Michelle Smellie and Others v National Commercial Bank Jamaica Ltd

• Jurisdiction: Jamaica
• Judge: Mangatal, J
• Judgment Date: 15 January 2013
• Court: Supreme Court (Jamaica)
• Docket Number: CLAIM NO. 2012 CD 00134
• Date: 15 January 2013

[2013] JMCC Comm. 1

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

IN COMMERCIAL DIVISION

CLAIM NO. 2012 CD 00134

Between

Michelle Smellie

1st Claimant

and

Ivan Lewis

2nd Claimant

and

Icilda Lewis

3rd Claimant

and

National Commercial Bank Jamaica Limited

Defendant

Mr. Marc Jones instructed by Henlin, Gibson, Henlin Attorneys-at-law for the Claimants.

Mrs. Alexis Robinson instructed by Myers, Fletcher & Gordon Attorneys-at-law for the Defendant.

INTERLOCUTORY INJUNCTION — MORTGAGE BY WAY OF GUARANTEE AND GUARANTEE — WHETHER SERIOUS ISSUE TO BE TRIED — UNCONSCIONABLE CONDUCT/UNDUE INFLUENCE — BANK'S OBLIGATIONS TO VOLUNTEERS — LEGAL ADVICE CLAUSE-CONDITION FOR GRANT OF INJUNCTION-PAYMENT INTO COURT

IN CHAMBERS

Mangatal, J

1 By way of Application for Court Orders filed on November 20, 2012, the Claimants seek the following orders, pursuant to Rule 17.1(1)(a) and 17.4 of the Civil Procedure Rules 2002, (‘the CPR’):

• a. An injunction to restrain the Defendant, whether by itself, its servants, agents or otherwise howsoever from disposing, transferring and dealing with land comprised in Certificate of Title registered at Volume 1007 Folio 42 of the Register Book of Titles known as 1A West Armour Heights, Constant Spring in the Parish of Saint Andrew (‘the mortgaged property’).

• b. Costs in the claim.

2 In the Claim Form and Particulars of Claim, also filed on November 20, 2012, the Claimants claim:

• a. A declaration that the Defendant's exercise of its power of sale under Mortgage No. 1613440 entered on the Certificate of Title for the mortgaged property is unconscionable against the Claimants.

• b. A declaration that Mortgage No. 1613440 entered on the Certificate of Title for the mortgaged property is set aside.

• c. Delivery up of the said mortgage for cancellation as against the Claimants.

• d. Rectification of the Certificate of Title for the mortgaged property by deleting therefrom Mortgage No. 161340.

• e. A permanent injunction restraining the Defendant from disposing, transferring and dealing with the mortgaged property.

• f. An order setting aside any Agreement for Sale entered into by the Defendant in the exercise of its power of sale under Mortgage 1613440.

• g. Costs.

3 The stated grounds of the application are as follows:

• (a) The mortgaged property is subject to Mortgage No. 1613440 in the Defendant's favour in the sum of $15,000,000.00.

• (b) The mortgage secures a guarantee given by the Claimants in respect of a debt incurred to the Defendant by a company operated by their husband and son-in-law respectively.

• (c) The mortgage is impeachable because the circumstances in which the Defendant procured the Claimants' execution of same render it unconscionable for the Defendant to enforce it, based upon the following circumstances:

  (i) The Claimants are volunteers to the mortgage. They did not obtain any financial benefit or other gain for giving the mortgage.

  (ii) The Claimants were unaware of relevant information about the financial arrangements between the said company and the Defendant in so far as they did not know the amount of the company's indebtedness for which they guaranteed.

  (iii) Furthermore the Claimants did not understand the nature of the Mortgage by way of Guarantee nor the risks and consequences of executing it.

  (iv) The Claimants were placed in this disadvantageous position because the Defendant failed to explain the transaction to the Claimants and/or ensure that they had the benefit of independent legal advice.

  (v) Instead the Defendant relied on Patrick Smellie, the principal of the debtor company, to procure the Claimants' execution of the Mortgage.

  (vi) The Defendant knew or ought to have known that Patrick Smellie is the Claimants' near relation in so far as he is the 1 ^st Claimant's husband and the son-in-law of the 2 ^nd and 3 ^rd Claimants and that accordingly they were likely to repose trust and confidence in him regarding the transaction.

  (vii) In those circumstances the Defendant appreciated or ought to have appreciated the risk that Patrick Smellie would not fully and accurately explain the transaction to the Claimants.

  (viii) The Claimants did not really understand the Mortgage by way of Guarantee that they executed in favour of the Defendant and which it now claims the benefit of, to their detriment.

