Mayberry Investments Ltd v Bridgeton Management Services Ltd
| Jurisdiction | Jamaica |
| Judge | Phillips P (AG),Edwards JA,Fraser JA (AG) |
| Judgment Date | 15 March 2019 |
| Neutral Citation | JM 2019 CA 48 |
| Date | 15 March 2019 |
| Court | Court of Appeal (Jamaica) |
[2019] JMCA Civ 6
SUPREME COURT CIVIL APPEAL 45/2017
The Hon Miss Justice Phillips P (AG)
The Hon Miss Justice Edwards JA
The Hon Mr Justice Fraser JA (AG)
Jerome Spencer instructed by Patterson, Mair, Hamilton for the appellant
Ransford Braham QC and Miss Kimberly Morris instructed by BrahamLegal for the respondent
Arbitration - Arbitration clause — Validity — Interpretation — Power of arbitrator to determine his own jurisdiction to conduct arbitration proceedings — Whether applicability of limitation defence was a matter for the court or the arbitrator to decide.
I have read in draft the detailed and comprehensive judgment of my brother Fraser JA (Ag). I agree with his reasoning and conclusion and have nothing to add.
I too have read the draft judgment of my brother Fraser JA (Ag) and agree with his reasoning and conclusion.
The appellant, Mayberry Investments Limited (‘MIL’), and the respondent, Bridgeton Management Services Limited (‘BMSL’), entered into two Client's Opening Margin Agreements for accounts held by BMSL with MIL. The first agreement was on 14 September 2004 for account 709246 (Margin Agreement 1) and the second was in June 2005 or 2006 for account 700083 (Margin Agreement 2). These agreements permitted BMSL, as an investor, to borrow against the value of the eligible securities in the accounts to purchase or sell securities. The agreements included a margin maintenance requirement which stipulated that BMSL had to maintain a certain market value in these accounts, failing which they would be subject to a “margin maintenance call” by MIL. A margin maintenance call requires an investor to repay debt owed in cash or deposit, or to sell sufficient securities to achieve the margin maintenance requirement.
The Margin Rate, which is the interest rate to be charged on Margin Agreement 1, is stated at clause 7 of the agreement. It states:
“I agree that a Margin Rate based on the current 30 (Thirty) Day Bank of Jamaica Treasury Rate plus 5% (+Five percentage points) be charged against my account for the period of time that the margin position is held with MIL. These and any other charges aforementioned will be applied monthly and interest is calculated on a compounded basis. MIL may, at its discretion, revise its Margin Rate agreed to in this contract whenever deemed necessary, by advising me in writing.” (Emphasis supplied)
As it relates to Margin Agreement 2, clause 7 contains details of the applicable Margin Rate. It states that:
“I agree that a Margin Rate based on the current 365 (Three Hundred and Sixty-Five) Day Bank of Jamaica Treasury Rate plus 5% (+Five percentage points) be charged against my account for the period of time that the margin position is held with Mayberry. These and any other charges aforementioned will be applied monthly and I further understand and agree that interest is calculated on a compounded basis. Mayberry may, at its discretion, revise its Margin Rate agreed to in this contract whenever deemed necessary, by advising me in writing.” (Emphasis supplied)
From 15 June 2005 onwards, BMSL contended that MIL had, since September 2004, incorrectly applied a higher margin rate than applicable under the margin agreements. MIL maintained that the relevant rate was 21.5% and BMSL that it was 18.5%. The effect of the difference in rates was significant. Based on the higher rate applied by MIL, BMSL was determined to be in default entitling MIL to make margin calls or sell off stocks to restore the margin maintenance requirement. BMSL, however, contended that the lower rate should have been applied, in which event, it would not have been in default and no margin call or sale would have been required.
Despite several exchanges through correspondence and otherwise over a period of five years, the disagreement concerning the rates proved resistant to resolution. Finally, on 1 July 2010, the parties met and had discussions which were later reduced into writing in a ‘without prejudice’ letter from MIL to BMSL dated 19 August 2010. The effect and outcome of the meeting of 1 July 2010, and the subsequent letter are, however, now also in dispute, with BMSL maintaining that a settlement was arrived at, while MIL contends it was a proposal that never ripened into an agreement.
Paragraphs 1 and 2 of MIL's letter of 19 August 2010 read as follows:
“1. I refer to the meeting of July 1, 2010 at our offices which was attended by your John Jackson and your attorney Norman Minott. Mayberry, as you will recall was represented by Sharon Harvey-Wilson and Trevor Patterson.
