Real Estate Board v Jamaica Redevelopment Foundation Inc. and Registrar of Titles
| Jurisdiction | Jamaica |
| Judge | Harris P(Ag),Dukharan JA,Brooks JA,Harris P (Ag) |
| Judgment Date | 20 July 2012 |
| Neutral Citation | JM 2012 CA 71,[2012] JMCA Civ 35 |
| Court | Court of Appeal (Jamaica) |
| Docket Number | SUPREME COURT CIVIL APPEAL NO 68/2011 |
| Date | 20 July 2012 |
[2012] JMCA Civ 35
JAMAICA
IN THE COURT OF APPEAL
The Hon Mrs Justice Harris P (Ag)
The Hon Mr Justice Dukharan JA
The Hon Mr Justice Brooks JA
SUPREME COURT CIVIL APPEAL NO 68/2011
and
Dr Lloyd Barnett and Ms Gillian Burgess for the appellant
Maurice Manning and Miss Ayana Thomas instructed by Nunes, Scholefield DeLeon and Co for the — st respondent
I St Jude Alder watching proceedings for the — nd respondent
MORTGAGES - Title - Whether prior charge entered pursuant to the Real Estate (Dealers and Developers) Act lodged against the title ranks ahead of a mortgage - Mortgage registered on title prior to the charge - Registration of Titles Act
I have read, in draft, the judgment of my brother Brooks JA and agree with his reasoning and conclusion. There is nothing I wish to add.
I too have read the draft judgment of Brooks JA and agree with his reasoning and conclusion and have nothing to add.
The issue with which this appeal is concerned is whether a charge, created pursuant to the Real Estate (Dealers and Developers) Act (the Act) and lodged against the title to registered land, may properly rank ahead of a mortgage, which was registered on the title prior to that charge. Resolution of the issue turns on the interpretation of section 31(5) of the Act.
In the instant case, Mangatal J ruled, on 12 May 2011, that the prior mortgage should take precedence over the later charge. She ordered that the mortgagee, the Jamaica Redevelopment Foundation Inc (JRF), was entitled to transfer the mortgaged land, pursuant to its powers of sale comprised in the mortgage, without prior reference to the charge. The appellant, the Real Estate Board (the Board), which is the chargee in question, contends that the learned trial judge was in error when she so ruled. It asserts that the ruling is in conflict with the clear terms of the relevant provisions of the Act.
In this judgment, I shall outline the factual background of the claim, set out the grounds of appeal and then summarise the respective submissions made on behalf of the Board and the respondent JRF. I trust that the summaries will do no injustice to those erudite submissions, for which I am grateful. Thereafter, I shall set out the relevant provisions of the Act and then carry out an analysis of the issues.
Between 1994 and 1996, Horizon Merchant Bank and Horizon Building Society loaned a total of $14,800,000.00 to New World Development Corporation Ltd (New World). The loans were secured by three separate mortgages, granted by New World, in respect of 24 acres of land of which it was the registered proprietor.
The mortgages were each registered on the title for the land. In 1996, New World, as part of its development of the land, subdivided it. New World requested, and was issued, several splinter titles by the Registrar of Titles (the Registrar). The three mortgages were registered on all the splinter titles. Three of those splinter titles are relevant to this appeal. There is no evidence in respect of the others.
Horizon Merchant Bank and Horizon Building Society both failed and these mortgages were assigned, in the year 1999, to Refin Trust Ltd (Refin Trust). Refin Trust, in turn, assigned them, in 2003, to JRF.
New World, pursuing its own interests, offered for sale, lots in the subdivision. As it was a registered developer under the Act, it entered into sale contracts with various persons for several of the lots. The contracts mentioned the construction of roadways. New World collected monies from those persons toward the sale price of each of the relevant lots. Where monies are collected in those circumstances, such contracts for sale are regarded, by the Act, as “prepayment contracts”.
When New World sought to use some of those monies toward financing the development of the land, it registered a charge against four of the splinter titles, including the three titles mentioned above. In accordance with the provisions of section 31 of the Act, the charge was drawn up in favour of the Board. It was registered on each of the titles on 7 February 2007. The charge specified, however, that it was subject to the mortgages, by then, held by JRF. Undoubtedly, because it was expressed to be subject to the mortgages, the Registrar allowed the charge to be registered without the production of the duplicate certificates of title.