• (d) The debtor company has defaulted on the loan from the Defendant.

• (e) The Defendant has called in the guarantee against the Claimants and is now exercising its power under the mortgage.

• (f) In the circumstances, damages are not an adequate remedy having regard to the fact that the mortgaged property is the Claimants' family home.

4 The Application is supported by the Affidavit of the 2 ^nd and 3 ^rd Claimants (‘Mr. and Mrs. Lewis’) and the Affidavit of Patrick Smellie. The Defendant has filed the Affidavit of Janice-Stone Dunkley, a Business Manager at the Defendant's Manor Park Branch in opposition to the application.

The Relevant Legal Principles

5 The guidelines for the grant of an interim injunction until trial (or interlocutory injunction), are set out in the oft-cited case of American Cynamid v. Ethicon Ltd. [1975] 1 All E.R. 504, and more recently in the decision of the Judicial Committee of the Privy Council in NCB V. Olint [2009] J.C.P.C. 16. Basically, the following considerations arise:

• (a) Is there a serious issue to be tried? If there is a serious question to be tried, and the claim is neither frivolous nor vexatious, the court should then go on to consider the balance of convenience generally.

• (b) As part of that consideration, the court will contemplate whether damages are an adequate remedy for the Claimants, and if so, whether the Defendants are in a position to pay those damages.

• (c) If on the other hand, damages would not provide an adequate remedy for the Claimants, the court should then consider whether, if the injunction were to be granted, the Defendants would be adequately compensated by the Claimants' cross-undertaking in damages.

• (d) If there is doubt as to the adequacy of the respective remedies in damages, then other aspects of the balance of convenience should be considered.

• (e) Where other factors appear to be evenly balanced, it is a counsel of prudence to take such measures as are designed to preserve the status quo.

• (f) If the extent of the uncompensatable damages does not differ greatly, it may become appropriate to take into account the relative strength of each party's case. However, this should only be done where on the facts upon which there can be no reasonable or credible dispute, the strength of one party's case markedly outweighs that of the other party.

• (g) Further, where the case largely involves construction of legal documents or points of law, depending on their degree of difficulty or need for further exploration, the court may take into account the relative strength of the parties' case and their respective prospects of success. This is so even if all the court can form is a provisional view-see NCB v. Olint, and the well-known case of Fellowes v. Fisher [1975] 2 All E.R. 829. This is of course completely different from a case involving mainly issues of fact, or from deciding difficult points of law, since, as Lord Diplock points out at page 407 G-H of American Cynamid, ‘It is no part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult points of law which call for detailed argument and mature considerations’.

• (h) There may also be other special factors to be taken into account, depending on the particular facts and circumstances of the case.

6 At the end of the day, in principle, what the court must try to do at this interlocutory stage is to adopt the course which seems likely to cause the least irremediable harm or prejudice, this exercise of necessity having to take place at a time when the court cannot be certain as to the final outcome of the matter.

7 Mrs. Robinson, who appeared for the Defendant, relied upon the decision in Garden Cottage Foods Ltd. v. Milk Marketing Board [1983] 2 All E.R. 770 at 774(j) and submitted that the relevant status quo is the state of affairs existing during the period immediately preceding the issue of the Claim Form. I agree that the relevant status quo in this case is that the property is mortgaged to the Defendant, the loan is in default and the Defendant has commenced its exercise of its power of sale by issuing a statutory notice. Indeed, this Notice was issued from January 2012 and this claim was filed on November 20 2012.

Is there a Serious Issue to be Tried

8 The evidence of the 2 ^nd and 3 ^rd Claimants (‘Mr. and Mrs. Lewis’) is that they intended to mortgage their home as collateral for a loan from NCB to Jatlin Construction and Associates Limited (‘Jatlin’). The mortgage the Claimants now seek to set aside was collateral for a loan to Jatlin in the principal sum of $15,000,000. Mr. and Mrs. Lewis say that they did not understand that the Mortgage was both a Mortgage and a Guarantee. They thought that they were only giving a mortgage. On these facts, Mrs. Robinson submits, a plea of non est factum cannot assist the Claimants in setting aside the mortgage though they allege they did not understand that they were guaranteeing Jatlin's debts. This, Counsel submits, is because there is no fundamental difference between what they did (i.e. guarantee $15,000,000 of Jatlin's principal debt and mortgage their home as collateral for that guarantee) and what they thought they were doing (i.e. mortgaging their home as collateral for a loan to Jatlin). Further, Mrs. Robinson submitted that what the Claimants have not disclosed to this...