Y P Seaton & Associates Company Ltd v National Housing Trust

• Jurisdiction: Jamaica
• Judge: Harris JA,Dukharan JA,Mcintosh JA
• Judgment Date: 22 November 2013
• Neutral Citation: [2013] JMCA Civ 44,JM 2013 CA 121
• Court: Court of Appeal (Jamaica)
• Date: 22 November 2013
• Docket Number: SUPREME COURT CIVIL APPEAL NO 133/2009

[2013] JMCA Civ 44

JAMAICA

IN THE COURT OF APPEAL

Before:

The Hon Mrs Justice Harris JA

The Hon Mr Justice Dukharan JA

The Hon Mrs Justice Mcintosh JA

SUPREME COURT CIVIL APPEAL NO 133/2009

Between

Y P Seaton & Associates Company Limited

Appellant

and

The National Housing Trust

Respondent

Dr Lloyd G Barnett and Miss Anna Maria Gracie instructed by Rattray, Patterson, Rattray for the appellant

W John Vassell QC instructed by DunnCox for the respondent

LOANS - Loan agreement - Termination of agreement to provide loan for the construction of 259 housing solutions in housing development project in East Prospect - Claim for interest - Question of interest remitted to arbitrator under Arbitration Act, S. 11(1) - Whether arbitrator acted in excess of his jurisdiction in awarding compound interest on contractor's profit - Whether arbitrator misdirected himself - Whether arbitrator had jurisdiction to award compound interest - Law Reform (Miscellaneous Provisions) Act, S. 3(b)

Harris JA

1 I have read in draft the judgment of my sister McIntosh JA. I agree with her reasoning and conclusion and have nothing to add.

Dukharan JA

2 I too have read the draft judgment of McIntosh JA and agree with her reasoning and conclusion. There is nothing that I can add.

Mcintosh JA

Introduction

3 On 28 August 1995 the appellant and the respondent entered into a Loan Agreement by virtue of which the respondent (also referred to hereafter as the NHT) was to make available to the appellant approximately $187,000,000.00 to partially finance the construction of 259 housing solutions in a housing development project in East Prospect, St Thomas on lands owned by the appellant. The loan was to be repaid by the sale of completed units or lots to the respondent which would then sell them to its contributors.

4 The project commenced in about November of 1995 and, in accordance with the provisions of the agreement, completion was to be 20 months after the first advance of funds to the appellant by the respondent. For a variety of reasons concerning which no reference need be made in this introduction, the project was never completed and the construction site was closed in October 1997. It is common ground that at that date only some of the housing units had been completed but the respondent did not share the appellant's view that by then the project was near completion.

5 Approximately six months later, the NHT purported to terminate the agreement by notice to the appellant dated 29 April 1998 setting out provisions of the agreement upon which it relied. Thereafter, a number of meetings were held with a view to resolving disputes which had arisen and the parties eventually arrived at a settlement in an agreement dated 27 July 1999, referred to as the Settlement (or Compromise) Agreement.

6 As stated in the Settlement Agreement its purpose was to facilitate the handing over of the project to the NHT, for completion as the NHT saw fit, so as to enable the NHT to be paid all sums due and payable to it by the appellant and to keep its commitment to sell units in the project to its contributors. The agreement also provided for the acceptance of ‘[T]he Project account’ prepared by the NHT as final:-

‘SAVE AND EXCEPT for the following issues:

These issues were accordingly submitted to arbitration and in a decision handed down on 12 July 2005 the arbitrator refused the respondent's claim for interest and awarded the sum of $24,325,000.00 to the appellant for profit and risk. He gave reasons for his decision.

(a)	INTEREST	YPS and NHT have agreed to refer to arbitration the interest portion of this statement shown as Twenty-seven Million Two Hundred and Fifty-five Thousand Nine Hundred and Nineteen Dollars and Ninety-two cents ($27,255,919.92) as at the 18 th day of January, 1999.
(b)	PROFIT	YPS and NHT have also agreed to refer to arbitration the issue of the contractor's profit which is provided for in the agreement at a rate of 14.8%
(c) …
(d) …’

7 In December 2005, the respondent paid the sum awarded to the appellant but the appellant, being dissatisfied that interest was not included in the award, filed a claim in the Supreme Court seeking an order that the question of interest upon the sum for profit be remitted to the arbitrator pursuant to section 11 (1) of the Arbitration Act on the ground that the arbitrator fell into error when he determined that no interest was payable because ‘none was claimed/pleaded’.