JRF asserts that it had no prior knowledge of the registration of the charge. It is also of significance that the duplicate certificates for the titles were not produced for the purposes of the registration.
It is important to note that in entering into the prepayment contracts, New World had acted in breach of section 26(l)(b) of the Act. That section prohibited New World from entering into such contracts, unless it had previously freed the land from any preexisting mortgage or charge which secured money or money's worth. Section 26(l)(b) provided an exception to that requirement. It excluded mortgages in respect of loans, which were for financing the construction of buildings or works on the mortgaged land. There is no dispute that the JRF mortgages were not so excluded.
New World later defaulted on its commitments under the mortgages. Consequently, JRF entered into contracts to sell the three lots under powers of sale contained in one of the instruments of mortgage. It succeeded in having transfers registered for two of the three titles but the Registrar refused to register the transfer of the third. In respect of the third, the Registrar asserted that the Board was entitled to the benefit of the provisions of section 31(5) of the Act, which stipulates that the charge, in favour of the Board, ranks in priority to JRF's mortgage. According to the Registrar, the Board's approval was required to permit the transfer to be registered. The inconsistency in the Registrar's approach to the various titles has not been explained but it is immaterial for the purposes of this judgment.
The Board refused to give its consent to the transfer unless JRF compensated the purchasers under the prepayment contracts. JRF, being dissatisfied with that stance, filed a claim in the Supreme Court asking, among other things, for declarations that it was entitled to transfer the title, pursuant to its powers of sale, and that the charge in favour of the Board was not binding on it. Mangatal J ruled in its favour on both of those issues. It is against that ruling that the Board appeals.
The Board filed eight grounds of appeal. They are as follows:
“i) That the learned trial judge erred in law in applying the general provisions of the Registration of Titles Act instead of the specific provisions of the Real Estate (Dealers and Developers) Act.
ii) That the learned trial [judge] erred in law in interpreting s. 31(5) of the Act otherwise than in accordance with the ordinary meaning of the words of the section.
iii) That the plain and ordinary meaning of the Act is that the charge lodged in favour of the Real Estate Board under s. 31 of the Real Estate (Dealers and Developers) Act indicates that the legislative intent was that this charge should rank in priority to all other charges.
iv) The learned trial judge erred in law in finding that the protection for the purchasers was only to occur where the land, which was the subject matter of prepayment contracts, was not already encumbered by a prior non-development related mortgage.
v) The learned trial judge erred in law in finding that the fact that the Act carries criminal penalties for the vendor in the event that he breaches the provisions of the Act by extension will cause the purchaser to lose the security the Act intended to confer on the purchaser.
vi) The learned trial judge erred in law in finding that if the Act provided that the Real Estate Board [sic] charge ranked in priority to all other mortgages then the purchaser would not require an option to withdraw from the contract.
vii) That the [sic] s. 26 of the Act creates duties and penalties for persons entering into a prepayment contract as vendor . (Underlining as in original)
viii) That it was not the intention of Parliament to deprive a purchaser of the statutory protection because the vendor had breached the terms of the Act.”
All these grounds raise the single issue identified in paragraph [3] and turns on the true construction of section 31(5), in the context of the Act as a whole and in relation to the Registration of Titles Act (ROTA). In my view, it is unnecessary, therefore, to address each ground separately.
Dr Barnett, on behalf of the Board, submitted that the context in which Parliament enacted the statute was that purchasers of real estate, particularly from land developers, needed protection. He argued that it was for that reason that section 31(5) of the Act, which stipulated that the charge in favour of the Board would have priority to all other charges, except those in respect of rates or taxes, was framed as it was.
On learned counsel's submission, Mangatal J incorrectly ignored the clear, natural and ordinary meaning of section 31(5). He argued that the learned judge, instead, interpreted section 31(5) using the rule of interpretation dubbed “the mischief rule”. Learned counsel submitted that the learned judge not only erred in using that rule but also incorrectly identified the mischief, which Parliament had intended to cure. It is on that basis, on learned counsel's submission, that Mangatal J interpreted section 31(5) by inserting words to give the meaning that Parliament intended that only...
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