Thompson (John) and Janet Thompson v Goblin Hill Hotels Ltd, Mies Investments Ltd, Marvin Goodman and Rosalie Goodman

• Jurisdiction: Jamaica
• Judge: SYKES J
• Judgment Date: 29 November 2006
• Judgment citation (vLex): [2006] 11 JJC 0601
• Court: Supreme Court (Jamaica)
• Date: 29 November 2006

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

CLAIM NO. C. L. T 005 OF 2002

BETWEEN

JOHN THOMPSON

FIRST CLAIMANT

AND

JANET THOMPSON

SECOND CLAIMANT

AND

GOBLIN HILL HOTELS LTD

FIRST DEFENDANT

AND

MIES INVESTMENT LTD

SECOND DEFENDANT

AND

MERVIN GOODMAN

THIRD DEFENDANT

AND

ROSALIE GOODMAN

FOURTH DEFENDANT

Roderick Gordon instructed by Audrey Mcleod of Alton Morgan and Company for the claimants

Lloyd Barnett instructed by Watson and Watson for the first defendant

Marina Sakhno instructed by Cowan, Dunkley, Cowan for the second, third and fourth defendants

COMPANY LAW - Directors - Disclosure of interest

SYKES J

1 The location

2 1 . On the north eastern shores of Jamaica lies the most idyllic of places - the parish of Portland. As one heads eastward from the sleepy parish capital, Port Antonio, towards the home of the famous Boston jerk pork, there is a bit of land, now known as Goblin Hill. It overlooks the sea and faces the incoming breeze of the North East Trade Winds. These qualities apparently commended themselves to the developers who decided to establish a vacation resort/second holiday home on the site. This decision was made in the 1960's. Visitors were coming to the island in their hundreds, thousands and tens of thousands. The government encouraged hotel building and investment in the hospitality industry. It did this by enacting the Hotel (Incentive) Act. The legislation provided a tax holiday for investors. This case is about one of those hotels.

3 2 . These are the litigants. Mr. John Thompson and Mrs. Janet Thompson, the claimants, are husband and wife ("the Thompsons"). Mr. Marvin Goodman, the third defendant, and Mrs. Rosalie Goodman, the fourth defendant, are husband and wife ("the Goodmans"). They are the only share holders of Mies Investment Limited ("Mies"), the second defendant. They are officers of Goblin Hill Hotels Limited ("GHHL"), the first defendant. Mr. Goodman is chairman of the board of directors/managing director and his wife is a director/company secretary. GHHL has five directors. Goblin Hill Villas of San San ("GHVSS") is not a party to the claim. I do not therefore see any basis to grant the relief sought at paragraph 4 (d) below.

4 3 . This litigation arose because of assessments and special assessments levied by GHHL on its share holders/lease holders. Some of them declined to pay the assessments. One of those declining to pay the increased assessments was the Thompsons. GHHL responded by forfeiting the lease and shares. The Thompsons say that this is unlawful.

5 4 . The claimants have brought suit against all the defendants. Against GHHL they are seeking:

• a . a declaration that the assessments and special assessments levied by GHHL on the claimants in the years 1994 – 2001 were unlawful and excessive;

• b . a declaration that GHHL improperly forfeited the lease with and shares in GHHL;

• c . a declaration that the occupancy charges levied by GHHL against the claimants in respect of the occupancy of the claimants' villa are unlawful and not permitted by the claimants' lease or the articles of association;

• d . a declaration that the debiting of the claimants' accounts with booking charges or commission payable to Goblin Hill Villa of San San Ltd were wrongful

• e . an injunction restraining GHHL whether by itself, its servants or its agents from forfeiting or purporting to forfeit or taking any steps to exercise the forfeiture of shares in GHHL;

• f . an injunction restraining GHHL, its servants or agents from taking any steps to exercise the purported forfeiture of the claimants' lease and/or taking any steps to occupy the leased premises to the exclusion of the claimants pursuant to any purported exercise of a right of forfeiture under the claimants' lease with the Mies;

• g . damages for breach of duty owed to the claimants;

• h . damages for breach of lease agreement by the wrongful forfeiture of the said lease;

• i . a proper account of sums expended by all the defendants or any of them forming the basis of the assessments and special assessments levied and which the defendants claim the claimants are in arrears of payment;

• j . an order that a receiver of GHHL be appointed for such period and on such terms as the court thinks fit

• and against all the defendants

• k . a declaration that the mortgages purportedly granted by the GHHL to Mies over its fixed assets including the lands are void, or alternatively void against the claimants and other lessees of villas on the mortgaged property;

• l . an injunction restraining the defendants and each of them by themselves, their servants, agents or otherwise from taking steps to enforce or procure the enforcement of the mortgages registered in favour of the Mies or otherwise, or from transferring or disposing of the said mortgage and debenture to third parties except on terms which preserve the claimants' lease and in the case of the Goodmans from using their voting or management power in Mies to achieve the said enforcement or transfer of the said mortgage or debenture;

• m . damages for conspiracy to injure the claimants in respect of their leased villa.

