Court name
Supreme Court of Turks and Caicos Islands
Case number
CL 110 of 2021

Meridian Mortgage Corporation Ltd -v- Jon Michael Hayes Shibley (CL 110 of 2021) [2022] TCASC 37 (18 October 2022);

Media neutral citation
[2022] TCASC 37
Flynote
Case summary:

By way of charge dated 30 May 2013 the Defendant granted security over parcels 50202/110 & 50202/114 Whitby, North Caicos, Turks and Caicos Islands (‘the Property’) in respect of borrowing from the Plaintiff in the sum of US$312,325.00. The Property comprises of bare land which has only been modified to the extent that the Defendant has built or has caused to have built, a boundary wall on the Property and has planted some 55 mature palm trees. The charge was duly registered in the incumbrances section of the registers.

On 15 January 2020 a notice purportedly being pursuant to s.72 of the Registered Land Ordinance (Cap. 9.01) (‘RLO’) (‘the Notice’) was drawn up showing that as at 31 December 2019 the balance on the account was US$457,945.10. Mr. Keith Burant swore an affidavit on 13 December 2021 in support of the Plaintiff’s application by originating summon filed on 14 December 2021 seeking inter alia, permission to rely on variations to s.72 of the RLO contained within the charge and to be able to sell the property by private treaty. An order for a sale by private treaty is required as this is a variation of s.75 of the RLO which provides that any sale must be by auction. A variation of inter alia s.72 and s.75 of the RLO is permitted pursuant to s.77 of the RLO, with the sanction of the Court.

Headnote and holding:

The Plaintiff shall have permission to sell the subject Property by private treaty, the Court having had regard to the proceedings and the conduct of the parties and allowing a variation of section 72 RLO.

 

 

 

 

IN THE SUPREME COURT

TURKS AND CAICOS ISLANDS

ACTION NO. CL110/21

 

 

 

 

BETWEEN:

 

 

 

 

 

 

MERIDIAN MORTGAGE CORPORATION LTD

PLAINTIFF

 

 

 

 

AND

 

 

 

 

 

JON MICHAEL HAYES SHIBLEY

DEFENDANT

 

 

 

 

 

 

 

 

RULING

 

 

 

Before:                                   The Hon. Mr. Justice Anthony S. Gruchot

Appearances:                        Mr. Craig Oliver of Wessex Fairchild for the Plaintiff

Mr. Shibley unrepresented

 

Hearing Date:                        11 October 2022  

Venue:                                    Court 5, Graceway Plaza, Providenciales

To be Handed Down:           on 18 October 2022 at 4:00 p.m.

 

