Ocean Chimo Ltd v Royal Bank (Jamaica) Ltd (RBC) and Others

JurisdictionJamaica
CourtSupreme Court
JudgeEdwards, J
Judgment Date18 Nov 2015
Docket NumberCLAIM NO. 2010 HCV 02413 CLAIM NO. 2012 HCV06552

[2015] JMCC Comm. 22

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

COMMERCIAL DIVISION

Edwards, J

CLAIM NO. 2010 HCV 02413

CLAIM NO. 2012 HCV06552

BETWEEN
Ocean Chimo LTD
Claimant
and
Royal Bank (Jamaica) LTD (RBC)
1 st Defendant

and

Royal Bank (T & T) LTD (RBC)
2 nd Defendant

and

Royal Bank of Canada
3 rd Defendant

and

Samuel Billard
4 th Defendant

and

Raymond Chang
5 th Defendant

and

Greg Smith
6 th Defendant
BETWEEN
Delroy Howell
Claimant
and
Royal Bank of Canada
1 st Defendant

and

Samuel Billard
2 nd Defendant

and

Raymond Chang
3 rd Defendant

and

Greg Smith
4 th Defendant

Mr. John Vassel , Q.C., Mrs. Julianne Mais-Cox and Mrs. Jennifer Scott-Taggart instructed by Dunn Cox for the Applicants

Mr. Roderick Gordon and Ms. Kereene Smith instructed by Gordon McGrath for the Respondent Ocean Chimo

Mr. Douglas Leys , Q.C. and Ms. Kimone Tennant instructed by Leys Smith for the Respondent Delroy Howell

CIVIL PROCEDURE AND PRACTICE-APPLICATION FOR SUMMARY JUDGEMENT-WHETHER APPLICATION NOTICE COMPLIES WITH THE RULES-WHETHER FAILURE TO COMPLY WITH THE REQUIREMENTS OF THE RULES IN THE NOTICE FATAL TO THE APPLICATION-WHETHER A CLAIM WITH DISPUTED FACTS AND VOLUMINOUS PLEADINGS IS AMENABLE TO SUMMARY JUDGEMENT-WHETHER ISSUES NARROW REGARDLESS OF VOLUME OF DOCUMENTS— PART 15, RULE 15. 4 AND 15.2 OF CIVIL PROCEDURE RULES;

AGENCY-CLAIM AGAINST BANK EMPLOYEES AND AGENTS FOR NEGLIGENCE, CONSPIRACY, FRAUD AND BREACH OF FIDUCIARY DUTY-WHETHER SUCH A CLAIM AGAINST EMPLOYEES AND AGENTS IS SUSTAINABLE;

BANKING-CLAIM BY GUARANTOR AGAINST THE BANK-GUARANTOR CLAIMING LOSS AS A RESULT OF ALLEGED ACTIONS OF BANK EMPLOYEES AND AGENTS TAKEN AGAINST THE BORROWER-NO PAYMENT MADE BY GUARANTOR AND NO PERSONAL LOSS SUFFERED BY HIM-GUARANTOR THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF THE BORROWER-WHETHER BORROWER'S LOSS IS GUARANTOR'S LOSS-WHETHER CLAIM BY GUARANTOR AGAINST THE PARENT BANK OF THE LENDERS, ITS EMPLOYEES AND AGENTS IS SUSTAINABLE.

IN CHAMBERS
Background to the Applications
1

Over several days I heard applications for summary judgment made in two separate actions filed herein. The matters were consolidated as they had not only common parties but also common issues of law and fact. It was agreed by all the parties that, with the court's approval, these matters could and should be addressed together.

2

The applicants are the 3 rd , 4 th , 5 th and 6 th defendants (hereinafter referred to collectively as ‘the defendants’) in the action filed by Ocean Chimo Limited (hereafter referred to as ‘the Ocean Chimo suit’) and all the defendants in the suit filed by Mr. Delroy Howell (hereafter called ‘the guarantor suit’).

3

The matters come against the background of an arrangement between Ocean Chimo Limited (Ocean Chimo) and RBC Royal Bank (Jamaica Limited) and RBC Royal Bank (Trinidad and Tobago Limited) (hereinafter together referred to as the lender banks) for what has been referred to in the loan agreement of 2008 as a ‘syndicated loan’ to be made to Ocean Chimo. This loan totaled approximately US$32 Million dollars and was contracted over two periods. The first was in August 2005 and that credit facility was increased in April 2008. Both banks contributed to the total sum of the loan in amounts set out in the agreement.

4

The loan was secured by a mortgage and a debenture over the property and the fixed assets of Ocean Chimo which was the then Hilton Kingston hotel and the assignment of the Fire and Allied Perils insurance over the buildings and assets of the hotel. The loan was also guaranteed by Mr. Delroy Howell (Mr. Howell) who was also the Chief Executive Officer and Chairman of Ocean Chimo.

