Rheshan Capital Management Ltd v First Global Bank Ltd

CourtSupreme Court (Jamaica)
JudgePalmerhamilton, J
Docket NumberCLAIM NO. SU2020CD00423

[2021] JMCC Comm 5



CLAIM NO. SU2020CD00423

Rheshan Capital Management Limited
First Global Bank Limited

Mr. Christopher Dunkley and Mrs. Kayola Muirhead instructed by Phillipson Partners for the Claimant/Applicant

Mrs. Sandra Minott-Phillips QC and Mr. Litrow Hickson instructed by Myers, Fletcher and Gordon for the Defendant/Respondent

Civil practice and procedure — Interlocutory injunction — Application to restrain the mortgagee from exercising power of sale under mortgage — Whether mortgagee acted in bad faith — Whether damages is an adequate remedy — Whether the applicant is entitled to Injunctions in circumstances of this case.

Palmerhamilton, J

This is an Application for an injunction pending the trial of the Claim brought by the Applicant against the Respondent for inter alia, damages for breach of contract and damages for breach of duties in relation to the Respondent's exercise of its power of sale. This Claim is stridently opposed by the Respondent.


The Applicant is a company duly incorporated under the laws of Jamaica carrying on the business of real estate development. The Respondent is a company duly incorporated under the laws of Jamaica carrying on the business of commercial banking.


The Applicant obtained several mortgages from the Respondent to fund the construction of its housing developments. On the Respondent's case the Applicant's cumulative principal debt to the Respondent was the sum of Five Hundred and Five Million Three Hundred and Ninety Thousand Six Hundred and Fifty-Five Dollars ($505,390,655.00) with interest. The agreed date for repayment was the 31 st day of March 2016. Evidently, the Applicant defaulted in its payments on the terms and conditions of the loan and upon this default in the repayment of the loans, the Respondent decided to exercise its power of sale.


The Applicant does not deny that it was in default of its obligations under the mortgage instrument nor does it contend that the Respondent's power of sale did not arise at the time it sought to exercise it. The gravamen of the Applicant's contention is that the Respondent exercised its contractual rights of the power of sale in complete bad faith.


The Applicant predicates this averment on the fact that it attempted to reduce its indebtedness to the Respondent by continuing its marketing of the remaining units for sale. This aggressive marketing was fruitful in that it resulted in the preparation of three (3) agreements for sale for units 16, 17 and 22, the combined total of these sales being One Hundred Million Dollars ($100,000,000.00). It is the Applicant's averment that despite being notified of these sales, the Respondent withheld its permission from the Applicant to complete the sales therefore no proceeds of sale would be forthcoming and this stifled its ability to reduce its debt.


The Applicant claimed that Respondent subsequently proceeded to exercise its power of sale over the said units at an undervalue that resulted not only in damage to its commercial reputation, but the loan facility with the Respondent continues to accrue interest daily to the Applicant's detriment.


This impelled the Applicant to file the substantive Claim. Against this background, the Applicant filed an application for an interim injunction seeking inter alia, an order to restrain the Respondent from disposing, transferring or otherwise dealing with the unit number 17. The Respondent vigorously asserted that the Claim is not maintainable primarily because the extent of the contractual relationship between the parties is defined in written contracts only and the Applicant admits being in breach of its obligations to the Respondent.


The Defence also itemizes other reasons why the Claim is not maintainable, including the reasons that the statements of case are an abuse of the process of the Court and it discloses no reasonable grounds for bringing the Claim. On the 7 th day of December 2020, the notice of application came on for hearing ex parte before me and after hearing the Applicant's attorney-at-law, I granted an interim injunction and made certain other orders relating to the Respondent's disclosure of certain documents pending the hearing of the inter partes application for interlocutory injunction. I will just say, in passing, that a tribunal considers and make decisions in a matter based on the material information put before it at the material time.


This judgment is in respect of the inter partes hearing of the application for injunction against the Respondent, which came on for hearing and was concluded on the 4 th day of January 2021. The evidence in support of the application is contained in three (3) Affidavits of Troy Brennan and the evidence in response to the application is contained in the Affidavit of Aleca Green-Miller.