Background

  1. By way of charge dated 30 May 2013 the Defendant granted security over parcels 50202/110 & 50202/114 Whitby, North Caicos, Turks and Caicos Islands (‘the Property’) in respect of borrowing from the Plaintiff in the sum of US$312,325.00. The Property comprises of bare land which has only been modified to the extent that the Defendant has built or has caused to have built, a boundary wall on the Property and has planted some 55 mature palm trees.
  2. The charge was duly registered in the incumbrances section of the registers.
  3. The term of the loan was 3 years from 27 May 2013, with an interest rate of 10% per annum calculated bi-weekly and was to be repaid by blended payments of principal and interest as set out in a commitment to lend agreement dated 27 May 2013 (‘the Commitment Agreement’). At clause 3(3) of the charge the loan period is stated to be from 27 May 2013 to 27 May 2015. I have taken the view that this is a typographical error.
  4. On 15 January 2020 a notice purportedly being pursuant to s.72 of the Registered Land Ordinance (Cap. 9.01) (‘RLO’) (‘the Notice’) was drawn up showing that as at 31 December 2019 the balance on the account was US$457,945.10.
  5. Mr. Keith Burant swore an affidavit on 13 December 2021 in support of the Plaintiff’s application by originating summon filed on 14 December 2021 seeking inter alia, permission to rely on variations to s.72 of the RLO contained within the charge and to be able to sell the property by private treaty. An order for a sale by private treaty is required as this is a variation of s.75 of the RLO which provides that any sale must be by auction. A variation of inter alia s.72 and s.75 of the RLO is permitted pursuant to s.77 of the RLO, with the sanction of the Court.
  6. In his affidavit Mr. Burant states that the Plaintiff was unable to personally serve the Defendant with the Notice but that it had been advertised for 3 consecutive weeks in the Turks and Caicos Islands gazette (‘the Gazette’) and copies of the Notice were prominently affixed to the land. No explanation was given as to why personal service could not be effected, but presumably this was because the Defendant is resident in the USA.
  7. On 4 February 2022 the Plaintiff filed an ex-parte application requesting leave to serve the process out of the jurisdiction and for substituted service by way of serving the documents in portable document format (pdf) by email and by WhatsApp to the Defendant’s last known email address and cell number. On 22 February 2022 Simons J granted that application. An acknowledgement of service was filed with the Court on 28 March 2022 together with what was purported to be an affidavit from the Defendant.
  8. On 1 June 2022 Agyemang CJ ordered that the Defendant file an amended affidavit within 10 days in order to remedy defects in the 1st affidavit. In the event an amended affidavit was filed on 16 June 2022. No issue was taken with respect to the late filing. The matter was listed for hearing on 25 July 2022 but for various reasons it was adjourned until 5 October 2022 when it came before me at which time Mr. Shibley requested an adjournment to put further evidence before the Court claiming he was blindsided by the process and had not anticipated the matter would be dealt with on that day. He was given until 11 October 2022 to file a further affidavit with his additional evidence. It was apparent that the Defendant was unfamiliar with the legal process in the Turks and Caicos Islands and he was invited to seek legal representation. I am told by Mr. Oliver that the Chief Justice had done likewise. Notwithstanding accommodating the Defendant with the adjournment, no further affidavit was filed.

Submissions

  1. In this ruling I am combining the submissions that were given on behalf of the Plaintiff and by the Defendant at both hearings before me.
  2. Mr. Oliver was unable to give the Court an up-to-date figure as to the account balance. He referred to the figures set out above and confirmed that the last payment was made on 10 May 2017 in the sum of $2,000.00. He further submitted that the balance on the account was now in excess of US$600,000. This was not disputed by the Defendant.
  3. The Court raised an issue to the extent that it appeared that no demand notice pursuant to s.64(2) of the RLO had been served.
  4. Mr. Oliver referred to the decision of Ground CJ in Temple Mortgage Fund Ltd -v- Rigby McKenzie TC 2003 SC 3 and the Court of Appeal of the Cayman Islands in Paradise Manor Limited (in liquidation), W.M. Becker and M.L. Becker -v- Bank Of Nova Scotia [1984–85 CILR 437] submitting that the Notice entitled a s.72 notice could be regarded as a notice pursuant to s.64 (2) of the RLO and the Court could allow the variation of s.72, as provided for at clause 6(c) of the charge waiving the requirement for a s.72 notice.
  5. Paradise Manor concerned the Registered Land Law of the Cayman Islands which is, insofar as this application is concerned, in identical form as the RLO.
  6. The Defendant resists the application on the following grounds:
    1. That he has never received an original copy of the Commitment Agreement or the Charge;
    2. That it was never intended that both parcel 50202/110 & 50202/114 be charged to secure the borrowing and hence the charge is invalid in that parcel 50202/114 was charged illegally and/or fraudulently;
    3. That he had signed a promissory note that only referred to 1 of the parcels (This was one of the documents for which the Defendant was granted an adjournment to produce);
    4. That the loan had been renewed on more than 1 occasion, the last time being in July 2019 in a telephone conversation. He further asserts that the terms of the renewals were on a “negative amortization (sic)” basis against which he could make voluntary payments, but that he had no obligation to do so.
    5. That the payments are in good standing / not in default;
    6. That the Plaintiff is not owed what is claimed;
    7. That the Plaintiff is in default of an agreement to fund the Defendant an additional US$300,000 – US$700,000 as a construction loan.
    8. That he never received any notice of default;
  7. Further, the Defendant submits that if the Court finds that the charge is valid, he seeks relief that:
    1. there is sufficient equity in the Property given that he has invested over US$1,500,000 in the acquisition (and improvements) and as such he requests an equitable solution;
    2. he should be given 90 days to attempt to sell the Property (or 1 of them) in order to pay out the Plaintiff.
    3. if the Court grants sale that it should be limited to just 1 of the parcels.

