L.D.T. Services Ltd and Another v Twin Acres Development Company Ltd and Others

• Jurisdiction: Jamaica
• Judge: Batts J
• Judgment Date: 29 July 2016
• Neutral Citation: [2016] JMCC Comm 20
• Court: Supreme Court (Jamaica)
• Docket Number: COMMERCIAL DIVISION CLAIM NO. CD 00030 of 2011
• Date: 29 July 2016

[2016] JMCC Comm 20

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

Coram:

Batts J,

COMMERCIAL DIVISION CLAIM NO. CD 00030 of 2011

Between

L.D.T. Services Limited

1 ^st Claimant

Leon Forte

2 ^nd Claimant

and

Twin Acres Development Company Limited

1 ^st Defendant

Horace Manderson

2 ^nd Defendant

Garth Williams

3 ^rd Defendant

Michael Gyles

4 ^th Defendant

Between

Twin Acres Development Company Limited

Ancillary Claimant

and

Horace Manderson

1 ^st Ancillary Defendant

Michael Gyles

2 ^nd Ancillary Defendant

Contract — Partnership — Company formed — Claim by one partner for work done and money owed — Breach of fiduciary duty and/ good faith — Claim for return of sums wrongly requested — Misrepresentation — Fraud — Conversion

1 At the commencement of the matter Ms Carol Davis Counsel for the Claimants requested permission to use a recorder to tape the evidence. There was no objection and I decided to allow it on condition that a copy of the recording was provided to all concerned afterwards. No copy of the recording has been provided to the Court. I therefore rely solely on my notes of the evidence for the purposes of the delivery of this judgment.

2 These proceedings are premised on the deteriorated relationship between partners whose disputes are now before the court for a resolution. The partners of whom I speak are Leon Forte, Horace Manderson, Garth Williams and Michael Gyles. They are all parties to the action, save for the 3 ^rd Defendant Garth Williams against whom the claim was discontinued when the matter came before me on the 11 ^th of April, 2016.

The partnership agreement is evidenced in writing by a document dated 28 ^th December 1994 [exhibit 2]. That document records the fact that the partnership commenced in or about December 1992.The purpose of the partnership was to acquire and develop property known as Twin Acres situated at 14 Stillwell Road in the parish of St. Andrew. The parties to the partnership agreement brought with them special expertise from their respective professions. They were each to contribute their expertise in formulating a construction, marketing and management team.

The 2 ^nd Claimant is a construction engineer. The 2 ^nd Defendant is a commissioned land surveyor. The 3 ^rd Defendant is a banker and the 4 ^th Defendant is an architect.

3 The 1 ^st Claimant, L.D.T. Services Limited is a company registered and engaged inter alia in the business of construction. The 2 ^nd Claimant is a director and majority shareholder of the 1 ^st Claimant. He is also one of the partners and a director and shareholder of the 1 ^st Defendant company. The 1 ^st Claimant was the company through which the 2 ^nd Claimant made his contribution to the project. The 2 ^nd , 3 ^rd and 4 ^th Defendants are also partners and directors and shareholders of the 1 ^st Defendant company.

4 It was the intention of the partners to raise revenue for the project through the stock market. The partners believed that the sale of shares would provide sufficient funds so that the professional team could; build, repay investors, pay dividends and make a profit. Unfortunately, by the time the project was identified conceptualised and the prospectus formulated, the stock market crashed [see exhibit 2 and paragraph 19 of the witness statement of the 2 ^nd Defendant]. The partners decided nevertheless to continue the development. The project received funding from two sources; capital injection from the partners and loans. The 2 ^nd Claimant also gave a guarantee on behalf of the 1 ^st Defendant.

5 On March 23, 1993 the partners incorporated a company as a special purpose vehicle to carry out its functions and objectives. This company is the 1 ^st Defendant, Twin Acres Development Company Limited. It is the vehicle through which the property at 14 Stillwell Road was developed. The name of the development is Twin Acres and it occurred in two phases. Twin Acres Phase 1 does not relate to these proceedings. I will however say that the development of Phase 1 failed and subsequently ended up with the Financial Sector Adjustment Programme (FINSAC). After approximately 10 years, the 1 ^st Defendant was eventually able to buy back the project from FINSAC and go on to complete it. This case concerns only Twin Acres Phase 2.

6 Although they went on to form a company the partners did not enter into a shareholders agreement. They agreed that the directors would be paid for their services from the proceeds of the sale of the units [see exhibit 2]. They alsoagreed that they would each receive a unit in the development. Fourteen apartments were built. To date, thirteen of these have been sold. The sole unit that remains unsold is identified as apartment B6. The value of which was between 27 and 29 million Jamaican dollars in the year 2013 [see exhibit 1 page 176].

