THE REPUBLIC OF TRINIDAD AND TOBAGO

IN THE HIGH COURT OF JUSTICE

Claim No. CV2013-00803

In the matter of the property comprised in a Deed of Mortgage dated

27th day of July, 1998 made between FITZROY PHILLIP MEDINA and ELISE

MEDINA of the First Part, MEDINA PLUMBING LIMITED of the Second Part and

THE ROYAL BANK OF TRINIDAD AND TOBAGO of the Third part

And

In the matter of Conveyancing and Law of Property Ordinance Chap. 27 No. 12

BETWEEN

RBC ROYAL BANK (TRINIDAD AND TOBAGO) LIMITED

(FORMERLY RBTT BANK LIMITED)

Claimant

And

KEITH MEDINA

First Defendant

LYDIA MEDINA

Second Defendant

CHRISTIAN MEDINA

Third Defendant

Before the Honourable Mr. Justice R. Rahim

Appearances:

Mr. C. Sieuchand Instructed by Ms. A. Donawa for the Claimant

Mr. R. Montano Instructed by Ms. S. Gopeesingh for the First and Second Defendants

Mr. B. Hallpike for the Third Defendant

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Judgment

1. This claim was instituted pursuant to Part 69 of the Civil Proceedings Rules 1998

(“the CPR”). The claimant, as Mortgagee, seeks an order for possession of the

property situate at No. 3 Clarence Street, St. James, Port of Spain (“the property”).

The property is not registered property under the provisions of the Real Property Act.

The trial in this case was a trial by way of affidavits with cross-examination of the

deponents.

Background

2. On the 28th February, 2013, the Claimant filed a Fixed Date Claim Form seeking inter

alia the following relief:

“Delivery up to the Claimant with vacant possession of: ALL AND SINGULAR that

certain piece or parcel of land situate at St. James in the City of Port of Spain in the

Ward of Port of Spain in the Island of Trinidad formerly known as No. 3B Clarence

Street but now known as No. 3 Clarence Street comprising ONE HUNDRED AND

NINETY-THREE POINT FOUR (193.4) SQUARE METERS delineated and coloured

pink and numbered “3” on the plan annexed and marked “A” to the deed registered

as No. 5666 of 1989…”

3. By Deed of Mortgage dated the 27th July, 1998 and registered as number 16361/98

(“the 1998 mortgage/loan”), Fitzroy Phillip Medina (“Fitzroy”) and Elise Medina

(“Elise”) conveyed the property to the Claimant as security for a loan of Three

Hundred Thousand Dollars ($300,000.00) to Medina Plumbing Limited (“the

Company”). Fitzroy and Elise were the guarantors/sureties of the 1998 mortgage and

the Company Keith and Lydia Medina, the First and Second Defendants herein

executed the 1998 mortgage on behalf of the Company as directors. The Mortgage is

therefore a legal mortgage in which title is vested in the Claimant with the

Mortgagors having an equity of redemption.

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4. Christian Medina, the Third Defendant, who is the sibling of the First Defendant

herein was made a party to these proceedings on 17th March, 2015 on his own

application since he claims to be in possession of the property and also claims to be a

beneficiary of the house standing upon the property under the provisions of a Will.

The Third Defendant’s application to join came rather late in these proceedings in

that the court had already adjourned for the purpose of delivering judgment when the

Third Defendant made his application which was argued and subsequently granted.

As a consequence, the trial was re-opened with further cross-examination of the

witness on behalf of the Third Defendant being permitted and evidence on his part.

5. Fitzroy and Elise, the parents of the First Defendant died on the 28th June, 2010 and

26th October, 2011 respectively. Elise was the step mother of the Third Defendant.

6. The Claimant is a limited liability Company registered under the laws of Trinidad and

Tobago.

Issues

7. The following issues fall for determination:

i. When does a Mortgagee become entitled to possession of mortgaged premises

pursuant to a legal mortgage.

ii. Are the Guarantee documents and the 1998 Deed of Mortgage unenforceable

due to lack of independent advice to the Guarantors, Fitzroy and Elise.

iii. Was the consent of the sureties, Fitzroy and Elise and the Third Defendant

necessary for the Second Demand loan to be secured under the 1998 Deed of

Mortgage.

iv. Was the 1998 Deed of Mortgage discharged by the repayment of the First

Demand loan.

v. Can an order of possession be made against each Defendant.

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The Case for the Claimant

8. The Claimant relied on the affidavit of Ms. Sandra John-Virgil, a Retails Collection

Officer, in support of the fixed date claim form. It is the case for the Claimant that

under and by virtue of the 1998 mortgage, the Claimant extended to the Company the

following facilities:

i. Demand Loan under Account Number 3010016024-14010599,

ii. Overdraft in the Current Account Number 941-101-263-7, and

iii. Demand Loan under Account Number 3010016024-14015457.

9. As a result of the said accounts falling into arrears by way of default in payment of

the Mortgage instalments, the Claimant pursuant to its power of sale under the 1998

mortgage sought to offer the property for sale with vacant possession.

10. Prior to these proceedings, the Claimant filed a Fixed Date Claim Form dated the 21st

July, 2010 against Fitzroy and Elise, for vacant possession of the property and

payment of the sums due and owing by virtue of the 1998 mortgage. However, both

Fitzroy and Elise died before the matter could be determined, after which the claim

was stayed. The Claimant then issued Notices to Quit to the First and Second

Defendants on the 10th of August 2012, after being informed that they were in

unlawful possession of the property.

11. According to the affidavit of Mrs. John-Virgil, sometime in or around March, 2013,

she instructed one of the Claimant’s Process Servers, Mr. Rondon Brown to effect

Service of the Fixed Date Claim Form and her principal affidavit dated 28th February,

2013 on the First and Second Defendants at the property.

12. It is Mrs. John-Virgil’s testimony that Mr. Brown informed her that in attempting to

effect service on the First and Second Defendants he was informed by a neighbour

that the First and Second Defendants did not currently reside at the property and that

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the Third Defendant occupied the property with the permission of the First and

Second Defendants. That the Third Defendant frequently visited the property on

behalf of the First and Second Defendants to check the same and would spend the

night and leave the following morning.

The Case for the First and Second Defendants

13. Having regard to the manner in which this case developed, the court will adopt a

different approach to the review of the case. What began as an unremarkable standard

action for recovery of possession by a Mortgagee soon turned into a highly

contentious matter. The gravamen of the Claimant’s case lies in large measure with

the response by the Claimant after allegations of impropriety were made. In

examining the respective cases therefore, it makes good sense to treat with the

allegations before moving on to the response to those allegations.

14. The case for the First and Second Defendants was set out by way of affidavit of the

29th May, 2014 sworn to and filed by the First Defendant. It is their case that in 1998

they applied to the Claimant for a loan of $300,000.00. The loan having been granted,

the First Defendant’s parents, Fitzroy and Elise provided security for the loan in the

form of their property situate at No. 3 Clarence Street, St. James, Port of Spain (“the

property”). The First Defendant testified that one of the conditions of the loan was

that it would not exceed $300,000.00 and that the Second Defendant and he were

present when his parents laid down this condition. Save and except for this evidence

there is no supporting evidence of such a condition either by way of the loan

documents or in any other form. In fact the evidence appears to be to the contrary, in

that facilities were granted whereby overdrafts would be extended using the very

security.

15. According to the affidavit of the First Defendant, in order for their loan request to be

facilitated, they were told to assign contracts that Medina Plumbing Limited, (“the

Company”) had at that time with third parties to the Claimant. Therefore, the

Claimant controlled and managed the Company’s income and expenditure. At that

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time the company had three contracts with NIPDEC (in relation to Fraud Squad,

Magistrate’s Court and T&TEC Head Office buildings) totalling 1.9 million dollars.

16. It is the First Defendant’s testimony that no-one from the Company requested any

overdraft facility on Account Number 941-100068-1, which was the Company’s main

account. That the only loan the First and Second Defendants requested or authorised

was that under Account Number 3010016024-14010599 for the sum of $300,000.00.