Discussion

  1. The first issue in this matter is whether a power of sale has arisen under the terms of the charge when read together with the provisions of the RLO.
  2. At clause 3(2) of the charge the Defendant covenanted to pay on the 27 May 2015 the total outstanding sums of principal, interest and any other charges then owing. As noted at paragraph 3 above, this is typographical error given the term of the loan was 3 years which the Plaintiff concedes. The repayment date was therefore 27 May 2016. The Defendant avers that the loan was renewed again in 2019, which alleged renewal I deal with at paragraphs 48 et seq.
  3. Section 64(2) of the RLO provides:

“A date for the repayment of the money secured by a charge may be specified in the charge instrument, and where no such date is specified or repayment is not demanded by the chargee on the date specified the money shall be deemed to be repayable three months after the service of a demand in writing by the chargee.

In Paradise Manor Limited, Kerr J.A. states:

It is self-evident that the intent of the Law is to control or put certain restraints on the disposition of land in these Islands, to provide a timetable for certain dispositions and to confer on the court a watching jurisdiction. In that regard s.77 provides:

“The provisions of sections 70 (2) and (3), 72, 73, 74 and 75 may in their application to a charge be varied or added to in the charge;

Provided that any such variation or addition shall not be acted upon unless the court, having regard to the proceedings and conduct of the parties and to the circumstances of the case, so orders.”

Section 64 is therefore not a section in which variation is permitted and on the principle of construction expressed in the maxim expressio unius est exclusio alterius, the provisions of s.64 cannot be avoided by terms or stipulations in a contract.

  1. No demand for payment was made on the 27 May 2016. It was therefore incumbent on the Plaintiff to serve a notice pursuant to s.64(2) of the RLO. As Ground CJ stated in Temple Mortgage Fund Ltd :

The notice provision in s.64(2) is plainly a safety net or last resort. It is to deal with the case where the parties make no provision for when the principal is to become due, or where having done so, the chargee has waived his right to payment on the due date by failing to require it on that date. In either such case there has to be a mechanism for fixing a new due date and that is what the notice provisions in s.64(2) are for. Those provisions have no application if there is a date for repayment and demand is made on that date. Nor does it apply where there is a fixed date for repayment which has not yet arrived. Nor is it concerned with default: s.64 is concerned with determining when money is due. while s.72 is concerned with the remedies for default.

  1. The form of charge does not contain any provision that in the event of default in payment of any installment then the whole debt becomes immediately payable. This is the same as the charge in Temple Mortgage Fund Ltd to which Ground CJ commented:

“I find the form of the charges difficult. They appear to be a hybrid of a mortgage for the purchase of property, repayable over a term of years by amortised instalments and a security for a fixed sum repayable on a fixed date. In this respect, the usual form for a mortgage fixes an early repayment date. with actual payment being postponed thereafter on condition of the payment of instalments: see Halsburv's Laws. Vol. 32. paras 499 -501. One corollary of that form is that, during the postponement period. the whole debt will become due in the event of default as explained in Ibid. para 501. However, a prolonged postponement does not seem to be what was intended in this case and these Charges contain no mechanism to provide that in case of a default in payment of any one instalment the whole debt is to become immediately payable.

