Jamaican Redevelopment Foundation Inc. v Real Estate Board and Registrar of Titles

• Jurisdiction: Jamaica
• Judge: Mangatal J:
• Judgment Date: 12 May 2011
• Judgment citation (vLex): [2011] 5 JJC 1202
• Court: Supreme Court (Jamaica)
• Docket Number: CLAIM NO. HCV 5152 OF 2009
• Date: 12 May 2011

JUDGMENT

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

IN CIVL DIVISION

CLAIM NO. HCV 5152 OF 2009

BETWEEN

JAMAICAN REDEVELOPMENT FOUNDATION INC

CLAIMANT

AND

THE REAL ESTATE BOARD

1 ^ST DEFENDANT

AND

THE REGISTRAR OF TITLES

2 ^ND DEFENDANT

IN CHAMBERS

^st

THE REAL ESTATE (DEALERS AND DEVELOPERS) ACT OF 1987-PREPAYMENT CONTRACTS- ENTERED INTO IN BREACH OF PROVISION LAND TO BE FREE OF MORTGAGE NOT CONCERNED WITH CONSTRUCTION OR BUILDING-WHETHER PREPAYMENT CONTRACT VOID OR VOIDABLE-WHETHER CHARGE IN FAVOUR OF BOARD VOID- WHETHER MORTGAGOR REQUIRED TO COMPENSATE PURCHASERS BEFORE EFFECTING TRANSFER UNDER POWER OF SALE- PRIORITY OF MORTGAGE/CHARGE

Mangatal J

1 1. This is a claim by the Claimant Jamaican Redevelopment Foundation Inc. ‘JRF’ for certain declarations and orders. The application was opposed by the 1 ^st Defendant the Real Estate Board ‘the Board’. Though the 2 ^nd Defendant the Registrar of Titles was served, that officer did not take any part in these proceedings, no doubt being content to abide their outcome and the court's ruling.

2 2. The relief sought is as follows:

• 1) A declaration pursuant to section 106 of the Registration of Titles Act that the Claimant is entitled to transfer property registered at Volume 1324 Folio 686 of the Register Book of Titles pursuant to the exercise of its power of sale.

• 2) A declaration that the charge endorsed as Miscellaneous No. 1453150 on Certificate of Title registered at Volume 1324 Folio 686 of the Register Book of Tides in favour of the Real Estate Board is null and void and not binding on the Claimant.

• 3) An order that the miscellaneous entry No. 1453150 be cancelled and struck off the Certificate of Title registered at Volume 1324 Folio 686 of the Register Book of Titles by the 2 ^nd Defendant.

• 4) Costs.

• 5) Such further and/or other relief as this Honourable Court deems just.

3 3. This case raises some very important issues for real estate business and for development schemes. It involves interpretation of certain provisions of the Real Estate (Dealers and Developers) Act of 1987 ‘the Act’ and its interplay with the Registration of Titles Act. I am grateful to the Attorneys on both sides for their invaluable submissions and assistance.

4 UNDISPUTED FACTS

5 4. Some of the material facts that are not in issue are as follows:

• a. New World Development Corporation Limited, the mortgagor, ‘NWDC’ received several loans from Horizon Merchant Bank and Horizon Building Society, security for which was all that land comprised in Certificate of Title registered at Volume 1266 Folio 801, ‘the parent title’. This included all that land numbered Lot 4 comprised in the now splintered issued Certificate of Title registered at Volume 1324 Folio 686 of the Register Book of Titles.

• b. Mortgages in favour of Horizon Merchant Bank and Horizon Building Society were accordingly registered on August 25, 1994, June 20, 1995 and January 24, 1996. The mortgages were transferred to Refin Trust limited on October 1, 1999. Refin Trust thereafter transferred these mortgages to JRF on the 29 ^th October 2003.

• c. NWDC defaulted in the repayment of the loans. On or about September 25, 2006 notices were sent by JRF to NWDC and its guarantors demanding payment of the sums outstanding and threatening legal action for recovery of the debt if no payment was made.

• d. The Board is a body established under the Act and its principal functions are to regulate and control the practice of real estate business, and the operation of development schemes and the disposition of land within them.

• e. On the 7 ^th of February 2007 a charge which JRF now challenges was entered on the Registered Title to Lot 4 in favour of the Board ‘in respect of all monies received under prepayment contracts pursuant to the provisions of section 31 of the Real Estate (Dealers and Developers) Act 1987.’

• f. The Charge Instrument stated that the land ‘is subject to the incumbrances, if any, set out in the Third Schedule hereto’. The Third Schedule sets out the incumbrances to which the lands are subject, such incumbrances being the mortgages which have been transferred to JRF.

