Ian Levy v Cecelia Levy

• Jurisdiction: Jamaica
• Court: Supreme Court (Jamaica)
• Judge: Edwards, J
• Judgment Date: 23 March 2018
• Docket Number: CLAIM NO. 2017 CD 00237
• Date: 23 March 2018

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

IN THE COMMERCIAL DIVISION

CLAIM NO. 2017 CD 00237

Between

Ian Levy

1 ^st Claimant

and

Cecelia Levy

2 ^nd Claimant

and

Julie Atherton

1 ^st Defendant

and

Richard Atherton

2 ^nd Defendant

and

Refreshing Ideas LLC

3 ^rd Defendant

IN OPEN COURT

John G. Graham and Ms. Peta-Gaye Manderson instructed by John G. Graham & Company for the Claimant.

Lascine A. Wisdom-Barnett instructed by the Norman Manley Law School Legal Aid Clinic for the Defendants

CONTRACT — DISPUTE AS TO NATURE AND VALIDITY OF CONTRACT — CONTRACT REFERRING TO LOAN/EQUITY — WHETHER MONIES ADVANCED WAS FOR A LOAN OR AN EQUITY INVESTMENT — WHETHER THE WRITTEN CONTRACT WAS SO AMBIGUOUS AS TO CALL INTO QUESTION THE CONTRA PROFERENTEM RULE — WHETHER CONTRACT IN BREACH OF THE MONEY LENDING ACT

CONTRACT — SUMS PAID UNDER AN EARLIER AGREEMENT — LATER AGREEMENT SUPERSEDING THE EARLIER AGREEMENT BUT INCORPORATING ITS TERMS — WHETHER CONSIDERATION PAST

Edwards, J

Background

1 Mr Ian Levy and Mrs Cecelia Levy (the claimants), are husband and wife. They are also entrepreneurs. Mr Richard Atherton and Mrs Julia F Riettie-Atherton (the defendants) are also husband and wife. Mrs Atherton is, what I would call, a serial entrepreneur. The couples were more than passing acquaintances, although, how close a friendship existed between, them, surprisingly became a matter of contention in these proceedings.

2 Mrs Atherton had the refreshing idea to bottle and sell water in environmentally friendly paper containers. To implement this idea she required a degree of capital, greater than that which she or Mr Atherton could procure from their own resources. So entered the claimants into the picture. The claimantswere asked by the defendantsto participate in the venture, which they agreed to do; the extent and nature of their participation seemingly being subject to their gaining further information as to the viability of the venture. In the result, the defendants entered into an agreement with the claimants in which the claimants promised to make sums of money available to the defendants, for the benefit of the company Refreshing Ideas LLC.

3 Refreshing Ideas LLC (the company) is a limited liability company duly incorporated in the United States of America. Its principal office is located at 1673 Bunting Lane, Weston, Florida 33327 and its sole agent and member/manageris listed as Julia F Riettie-Atherton. The company was registered on the 27 June 2008. The ordinary business of the company included the selling of branded spring water called “h2O”. Mrs Atherton is the owner of the registered trademark “h2O”.

4 Mrs Atherton waspresented with what appeared to be a lucrative business opportunity by Paramount Studios in the United States, which required capital projected at Two Million United States Dollars (US$2,000,000.00). The marketing requirements to take advantage of this opportunity meant that some capitaloutlay had to be sourced for the company, if it was to meet its financial obligations. As a result the defendants approached Mr. Levy and invited him to participate in this investment opportunity. Mr Levy took the idea to his wife. Discussions ensued between the defendants and the claimants. Mrs Levy took Mrs Atherton to the United States and introduced her to a friend to whom Mrs Atherton could also make a proposal regarding the venture. The claimants were also informed by the defendants that the company had immediate cash needs and per the defendants' request, the sum of $20,000.00 was transferred to the company's account. This sum was transferred on the 7 February 2011, the same day Mrs Levy and Mrs Atherton went to the United States. Thus, a first sum of US$20,000.00 was advanced to the defendants at their request, as the first instalment under an agreement to advance US$50,000.00 to the account of the company.

5 For reasons which also became the subject of dispute in these proceedings, the financial proposal made by Mrs Atherton to the persons in the United States to whom she was introduced by Mrs Levy, fell through. Incidentally, Mrs Atherton blames Mrs Levy for that catastrophe.