  1. If no s.64(2) notice has been served then there has been no demand for payment and it naturally follows there is no default upon which a power of sale can arise. Temple Mortgage Fund Ltd is distinguishable on the following grounds:
    1. The ‘Temple demand’ was served prior to the repayment date in respect of a default in payment of installments whereas, given my findings with respect to renewal of the loan, in the instant case it was served after.
    2.  The ‘Temple demand’ was considered by Ground CJ to be “not straightforward”. It did not refer to the RLO or any specific provision of the charge and simply stated a balance figure and an arrears figure. It requested “repayment of all due amounts” and was accompanied by a covering letter saying “…we are under tremendous pressure from our auditors to have this facility BROUGHT UP TO DATE or repaid in full…” (emphasis copied).
    3. Ground J took the view that the ‘Temple demand’ was a demand for payment of the arrears in the contractual payments.
    4. Having taken that view he went on to hold that a s.64(2) RLO notice was not required in respect of installment payments and held that the ‘Temple demand’ complied with the provisions of s.72 RLO and as such a power of sale had arisen.
  2. Mr. Oliver submits that in order to remedy what appears to be an error or oversight by the Plaintiff, of not serving a s.64(2) notice, that it is open to the Court to take the Notice which was entitled “NOTICE PURSUANT TO SECTION 72(1) OF THE REGISTERED LAND ORDINANCE” to be a notice which satisfies the requirements of s.64(2) RLO.
  3. In support of his submission, he refers again to Temple Mortgage Fund Ltd where Ground CJ says:

Finally. had I come to a different conclusion in respect of the application of s.64(2) I would have had no hesitation in allowing the plaintiff to now act upon the variation of s. 72 contained in clause 5(a) of the charge. The full principal sum is now due and in the circumstances, there has plainly been an implicit demand for repayment of the whole, which has not been met. The default has continued for more than 7 days. I would. therefore. have sanctioned the plaintiff giving 7 days’ notice of default and then proceeding to exercise its power of sale.

  1. There is no prescribed form for either a s.64(2) or a s.72(1) notice. Both Temple Mortgage Fund Ltd and Paradise Manor Limited approve an approach to such notices that it is the content of the notice that is relevant and not the form. In Temple Mortgage Fund Ltd there was a single notice. There was no reference on the notice to suggest that it had been served pursuant to any particular provision of the RLO. Whilst the Court went on to hold that in the circumstances of that case, no s.64(2) notice was required and that the notice complied sufficiently with the provisions of s.72 RLO it is clear from the above passage that the learned judge was of the view that had a s.64(2) RLO been required, he would have accepted the served notice as such and gone on to allow a variation of s.72 and an exercise of the power of sale.
  2. Similarly, in Paradise Manor Limited there was a single notice. It was unsuccessfully argued that a s.64(2) notice must specify a date on which payment must be made. Zacca P held “The section clearly states that the money is due three months after the service of the demand in writing and it is unnecessary to specify the exact date in the notice. By operation of law the money becomes due three months after the service of the demand in writing.” In that matter the Court held that the letter could be regarded as a demand in writing under s.64(2) and that it was therefore not a notice to pay money owing under s.72.
  3. In both of the above matters the court looked at the content of the ‘notices’ to determine if they conformed with the particular section necessary to allow the application to proceed. In my judgment, I am not confined by the strict form of wording of the Notice to the extent that it states that it is made pursuant to s.72 RLO. The question is does the Notice satisfy the requirements of s.64(2) for the present purposes?
  4. The provisions of s.64(2) are set out above at paragraph 18. The date for the repayment of the loan I have held was 27 May 2019. That date had passed with demand not being made. The notice sets out the amount of the loan inclusive of interest, renewal fees and other charges. It demands payment 3 months from the date of service of the notice and it is in writing. I therefore find that the notice does satisfy the requirements of s.64(2) RLO and it amounts to demand for payment.
  5. In order for a power of sale to have arisen there must be a default in payment following demand. S.72(1) & (2) provide:

“72. (1) If default is made in payment of the principal sum or of any interest or any other periodical payment or of any part thereof, or in the performance or observance of any agreement expressed or implied in any charge, and continues for one month, the chargee may serve on the chargor notice in writing to pay the money owing or to perform and observe the agreement, as the case may be.

(2) If the chargor does not comply, within three months of the date of service, with a notice served on him under subsection (1), the chargee may—

(a) appoint a receiver of the income of the charged property; or

(b) sell the charged property:…

  1. This provision sets out 2 periods of time which must pass before the power of sale arises. The first is that the chargee must be in default of a demand for payment for a period of 1 month before a notice pursuant to s.72(1) RLO can be served. A further period of 3 months must then expire before the power of sale arises.
  2. As noted above pursuant to s.77 RLO the provisions of s.72 RLO can be varied or added to in the charge, subject to consent by the Court. As Kerr JA, again in Paradise Manor put it:

I must also say that so far as the issue of notice goes I am inclined towards Mr. Cohen’s argument that the court should lean towards enabling the bank to realise the security. In all the circumstances of this case, the objections taken by the defendants as to the alleged defects in notice are in my opinion technical. The legislature has laid down a requirement. Thus three months’ notice must be given before the power of sale may be exercised. But it also provided that where the parties have agreed, the court may sanction a variation of this requirement. It has gone further than that. In considering whether to do so, the court may have regard to the proceedings and conduct of the parties and the circumstances of the case.