17. The First Defendant averred that he and the Second Defendant were the only two

persons who were authorised to sign on behalf of the Company, and to request the

facilities of the Claimant on the Company’s behalf. That the First and Second

Defendants were unaware of their account being credited with money from overdraft

facilities which were subsequently consolidated in the sum of $815,000.00. See

paragraph 23.

18. The First Defendant testified that it was only in December, 1999 that he and the

Second Defendant realized that the loan payments were not being deducted from their

account. That at that time they owed $160,327.93 towards the 1998 loan, were

consistently paying the monthly sum of $27,936.00 on account thereof and had

sufficient funds in their bank account to continue payments in this manner.

19. According to the affidavit of the First Defendant, six equal monthly instalments had

been paid between the 25th September, 1998 and the 25th February, 1999. That the

loan was paid via a standing order and was deducted from their Account Number

941-100068-1. The First Defendant testified that they did not require any further loan

since at that time they had sufficient funds to continue paying off the 1998 loan and

did not know why the Claimant stopped deducting the loan payments.

20. It is the testimony of the First Defendant that he went to the Bank to get a loan to

purchase a vehicle and was told by Mrs. Melville, an employee of the Bank, that his

accounts were in disarray and that he should get to the bottom of it. That Mrs.

Melville told him that the 1998 mortgage was not being serviced and as a result he

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had problems with his credit rating. Further, Mrs. Melville indicated that unusual

amounts of money were coming out of the account but yet the 1998 mortgage was not

being serviced.

21. Mrs. Melville told the First Defendant that the Bank had stopped a certain Bank

Teller from dealing with their account because of some irregularities the Bank was

seeing on their end. That Mrs. Melville made a connection between this Bank Teller

and one of the Company’s employees, Ms. Hazel Ann Murray as they had gone to a

Bank’s event together. Ms. Murray was the Company’s Administrative Assistant.

22. The First Defendant testified that Mrs. Melville promised to investigate the matter but

she was re-assigned by the Bank and as such was no longer their attendant officer.

Ms. Mercedes was thereafter assigned to the Company’s account.

23. According to the affidavit of the First Defendant, in March, 2000, the Second

Defendant found falsified pay roll sheets in the Company’s office bins. These sheets

which included names of employees who were not employed with the Company. That

as a result of what Mrs. Melville told the First Defendant, he now had proof to fire

Ms. Murray and so he did. Subsequently, the First Defendant sought answers from

Ms. Mercedes in relation to the suspicious transactions in the account but none were

forthcoming.

24. It is the First Defendant’s testimony that they never received any notifications of the

purported loan and overdraft facility. That on the 3rd August, 2000, the First

Defendant was called into the Bank and presented with a letter dated the 2nd August,

2000 and a promissory note dated the 3rd August, 2000.

25. Ms. Tang Yuk, the manager of the Bank telephoned the First Defendant and told him

to bring the Company’s stamp. Ms. Tang Yuk and he were the only persons at the

meeting on the 3rd August, 2000 and she instructed him to sign the promissory note in

the sum of $815,000.00. The First Defendant testified that he explained to Ms. Tang

Yuk that they did not take this money and she responded by saying that if he did not

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sign it, the Claimant would take his parents’ house (the property). That he, the First

Defendant was then handed the letter dated the 2nd August, 2000 which advised him

that they were making available to the Company a facility of $815,000.00. The letter

requested that the First and Second Defendants sign and confirm acceptance of the

terms and conditions but made no mention of any overdraft facility. Thus, the First

and Second Defendant were still unaware of the overdraft facility.

26. According to the affidavit of the First Defendant, at the above mentioned meeting Ms.

Tang Yuk did not give him an opportunity to read the letter dated 2nd August, 2000.

Ms. Tang Yuk kept telling him that his parents’ home would be repossessed. That she

also instructed him to take any further existing contracts of the Company and assign it

to the Bank. The First Defendant testified that they assigned their contracts with NH

International, Moosai Development and Carillion. These contracts according to the

First Defendant were about to start in September, 2000 and October, 2000 and their

contract values were $411,000.00, $300,000.00 and $410,000.00 respectively. The

contractors then dealt with the Bank as all contract payments went to the Bank.

27. The First Defendant testified that between the periods 2000 to 2002 all the

Company’s contracts were assigned to the Claimant and the Claimant would release

to the First and Second Defendants limited funds in order to pay their workers and to

buy material. That the Second Defendant was at the time employed as a teacher at St.

Francois Girl’s College and the First Defendant and his family lived on her income

alone.

28. It is the First Defendant’s testimony that in 2004, he and the Second Defendant

received correspondence and were invited to a meeting where they were instructed

that the Remedial Unit of the Bank would now be dealing with their account. The

First and Second Defendants met with Mr. Michael Bhimsingh and Mr. Raymond

Bachoo. The First Defendant testified that he and the Second Defendant wrote to their

contractors informing them that all payments were to be forwarded to the Claimant.

In 2003, the Company got contracts with Raghunathsingh Limited, National Gas

Company and Triple Bique Limited for the amounts of $299,000.00, $108,000.00 and

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$150,000.00 respectively. These contracts were subsequently assigned to the

Claimant.

29. According to the First Defendant’s affidavit, he broke his leg in December, 2004 and

requested funds in order to have a surgery, however, his request was denied. The First

Defendant testified that it was now clear that things were extremely wrong and he and

the Second Defendant started writing to the Claimant and documenting the same.

That the Claimant never informatively responded. The First and Second Defendants

requested their Bank statements from the Claimant since the First and Second

Defendants were not receiving them in the mail. The Claimant did not provide the

statements on this occasion.

30. The First Defendant testified that on the 19th January, 2006 it appeared that the 1998

mortgage had been up-stamped. That the Claimant neither sought the consent of the

First Defendant’s parents, Fitzroy and Elise nor his consent for this.

31. The First Defendant attested that he was advised that the Claimant released the

Guarantee by their actions of changing and allegedly consolidating the 1998

mortgage. That the Deed for the property should have been given back to the First

Defendant’s parents. Further, if the Claimant wanted to extend the guarantee, it

should have followed proper procedure and extended the agreement with fresh

signatures from the First Defendant’s parents.

32. It is the First Defendant’s testimony that the Claimant initiated legal proceedings

against his parents for possession of the property and that his parents received several

Notices to vacate the same.

33. According to the First Defendant’s affidavit, MG Daly & Partners on the Claimant’s

behalf began communicating with his parents, his attorney Mr. Montano, the Second

Defendant and he via letters in 2005. That it was only by correspondence dated the 8th

February, 2006, they we formally informed of the overdraft and that it amounted to

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$606,000.00. That the Company’s current account number 941-101263-7 without the

First and/or Second Defendant’s authorisation became an overdraft facility.

34. It is the First Defendant’s testimony that in 2006, the Claimant provided a summary

sheet of the history of the 1998 mortgage for the periods 1998 to 2003. That the

summary sheet showed a gap from March, 1999 to July, 2000. That this statement

could not reflect what they, the First and Second Defendants were actually paying

toward the 1998 mortgage since they knew their contract values. Over the periods

1998 to 2004, the First and Second Defendants assigned over approximately

$5,088,000.00 in contracts to the Claimant. In the year 1999 between March to

August, a total of $963,753.70 was deposited into their current account. That they did

not understand why the Claimant did not continue the standing order on the 1998

mortgage. Further, that there was little reflection of loan payments in that account

over the years.

35. According to the First Defendant’s affidavit in 2010 through his attorney, Mr.

Montano, he, the First Defendant finally got access to some of the Bank Account

Statements for the periods 1998 to 2004.

36. Consequently, the First and Second Defendant finally had access to the information

concerning the steady climb of the overdraft facility which they never authorised. It

was only then that they understood that there was an overdraft facility existing

simultaneously with the 1998 loan account. The First Defendant testified that the

statements received did not match the loan history summary sheet that was provided.

That the First and Second Defendants tried to get answers from the Governor of the

Central Bank and Mr. Pennycock, the Minister of Tobago Development and Bankers

Association.

37. It is the First Defendant’s testimony that by letter dated the 6th April, 2009, the

Claimant suggested that he orally requested the extensive overdraft facility. That the

First Defendant requested this overdraft from time to time to assist the Company to

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fund various projects in which it was involved. Further, the First Defendant testified

that he never requested the new account number 941-101263-7.

