Smith's Trucking Service Ltd and Another v Jamaica Redevlopment Foundation Inc.

• Jurisdiction: Jamaica
• Judge: Morrison JA,Phillips JA,McIntosh JA
• Judgment Date: 20 December 2012
• Neutral Citation: JM 2012 CA 121
• Docket Number: SUPREME COURT CIVIL APPEAL NO 74/2009
• Court: Court of Appeal (Jamaica)
• Date: 20 December 2012

[2012] JMCA Civ 63

JAMAICA

IN THE COURT OF APPEAL

Before:

The Hon Mr Justice Morrison JA

The Hon Miss Justice Phillips JA

The Hon Mrs Justice Mcintosh JA

SUPREME COURT CIVIL APPEAL NO 74/2009

Between

Smith's Trucking Service Limited

1st Appellant

and

Estate Selvyn Seymour Smith (Represented by Cynthia Lamore Smith)

2nd Appellant

and

Jamaica Redevelopment Foundation Inc

Respondent

Ms Carol Davis and Mrs Charmaine Smith Bonia for the appellants

Miss Maliaca Wong and Krishna Desai instructed by Myers Fletcher and Gordon for the respondent

LOAN - Bill of sale - Mortgage - Power of sale - Whether loan tainted with illegality - Whether injunction should be discharged

Morrison JA

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

Phillips JA

2 This is an appeal from the judgment of Brooks J (as he then was) given on 6 May 2009, wherein he made the following orders:

• ‘1. Judgment be entered for the Defendant on the claims;

• 2. Judgment be entered for the Defendant on the counterclaim in a sum to be determined by the Registrar of the Supreme Court after taking an account of the consolidated loan established on April 23, 1990;

• 3. In taking the account, the Registrar shall use such interest rates as may be proved to have [sic] communicated to the Claimants by Jamaica Citizens Bank Ltd. and/or Jamaica Citizens Trust and Merchant Bank Limited up to January 31, 1996, and failing such proof shall use the rate of 35% per annum;

• 4. Interest shall accrue on the principal sum, found due by the Registrar as at 1 ^st February 1996 at the rate found to be applicable as at that date, until payment;

• 5. The injunction granted by Ellis, J on 16 ^th August, 1995, in Claim No.E328/1994 is hereby discharged;

• 6. Costs to the Defendant on the Claims and Counterclaim, to be taxed if not agreed;

• 7. Liberty to apply.’

3 Notice of appeal was filed on 10 June 2009, and contained the following eight grounds of appeal:

• ‘i The Learned Trial Judge erred in finding that the equipment leases between the Appellant and the Respondent were not illegal and/or enforceable [sic].

• ii The Learned Judge erred in finding that the mortgage over the 2 ^nd Appellant's property was enforceable.

• iii The Learned Trial Judge erred in finding that the mortgage of the 2 ^nd Appellant's property was not tainted with illegality.

• iv The Learned Trial Judge erred in finding that the Bill of Sales was not tainted with illegality and enforceable.

• v The Learned Trial judge erred in finding that the Consolidated Loan was not tainted with illegality and/or unenforceable

• vi In the alternative, the Learned Trial judge erred in finding that the mortgage of the 2 ^nd Appellant's property secured a sum in excess of $2,000,000.00

• vii The Learned Judge having found that the Respondent's [sic] had not proved their [sic] claim, erred in ordering that the Registrar of the Supreme Court take an account of the consolidated loan established on April 23, 1990

• viii The Learned Trial Judge erred in discharging the injunction of Ellis J granted on 16 ^th June, 1995.’

4 The appellants sought orders to the effect that the equipment leases, the mortgage endorsed on the 2 ^nd appellant's property and the consolidated loan were all illegal or tainted with illegality and unenforceable; and in the alternative that the said mortgage did not secure a sum in excess of $2,000,000.00. Additionally, they also sought an injunction restraining foreclosure of the mortgage.

5 I agree with the categorization given to the above grounds of appeal by counsel for the respondent, in that they cover three defined areas, namely (i) illegality, (2) the effectiveness of the mortgage under the Registration of Titles Act (ROTA), and (3) the computation of the accounts, and I will endeavour to deal with the submissions and my analysis of the arguments in that way later in this judgment.

Background facts

The pleadings and evidence in the court below

6 There were initially two actions: suit no E327/1994, which involved the 1 ^st appellant against the Jamaica Citizens Trust and Merchant Bank (JCT&MB) and suit no E328/1994, which involved the 2 ^nd appellant against JCT&MB and Jamaica Citizens Bank Limited (JCBL). Both actions had already been consolidated when they were tried by Brooks J, and the defendants had been substituted by the respondent in this appeal, Jamaica Redevelopment Foundation Inc (JRFI), as subsequent to the commencement of the claims both institutions had ceased to exist, and some of their receivables, including those said to be debts owed by the 1 ^st and 2 ^nd appellants had been assigned to the respondent.