6 and against the Goodmans:

• n . damages for breach of fiduciary duty;

• o . damages for interference with contractual relations between the claimants and GHHL;

• p . damages for unjust enrichments and an order that the defendants refund the claimants any sums found due in a proper financial accounting together with any interest or profit unlawfully earned by the defendants on the said sums;

• q . aggravated and/or exemplary damages;

• r . interest at 1% above the commercial banks prime lending rate for such period as the court thinks.

7 History of the hotel

8 (a) Incentive period

9 5 . In this section of the judgment I shall give a broad overview of the matter and shall give more details where necessary in order to resolve the issues of fact and law. For digestibility I shall divide the narrative into the incentive and post-incentive periods. The incentive period refers to that period of time when GHHL would enjoy tax free status.

10 6 . There is some uncertainty regarding the length of the incentive period. Mrs. Goodman in said that the incentive period was to last twenty years (1971–91) (see paras. 5 and 26 of Mrs. Goodman's witness statement). In cross examination she said that the incentive period was fifteen years ending in 1986. According to her the documents were originally prepared with a fifteen year incentive period in mind. There was evidence that the incentive period ended in 1989. Regardless of the duration of the incentive period it is common ground that in the incentive period the investors would have access to the property by way of a licence agreement entered into between the investor and GHHL.

11 7 . The idea for the development was sparked by the rapid expansion of tourism in Jamaica during the late 1950s and the decade of the 1960s. The developers of the project in the instant case sought to take advantage of the Hotel (Incentive) Act and came up with the proposal to purchase the 11 ½ acre site in order to develop a unique type of resort. The developers' blueprint for prosperity involved providing a rustic ambience with sufficient privacy allied to first class services. Open spaces, manicured lawns and trees providing coverage from the heat of the sun were to be a feature of the property. The athletically inclined would have tennis courts and swimming pools available to them.

12 8 . GHHL was incorporated in 1969 with Messieurs Marvin Goodman, Anthony Alberga and Douglas Graham as the first directors. These men were identified, in the evidence, as the original developers. The relevant directors for the purposes of this claim are Mr. and Mrs. Goodman, Mr. Douglas Graham, Mr. A. Moodie and Mr. Don Phillips.

13 9 . The capital to purchase the property came from the father in law (who has not been identified by name) of Mr. Anthony Alberga. The father in law lent money to the three developers through a corporate vehicle known as San San Investments Ltd ("SSIL"). SSIL was a company incorporated in the Cayman Island and "held by the father in law of Mr. Anthony Alberga" (see para. 11 of Mrs. Goodman's witness statement).

14 10 . GHHL had a share capital of $54,000 representing 54,000 shares at $1.00 each. There were three classes of shares: classes A, B and C. More will be said about the rights of each class of shares. Article 3 says that the authorised share capital of GHHL is $54,000.00 (54,000 shares at $1.00 each) divided into 30, 600 class A ordinary shares; 15,300 class B ordinary shares; and 8,100 class C ordinary shares. The article also has these words "[s]ave as in these Articles (sic) expressly provided the rights of the holders of the Class A ordinary, Class B ordinary and Class C ordinary shares shall be in all respects identical."

15 11 . Article 4 (1) makes it plain that blocks of shares were to be allocated to each of the villa units in phase 1 of the development of the project. Shares numbered A1 to A 19,976 were to be allocated to the twenty eight units which comprised forty four apartments. The shares numbered A19,977 to A30,600 were to be allocated to the remaining twenty six bedrooms. In this phase 908 class A shares were allocated to a two apartment bedroom villa unit and 454 to one apartment bedroom villa unit. On completion, phase one would have seventy rooms.

16 12 . Article 4 (1) al so provided that holders of shares numbered A1 to A1 9, 976 entitled them to "participate in the earnings of the Company as from the date of completion of construction of the villa units relating to such shares". Similarly the holders of shares numbered A1 9, 777 to A30, 600 entitled the holders to "participate in the...