38. According to the First Defendant’s affidavit, the Second Defendant, Mr. Ved

Seereram, their financial advisor and he met with Ms. John-Virgil on the 29th May,

2013 at RBC Independence Square. At this meeting, they continued to make requests

that certain documents allegedly within the Claimant’s possession with regard to the

authorisation of the overdraft facility be provided. That they specifically asked for

withdrawal slips to prove that they, the First and Second Defendants were taking

funds from the overdraft facility. That they have been denying this fact and have been

asking the Claimant for years for the production of these documents and the Claimant

has been unable to provide the same. That the Claimant allowed an excessive

overdraft facility on Company’s account, without a limit and without the First and

Second Defendants’ consent.

39. Thus, it is the case of the First and Second Defendants that the overdraft facility was

extended continuously over the years without their consent, the Claimant forced the

First Defendant to sign a promissory note in the sum of $815,000.00 and acceptance

of the terms of such. Further, that the Claimant refinanced the 1998 mortgage by

almost 200% without any documentation and that the Claimant never provided details

of deposits collected from the First and Second Defendants loan amounts.

Cross-examination of the First Defendant

40. In cross-examination, the First Defendant was shown the bank statements marked

“KM11” attached as exhibits to the affidavit of the First Defendant. These bank

statements cover various months during the years 1998 to 2004. When asked what the

letters “OD” marked next to particular figures on those statements stood for, the First

Defendant agreed that they stood for overdraft. The First Defendant testified that as at

the 24th February, 1999 the Company’s account was overdrawn. That the monies to

pay for the overdrawn balance came from cheques that were brought into the account.

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41. According to the evidence of the First Defendant, the current account was the

Company’s operational account and monies were being withdrawn from it to meet the

Company’s expenses which included salaries and material costs.

42. The First Defendant testified during cross-examination that every transaction or every

cheque that he collected he would take to Mrs. Melville. That when he met with her,

they would discuss the sum that he would be able to receive from that cheque. Also

they would discuss that the First Defendant had to pay salaries and material costs.

That she would release the balance from the cheque into the Company’s account.

43. According to the evidence of the First Defendant, since the establishing of the

Company’s account he had to request permission to withdraw funds from the Bank.

That he could not withdraw money or issue cheques on the account without prior

consultation with the Bank. That before he wrote a cheque he would have to consult

the Bank to ensure that it did not bounce. Further, that Mrs. Melville would

sometimes bounce the cheques.

44. The First Defendant testified that he was not earning a salary from the Company and

it was only when he left the Bank he started earning a salary from the Company but

could not say at what date he left the Bank.

45. Further, the First Defendant testified that he saw the demand letter dated the 9th

February, 2000 which was issued by the Claimant to the Company. This letter

demanded full settlement of the Company’s indebted to the Bank.

The Case for the Third Defendant

46. The Third Defendant swore to and filed an affidavit on the 31st March, 2015.

According to his affidavit, he has been living at the property since in or around July,

1976. That in or around July, 1999, after completing his studies and obtaining gainful

full time employment at Insync Software Limited as an Analyst/Programmer, he

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started contributing financially to the upkeep of the property which was owned by his

parents, Fitzroy and Elise.

47. The Third Defendant testified that in 2002, he married and brought his wife into the

property to live with he and his parents. During this time he was a temporary

caretaker for a house in Freeport owned by one of his sisters. That he and his wife

would overnight at that house two or three times a week but still contributed

financially to the property since that was where they stayed most of the time.

48. He testified that in or around 2005, he obtained a bridging loan from RBC to

construct a home on a property situate at Corner Lawrence Wong Road and Maraj

Lane, Longdenville, Chaguanas (“the matrimonial property”). This property was

owned by both he and his wife. That in or around 2006, the loan was converted to a

mortgage.

49. His marriage subsequently failed and as part of the divorce settlement he continued to

pay the mortgage as payment towards the maintenance of his son and relinquished all

of his rights to the matrimonial property. In or around March, 2010 he obtained new

employment with John Dickson & Co. (WI) Ltd as an I.T. Administrator. That due to

an increase in salary and the advanced ages of his parents, he started contributing

more to the upkeep and maintenance of the property.

50. It is the Third Defendant’s testimony that on the 26th October, 2011, his step mother,

Elise, passed away. He testified that he lived with Elise since he was five years old,

she considered him to be her son and he considered her as the only mother that he

knew. That by Elise’s last Will and testament executed on the 25th July, 2011, she

bequeathed the property to him absolutely. In or around November, 2011 after the

death of Elise, he took all responsibility for the running of the property which

included but was not limited to paying for all the utilities, the maintenance and

upkeep of the same.

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51. A Grant of Probate in respect of Elise’s estate was issued to him on the 11th May,

2012. He gave evidence that upon receiving the grant of probate, he was advised that

in order to have the property conveyed to him he would have to do a Deed of Assent.

However, having expended $30,000.00 for the grant of probate, the Third Defendant

informed his attorney that he was unable financially to undertake the task of the Deed

of Assent and has not done so to date.

52. The Third Defendant testified that the First Defendant has not lived on the property

since in or around 1995 and the Second Defendant has never lived on the property.

That the First and Second Defendants have never been in possession of the property.

Fitzroy and Elise were seized and possessed of the property before their death and

subsequently, the Third Defendant became seized and possessed of the property by

Elise’s Will.

53. According to the affidavit of the Third Defendant, at no time before Elise’s death he

was made aware that the property was mortgaged to the Claimant. That he was never

made aware by the First and Second Defendants that there was a High Court case for

possession of the property. The Third Defendant testified that he never received any

documents from the Court and/or from the Claimant involving this matter and he has

never seen anyone from the Court and/or Claimant at the property. That the First time

he saw any documents involving this matter was during Christmas in 2014 when he

showed the same to the First Defendant. The First Defendant subsequently informed

him for the first time that the property was the subject matter of a High Court case in

which the Claimant was seeking possession of the same.

Cross-examination of the Third Defendant

54. The Third Defendant testified that the First Defendant would have been working with

the Company in 1995. That when the First Defendant left the property situate at No. 3

Clarence Street St. James (“the property”) in 1995, he took up residence in Diego

Martin. That he did not know when the Third Defendant took up residence in Tobago,

but he found out that he was so living five years ago.

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55. The Third Defendant testified that when correspondence addressed to the First

Defendant was mailed to the property he would leave it there and would not call to

inform the First Defendant of the same. That the First Defendant did receive

correspondence at the property but there was no indication on the outside of the

envelope to specify who the mail was sent from and he, the Third Defendant did not

open the letters.

56. It is the evidence of the Third Defendant that he did not know whether the Company

was still in operation or whether it was closed down at any point in time.

57. The Third Defendant testified that he did not know if the First Defendant knew of the

Will and that there were no gifts to the First Defendant in the Will. That he and the

First Defendant did not share a close relationship.

The Claimant’s Response to the Case of the First and Second Defendants

58. The Claimant responded to the First and Second Defendants’ claims by way of

affidavits of Mrs. Sandra John-Virgil and Mrs. Marlene Melville both sworn to and

filed on the 21st October, 2014.

Mrs. John-Virgil

59. According to the affidavit of Mrs. John-Virgil, Ms. Tang Yuk was also present at the

meeting held on the 29th May, 2013. That at the said meeting the First and Second

Defendants indicated that they were not aware of how the current account escalated.

Mrs. John-Virgil testified that they indicated that all information with respect to the

account of Medina Plumbing Limited (“the Company”) was previously supplied to

the First and Second Defendants through the Claimant’s attorney.

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60. It is the testimony of Mrs. John-Virgil that the 1998 loan for the sum of $300,000.00

was secured by the following:

a) Two contracts and Guarantee and Postponement of Claim Forms, one signed

by Fitzroy and Elise and the other signed by the First and Second Defendants

respectively. See paragraph 4 of the affidavit of Mrs. John-Virgil of the

October 21st 2014. Both Guarantees secured the repayment of the debts of the

Company to the limit of $300,000.00.

b) Deed of Mortgage dated the 27th July, 1998, executed by Fitzroy and Elise.