Both parties through their Attorneys-at-Law, have provided written submissions, which were bolstered by extensive oral submissions. Both parties were also given the opportunity to make submissions in reply to the authorities cited by each. I wish to state at this juncture that I have given them careful and due consideration, but for the sake of brevity, I do not propose to recite them in detail in this judgment but only to the extent that influenced my decision.


Learned Counsel for the Applicant Mr. Christopher Dunkley submitted that in considering whether to grant an interim or interlocutory injunction, the Courts have been consistently guided by the principles laid down in the American Cyanamid v Ethicon [1975] 1 All ER 504. Mr. Dunkley indicated that the three (3) main principles from that case are:-

  • 1. Is there a serious issue to be tried?

  • 2. Would damages be an adequate remedy?

  • 3. Does the balance of inconvenience lie in favour of granting or refusing the injunction?


In submitting on section 106 of the Registration of Titles Act (hereinafter referred to as “the RTA”) and the issue of the mortgagor's equitable right to redeem, Mr. Dunkley submitted that where an exception applies, a mortgagor is at liberty to ask for injunctive reliefs on the basis that section 106 is not applicable, in which case the transaction is liable to be set aside in any event.


Learned Counsel averred that the case of Aspinal Wayne Nunes v Jamaica Redevelopment Foundation Inc [2019] JMCA Civ. 20 determined that in cases concerning whether the mortgagee can be restrained from exercising powers of sale, section 106 of the RTA is not relevant to consider whether damages are an adequate remedy under American Cyanamid v Ethicon (supra) principles. It was also submitted that the limitation of damages under section 106 of the RTA is a statutory imposition relating to certain circumstances where a mortgagee has already dealt with the property and could be considered an imposition based on public policy rather than any substantive consideration of what constitutes “adequate” compensation.


Paragraph 70 of Aspinal Wayne Nunes v Jamaica Redevelopment Foundation Inc (supra) was quoted and Learned Counsel stated that this judgment concluded that section 106 was not a deeming provision, meaning, it did not necessarily follow that in every case, damages would be an adequate remedy, or an injunction should automatically be granted. In certain instances, a Court will readily find that damages are not an appropriate remedy, given the nature of the breach and the rights that are being interfered with.


Mr. Dunkley stated that the right to redeem is a fundamental right under a mortgage. The right is also partly founded in equity, and a court of equity would be loath to sanction poor conduct by and signal to mortgagees, that they are free to behave in bad faith or oppressively in relation to a mortgagor by deriving the latter of his to property once he can pay compensation.


Mr. Dunkley propounded that in certain instances, a mortgagee may seek to exercise its powers of sale in bad faith and in a manner which is oppressive to the mortgagor which would warrant the intervention of the Court at the enforcement stage. Learned Counsel submitted that the “bad faith” conduct which warrants the exception to section 106 of the RTA would rest somewhere above mere impropriety, negligence or carelessness and below actual fraud. It is conduct amounting to a misuse of the contractual power granted to it in an oppressive manner or in a manner that is calculated to “cheat” the mortgagor out of his equity of redemption which is a fundamental legal right grounded in the contract with the mortgagor.


Learned Counsel proffered that the case of Waring (Lord) v London and Manchester Assurance Company Limited and others [1935] Ch. 310 acknowledges the equitable jurisdiction to set aside a contract for sale with a third party due to the lack of bona fides on the part of the mortgagee. Mr. Dunkley also indicated that the jurisdiction to set aside for bad faith was also implicitly recognized by Forbes and Forbes v Miller's Liquor Store (Dist) Limited [2016] JMCA Civ. 1 where the mortgagee's powers of sale came under scrutiny. Paragraph 52 was quoted and Learned Counsel stated that implicit in the reasoning of the trial judge is that bad faith in the process of the sale would have been a basis for the said transaction to be set aside, thereby preserving the mortgagors' equity of redemption, irrespective of whether the third party purchaser was aware of it.


The Australian case of Forsyth and another v Blundell and others (1973) 129 CLR 477 was cited by Learned Counsel and he indicated that the court upheld the granting of the injunction on the ground that the mortgagee acted with calculated indifference to the interests of the mortgagor when exercising its...

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