford them the time to file the affidavit required under section 79.

The matter again came before the court on January 15, 1998, but no affidavit was filed.

In fact no application has been filed contesting the summons for summary judgment. There is, however, a...