This Deed was initially stamped for the sum of $300,000.00 but was also

security for any further advances.

61. The Claimant agreed that the Company assigned to the bank, sums payable under its

contracts with third parties. Additionally, the Claimant instructed those third parties

to make the contractual payments directly to it.

62. Mrs. John-Virgil testified that the monies that were in fact paid by those debtors to

the Company were reflected in the account statements. That since contracts were

assigned to the Bank, the Claimant was controlling the inflow and outflow of the

funds and would allow the Company access to funds in its account so that the First

and Second Defendants’ business would continue and it would be provided with the

opportunity to meet their commitments.

63. Further, Mrs. John-Virgil testified that the Company’s account was eventually

transferred to the Remedial Unit in the year 2002.

64. On the 19th January, 2006, the 1998 Mortgage was up-stamped to cover additional

borrowings of the Company. That paragraph 11 of the 1998 mortgage provides that

the Claimant shall be at liberty to up-stamp the mortgage to cover any monies and

liabilities thereby secured in excess of $300,000.00.

65. Mrs. John-Virgil testified that it is not true to say that the Claimant released the

Guarantee by the consolidating loan. That the 1998 mortgage was a continuing

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security to the Claimant to cover all debts and liabilities, present and/or future of the

Company.

66. It is Mrs. John-Virgil’s testimony that it is not true that the First and Second

Defendants were only formally informed of the existence of the overdraft facility and

that the balance stood at $606,000.00 by letter dated the 8th February, 2006. That due

to the Company’s indebtedness to the Bank, the Claimant issued a Demand letter to

the Company dated the 9th February, 2000, requesting full settlement of the debts

under the overdrawn current account and demand loan amount.

67. The First Defendant writing on behalf of the Company, by letter dated the 21st

February, 2000, acknowledged the indebtedness of the Company and requested that

the Company be given until the 13th March, 2000 to settle the said accounts.

68. Further, Mrs. John-Virgil testified that at all material times the First Defendant was

aware of the fact that the Claimant allowed the Company to access this overdraft

facility on the current account since statements for the account were mailed to the

Company every two months and set out in detail all credits and debits on the account.

69. According to Mrs. John-Virgil’s affidavit, subsequent to the consolidation of the

debts of the Company, by virtue of the letter of offer and promissory note dated the

2nd and 3rd August, 2000 respectively and by letter dated the 26th March, 2001, the

Company was provided with a breakdown of its indebtedness as at the 3rd August,

2000. The letter dated 26th March, 2001 indicated that as at the 3rd August, 2000 the

overdraft balance stood at $606,041.91.

70. Further, Mrs. John-Virgil testified that since the year 1998, the First and Second

Defendants would have been aware that there was an overdraft facility existing

simultaneously with the loan account.

71. By letter dated the 27th July, 2011, the Claimant wrote to the Governor General of the

Central Bank in response to the letter sent by the First and Second Defendants dated

the 18th April, 2011.

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72. It is the testimony of Mrs. John-Virgil that it is not true to say that the Claimant

refinanced the 1998 loan by almost 200%. That the Claimant with the consent of the

First Defendant consolidated the two outstanding facilities in the name of the

Company and offered the Company a new loan for the sum of $815,000.00 which

was to be repaid in accordance with the terms of the letter of offer dated the 2nd

August, 2000. That the First Defendant’s signature on the letter of offer and

promissory note dated the 2nd and 3rd August, 2000 respectively indicated his

acceptance of the terms of the consolidated loan for the sum of $815,000.00.

Cross-examination of Ms. John-Virgil

73. Mrs. John-Virgil testified in cross-examination that she was familiar with the affairs,

books, documents and papers of the Bank which related to the Company’s account

since she had been the officer for the Company’s account for the periods July, 2009 to

October, 2013. That she has no personal knowledge of the events preceding July,

2009. It is her evidence that she is aware that the First and Second Defendants reside

in Tobago.

74. According to her evidence in cross-examination, under normal practices, clients are

supposed to sign documents requesting an overdraft facility but sometimes a client

could make a request to the Bank’s officers to extend certain courtesies to them

because of urgent circumstances. That the failure to have the documents endorsed

with other requests made by the First Defendant may have been an oversight. Further,

that a request may be accommodated because of the nature of security been held and

the relationship between the client and the Bank.

75. Mrs. John-Virgil further testified in cross that if a guarantor is involved with an

overdraft facility and involved in the letter of offer for the overdraft, he should sign

off on the letter. She admitted that the proper practise requires the Bank to call in the

guarantors and explain to them the implications of the guarantee. Further, she testified

that there was no letter of offer on the Company’s file for the sums over the approved

19

temporary overdraft facility of $60,000.00. That the only letter of offer for the

Company was the letter pertaining to the promissory note of $815,000.00 which

consolidated the facilities.

76. It is the testimony of Mrs. John-Virgil that if a contractor of the Company was not

paying its debts under the terms of the contract, it was the Company’s responsibility

to obtain the money owing. However, she testified that it would have been the Bank’s

responsibility to notify the Company that the money was not being received and that

there was no evidence to show that the Bank did notify the Company of such. Further,

that at the meeting on the 29th May, 2014 the question of assigned contracts did not

come up.

77. Mrs. John-Virgil testified that when a loan is consolidated, a new loan is created with

new terms and conditions. That the borrowers and guarantors have to agree to these

new terms and conditions. Further, that based on the records the guarantors were not

made aware of the new loan and its new terms and conditions.

78. When asked if the Bank treats all of their clients the way the Company was treated,

that is, that the bank allows an overdraft facility to escalate in the manner that the

Company’s overdraft did, Mrs. John-Virgil replied that she could not say. She

testified that she knew that the Bank had tried to be accommodating to some clients in

the past and even at present day because that this was the nature of the business in

terms of how the Bank tries to help clients.

79. It was the evidence of Mrs. John-Virgil in cross-examination that the manager of the

Bank must have approved the increased overdraft facility but that there were no

documents to establish this. That she did not see any documents of approval of the

increased overdraft facility. Further, that she could not say whether this was a verbal

approval but it was reasonable to assume that this overdrawn balance was allowed to

increase by a verbal request. She further testified that this was not a common practice

or a practice of a professional Bank. That the Company’s account was not handled

according to procedure.

20

Ms. Marlene Melville

80. According to the affidavit of Mrs. Melville, during the period 22nd April, 1999 to the

5th October, 2001, she was employed with the Claimant as a Credit Officer and was

attached to the Claimant’s St. James branch. As a Credit Officer, she was required to

manage accounts in the portfolio assigned to her. She also worked directly with her

then manager, Ms. Tang Yuk in managing problematic and/or delinquent accounts

within her portfolio. That when she assumed the position of Credit Officer, the

account in the name of Medina Plumbing Limited (“the Company”) was one of the

accounts in the portfolio assigned to her.

81. It is the testimony of Mrs. Melville that during the period 22nd April, 1999 to 5th

October, 2001 while she was in charge of the Company’s account, the Company had

a current account number 941-10068-1 with the Bank. That this was completely

separate and apart from the loan facility which was granted to the Company. The

current account was poorly serviced by the Company and on several occasions was in

a state of being overdrawn, that is, there were insufficient funds in the account to

cover the debits being charged to the account.

82. The First Defendant would request from time to time that the Bank honour the

cheques in the account on the expectation that monies would be coming into the

account shortly. Mrs. Melville testified that the status of this account deteriorated

rapidly since expected deposits were not made in a timely manner. Therefore, the

excess drawings on the account attracted interest and this exacerbated the

deterioration of the account.

83. According to the affidavit of Mrs. Melville, the First and Second Defendants failed to

pay the sums due under the current account over the period, which resulted in the

account being overdrawn in the sum of $571,491.86 as at February, 2000. In addition

to which, as at February, 2000, the 1998 demand loan had an outstanding principal

balance of $160,327.93.

21

84. The Company had anticipated payment of the sum of $500,000.00 from a contract

that it held with NIPDEC, however this never materialised which contributed to the

Company’s inability to repay outstanding sums.