  1. Clause 6(c) of the charge provides:

Section 72 of The Statute shall be varied and extended pursuant to Section 77 of the Statute so that the powers of sale and of appointing a receiver thereby conferred and the Chargee’s right to foreclosure and any other powers and remedies of a Chargee whether by common law statute or equity may be exercised by the Chargee at any time after demand for repayment has been made here under if at the time of the exercise hereof any case shall have happened in which the Chargee is hereinbefore authorized(sic) to take possession of the mortgaged (sic) premises and it shall not be necessary to give any such notice to the Chargor as mentioned in section 72 of the (sic) Statute.” (My emphasis).

  1. Clause 9(e) of the charge provides:

Upon the Chargee obtaining an order of the Court permitting this clause to be enforced Section 72 of the (sic) Statute shall be varied in respect of this Charge so as to entitle the Chargee immediately upon default by the Chargor in payment of the Principal Sum or of any interest payable hereunder or in the performance or observance of any agreement expressed or implied herein to serve on the Chargeor notice in writing to pay the money owing or to perform an observe the agreement as the case may be and further so as to provide that if the Chargor does not comply within 30 days of the date of service of such default the charge may thereupon either appoint a receiver of the income of the charged property or sell the charge to property.” (My emphasis).

  1. The net effect of these 2 provisions of the charge is that, subject to an order of the Court, the chargee (the Plaintiff) may inter alia seek to sell the charged property immediately there is default, clause 9(e) removing the requirement for there to be default after demand of 1 month and clause 6(c) removing the requirement of a period of 3 months before the power of sale arises.
  2. These are not uncommon provisions and are contractual agreements freely entered into by the parties to the charge. As Simons J put it in Meridian Mortgage Corporation Ltd. -v- Blue Water Villas &Spa Ltd. (CL 21 of 2021) [2021] TCASC 10 (27 April 2021) I granted the Plaintiff an Order for Sale by private treaty under the Chargee’s remedies provisions of the Registered Land Ordinance (Cap. 9.01) (RLO). It was a routine application that would normally have been granted unopposed in the usual course, except that Mr. Missick for the Defendant pressed various points in resistance.” (Emphasis added).
  3. Having found that the 15 January 2020 notice is sufficient to satisfy the requirements of s.64(2) consideration must now be given to whether the Court should sanction the variations to sections 72 & 75 RLO. In doing so the Court must take into account the proceedings and the conduct of the parties.
  4. The Defendant has raised a number of issues which go to the conduct of the Plaintiff. A review of how this matter has proceeded before the Court is useful.
    1. The demand notice was served pursuant to section 151(d) RLO which requires it to be published in 3 consecutive issues of the Gazette. In my judgment service is therefore deemed to have been effected on the date of the 3rd publication, that being 7 February 2020.
    2. The notice gave a period of 3 months to remedy the default i.e. by 6 May 2020.
    3. The originating summons was not filed until 14 December 2020.
    4. An order granting leave for substituted service and service out of the jurisdiction was made on 22 February 2021.
    5. The Defendant filed his acknowledgement of service late on 28 March 2021 together with his responsive affidavit.
    6. On 1 June 2022 the Defendant was given time to rectify deficiencies in his responsive affidavit which he filed on 16 June 2022.
    7. On 5 October 2022 the Defendant was given leave to file an additional affidavit to include all evidence in support of his allegations/defence. No further evidence was filed.
  5. Dealing first with the Defendant’s complaint that he didn’t receive any notice of default. S.151 RLO provides:

Service of notices

151. A notice under this Ordinance shall be deemed to have been served on or given to any person––

(a) if served on him personally; or

(b) if served on an attorney holding a power of attorney whereunder such attorney is authorised to accept such service; or

(c) if sent by registered post to him at his last known postal address in the Islands or elsewhere and a receipt purporting to have been signed by him has been received in return; or

(d) if service cannot be effected in one of the above-mentioned ways, by displaying it in a prominent place on the land affected and by publishing it in three consecutive issues of the Gazette.”