8 After due consideration of the claim, Marva McIntosh J remitted the matter to the arbitrator, on 22 January 2007, ‘to consider and arbitrate on the issue of interest on the profit awarded’ and, having complied with that directive, the arbitrator then published a Supplementary Award on 11 May 2007 in which he made an award of $214,512,232.76 to the appellant as compound interest for the period 30 October 1997 to January 2007. This time the dissatisfaction was the respondent's, resulting in its fixed date claim form filed in the Supreme Court on 24 July 2007 seeking orders that the Supplementary Arbitration Award be set aside and that the matter be remitted to the arbitrator ‘to reconsider and arbitrate on the issue of interest in accordance with the laws of Jamaica’.

9 The claim came up for hearing in chambers on 10 and 11 April 2008 and in a judgment delivered on 11 September 2009 the learned judge held that the arbitrator ‘acted in excess of his jurisdiction in awarding compound interest on contractor's profit and thereby misconducted himself’. The learned judge therefore set aside the award of compound interest and remitted the matter to the arbitrator for him ‘to reconsider the rate of simple interest to be applied and the date from which the computation should commence’. This is the decision which the appellant now seeks to set aside.

The appeal

10 In its amended notice of appeal filed on 23 December 2009 the appellant challenged the learned judge's findings of fact and law and formulated its complaints as follows:

• ‘(a) The Learned Judge erred on the facts and arrived at conclusions contrary to the evidence in that:-

  • (i) The learned judge held that the Agreement entered into on 27 ^th July 1999 terminated the 1995 Loan Agreement.

  • (ii) The Learned Arbitrator, in the Final Award dated 12 ^th July 2005, which is unchallenged, found that the contractor's profit and risk was payable in installments (see paragraphs 3.2.7 page 23 of the Final Award).

  • (iii) On consideration of the provisions of the Loan Agreement with regard to the Developer, it is plain that the parties envisaged that the applicable rate of interest payable by the Trust to the Developer was the commercial bank rate and not the interest rate prescribed by the Judicature (Supreme Court) Act.

  • (iv) The applicable interest rate in respect of profit owed to the Developer was interest at the commercial bank rate as this represented the true cost to the Developer of being kept out of his money.

  And in holding that:-

  • (v) In the award referred to by the arbitrator, he was then dealing with interest which might have been due to NHT because of the cessation of work by YPSA and had nothing to do with the award of interest on contractor's profit.

  • (vi) It is quite clear that the arbitrator accepted the 30 ^th October, 1997 as the date of completion of the project. This I think is clearly wrong as the Compromised Agreement between the parties was to “facilitate the handover of the East Prospect Phase II housing project (the Project) by YPS to NHT for completion as NHT sees fit.” This in my view marked the termination of the 1995 Loan Agreement.

  • (vii) I do not believe that August 4, 1998 could also be considered to be an appropriate starting point. Any sums requested in August 1998 could not therefore be applied as stated, as work on the project had ceased in 1997.

  (b) The Learned Judge erred in law in:-

  • (i) Failing to find that the nature of the contractual and business relationship of the parties implied that compound interest was applicable;

  • (ii) In [sic] finding that the Arbitrator was guilty of misconduct in assuming the jurisdiction to award compound interest in that he did not have that power by the terms of the reference or submission or by general law;

  • (iii) In [sic] determining that there was an error on the face of the award by having regard to the Loan Agreement of May 1995 as this was not incorporated into the award;

  • (iv) In [sic] finding that the proviso to section 3 of the Law Reform (Miscellaneous Provisions) Act excluded the Court and by extension an Arbitrator from awarding compound interest, whereas that section was inapplicable to any debt upon which interest is payable as of right by virtue of any agreement or otherwise.

  • (v) In [sic] failing to take into account that by virtue of the nature of the relationship between the parties and the subject-matter of the transaction as well as the provisions of the relevant Agreement that the rate of interest should be the same rate “as the Developer shall pay its bankers on any borrowed [sic] for the Development”, compound interest was applicable.’

11 The appellant therefore seeks the following:

1

That the order remitting the matter to the arbitrator to reconsider (a) the rate of simple interest to be applied and (b) the date from which the computation should commence be set aside; and 2. That the costs in the Court of Appeal and in the Supreme Court be paid by the respondent to the appellant and be taxed if not agreed.

The respondent's reaction to the notice of appeal

12 The respondent filed a counter-notice of appeal on 31 March 2010 supporting the decision of the learned judge and contending that in addition to the reasons advanced in his judgment the judge's decision should also be...