85. It is the testimony of Mrs. Melville that the account became so overdrawn that the

Bank could no longer indulge the conveniences requested by the First Defendant.

Therefore, the Bank took a decision to only honour payroll cheques drawn on the

account when sufficient deposits had been made to the account to cover those payroll

expenses. This occurred sometime prior to 2000.

86. Due to the indebtedness of the Company, Mrs. Melville issued a demand letter dated

the 9th February, 2000 to the Company on behalf of the Bank demanding full

settlement of the above mentioned debts within seven (7) days of the date of the

letter. By letter dated the 21st February, 2000, the First Defendant, writing on behalf

of the Company acknowledged the indebtedness of the Company in the sums referred

to above and requested that the Company be given until the 13th March, 2000 to settle

the accounts.

87. According to the affidavit of Mrs. Melville, when the Company’s facilities with the

Bank came up for annual review in the year 2000, the current account had been

overdrawn to a value of approximately $600,000.00. Ms. Tank Yuk and Mrs.

Melville came up with strategies that they could share with the First Defendant in

order to improve the operation of the account. Mrs. Melville would have spoken to

the First Defendant many times prior to August, 2000.

88. Mrs. Melville and the First Defendant would have discussed the best way for the

account to be placed in a better footing. During their conversation, the First

Defendant informed her that he expected to receive a total of $491,655.75 as a result

of contract payments which were to fall due from Carillon Limited, Moosai

Development Company Limited and NIPDEC. Mrs. Melville testified that but for the

22

First Defendant’s representations to her on these matters, she would not have known

about these monies which he expected to be paid to the Company.

89. It is the testimony of Mrs. Melville that she formalized the strategies developed for

the servicing of the facilities into an offer letter dated the 2nd August, 2000 which was

issued to the First Defendant. She as well as Ms. Tang Tuk signed this letter. The

First Defendant signed the letter on behalf of the Company and attached the

Company’s stamp thereby confirming his acceptance of the terms and conditions

offered. Pursuant to the offer letter the Claimant issued to the Company a promissory

note for the sum of $815,000.00.

90. Mrs. Melville testified that as far as she is aware no officer from the Bank forced the

First Defendant to sign any promissory note or any letter. That the promissory note

and the letter of offer which the Bank issued to the Company was a concession made

by the Bank in order to try and realize some positive movement on the current

account. The concession was made by the Bank in order to save the Company money

by avoiding the incurrence of interest fees and penalties on their delinquent accounts.

91. According to Mrs. Melville’s affidavit, the Company did not have sufficient money in

its current account to continue paying the loan via the standing order. That the

account was so overdrawn, the Bank stopped authorising further deductions there

from and as such the standing order was also stopped. The standing order

arrangement only resumed in August, 2000 after the consolidation.

92. Mrs. Melville denies paragraph 20 and 21 of the First and Second Defendants’ case.

She averred that she never met with the First Defendant and made those statements.

93. Mrs. Melville further denies that the First Defendant was unaware of the overdraft

facility. That on the request of the First Defendant and by letter dated the 22nd

February, 2001, she informed the First Defendant of the total interest compounded on

the overdraft facility for the period February, 1998 to January, 2001.

23

94. According to the affidavit of Mrs. Melville, she was not aware of any other contracts

of the Company being assigned to the Bank other than the contracts mentioned above.

That as the facilities were not being serviced in a timely manner, the Bank would only

release limited funds to the Company to pay its workers once there was a deposit in

the account to cover same.

95. Mrs. Melville testified that the First Defendant at all times knew of the indebtedness

of the Company. The Claimant with the consent of the First Defendant consolidated

the two outstanding facilities of the Company. That by letter dated the 26th March,

2001, Ms. Melville informed the First Defendant that on the 3rd August, 2000 the two

facilities in the name of the Company were consolidated to one loan of $815,000.00.

This letter indicated that the sum of $815,000.00 comprised of the outstanding 1998

loan balance of $160,327.93, outstanding loan interest in the sum of $48,530.16 and

the overdraft balance of $606,041.91.

96. By letter dated the 16th January, 2001, Ms. Melville made a formal demand on behalf

of the Claimant to the Company for the payment of the sum then due and owing

under the consolidated account.

Cross-examination of Mrs. Melville

97. During cross-examination, Mrs. Melville testified that she has been a Banker for

thirty (30) years. She began as a junior clerk in the Bank and is currently employed as

a Credit Administrative Officer. Between the periods of the 22nd April, 1999 to

October, 2001, she held the position of a Credit Officer and her duties included

managing a portfolio of accounts which generally consisted of business accounts. She

was also involved in granting loans.

98. It is the testimony of Mrs. Melville that an account would incur an overdraft if

cheques written on the account were honoured by the Bank and there were

insufficient funds to cover those cheques. The Bank’s decision to honour those

cheques would be based on the level of confidence the Bank has in the Client to cover

24

the overdraft and the contracts identified and/or the identified source of funds to

cover the account. That a bad Client’s account would not be allowed to go into an

overdraft. That when she took over the Company’s account, she was told that this was

a good account.

99. Mrs. Melville testified that the policy with regards to the granting of overdrafts was

based on the client’s request. That the Bank would then obtain information on the

type of business, the account operations, the contracts that are involved, and the level

of deposits entering into the account. This information would give the Bank an idea

of how much overdraft facility it can extend. When the decision is made the client

would sign a letter of offer. The letter of offer would set out the terms and conditions

of the overdraft, the amount of the overdraft and the interest rate applicable to the

overdraft facility.

100. According to the evidence of Mrs. Melville, when she took control of the

Company’s account in 1999, there was a temporary, approved overdraft limit of sixty

thousand dollars attached to its account. Also there was an overdraft balance in the

region of over three hundred thousand dollars. That there was some internal

documentation to back up this facility, namely, a credit hour documentation of credit

facilities and the internal approval for the facility. The witness was not asked to

explain what she meant by a credit hour documentation of credit facilities but the

court can take judicial notice of the fact that this is a well-known method of recording

revolving credit. When asked if there was a letter of offer for the overdraft facility for

the sixty thousand dollars, Ms. Melville testified that she did not know and did not

recall seeing one.

101. When asked if she saw any documentation allowing the overdraft to go from sixty

thousand dollars to some three hundred thousand dollars plus, Mrs. Melville testified

that what she saw from the Bank’s statements was that payroll cheques were being

processed to the account and while deposits were being made, these deposits were not

sufficient to cover the cheques.

25

102. She stated that depending on the relationship the Bank had with the client, the

Bank would bounce the cheques if there was an unsatisfactory state of affairs or the

Bank would contact the client and ask him when he would be expecting funds to

cover the overdrawn status of the accounts. That the overdrawn balance would not

have been allowed if the First Defendant did not advise the Bank that he was

expecting a deposit to cover the cheques.

103. Mrs. Melville testified that the Company’s account came up for review around

August, 2000 and by this time more than three hundred thousand dollars had been

added to the overdraft facility. That the only documentation that existed in allowing

this overdraft to escalate to six hundred thousand dollars and more was memos to the

Company’s file.

104. Further, Mrs. Melville testified that even though during the three year period the

Company’s overdraft was increasing and interest was being charged close to a quarter

of a million dollars on the facility, the First Defendant’s cheques were still being

honoured because he requested them to. That it was her manager, Mrs. Tang Yuk and

her decision to continue honouring the cheques of the First Defendant.

105. According to the evidence of Mrs. Melville she would have had several meetings

with the First Defendant in person and on the phone and it was very likely that she

would have advised him that his accounts were in disarray. Mrs. Melville testified

that she could have told the First Defendant that he should get to the bottom of why

his accounts were in disarray and that his loan was not being serviced and as a result

the First Defendant had problems with his credit rating.

106. Mrs. Melville testified that she may have visited the Company’s offices once in

2000 and remembered speaking to the First Defendant. Further, that as a Credit

officer it was a part of her job to visit the premises of the customers. The Company’s

office was at the street to the back of the Bank.

26

107. Further, Mrs. Melville testified that her control of the Company’s account was

reassigned in October, 2001.