7 In suit no E327/1994, the 1 ^st appellant claimed, as an incorporated body operating out of the parish of Saint Mary, that it had been for several years engaged as a haulage contractor by Kaiser Bauxite Company (Kaiser Bauxite), a recognized bauxite producer, under the provisions of the Bauxite and Alumina (Encouragement) Act (‘the Act’). It was the 1 ^st appellant's case that Kaiser Bauxite facilitated the importation of certain articles pursuant to the Act, which articles were introduced into the island free of customs duty and subject to certain conditions also pursuant to the said Act. The 1 ^st appellant applied for a loan to purchase the said articles and referred to and relied on a letter dated 5 May 1989 from JCT&MB offering to make the loan available to the 1 ^st appellant on certain terms and conditions, ‘including coverage of the importation of the articles as listed therein’. Subsequently, JCT&MB tendered an equipment lease to the 1 ^st appellant, ‘incorporating an Instrument of Sale of the said articles’ by JCT&MB to the 1 ^st appellant, and ‘thereby contravened the Act’. JCT&MB later seized and sold the articles under the said equipment lease and the 1 ^st appellant alleged that it had failed and/or neglected to account for the proceeds of sale of the same. The particulars of negligence stated inter alia that JCT&MB had failed to advertise in a relevant market, or to obtain advice with regard to the true value of the articles, and therefore sold the articles at an undervalue. It was pleaded that at the time the articles were seized, their market value was $12,900,000.00, and the forced sale value was $9,900,000.00. The loan, if any, did not exceed $8,853,926.07. As a consequence of the foregoing, the 1 ^st appellant pleaded loss and damage.

8 The 1 ^st appellant also sought several declarations namely that the agreements entered into with JCT&MB including the equipment leases, were all contrary to the Act and unenforceable; that the loans should be credited with certain sums which ought to have been realized on the sale of the articles; that the loans had been fully discharged; and that there be a full accounting for all sums received from the 1 ^st appellant pursuant to the transactions.

9 In suit no E 328/1994, the claimant, Selwyn Smith, who died subsequent to the judgment having been delivered and the appeal having been filed, was the managing director of the 1 ^st appellant and the registered proprietor of the lands comprised in certificates of title registered at Volume 950 Folio 287 and Volume 916 Folio 99 of the Register Book of Titles. In this suit, the 2 ^nd appellant (the claimant) pleaded that he applied for a loan in early 1989 and that he was offered a loan upon certain terms and conditions in May 1989, upon which he intended to rely at the trial. He confirmed the equipment leases incorporating the instrument of sale of the articles, and then pleaded specifically the letter of 21 May 1990 in which the respondent consolidated the debts of the 1 ^st appellant under the equipment leases and collateral agreement, into a single demand loan providing for a mortgage over the 2 ^nd appellant's property which was given. The appellants sought at the trial the true construction of this documentation.

10 Additionally, the appellants pleaded that the mortgage was not in conformity with the provisions of the Registration of Titles Act and was therefore unenforceable, or alternatively, if valid, only secured the amount of $2,000,000.00. The defendant banks were therefore not entitled to foreclose on the mortgage, or entitled only to the sum of $2,000.000.00, and the mortgage could therefore be discharged on tender of the same. In any event, as the debts had been discharged by the seizure and sale of the articles, the mortgage could not be utilized for settlement of those debts. Also, the appellants were relying on the fact that the mortgage had been procured for an illegal purpose, namely the sale and lease-back of articles imported into Jamaica duty free pursuant to the provisions of the Act which had thus been contravened. The 2 ^nd appellant sought similar declarations as those prayed for in the suit filed by the 1 ^st appellant.

11 The defences filed by the respective banks were similar in content. Essentially they denied any knowledge that the articles had been imported by the appellants pursuant to the Act. It was the banks' position that the appellants had applied for a loan for working capital and for the purpose of purchasing motor vehicles and equipment for the business, which had been given on the terms and conditions set out in the letter of 5 May 1989. The defences set out that JCT&MB was a subsidiary of JCBL, and that both institutions were engaged in the business of providing banking facilities and finance to customers. They agreed that they had entered into the equipment lease agreement. Additionally, the loan granted in May 1989, by both banks, was then consolidated into a new loan in the amount of $6,300,000.00 from JCBL on the terms and conditions which were set out in letters...