5

Interest on the loan was agreed to be calculated on the basis of six months London Inter Bank Ordinary Rate (LIBOR) plus a fixed rate of 4.5%. Interest was therefore, to be reset every six months based on the prevailing LIBOR rate. The terms of the loan were set out in a commitment letter and a loan agreement dated April 28, 2008. A provision in the commitment letter was to the effect that, if the borrower went into default, the bank was entitled to adjust the interest rate in a manner, which in its discretion, it deemed justified. The borrower, on the lender banks' account, went into default in the first interest period and they, purporting to act in accordance with the terms of the loan contract, came off LIBOR rates and applied a fixed rate of interest.

6

There was some issue with the lender banks disbursing the funds in May 2008 over a three day period when LIBOR rates were different for each day. This meant that a weighted average LIBOR rate was applied to the sums disbursed for the first interest period. It is now disputed as to how the prevailing rate of interest was then arrived at by the lender banks and the legal basis and or authority for applying a weighted average rate. However, the lender banks, having determined that the loan payments had subsequently fallen into arrears, increased the interest rates as per the provision in the agreement. When there was continued default in the payment of the arrears, they then exercised their rights under the debenture and placed Ocean Chimo into receivership. Subsequently, they also called on the guarantee, which call was ignored.

7

For the uninitiated, LIBOR, according to the British Bankers' Association, refers to ‘the rate at which an individual contributor panel bank could borrow funds were it to do so by asking for and then accepting interbank offers in reasonable market size just prior to 11.00 a.m. London time’ (See Graiseley Properties Limited & ors v Barclays Bank PLC [2013] EWCA Civ 1372 ).

8

On the lender banks case the loan was in default in the first interest period ending November 30 th 2008 and it was thereafter that the interest rate was duly adjusted in accordance with the loan contract. This exercise of its discretion by the lender banks in and of itself raised numerous disputed issues. Some of these issues surrounded whether:

  • a) Ocean Chimo was in fact in default at the end of the first interest period of the loan;

  • b) the lender banks were wrong in adjusting the rates in a manner which saw them coming off LIBOR rates and instead applying a fixed rate of interest of 9.25%;

  • c) the lender banks were wrong to increase or vary the interest rates at all if the borrower was not in default;

  • d) the parent company of the lender bank played any part in the increase in the interest rates on the loan resulting in loss to the claimants;

  • e) the activities of the employees and external counsel of the parent bank in the administration of the loan resulted in direct loss to the claimants; and

  • f) whether such activities gave rise to personal liability on the part of the employees and external counsel to the alleged parent bank who acted as agents of the lender banks.

9

The fallout from these disputed issues resulted in numerous court battles being fought between the main protagonists. The earlier ones were as a result of the lender banks appointing a receiver over the assets of the borrower, which was the hotel. The hotel was eventually sold by the banks acting under the debenture in 2014. Ocean Chimo and Mr. Howell both sued the lender banks in separate claims. The claim by Ocean Chimo commenced from as far back as 2010. Since then there have been several interlocutory applications and the matters are nowhere near ready for trial.

10

The loans were originally taken out when the banks operated under the name RBTT. That name was changed to RBC Royal Bank (Jamaica) Limited and RBC Royal Bank (Trinidad and Tobago). Although it is unclear from the records what the corporate relationship was between these banks and the 3 rd defendant Royal Bank of Canada (RBC Canada) it was generally agreed and accepted that RBC Canada became the parent company of these subsidiary banks by 2009.

11

RBC Canada has become gripped in this vortex of litigation because of the activities of what is known as its Special Loans Advisory Group (the loans group) and because the lender banks are alleged to be its subsidiaries. The defendants Raymond Chang (Mr. Chang) and Greg Smith (Mr. Smith) are members of the loans group. Samuel Billiard (Mr. Billiard) was RBC Canada's external counsel.

12

No one is disputing that the actions brought against the lender banks should proceed to trial. The issue here is whether there should be summary judgment in favour of RBC Canada, its employees Mr. Chang and Mr. Smith and external counsel Mr. Billiard, on the basis that Ocean Chimo and Mr. Howell's actions against them have no real prospect of succeeding.

13

This loans group existed in RBC Canada to provide assistance to subsidiary banks, at their request, that were having problems/issues with large loans, especially those that had gone into default. Both claimants contended that the activities of the defendants were such as to rise to the level of conspiracy, fraud, breach of fiduciary duties, negligence and unjust enrichment. In a nutshell both claimants contended that the defendants conspired together and with the lender banks to unlawfully increase the interest rate under the loan agreement and that the object of the conspiracy was to ultimately ‘wrest’ the hotel away from the borrower and call on the guarantee.

14

The defendants on the other hand submitted that these claims have come very late in the history of the case and are without merit and therefore doomed to fail. The original action filed by Ocean Chimo was against the lender banks and was filed in 2010. There were several amendments made to that initial action but it was only in 2012 that these defendants were joined and the list of causes of action expanded.

The Ocean Chimo Claim
15

The original claim brought by Ocean Chimo was against the lender banks. By way of...

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