108. It is the testimony of Mrs. Melville that a guarantor would be held liable for

existing specifics that he would have signed. That he is advised that he is taking on

the responsibilities of a guarantor. Mrs. Melville testified that the Bank now has a

strict policy of independent legal advice, however, this was not the case in the past.

Further, it is the policy of the Bank to keep the guarantor informed at all times as to

what was going on with the facility that they stood as a guarantor for. She testified

that a copy of the letter of offer and promissory note of $815,000.00 as well as the

letter dated 22nd February, 2001 which informed the First Defendant of the compound

interest on the overdraft facility was not sent to the guarantors for the 1998 mortgage

(Fitzroy and Elise). That she did not know if a copy of those documents should have

been sent to the guarantors but that they should have been at least advised of the

facility. Further, that she did not have any evidence that the guarantors, Fitzroy and

Elise were so advised and that this was an unprofessional action on her part.

109. Mrs. Melville testified that Fitzroy and Elise were continuing sureties for the new

loan of $815,000.00 to the First and Second Defendants. Further, she testified that

Fitzroy and Elise would only be liable up to $300,000.00, this sum being the original

amount which they guaranteed.

110. According to the evidence of Mrs. Melville, she does not know where the First

Defendant resides. Further, she testified that she does not know who is currently in

occupation and/or possession of the property situate at No. 3 Clarence Street, St.

James.

The First Issue

27

When does a Mortgagee become entitled to possession of mortgaged premises pursuant to a legal

mortgage

Law

111. This claim was brought under Part 69 of the CPR. Rule 69.4 (d) of the CPR states

that on a claim for possession of the mortgaged property or for payment of the

mortgage debt, the claimant must file with the claim form evidence:

“(d) where the claimant seeks possession of the mortgaged property:

(i) stating the circumstances under which the right to possession arises;

and

(ii) giving details of any person other than the defendant and his family

who to the claimant’s knowledge is in occupation of the mortgaged

property.”

112. According to the learning in Fisher and Lightwood’s Law of Mortgage, Twelfth

edition, Butterworths, page 540, paragraph29.1, the general rule is that, subject to

contractual or statutory limitations, a Mortgagee under a legal charge is entitled to

seek possession of the mortgaged property at any time after the mortgage is executed,

by virtue of the estate vested in him. A Mortgagee’s right to possession derives from

his estate or interest in the land, and is not dependent on fault: Birch v Wright (1786)

1 Term Rep 378.

113. A Mortgagee’s application for an order for possession is simply an order for the

recovery of land and is not proceedings for enforcing the mortgage. Hence an order

for possession can be made against a complete stranger to the title who happens to be

in actual possession in the total absence of the Mortgagor: Esso Petroleum Co Ltd v

Alstonbridge Properties Ltd [1975] 1 WLR 1474 AT 1481.

28

114. Quite recently in the case of Taurus Services Ltd v Emelda Thomas & Others

Civ Appeal S117 of 2013, Justice of Appeal Mendonca in delivering the decision of

the full court set out the law as relates to the rights of the Mortgagee to possession

under a common law mortgage as follows:

34. In Four-Maids Limited v Dudley Marshall (Properties) Limited [1957] Ch.

317 it was held that at common law a legal Mortgagee, unless precluded by some

term express or implied in the mortgage, has a right at any time to go into

possession of the mortgaged property by virtue of the legal interest he has therein

whether or not payment under the mortgage is outstanding. In that case Harman,

J. said (at p 320):

“The Mortgagee may go into possession before the ink is dry on the mortgage

unless there is something in the contract, express or by implication, whereby he

has contracted himself out of that right. He has the right because he has a legal

term of years in the property or its statutory equivalent. If there is an attornment

clause, he must give notice. If there is a provision that, so long as certain

payments are made, he will go into possession, then he has contracted himself out

of his rights. Apart from that, possession is a matter of cause.

35. Similarly in National Westminster Bank PLC v Skelton and Anor.

[1993] 1WLR 72, Slade, L.J. in his judgment, with which the other members of the

Court agreed, stated (at p. 77):

“In explaining my reasons, I begin by stressing that the bank’s claim is one simply

for possession, and not payment. The general rule established by long-standing

authority is that except insofar as his rights are limited by contract or statute, a

Mortgagee by way of legal charge is entitled to seek possession of the mortgage

property at any time after the mortgage is executed: see, for example, Mobil Oil

Co. Limited v Rawlinson, 43 P. & CR 221; Barclay’s Bank PLC v Tennet

(unreported), June 6th 1984; Court of Appeal (Civil Division) transcript No. 242 of

1984 and City Bank Trust Limited v Ayivor [1987] 1 WLR 1 1157.”

29

36. More recently in National Westminster Bank PLC v Ashe, supra, it was

stated (per Mummery, L.J.):

26. It is common ground that although that it is highly unlikely that Mr. and Mrs

Babai appreciated this any more than anyone else in their position would have

done, the Bank had, in law, the immediate right to take possession of the property,

if it chose to do so, as soon as the “all monies” legal charge was executed on June

8th 1989. The Bank’s right to enter into possession did not depend on the terms of

this particular mortgage, on any default on the part of Mr. and Mrs. Babai:

National Westminster Bank plc v Skelton [1993] 1 ALL ER 242 [1993] 1 WLR

72n, 77 and 81H per Slade LJ (Skelton):

“27. The Bank’s right to immediate possession is enjoyed by virtue of the statutory

equivalent of a legal term of years (less one day) conferred on the Bank by the legal

charge and stems from long established principles of English real property law

applicable to the form of legal charge used in this case. The terms of the Bank’s

“all monies” charge did not expressly restrict the right of the Bank to take

immediate possession of the Property as legal Mortgagee: see for example, Four-

Maids Ltd. v Dudley Marshall (Properties) Ltd. [1957] Ch 317 at 320, [1957] 2

All ER 35, [1957] 2 WLR 931. Skelton also states that the court will not readily

imply a term into a legal mortgage restricting the right of the Bank, as legal

Mortgagee, to take possession of the property.”

37. Although the above cases refer to a mortgage of a term of years the position

is not any different where the mortgage is of the fee simple as is the case here. The

position therefore at common law is that the Mortgagee by virtue of the legal estate

and interest vested in him, has the immediate right to possession of the mortgaged

property unless expressly or impliedly he has contracted himself out of that right.

38. In this case, as I noted, the mortgage is a legal mortgage. By the deed of

mortgage the legal estate in the fee simple became vested in the appellant subject to

the equity of redemption. By virtue of that interest the Mortgagee has a right to

30

immediate possession before the ink on the deed is dry unless expressly or impliedly

he has contracted himself out of that right. A Mortgagee may contract himself out

of his right to immediate possession by for example, an attornment clause or by a

clause restricting the right to possession until default in the payment of the debt is

made by the Mortgagor.”

115. In this case, it follows that under the common law principle, the Claimant has a

right to immediate possession unless expressly or impliedly it has contracted itself out

of that right. In that regard, the mortgage contains a provision for demand on the part

of the Claimant.

116. Paragraph 1 of the First Part of the Second Schedule of the Deed of Mortgage

dated the 27th July 1998 reads as follows:

“On demand in writing made to the Borrower to pay to the Bank the balance which

on account of the Borrower with the Bank shall for the time being (and whether on or

at any time after such demand) be due and owing to the Bank in respect of all moneys

now or from time to time hereafter owing by the Borrower or for which the Borrower

may be liable either solely or jointly with any other persons firms or companies and

whether as principal or surety for or in respect of bills or notes discounted or paid or

other loans, payments, credits or advances on banking account or otherwise made or

on account of or for the accommodation or at the request of the Borrower or for

interest discount commission or other lawful charges and expenses which the Bank

may in the course of its business charge in respect of any of the matters aforesaid or

for keeping the account of the Borrower and will thereupon also retire all bills or

notes which may for the time being under discount with the Bank and to which the

Borrower is a party either as drawer, acceptor, maker, or endorser without any

deduction whatsoever.”

