Fletcher & Company Ltd v Billy Craig Investments Ltd ((in Receivership))

• Jurisdiction: Jamaica
• Judge: BROOKS, J.
• Judgment Date: 22 January 2010
• Judgment citation (vLex): [2010] 1 JJC 2204
• Court: Supreme Court (Jamaica)
• Date: 22 January 2010
• Docket Number: CLAIM NO. 2009 HCV 02459

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA IN CIVIL DIVISION

CLAIM NO. 2009 HCV 02459

IN CHAMBERS

BETWEEN

FLETCHER & COMPANY LTD.

CLAIMANT/APPLICANT

AND

BILLY CRAIG INVESTMENTS LTD. (In Receivership)

DEFENDANT/RESPONDENT

Civil Procedure - Injunction — Mortgage granted by company by way of guarantee of a loan to shareholders — Loan for the purpose of purchasing shares in the said company - Application to prevent mortgagee from exercising power of sale contained in a mortgage — Mortgagee a transferee of the mortgage - Whether mortgagee should be restrained — Whether applicant entitled to equitable remedy — Section 71 of the Registration of Titles Act

CIVIL PROCEDURE - Injunction - Mortgage granted by company by way of guarantee of loan to shareholders - Loan for purpose of purchasing share in said company - Application to prevent mortgagee from exercising power of sale contained in a mortgage - Mortgagee a transferee of the mortgage - Whether mortgagee should be restrained - Whether applicant entitled to equitable remedy - Registration of Titles Act, s. 71

BROOKS, J

1 "Courts of equity do not shackle themselves with unbreakable fetters if the justice of the particular case demands a more flexible approach."

2 This quote from the judgment of Rattray, P. in Flowers, Foliage and Plants of Jamaica Ltd. and Others v Jamaica Citizens Bank Ltd. (1997) 34 JLR 447 was cited by Miss Davis on behalf of the claimant, Fletcher and Company Ltd. Learned counsel relied on this principle in submitting that this court should not follow the normal approach that a mortgagee should not be deprived of the benefit of his security.

3 Fletcher & Co. seeks to restrain Billy Craig Investments Ltd. (In Receivership) from exercising its powers of sale, contained in a mortgage of land, of which Fletcher & Co. is the registered proprietor. It alleges that there have been many breaches of the law in arriving at the position where Billy Craig is now registered as mortgagee of the land. It contends that on that basis, the validity of the mortgage is in question and therefore the court should take the unusual step of restraining Billy Craig.

4 The Background

5 The background to this claim is as follows: Mr. and Mrs. David Fletcher owned the entire shareholding in Fletcher & Co. In 1995 they sold all the shares to Robert Joseph, Clyve Lazarus and Constantine Nicholas (together called "the purchasers") for US$1,500,000.00. The purchasers paid one-half of the purchase price and the remaining US$750,000.00 was deemed a loan. The loan was to be repaid to Sportula, a company apparently owned by the Fletchers. The purchasers issued a promissory note in respect of the loan, and, as was stipulated by the sale agreement, Fletcher and Co. issued a mortgage by way of guarantee for the repayment of the loan. Two parcels of land were mortgaged. The principal borrowers named in the mortgage document, were the purchasers.

6 Sportula sold the mortgage in 1997, to Glenrosa Ltd. and, on the direction of Glenrosa, transferred the mortgage to Billy Craig. The transfer of the mortgage was registered on both Certificates of title for the lands. Billy Craig's receiver has since threatened sale of the properties, on the basis that there had been a default in repayment of the loan. Fletcher & Co. seeks to prevent the sale.

7 The Complaints

8 Fletcher & Co. alleges that the mortgage is illegal and void. It asserts:

• a. as it granted the mortgage to secure the purchase of its own shares, the mortgage is in breach of Section 54 of the Companies Act 1967, which was the relevant legislation at the time;

• b. as the interest rate was expressed to be paid at a rate of 5% above the US prime rate, the mortgage is in breach of section 3 of the Money lending Act which speaks to a maximum prescribed rate of interest;

9 In addition, says Fletcher & Co. subsequent acts make the mortgage unenforceable:

• a. as Billy Craig did not provide consideration for the transfer of the mortgage to its name, the transfer is illegal, void and of no legal effect;

• b. the debt was unilaterally converted by Billy...