7 The development of Phase II started in 2004 and ended in 2007 when the last unit was completed. It is clear that the contribution of the partners to the project was by no means equal. These proceedings have placed a spotlight in particular on the contribution of the 2 ^nd Claimant who has sought to recover through the 1 ^st Claimant the value of his contribution to the project. As counsel for the Claimants put it the 2 ^nd Claimant's expertise was that of contractor in the field of construction engineering. The other three directors have not sought remedies to recoup their contribution, neither have they lead evidence of the value of same.

8 Suit was commenced on April 6, 2011 against Twin Acres Development Limited as the sole Defendant. By way of further amended claim and particulars of claim Horace Manderson, Garth Williams and Michael Gyles were added as Defendants. The 1 ^st Claimant says that it did work for the benefit of the 1 ^st Defendant for which it has not been paid while the 2 ^nd Claimant seeks to recover monies due under a loan to the 1 ^st Defendant as well as an account of profits of the partnership by the Defendants.

9 I have reproduced below the remedies sought by the Claimants as contained in their further amended claim form;

1. The sum of $24,680,598 for work done on the construction at 14 Stillwell Road (inclusive of management fees)

2. The sum of US$18,000 for loan made to the defendant by the 2 ^nd claimant.

3. The sum of $1,258,227 for loan made to the defendant by the 2 ^nd claimant.

4. Interest at a commercial rate of 16% p.a. or such other rate as this Honourable Court shall determine.

5. A mareva injunction / freezing order restraining the defendant, their servants or agents from selling, disposing of, transferring, charging, or in any way whatsoever dealing with or removing the property of the defendant and in particular equipment as follows:

a. The defendant's land registered at volume 1399 folio 793 of the register book of titles.

b. The sum of $ 6,100,000 held in account # 726531 at NCB Capital Markets, The Atrium, Trafalgar Road, Kingston 5

6. An account of profits of the partnership received by the 2 ^nd , 3 ^rd and / or 4 ^th defendants.

7. Costs.

10 The Defendants have not only defended the claim but have filed a counterclaim suing the Claimants for damages. On June 10, 2014 the 2 ^nd and 4 ^th Defendants by way of an amended defence and counterclaim sought against the 1 ^st Claimant the sum of $16,866,092.35 which they say was wrongfully requested for pay bills on the Twin Acres Phase 2 project and for all other sums wrongfully requested and sums overpaid for construction work done. The 2 ^nd and 4 ^th Defendants claimed against the 2 ^nd Claimant for the return of the sum of one million Jamaican dollars ($1,000,000.00) allegedly loaned to him by the 1 ^st Defendant. The Defendants also claimed against the 2 ^nd Claimant for misrepresentation, fraudulent conversion and breach of fiduciary duty and/ or duty of good faith.

11 I reproduce below the remedies sought by the Defendants as contained in their defence and amended counter claim;

The 1 ^st , 2 ^nd and 4 ^th defendants claim:

1. Against the 1 ^st claimant as agent and/or servant of the 2 ^nd claimant and/or the 2nd claimant for return of the sum of $16,866,092.35 wrongfully requested for the pay bill for the Twin Acres Phase 2 project at 14 Stilwell Road in the parish of Saint Andrew.

2. Against the 1 ^st claimant as agent and/or servant of the 2 ^nd claimant and/or the 2 ^nd claimant for return of all other sums wrongfully requested and for the return of all funds overpaid for construction work done on the Twin Acres Phase 2 project at 14 Stilwell Road in the parish of Saint Andrew.

3. Against the 2 ^nd claimant for the return of the sum of $1,000,000.00 loaned to him by the 1 ^st defendant.

4. Against the 2 ^nd claimant for damages for:

(a) misrepresentation;

(b) fraudulent conversion; and

(c) breach of fiduciary duty and/ or duty of good faith

5. Interest on such amounts found to be due to them from the 1 ^st and 2 ^nd claimants at such rate and for such period as the court deems just pursuant to the Law Reform (Miscellaneous Provisions) Act.

6. Costs against the 1 ^st and 2 ^nd claimants.

7. Further and/or other relief.

12 On November 6, 2015 an ancillary claim was brought by the 1 ^st Defendant by way of a derivative action against the 2 ^nd and 4 ^th Defendants; Horace Manderson and Michael Gyles. The claim is for an account of monies collected by the Ancillary Defendants in the sale of apartments, as well as damages.

13 I reproduce below the remedies sought by the ancillary claimant as contained in its ancillary claim;

And the claimant claims:

Damages

An account of all monies collected by the ancillary defendants in their purported sale of all properties belonging to the ancillary claimant;

Payment of all sums found due to the...