  1. The Defendant does not reside in the Turks and Caicos Islands, accordingly personal service on him was either not possible or impractical. He does not have an attorney. The Turks and Caicos Islands does not have a registered postal service, albeit if requested, I would have accepted recorded delivery by Fed-Ex, DHL or other similar private delivery service provider. S.151(d) is only available in circumstances where service cannot be effected pursuant to subsections a) to c), which it is apparent were not available to the Plaintiff. It would have been prudent for the Plaintiff to send a copy of the notice to the Defendant either by email or by WhatsApp (the methods they requested for substituted service of the originating summons) but it was under no obligation to do so. The notice was served in accordance with the RLO.
  2. The Defendant says that he has never received an original copy of the Commitment Agreement or the charge. He confirmed that he did not engage the services of an attorney with respect to the borrowing and the security, stating that he was a business man and knew what he was getting into. The Defendant did not suggest that he had asked for an original copy nor did he suggest that such a request had been refused or ignored by the Plaintiff. Not receiving original copies of documents does not amount to a defence to the action, particularly when there is no viable challenge to the documents.
  3. The Defendant says it was never intended that both parcels of land were to be charged as security for the loan and that the second parcel (50202/114) was only to be security when a further advance was made to him in respect of which the Plaintiff is in default which allegation, I deal with at paragraph 57 et seq. In support of this he referred to a purported email dated 20 March 2015 from a Max Thomas of the Plaintiff which states:

I will do the loan. I have approval for the loan. we (sic) agreed that you would pay off 300k and I would give you a loan for 600k. I just had a chat with Keith, when you are ready we are. Sorry for the delay and I will need a charge over all parcels of land and will need to get a survey done. I called your cell earlier.

  1. The Defendant suggest that this is proof that parcel 50202/114 was never intended to be charged and further that as of 20 March 2015 the Plaintiff only had a charge over parcel 50202/110.
  2. The Court took the Defendant to both the Commitment Agreement, the charge and the signature page to the schedule to the charge and the Defendant agreed that it was his signature on all of those documents. The Defendant expressly accepts the validity of the documents, save to the extend that they extend to parcel 50202/114. Both the Commitment Agreement and the charge refer to both parcels of land. The Charge was registered on each title on 14 June 2013. Additionally, at the hearing on 5 October 2022 the Defendant stated that he signed a promissory note which only referred to 1 parcel being put as security but was unable to produce that document despite being given time to do so.
  3. I am not persuaded that the purported email from Mr. Thomas is sufficient to sustain the Defendant’s argument that he did not grant a charge over parcel 50202/114. It is clear that both parcels were charged in 2013 and I reject the Defendant’s suggestion that this was done without his knowledge, illegally and/or was a fraud carried out post-closing of the loan. The charge was clearly over both parcels as evidence by the document itself, admittedly signed by the Defendant. I repeat that the Defendant maintained that he was a competent business man, knew what he was doing and did not consider he needed to engage an attorney in circumstances where he had the wherewithal to do so. At best the email from Mr. Thomas, on its own, demonstrates that he was mistaken or unaware of the security already held by the Plaintiff and does not reflect the intention of the parties very nearly 2 years earlier.
  4. In his amended affidavit the Defendant make a surprising averment that:

“The Plaintiff Claims (sic) that Shibley has not made a Payment (sic) in Years, (sic) specifically that the last payment was in May 2017, prior to that was September 2016. Shibley Claims (sic) his loan is current, both are true.”