6 The claimants, however, decided they were still interested in the venture, despite misgivings regarding its debt structure, but would participate only on certain terms. On the 15 February 2011, the claimants and the defendants signed awritten agreement. The agreement outlined that the sum of US$20,000.00, transferred to the account of the company on Monday 7 February 2011, constituted a loan facility and that this facility was for a period of 120 days from the date of the signing of the agreement. The interest rate was stated to be 10% per annum. There was also an option to convert the sums advanced into equity in the company, at a later date.

7 This agreement also outlined that the sum of US$30,000.00 was to be transferred to the account of the company on 16 February 2011, and that this sum alsoconstituted a loan facility. This facility, according to the agreement, was for a period of 120 days from the date of the signing of the agreement, at an interest rate of 10% per annum also with the option for it to be converted to equity in the company. In keeping with the terms of the agreement, this further sums of US$30,000.00was transferredto the account of the company on 16 February 2011.

8 After further discussions, the claimants and the defendants entered into another written agreement dated 28 February 2011. This agreement was drafted essentially by Mrs Levy. In this agreement it was outlined that the sum of US$700,000.00 would be transferred to the company's account. The agreement set out a schedule for the payments. This sum of US$700,000.00 was to include the sum of US$50,000.00 which was transferred on 7 and 16 February 2011. Also, on the 28 February 2011, the claimants transferred the sum of US$150,000.00 to the account of the company.

9 A term of this new agreement was that the amount transferred as at 28 February 2011, should be deemed a loan facility at an interest rate at 10% per annum for a period of 120 days from the date of the receipt of funds in the first instance, and that an option existed to convert the amount to equity in the company. This agreement also stated that it superseded all other written agreement between the parties.

10 On the 28 March 2011, the claimants transferred the sum of US$50,000.00 to the company's account. Therefore, the total sum advanced to the defendants was US$250,000.00.

11 By letter dated 26 April 2011, the claimants advised the defendants that they would not exercise their option to convert the amounts advanced to equity in the company, but that they had decided to limit the amount to be loaned to US$250,000.00. Between April 2011 and September 2011 the claimants requested that the defendants repay the sum of US$250,000.00 but the defendants requested time to do so. On or about 20 September 2011 the second defendant repaid the sum of US$2,083.33, which represented interest due on the initial sum of US$50,000.00which had been advanced to the defendants.

12 The true intent and the validity of the agreement dated the 28 February 2011 is now in question, as the claimants contend that all the sums transferred by them to the company's account was a loanto the defendants, with an option to convert, which they declined to exercise. However, it is the defendants' contention that all the sums transferred, amounted to a capital investment by the claimants.

The Claim

13 The claimants, by way of a claim form and particulars of claim filed on 24 April 2013, initiated a suit against the defendants and the company. The company was never served and effectively was not a party to these proceedings. All references to the defendants, is therefore, a reference to Mrs and Mr Atherton only. The claimants claimed for the return of the sum of US$250,000.00 plus interest of 10% per annum from 28 February 2011, pursuant to a loan contract. In their particulars of claim, the claimants outlined that, through their Attorneys-at-law, by letter dated the 1 February 2013, a formal demand for payment of the sums loaned was made but the defendants failed, neglected and/or refused to settle their debt, despite various promises to do so.

The Defence

14 On the 27 June 2013, the defendantsfiled a defence to the claim and an ancillary claim. The thrust of their defence was that they did not enter into a loan agreement with the claimants, but that they entered into an equity agreement, by virtue of which the claimants were to acquire equity in the company. The defendants also maintained that the third defendant was not a party to the agreement and therefore was not an appropriate party to the action. The defendants further maintained that the said agreement was drafted by the claimants, and to the extent that there were any ambiguities or questions concerning its construction, pursuant to the contra proferentem rule, the ambiguities ought to be resolved in their favour.

15 The defendants also averred that, in the alternative, should the agreement be held by the court to constitute a loan agreement, no monies would be owed to the claimants, as section 8 of the Money Lending Act would apply and the claimants would be in breach of the Act. This section of the Money Lending Act stipulates that no money lending contract is enforceable unless there is a note or memorandum in writing, containing all the terms of the contract, made within seven days of the contract. The defendants deny that any such note or memorandum was made or signed by them or delivered or sent to them and therefore the contract was not enforceable.

16 The defendants also relied on section 2(1) of the Money Lending Act. They contended that the 10% interest rate charged in the agreement, which concerns a loan in US currency, is not in line with market interest rates and, as such, is excessive, harsh...