Somerset Enterprises Ltd v National Export Import Bank of Jamaica Ltd
| Jurisdiction | Jamaica |
| Judge | Brooks P,Sinclair-Haynes JA,F Williams JA |
| Judgment Date | 12 March 2021 |
| Neutral Citation | JM 2021 CA 28 |
| Docket Number | SUPREME COURT CIVIL APPEAL NO 69/2018 |
| Court | Court of Appeal (Jamaica) |
[2021] JMCA Civ 12
IN THE COURT OF APPEAL
THE HON Mr Justice Brooks P
THE HON Mrs Justice Sinclair-Haynes JA
THE HON Mr Justice F Williams JA
SUPREME COURT CIVIL APPEAL NO 69/2018
and
Written submissions filed by Debayo A Adedipe for the appellants
Written submissions filed by Nigel Jones & Co for the respondent
(Considered on paper pursuant to rule 2.4(3) of the Court of Appeal Rules 2002)
Somerset Enterprises Limited (Somerset) and its managing director, Mr Lindeerth Powell (collectively referred to as “the appellants”), are seeking to set aside the order for summary judgment entered in favour of National Export Import Bank of Jamaica Limited (the Bank). The relevant portion of the order, by the learned judge of the Supreme Court states:
“(i). Summary judgment in favour of [the Bank] against [Somerset] and [Mr Lindeerth Powell] in the sum amount of Ninety-One Million, Seven Hundred and Thirty-Thousand and Seven Dollars and Eighty-Seven Cents ($91,730,007.87).
(ii) Interest at 12% per annum from May 2016 to the date of this judgment[.]
(iii) Costs to [the Bank] to be taxed or agreed[.]
(iv) Permission to appeal granted[.]
…”
In or about February 2007, Somerset was in discussions with the Bank in respect of financing of the purchase of equipment from a supplier overseas. The equipment was needed in order to allow Somerset to capitalise on a cut stones market for the construction of Spanish-owned hotels in Jamaica, and for export. No disbursement was made in connection with those discussions. Somerset claims that the market for that product evaporated. It, however, had already committed to purchase the equipment and needed financing to complete the purchase.
It, therefore, in or about June 2008, applied for a loan from the Bank. Mr Powell signed a form of guarantee and indemnity in respect of the loan, and it was disbursed in November 2008.
Somerset says, however, that it was unable to profit from the use of the equipment, and it fell into arrears with the loan repayment.
On 5 May 2015, the Bank filed a claim in the Supreme Court seeking to recover the debt, costs associated with the loan and interest. It was in that context that it applied for and was granted summary judgment against the appellants.
The Bank contends that in response to Somerset's loan application, it issued a commitment letter, dated 22 August 2008 (the first commitment letter), which contained the terms of the loan. It states that it agreed to lend Somerset the sum of $58,240,000.00 (the first loan) to purchase certain equipment. Somerset later requested, on two occasions, amendments to the list of needed equipment. Those requests were approved by the Bank. The Bank maintains that all these amendments were still governed by the terms of the first commitment letter. The Bank alleges that it also lent Somerset the sum of $2,500,000.00, the terms of which are outlined in letter dated 6 February 2012 (the second commitment letter). It was a specific stipulation that once any of the loans were in default, the entire loan facility would become due.
The Bank indicates that in order to secure the first loan, it obtained a mortgage over Somerset's property, a Bill of Sale over certain equipment in the sum of $15,000,000.00, and Mr Lindeerth Powell signed the Guarantee and Indemnity.
The Bank states that Somerset incurred other liabilities to it, namely:
The Bank's claim also sought to recover these sums from the appellants.
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a. an additional loan debt, which is indicated in a letter dated 6 February 2012 (loan restructure letter);
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b. mortgage premium payments; and
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c. costs associated with an attempt to sell Somerset's property by way of power of sale contained in a mortgage.
The Bank noted that the total liability, including interest as at 6 May 2016, amounted to the sum of $91,730,007.87 and interest post judgment in the sum of $50,865,017.96. These sentiments were also reproduced in the affidavit of Maria L Burke in support of notice of application for summary judgment filed 5 July 2016.
In their further amended defence, the appellants accept that they agreed in August 2008 to the terms of the loan, but stress that the Bank and Somerset entered into negotiations from 2007 to secure the loan and time was of the essence. Despite this, the loan was not disbursed until November 2008. They assert that the Bank made certain representations, which induced Somerset to order the equipment and pay a deposit to the overseas supplier, AMS.