• g. No payment was made and JRF exercised its power of sale under the mortgage. Valuations were obtained for the various lots which had originally formed part of the lands comprised in the parent title and sale was attempted by way of public auction on February 8, 2007 and subsequent dates. In March of 2007 an offer to purchase above the reserve price was made in respect of Lot 4 registered at Volume 1324 Folio 686. This was accepted by JRF, a sale agreement was concluded and a transfer executed and lodged with the Registrar of Titles on November 13, 2007.

• h. JRF indicates, in paragraph 11 of the Affidavit of Janet Farrow, sworn to on the 29 ^th September 2009, the then Chief Executive officer of the Jamaican branch of JRF, that the Registrar of Titles refused to register the transfer. The refusal was on the basis that the Board's consent is required as the Board's charge ranks in priority to any other mortgages pursuant to section 31 of the Act. Mrs. Farrow indicated that it was only at that time that JRF learnt of the charge in favour of the Board.

• i. There were two other properties subject to the same charge in favour of the Board, that have been subsequently transferred by the Registrar of Titles to new proprietors after exercise by JRF of its powers of sale under one of the relevant mortgages. These properties are the parcels of land registered at Volume 1324 Folio 698 and Volume 1304 Folio 721 respectively.

• j. There is no complaint being made as to JRF's exercise of its power of sale. However, the Board has indicated to JRF in respect of Lot 4 that it is unwilling to remove the charge or consent to the transfer unless the JRF makes arrangements to compensate the purchasers under the prepayment contracts.

6 OTHER FACTS AND EVIDENTIAL CONSIDERATIONS

7 5. According to the Affidavit of Sandra Watson, the Board's General Manager, the Board received an application dated March 17, 1994. It was from ‘NWDC’ to be registered as a developer for the purposes of a development scheme at Pleasant Valley, Belvedere, in the Parish of Saint Andrew.

8 6. The application form indicated that there were no mortgages on the title. The application was approved. In paragraph 8 of her Affidavit, Ms. Watson states that an applicant who has entered into prepayment contracts is mandated to lodge the money he receives in connection with the contract into a trust account. That money should not be withdrawn from the trust account until completion or rescission unless the applicant does a number of things, including lodging a charge in favour of the Board.

9 7. In paragraphs 9, 11 and 12 of her Affidavit Ms. Watson states:

• 9. From information received from the registered proprietor, it entered into prepayment contracts with respect to the land in the development. Lot 4, the subject of the claim, was sold to Ms. Debbie Gibson who resides in the United States of America. A copy of the Sale Agreement is exhibited hereto and marked ‘ SW2’ for identification. Receipts indicate that some of these prepayment contracts were signed prior to the Claimant's mortgage.

• 11…the land contained in Certificate of Title registered at Volume 1304 Folio 721 was purchased by Ms. Barbara Ellis. A copy of the Agreement for Sale is exhibited hereto and marked ‘ SW 3’ for identification. Ms. Barbara Ellis has sent us receipts that pre-date the mortgage assigned to the Claimant. Copies of the receipts are exhibited hereto marked ‘ SW4’ for identification.

• 12. I am shown receipts from New World Developments drawn in favour of Raymond Jones in respect of Lot #3. I exhibit hereto and mark ‘ SW5’ copies of those receipts.

10 8. Mr. Manning contended that paragraph 9 of Ms. Watson's Affidavit contains hearsay statements. He also submitted that Ms. Watson's Affidavit has serious omissions in relation to matters that need to be established in order to show that there are prepayment contracts. He further submitted that the evidence put forward by the Board fails to demonstrate that these contracts predated JRF's mortgages.

11 The Issues

12 9. The main issue joined between JRF and the Board is whether the charge placed on the Certificate of Title purportedly by virtue of the Act, was lodged in accordance with its provisions and whether the Board's charge ranks in priority to JRF's mortgages duly registered under the Registration of Titles Act prior to the charge.

13 10. JRF also asks the Court to determine whether such a charge is permissible in the present circumstances and what are the ramifications as it relates to JRF's ability to pass title to its purchaser and the obligations of JRF if any to the purchasers under the prepayment contracts.

14 The Law

15 11. The following sections of the Act are particularly relevant to the issues. In section 2 of the Act, land is defined to include:

…all estates and interests, whether freehold or leasehold, in real property including (where appropriate) an estate or interest comprised in a strata title under the Registration (Strata Titles) Act.

16 A prepayment contract is defined in section 2 of the Act as follows:

‘prepayment contract’ means any contract under which at the time of entering into the contract, there are to be performed or discharged by one party for the benefit of the other party, or for the benefit of a party to a connected contract, obligations, expressed or implied, with regard to -

• (a) the building of roads or the carrying out of engineering or other operations in, on, over or under any land the subject of the contract or any connected contract; or

• (b) the carrying out of any building operations, including, but not limited to, the construction or completion of any...