2. At the meeting, you argued that there were no 30-day BOJ treasury rate or 365-day BOJ treasury rate as provided for the margin agreements. In the interest of an amicable resolution, it was agreed that the following rates would be used:
(a) first, the comparable GOJ treasury bill rate for the same tenor;
(b) failing (a) above, the BOJ repo rate for the same tenor would be used;
(c) interest, as calculated above, based on one of the above rates as applicable would be compounded at monthly rests as provided for in the Agreement.”
The letter also outlined that the margin rates had been adjusted on 1 March 2008 to 22% per annum, on 8 December 2008 to 25% per annum and on 1 April 2010 to 20% per annum. The letter was accompanied by two sets of spreadsheets; “A” and “B”. The set marked “A” showed a) the margin rates initially applied to both accounts; b) the rate used based on paragraph 2 of the letter; and c) the actual calculation and relative adjustments arising from the use of the new rates. The set marked “B” compared the margin maintenance threshold with the recomputed loan balance. The letter ended with a demand for amounts due based on the terms of the letter.
Subsequent to this letter, disputes arose concerning whether the new interest rates were applied to Margin Agreement 1 and whether when the new rates were applied, BMSL was in fact in default, entitling MIL to make a margin call and sell stocks belonging to BMSL.
On 29 June 2016, BMSL served a Notice of Arbitration Proceedings on MIL, referring the disputes, differences and controversies relating to the agreements to arbitration.
MIL, through their attorneys-at-law, responded on 12 July 2016 indicating that any claim flowing from disputes that arose in 2004 and 2005, were statute barred and as such it would not submit to arbitration. BMSL disagreed that the claim was statute barred and pursuant to section 6 of the Arbitration Act 1900 (‘the Act of 1900’), by letter dated 13 July 2016, served on MIL a Notice to Appoint Arbitrator requiring R Anderson J (retired) to be appointed as the arbitrator. The notice also indicated that failure to appoint, or concur in the appointment of the arbitrator, would result in an application being made to the Supreme Court for an order to effect the appointment.
MIL failed to concur in the appointment of the arbitrator and on 30 September 2016, BMSL, by fixed date claim form, applied to the Supreme Court to appoint R Anderson J (retired) as the arbitrator to settle the disputes and controversies between the parties. MIL, in response, contended that the claim was an abuse of the process of the court and should be struck out.
Before Batts J, BMSL argued that the arbitrator should be appointed as the claim was not statute barred and, in any event, the determination as to whether it was, should be made at the arbitration proceedings. In response, MIL submitted that the claim was statute barred and therefore appointing an arbitrator would be an exercise in futility. MIL also contended that the arbitrator could not be asked to determine issues relating to his own jurisdiction. Therefore, since the question of whether the claim was time barred would depend on whether the parties had entered into a settlement agreement, the issue was not for the arbitrator to decide. MIL also submitted that section 6 of the Act was not mandatory and, in the circumstances, the learned judge should exercise his discretion by declining to make the appointment sought.
After considering the evidence and submissions of counsel for both parties, on 7 April 2017 Batts J made the following orders:
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“1. Pursuant to Section 6 of the Arbitration Act The Honourable Mr. Justice Roy Anderson (retired) is appointed sole arbitrator to determine the matters in dispute between the parties or and concerning the construction, performance or breach of the Margin Agreements dated the 12 th September 2004 and 16 th September 2006 [sic] or any other agreements entered into between [the Respondent] and [the Appellant].
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2. Liberty to Apply.
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3. Costs to the [Respondent] to be agreed or taxed.”
It should be noted at this point that there is some conflict concerning in which year Margin Agreement 2 was executed. In a letter to Mrs Harvey-Wilson dated 21 August 2010, Mr Jackson, principal in BMSL, referenced both years. In a follow up letter to her dated 29 August 2010, he indicated that the agreement was executed in mid-June 2006. In his affidavit filed 30 September 30 2016, he however stated the agreement was entered into 16 June 2005. At paragraph 7 of his judgment, and in the first of the final orders made, Batts J refers to this agreement as being in 2006. As dates are of some significance in this matter, at the appropriate time the discrepancies in the date may need to be settled.
Before this court, MIL challenged the decision of Batts J to appoint the arbitrator on the following grounds:
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“(1) The Learned Judge erred as a matter of fact in his finding that the dispute that arose between the parties concerned...
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