They argue that by the time the Bank disbursed the funds, the business opportunity had diminished and the Jamaican economy was in decline. Notwithstanding this decline, Somerset still accepted the loan financing because it was obliged to complete the purchase of the equipment.
Repayment of the loan was, however, challenging. As a result, the term of the loan was re-negotiated and the interest rate of the first loan was reduced to 10.5%.
The appellants contend that during the negotiation discussions, Mr Lindeerth Powell agreed to a personal guarantee, however the Bank presented him with a Guarantee and Indemnity, which he executed without the benefit of independent legal advice. The appellants say that Mr Lindeerth Powell was not prepared to give a Guarantee and Indemnity and did not provide any consideration for it. Accordingly, they assert that the Guarantee and Indemnity is void or voidable.
Consequently, the appellants also argue that the Bank induced them to enter into the loan agreement by virtue of misrepresentations. Those misrepresentations, they state, caused them significant loss. They argue that the misrepresentations caused Somerset to enter into contractual arrangements with AMS and caused them to make additional payments on their contract with AMS to avoid losing the deposit. They also argue that Somerset had to pay a non-refundable commitment fee to the Bank and incur debt from the Bank of Nova Scotia (BNS) to finance the deposit and further payments for the equipment.
Accordingly, Somerset claims a set-off of its payments to AMS against the claims by the Bank. The appellants also claim that the maximum interest rate the Bank can claim is 10.5%. This rate, they argue, extends to the post judgment interest.
The appellants filed the following grounds of appeal:
“i. The learned Judge erred in law in holding that the defences of both [appellants] had no reasonable prospect of success.
ii. [T]he learned Judge erred in law in holding, in effect, that [Somerset] was not entitled to set off its losses against the sums claimed by [the Bank].
[iii] The learned Judge erred in law in failing to find that the personal guarantee which [Lindeerth Powell] had been informed he would be required to give is a different obligation from the guarantee and indemnity which was presented to [Lindeerth Powell] for his signature.
[iv] The learned Judge erred in law in failing to recognise that the Guarantee and Indemnity would be void or at the very least as against [Lindeerth Powell] in the event that the facts pleaded by [Lindeerth Powell] were found to be true at trial.
[v] [T]he learned Judge erred in law in any event in failing to find that the greatest liability that would attach to [Somerset] on the guarantee, if upheld, would have been the amount truly due from [Somerset] on the loan after regard was had to the claimed set off by way of defence.
[vi] The learned Judge erred in law in finding that the rate of interest payable on the principal sums sued for was 17.5% per annum.”
The issues arising from these grounds are:
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i. The defence's prospect of success (ground i)
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ii. The set off (grounds ii and v)
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iii. Personal Guarantee versus Guarantee and Indemnity (grounds iii and iv)
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iv. Interest rate (ground vi)
The learned judge found that the intended defence did not have a real prospect of success.
Mr Adedipe, on behalf of the appellants, argued that where a claim can be defended, the defendant is not to be denied a trial. He contended that there were serious issues raised on the defence, accordingly, the matter should proceed to trial. He asserted that the burden of proving that there is no serious issue to be tried rests on the Bank and it has not disputed the appellants' case. He further asserted that credibility is a live issue in the matter, which cannot be tested on a summary judgment application, which is not a mini trial.
Ms Moore, on behalf of the Bank, submitted that since it was the Bank's summary judgment application, it was vested with the duty of satisfying the court below that the appellants had no real prospect of successfully defending the claim. She, however, contended that the appellants were to provide evidence to support their defence. She submitted that the affidavit filed by Mr Lindeerth Powell contesting the summary judgement application contained hearsay statements. Learned counsel argued that in that affidavit, Mr Lindeerth Powell stated that the Bank made certain representations to Somerset's Managing Director, Mr William Powell, which induced Somerset to enter into agreements with AMS. She asserted that those statements were therefore hearsay as the affidavit did not comply with rule 30.3 of the Civil Procedure Rules (CPR). Accordingly, she submitted, the learned judge should not have considered the offending statements.
Ms Moore argued alternatively that there was no misrepresentation as alleged by the appellants. Learned counsel argued that misrepresentation would involve only the Bank and the...
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