Jamaica Youth Development Foundation v Portfolio International Jamaica Ltd
| Jurisdiction | Jamaica |
| Judge | Sykes J (Ag) |
| Judgment Date | 10 December 2004 |
| Judgment citation (vLex) | [2004] 12 JJC 1001 |
| Court | Supreme Court (Jamaica) |
| Date | 10 December 2004 |
IN THE SUPREME COURT OF JUDICATURE OF JAMAICA
LANDLORD AND TENANT - Tenant of a mortgagor - Breach of lease agreement - Whether claimant is a tenant of the defendant - Whether a trespasser - Whether serious issue to be tried - Rent Restriction Act - Registration of Titles Act
1. This hearing raises this question: does a tenant who leases property from a mortgagor, who let the property in breach of an express covenant not to let the property without the written consent of the mortgagee, becomes a tenant of the purchaser from the mortgagee who exercised his power of sale? Is such a tenant a tenant under the Rent Restriction Act (RRA)?
2. This issue has arisen because I had granted an ex parte interim injunction on October 8, 2004 restoring the claimant to possession of premises from which it alleged it was being ejected. The injunction also restrained the defendant and/or its servants and/or its agents from doing anything that breached the claimant's right to quiet enjoyment. The matter was set for further consideration on October 25, 2004. It was not heard then because the parties needed to file further affidavits. This is now an inter partes hearing where Mr. Samuda has taken the fundamental point that there is no serious issue to be tried because the affidavit evidence of the claimant does not disclose that it has a tenancy binding on the mortgagee. Consequently, there is no lease binding on the purchaser from the mortgagee. Therefore, applying the principles of American Cyanamid Co v Ethicon Ltd [1975] 1 All ER 504 the injunction should be discharged. Mr. Samuda made other submissions regarding the balance of convenience but having regard to my conclusion I need not consider the other submissions.
3. He submitted that the tenant of a mortgagor, who leased premises in breach of his mortgage agreement not to lease the premises without the written consent of the mortgagee does not become, without more, a tenant of the mortgagee. As between the mortgagee and the tenant, there is, in law, no tenancy. If there is no tenancy between the mortgagee and the tenant, then there is no protection under the RRA, which leads to the ultimate conclusion that as between the purchaser from the mortgagee and the tenant, there is no tenancy. The tenant is a trespasser as far as the mortgagee is concerned. The RRA applies only to tenants and landlords. This, admittedly, seems an offensive conclusion in modern times but it seems to me that the law supports Mr. Samuda in his analysis and conclusion.
4. Mrs. Kitson says this is simply not so. Section 108 of the Registration of Titles Act (RTA) says that the creation of a mortgage does not have the effect of transferring the legal estate to the mortgagee. This means that the mortgagor still has the legal estate out of which he can create lesser interests and estates. According to Mrs. Kitson, this means that once the mortgagor created a lease, that lease binds the mortgagee and so is transferred to the purchaser from the mortgagee who exercised his power of sale. Thus, the tenant is a tenant of not only the mortgagee but also the purchaser from the mortgagee.
5. I must set out more of the history of the matter.
6. The defendant, Portfolio International Jamaica Ltd, (PIJ) purchased the property from the mortgagee of Summer Isle Vacation and Car Rental Limited (SIV) after SIV defaulted on its loan. SIV granted a lease to Jamaica Youth Development Foundation (the Foundation) on July 6, 2003. This was after the property was mortgaged. SIV, at the time of the lease, had mortgaged the property to Trafalgar Commercial Bank. It is not clear whether the mortgagee changed its name to First Global Bank Limited (FGBL) or FGBL acquired the mortgage, but either way, FGBL is the mortgagee for the purposes of this case. Both lessor and lessee are companies registered under the Companies Ad of Jamaica.
7. There is a body of evidence that suggests that the defendant might not have known of the claimant's existence until after it bought the property. The correspondence suggests that PU thought that SIV was still occupying the premises. That may explain why PIJ commenced recovery proceedings against SIV in the corporate area Resident Magistrate's Court.
8. It is not hard to see how this error might have come about. Mrs. Wright- Evans and her husband are the shareholders of SIV. Mrs. Wright- Evans is the executive director of the Foundation and a director of SIV.
9. PIJ's legal advisers trawled the seven seas of the law of mortgages, plumbed its depths, and found this legal principle: the tenant of a mortgagor who leased the premises in breach of the mortgage deed, which expressly prohibits any letting of premises without the express written consent of the mortgagee, is not, without more, a tenant of the mortgagee.
10. This legal revelation precipitated a change of course for PIJ. It promptly abandoned its action before the Resident Magistrate because the person from whom it sought recovery possession was no occupying the premises. PIJ resorted to the ancient remedy of self-help. i.e. they proceeded to eject the claimant from the property. The advantages are clear – no court, no judge, no lawyers, no extension of time. It is cheap, fast and effective and if the tenant is made of fluff, risk free. PIJ regarded the claimant as a trespasser.
11. The Foundation responded by claiming in the action filed,
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(a) damages for breach of contract/lease agreement;
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(b) damages for breach of the covenant of quiet enjoyment;
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(c) damages for trespass;
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(d) damages for nuisance;
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(e) special damages;
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(f) interest
12. Mrs. Wright-Evans filed an affidavit dated November 22, 2004 an behalf of the claimant. Her affidavit had these fatal words in paragraph 4: That none of the names of any of the prospective Lessees for the offices were (sic) ever submitted for approval of the Bank and no specific written approval for any lease was ever sought. This was not only a breach of the mortgage agreement but also a failure to follow the requirements of the RTA. Strengthened by this admission, Mr. Samuda laid his legal axe at the root of the claimant's action.
13. It is somewhat surprising that there are no reported cases in the West Indian Reports and the Jamaica Law Reports, which have examined this narrow corner of the law, particularly, as it relates to registered land. Neither counsel nor I have been able to find a single case dealing with this specific issue. In the absence of reported authority in Jamaica and the West Indies, I have to go back to first principles. The journey goes back to the nineteenth century.
14. I begin with a definition of a mortgage. A mortgage is a transfer of ownership of the asset (or of any lesser interest held by the transferor [mortgagor]) by way of security upon the express or implied condition that ownership will be retransferred to the debtor on discharge of his obligation (see Goode, Roy, Legal Problems of Credit and Security 35 (London, Sweet and Maxwell 3" ed 2003). This is a good definition that captures the essence of a mortgage. In relation to land, at common law, there was a transfer of the legal estate from the mortgagor to the mortgagee who would be obliged to retransfer the legal estate to the mortgagor once the debt was paid. The mortgage of land was an actual conveyance from the mortgagor to the mortgagee. The condition of the reconveyance was the payment of the debt by the date specified in the instrument of mortgage. The common law knew no mercy. If the mortgagor did not discharge his debt by the date agreed, the mortgagee's estate in the land became absolute and he was no longer bound by the condition to reconvey (see Williams on Real Property 599 (23 rd ed)).
15. Equity mitigated the rigours and treated the mortgagor as having an equity of redemption that existed beyond the date of repayment. In equity, this meant that failure to repay by the stated date did not mean that the title of the mortgagee became absolute. The mortgagee was not discharged from his obligation to reconvey and neither was the mortgagor relieved of his obligation to repay the loan. It was a short step from this...
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Adola Manufacturing Company Ltd v McDonald and Others
...can enforce the lessee's covenants. 26 In the unreported judgment of Sykes J., Claim No. 2004/HCV 2305, Jamaica Youth Development Foundation v. Portfolio International Jamaica Limited, delivered December 10 2004, paragraph 40, the law is admirably summarized as follows: 40. This is the comm......