117. Again, in the case of Taurus supra, Their Lordships of the Court of Appeal also

considered the issue of whether a provision for demand in such a case amounts to

31

either an expressed or implied agreement on the part of the Mortgagee to contract

itself out of its entitlement to possession. At paragraphs 39 and 40 of the said

decision, Justice of Appeal Mendonca states:

“39. I have perused the deed of mortgage and it contains no provision that

expressly restricts the Mortgagee’s right to immediate possession. Certainly none

has been referred to by the parties.

40. So far as any implied provision is concerned the Court will not readily imply

such a provision. I see no basis in this case for implication of any such term and

indeed no argument was advanced by any of the parties in that regard. I may

however say that insofar as reliance might be placed on the provision in the deed

for payment on demand it was held in Skelton that such a provision does not

suffice to show that the Mortgagee’s bank has impliedly deprived itself by

contract of the right to immediate possession. Slade, L.J. stated in the Skelton

case (at p. 77):

“Mr. Brock, in the course of his forceful argument drew our attention particularly

to clause 1(a) of the mortgage in the present case which expressed the security to

be: ‘a continuing security to the bank for the discharge on demand by the bank on

the Mortgagor’ of the liabilities of the company. This provision in his submission

by implication showed an intention to limit the bank’s right to take possession so

that it will not be exercisable until demand, which in his submission meant

“proper demand” was made. I do not feel able to read the clause in this way. The

reference to ‘demand’ certainly makes it clear that the Mortgagors will not

actually be in default until demand is made. In my judgment, however, it does not

suffice to show that the Mortgagee’s Bank has deprived itself by contract of the

right to immediate possession, which it enjoyed by virtue of the statutory

equivalent of a legal term of years conferred on it by the mortgage.”

I think that applies equally here and I agree with the force of that statement.”

32

118. On the strength of the dicta set out in Taurus and this court holds that the

principle equally applies to the facts of this case. So that in this case, the Claimant

would not have contracted itself out of the right to immediate possession of the

property.

The Second Issue

Is the guarantee in the 1998 Deed of Mortgage unenforceable due to lack of independent advice

to the sureties, Fitzroy and Elise.

119. According to the Halsbury's Laws of England Volume 23 (2013) paragraph

318, where the lender requires a surety to enter into the transaction, the surety should

be advised to take independent advice before signing the security document.

Submissions of the First and Second Defendants

120. Counsel for the First and Second Defendants argued that the 1998 mortgage is not

enforceable. It was submitted that the 1998 mortgage was signed by the sureties,

Fitzroy and Elise in circumstances in which they did not have independent legal

advice. That the transaction on the face of it was not to the financial advantage to the

sureties and there was evidence that there was a substantial risk to them in such a

transaction. Therefore, it was the contention of the First and Second Defendants that

the guarantee will not be enforceable: Barclays Bank plc v O’Brien [1993] 4 All ER

417 at page 418.

121. It was submitted that at all times the Claimant was well aware of the relationship

between the sureties and the First and Second Defendants. That the Claimant ought to

have taken reasonable steps to ensure that the sureties knew and understood the

potential risks involved.

33

122. Counsel for the First and Second Defendants submitted that the Claimant’s

witnesses, Mrs. Melville as well as Mrs. John-Virgil admitted in cross-examination

that at the time the 1998 mortgage was signed it was not the policy of the Bank to

ensure independent advice was sought.

123. Counsel for the First and Second Defendants relied on the authority of Royal

Bank of Scotland v Etridge (No. 2) and other appeals [2000] 4 All ER 449,

paragraph 79 in which it has now been established that in any case where the

guarantee is “non-commercial” it is incumbent on the bank to take certain steps which

are designed to require the guarantor to take independent legal advice before entering

into the contract of guarantee.

Submissions in reply by the Claimant

124. It is the argument of the Claimant that there was no evidence of any failure on the

part of the sureties to obtain independent legal advice.

125. Counsel for the Claimant submitted that no such issue was raised in the First

Defendant’s affidavit. Further, that the First and Second Defendants did not put

before the Court any evidence whatsoever as to whether the sureties did not in fact

obtain independent legal advice at the time of entering into the 1998 mortgage.

126. The Claimant submitted that any attempt to introduce this issue at this stage of the

proceedings, particularly in the absence of any evidence in support, must be

prohibited.

Finding

127. The record clearly shows that this issue was not raised in any form whatsoever

whether by way of affidavit or otherwise by the First and Second Defendants prior to

cross-examination. Put quite simply it is not part of their case.

34

128. During the cross-examination of Mrs. Melville, the following evidence was

elicited that a guarantor is advised that he is taking on the responsibilities of a

guarantor:

Q: What is the bank’s policy with dealing with guarantors generally.

A: The guarantors are held liable for

Q: Sorry what.

A: Guarantors are held liable for existing specifics that they sign.

Q: But, how does the bank deal with the guarantors, I want a loan of let’s say

five thousand dollars and you tell me well Montano, you know your credit

isn’t that good you need to get Mr. Seuchand’s guarantee on that, and Mr.

Seuchand’s kindly agrees to guarantee the loan of five thousand dollars.

What is your policy towards Mr. Seuchand and my loan of say five

thousand dollars.

A: He is advised of the responsibilities he is taking as a guarantor of the

facility

Q: So, you would call Mr. Seuchand in.

A: Yes

Q: And you would give him certain advice as to his potential liability. Would

you tell him that he had the right to get independent legal advice.

A: At that time, now the bank is very strict with that, at that point in time I

wasn’t aware of that.

Q: No, you wouldn’t have done that.

A: No

Q: And is it the policy of the bank or was it then the policy of the bank to keep

them in the dark.

A: No

Q: So the policy was to inform the guarantor at all times as to what was

going on.

A: Yes

35

129. Further Ms. Melville testified that it is the policy of the Bank to keep the sureties

informed at all times as to what was going on with the facility that they stood as a

guarantor for. She testified that a copy of the letter of offer and promissory note of

$815,000.00 as well as the letter dated 22nd February, 2001 which informed the First

Defendant of the compound interest on the overdraft facility was not sent to the

guarantors for the 1998 mortgage (Fitzroy and Elise). That she did not know if a copy

of those documents should have been sent to the guarantors but that they should have

been at least advised of the facility. Further, that she did not have any evidence that

the sureties, Fitzroy and Elise were so advised and that this was an unprofessional

action on her part.

130. The only evidence as relates to independent legal advice from the evidence of Ms.

Melville is therefore to be found at highlighted words contained above. Having

carefully considered the evidence in the context in which the answers to the question

was given and having regard to the flow of the evidence, the court is of the view that

when the witness stated that at the time she would not have “done that” she is

referring to the general practice of the bank in advising the Guarantor to obtain

independent legal advice and not to the specific fact of not so advising the sureties in

this case, the question posed being a hypothetical one in relation to a loan to be taken

by opposing Counsel. The other aspects of the evidence in cross-examination above

treat with the issue of informing the sureties of the increased debt and so is not

relevant to whether the sureties were advised to seek independent legal advice prior to

the execution of the 1998 documents.

131. The evidence in cross-examination from Mrs. John Virgil on the issue was as

follows:

Q: So the proper practice requires the bank to call in the guarantors and explain to

them the implications of the guarantee.

A: Yes sir.

36

Q: Then the security is perfected, the bank has called in the guarantor and explains

to the guarantor the implications of the guarantee.

A: Yes sir.

Q: At that time that is to say in 1999/2000 the bank did not advise we have it from

Mr. Melville the bank would not advise the guarantor that they were entitled to

independent legal advice.

A: Yes sir.

132. In this regard the court finds as follows. Firstly, the fact is that on the evidence the

bank did not have a practice at the material time of advising clients to obtain

independent legal advice. It is a reasonable inference to be drawn therefore that the

sureties in this case were not so advised. But that is not the end of the issue. A review

of the instructive dicta in Royal Bank of Scotland V Etridge (supra) demonstrates

that the issue of independent legal advice arises in treating with an allegation of

undue influence. In some cases the allegation may be that of a wife against her

husband, parents against their children and other relationships which give rise to

susceptibility. In some cases the very nature of the relationship will give rise to a

rebuttable presumption of undue influence.