  1. This takes me to the allegation that the loan was renewed once in 2016 and again in 2019 on terms that are described by the Defendant as “negative amortization,(sic) voluntary payments”. The best I could make of this suggestion is that the Defendant is alleging that the Plaintiff, in a telephone conversation in July 2019, agreed that the loan would be extended for a further period on terms whereby the Defendant would not have to make any payments towards the loan unless he chose to do so, and the loan balance would simply be allowed to increase. In essence, the Defendant is suggesting that the loan could remain in a state of permanent increasing arrears, but no action would be taken by the Plaintiff who was comfortable with the level of equity in the Property or, if the Defendant is to be believed just parcel 50202/110. I find such a suggestion incredible. The Plaintiff is commercial enterprise, in the business of inter alia of lending money for a profit. Further, it is not the Court’s understanding that what has been described is a negative amortisation loan. In such loans it is usual for monthly payments to be maintained against the principal loan and the borrower is able to make scheduled payments that are less than the interest on the loan such that deferred interest is created.
  2. Notwithstanding, the Defendant did not produce any evidence whatsoever in support of his allegation, the evidence he did produce is contrary his assertion.
  3. In his affidavit the Defendant asks “Why would the Plaintiff renew Shibley’s loan in 2019, if only one payments (sic) was made since 2016, and one in 2017?” The short answer is that it did not.
  4. On 29 June 2016 the Defendant writes “… send me the new terms on the $243,000 new note 24 months if we can and I will execute And (sic) pay down the hundred grand at closing…”. Mr. Thomas responds on 30 June 2016 “10% 3 year term AMT 15 Years Does that sound good?”. The Defendant replies “That works great, shoot me the Paperwork (sic) I signed on the current and the new so I can review, and a few dates that work to come down and close…”. There is no suggestion in this exchange that this renewal of the loan in 2016 was on a “negative amortisation voluntary payment” arrangement as the Defendant suggests. It appears to me that the loan was extended for a 3-year period at 10% i.e. the initial period expired on 27 May 2016 and was extended for a further period of 3-years to 27 May 2019.
  5. It is noteworthy that in the exchange above there is a clear suggestion that the renewal was to be papered. No such suggestion appears in connection with the alleged 2019 renewal.
  6. As noted in paragraph 44 the Defendant acknowledges that the last payments made to the loan account were in September 2016 and May 2017. The Defendant has produced an email from Desiree Abrams of the Plaintiff dated 5 July 2019 in which she expresses concern about the delinquent account. That is followed on 8 July 2019 by a reply from the Defendant in which he states “… I am available at your convenience by phone anytime on the 13th or beyond at your convenience… I’ve been working very hard on a development strategy for the property or to sell the property…”. The next email is from the Defendant on 4 September 2019 in which he says “Keith and Desiree good afternoon, wanted to give you a update looks like I have a purchaser, I expect a letter of intent to be executed within the next week or so, if so I will forward that to you, As a backup plan I am proceeding with a Hardmoney refinance at a 50% loan to value those wheels are turning as a backup plan, I’m not sure how quick they can close So I plan to get some cash to you if I can from the earnest money, I’m hoping they don’t need more than 30 days due diligence Since they are familiar market with the market.” (Copied verbatim)
  7. Ms. Abrams replies on 23 October 2019 saying “Just following up on your note below. It has been about six weeks, so we believe you should have made some progress with either plan A or B. Kindly give us update asap.”
  8. There is nothing in that exchange to suggest a renewal of the loan, in fact quite the contrary. The Plaintiff is looking to resolve the arrears and payments issue. The Defendant has not produced any evidence to support his suggestion that the loan was renewed on most unusual terms. Further it is apparent that in September 2019 he was content for the Property to be sold or that he would obtain re-financing, which matters are inconsistent with the suggestion the Plaintiff had agreed to the ‘negative amortisation’ arrangement.
  9. The fact that the loan was only renewed on 1 occasion is supported in the figures in the Notice which details renewal fees of $13,122.02 similar to the arrangement fees in the Commitment Agreement of $12,200.
  10. I reject the suggestion that there was any renewal of the loan in 2019 either on the terms the Defendant suggests or at all and the only logical conclusion is that the loan fell due and payable on 27 May 2019 which I hold to be the case.
  11. Paragraphs 44 to 54 above also deal with rejecting the Defendant’s suggestion that the loan payment are in good standing and are not in default. That could only be the case if I were to accept that there was a negative amortisation agreement, which I have rejected.
  12. The Defendant did not develop any argument with respect to his suggestion the that Plaintiff is not owed what is claimed and the allegation is left at that, a simple bare unsupported allegation. In the event, I do not consider it relevant to the application that is before the Court. The Defendant accepts that he took a loan from the Plaintiff and that the last payment that was made was in May 2017. Having rejected the Defendant’s negative amortisation argument, it is clear that the loan is in default and as such the Plaintiff is entitled to bring the application it has. Any argument as to the amount that is owed under the charge is a matter for accounting upon redemption of the charge and is not relevant to the questions of whether a power of sale has arisen and whether a sale of the property by private treaty should be allowed.
  13. The remaining ground upon which the Defendant relies is his assertion that the Plaintiff should be denied relief as it defaulted on an agreement to lend further funds and that this default was the reason he stopped making payments. Again, I fail to see what merit this argument has with respect to the relief that is being sought. In his affidavit, the Defendant alleges that the Plaintiff had agreed to lend him a further US$300,000 to US$700,000 and that this was an inducement to borrow the original loan of US$312,325.00. In support of that argument, he refers to a purported email from Max Thomas of the Plaintiff which has had the date removed and in which he says:

Yes we are still an option. We agreed to lend you the funds but we are awaiting a 2 million subscription to hit our account. Until we receive those funds. I will not be able to move forward. I spoke with Keith this morning again and he said we should receive it by the end of the month. Sorry for the delay.

  1. The above is not, in my view a commitment to lend. The words “we are still an option” indicate that no firm agreement had been put in place. Further the Defendant has exhibited a further email from the same Mr. Thomas which states:

I will do the loan. I have approval for the loan. We agreed that you would pay off 300k and I would give you a loan for 600K…

  1. That email was dated 20 March 2015 very nearly 2 years after the original loan agreement. If this email is possible to amount to a further commitment to lend, it appears firstly that any further advance was conditional on the 1st loan being repaid (which it was not) and secondly could not, due to it date, have been an inducement to for the original borrowing.
  2. Turning then to the relief sought by the Defendant. He suggests that there is sufficient equity in the Property and he seeks an equitable solution, but does not explain what he means by this, other than saying he wants 90 days to sell the Property by himself and that if there is to be a sale then only one of the parcels should be sold.
  3. If there is sufficient equity in the Property then that is a good position. It will mean that the Defendant will, upon sale of the Property, have a return, which possibility diminishes with the passage of time given that no payments are being made. If the Plaintiff is granted the order to sell by private treaty it is under an obligation to obtain the best possible price for the Property (see Tse Kwong Lam -v- Wong Chit Sen [1983] 3 All E.R. 54) and to account to the Defendant for any surplus proceeds of sale after the indebtedness has been satisfied. In the same vein, if there is more than sufficient equity in one or the other of the parcels then the Plaintiff will only have to sell one of them in order to pay off the borrowing, but I am not of the view that the Plaintiff should be prevented from marketing both parcels it has a charge over. In my view this will afford the best possibility of an early sale as it provides options.
  4. As for being given 90 days to try and sell the Property himself, the Defendant has had notice of these proceedings since before 28 March 2022 and says in his affidavit that he has been trying to sell the Property since at least September 2019. To my mind, keeping the Plaintiff waiting a further 90 days will achieve nothing. It is also the position that there is nothing preventing the Defendant from continuing to try and secure alternative financing or find a purchaser himself.

Disposition

  1. The Plaintiff shall have permission to sell the subject Property by private treaty, the Court having had regard to the proceedings and the conduct of the parties and allowing a variation of section 72 RLO.
  2. With respect to the additional relief sought in the summons paragraph No. 2 of the order sought is granted to the extent that a purchaser is found by the Plaintiff it shall have conduct of the sale. I am not minded to restrict the Defendant from continuing his efforts to find a purchaser, if that is what was intended.
  3. Paragraph No. 4 of the relief is superfluous and is to be removed. The balance of the relief is granted.

 

 

18th October 2022

 

 

The Hon. Justice Anthony S. Gruchot

Judge