133. In the RBS V Etridge Case, Lord Bingham of Cornwall set out at paragraphs 2

and 3, the gravamen of the banks’ duty to advise clients to seek independent legal

advice in treating with claims of undue influence as follows:

“2. The transactions which give rise to these appeals are commonplace but of

great social and economic importance. It is important that a wife (or anyone in a

like position) should not charge her interest in the matrimonial home to secure

the borrowing of her husband (or anyone in a like position) without fully

understanding the nature and effect of the proposed transaction and that the

decision is hers, to agree or not to agree. It is important that lenders should feel

able to advance money, in run-of-the-mill cases with no abnormal features, on the

security of the wife's interest in the matrimonial home in reasonable confidence

that, if appropriate procedures have been followed in obtaining the security, it

37

will be enforceable if the need for enforcement arises. The law must afford both

parties a measure of protection. It cannot prescribe a code which will be proof

against error, misunderstanding or mishap. But it can indicate minimum

requirements which, if met, will reduce the risk of error, misunderstanding or

mishap to an acceptable level. The paramount need in this important field is that

these minimum requirements should be clear, simple and practically operable.

3. My Lords, in my respectful opinion these minimum requirements are clearly

identified in the opinions of my noble and learned friends Lord Nicholls of

Birkenhead and Lord Scott of Foscote. If these requirements are met the risk that

a wife has been misled by her husband as to the facts of a proposed transaction

should be eliminated or virtually so. The risk that a wife has been overborne or

coerced by her husband will not be eliminated but will be reduced to a level

which makes it proper for the lender to proceed. While the opinions of Lord

Nicholls and Lord Scott show some difference of expression and approach, I do

not myself discern any significant difference of legal principle applicable to these

cases, and I agree with both opinions. But if I am wrong and such differences

exist, it is plain that the opinion of Lord Nicholls commands the unqualified

support of all members of the House.”

134. Lord Nichols of Birkenhead, in delivering the decision went on to state as

follows:

“13. Whether a transaction was brought about by the exercise of undue

influence is a question of fact. Here, as elsewhere, the general principle is

that he who asserts a wrong has been committed must prove it. The burden

of proving an allegation of undue influence rests upon the person who

claims to have been wronged. This is the general rule. The evidence

required to discharge the burden of proof depends on the nature of the

alleged undue influence, the personality of the parties, their relationship,

the extent to which the transaction cannot readily be accounted for by the

ordinary motives of ordinary persons in that relationship, and all the

circumstances of the case.

38

15. The case of Bainbrigge v Browne, 18 Ch D 188, already mentioned,

provides a good illustration of this commonplace type of forensic exercise.

Fry J held, at p 196, that there was no direct evidence upon which he

could rely as proving undue pressure by the father. But there existed

circumstances 'from which the court will infer pressure and undue

influence.' None of the children were entirely emancipated from their

father's control. None seemed conversant with business. These

circumstances were such as to cast the burden of proof upon the father.

He had made no attempt to discharge that burden. He did not appear in

court at all. So the children's claim succeeded. Again, more recently, in

National Westminster Bank Plc v Morgan [1985] AC 686, 707, Lord

Scarman noted that a relationship of banker and customer may become

one in which a banker acquires a dominating influence (Emphasis

mine). If he does, and a manifestly disadvantageous transaction is proved,

'there would then be room' for a court to presume that it resulted from the

exercise of undue influence.

16. Generations of equity lawyers have conventionally described this

situation as one in which a presumption of undue influence arises. This

use of the term 'presumption' is descriptive of a shift in the evidential onus

on a question of fact. When a plaintiff succeeds by this route he does so

because he has succeeded in establishing a case of undue influence. The

court has drawn appropriate inferences of fact upon a balanced

consideration of the whole of the evidence at the end of a trial in which the

burden of proof rested upon the plaintiff. The use, in the course of the

trial, of the forensic tool of a shift in the evidential burden of proof should

not be permitted to obscure the overall position. These cases are the

equitable counterpart of common law cases where the principle of res ipsa

loquitur is invoked. There is a rebuttable evidential presumption of undue

influence.

Independent advice

39

20. Proof that the complainant received advice from a third party before

entering into the impugned transaction is one of the matters (Emphasis

mine) a court takes into account when weighing all the evidence. The

weight, or importance, to be attached to such advice depends on all the

circumstances. In the normal course, advice from a solicitor or other

outside adviser can be expected to bring home to a complainant a proper

understanding of what he or she is about to do. But a person may

understand fully the implications of a proposed transaction, for instance, a

substantial gift, and yet still be acting under the undue influence of

another. Proof of outside advice does not, of itself, necessarily show that

the subsequent completion of the transaction was free from the exercise of

undue influence. Whether it will be proper to infer that outside advice had

an emancipating effect, so that the transaction was not brought about by

the exercise of undue influence, is a question of fact to be decided having

regard to all the evidence in the case.”

135. In the present case therefore, the fact that the sureties were not advised that they

ought to obtain independent legal advice or evidence of the provision thereof is

absent cannot be relied on by the Defendants so as to set aside the Guarantee

documents. Firstly, there is no allegation of undue influence by First and Second

Defendants or the Company on the sureties in 1998. Indeed it could not have been the

case of the First Defendant that he exerted undue influence on his parents and he has

not so claimed. More importantly, there is no allegation of undue influence by the

Bank in 1998. There is no such evidence by way of direct evidence or inference.

Should this have been the case one certainly would have expected that the First

Defendant would have alleged same in his affidavit but that is not the case.

136. It appears to the court that the issue of independent legal advice arose in this trial

as an afterthought based on the bare thread evidence provided by the witnesses in

cross examination. There being no allegation of undue influence, the fact that the

sureties were not advised to obtain independent legal advice in 1998, by itself when

40

taken with the evidence of Ms. Melville that she did in fact advise the sureties of their

responsibility is insufficient in the court’s view to find that the Guarantee documents

are unenforceable without more.

137. Further, there is no allegation of undue influence in the execution of the Deed of

Mortgage. As a consequence there is no evidence of execution of that Deed before

this court and none was to be expected having regard to the issues raised by the

Defence in their affidavits. It therefore follows that there is no basis in law for this

court to hold that the Guarantee clause in the said deed is unenforceable and the court

so finds.

The Third Issue

Was the consent of the Guarantors, Fitzroy and Elise and the Third Defendant necessary for the

Second Demand loan to be secured under the 1998 Deed of Mortgage.

Submissions of the First and Second Defendant

138. Counsel for the First and Second Defendants submitted that in the case of Triodos

Bank NV v Dobbs [2005] EWCA Civ 630 (24 May 2005) it was held that “where the

obligation guaranteed has been modified, and the change is not within the scope of

changes permitted by the guarantee, the bank can no longer rely on the guarantee.

This was despite provisions purporting to allow the bank to amend the underlying

obligation without prior consent from or consultation with the guarantor.”

139. It is the submission of the First and Second Defendants that there has to be a new

guarantee for a new loan. That the facts of this case show clearly that there was a new

loan. The new loan effectively subsumed the old $300,000.00 loan for which the

guarantee was originally provided.

41

140. Counsel for the First and Second Defendants further relied on the case of Holme v

Brunskill (1878)LR 3 QBD 495. The submission of the Defendants appears to have

erroneously quoted the dicta of the case. The correct dicta is as follows:

“ The true rule in my opinion is, that if there is any agreement between the

principals with reference to the contract guaranteed, the surety ought to be

consulted, and that if he has not consented to the alteration, although in cases

where it is without inquiry evident that the alteration is unsubstantial, or that it

cannot be otherwise than beneficial to the surety, the surety may not be

discharged; yet, that if it is not self-evident that the alteration is unsubstantial, or

one which cannot be prejudicial to the surety, the Court, will not, in an action

against the surety, go into an inquiry as to the effect of the alteration, or allow the

question, whether the surety is discharged or not, to be determined by the finding

of a jury as to the materiality of the alteration or on the question whether it is to

the prejudice of the surety, but will hold that in such a case the surety himself

must be the sole judge whether or not he will consent to remain liable

notwithstanding the alteration, and that if he has not so consented he will be

discharged. This is in accordance with what is stated to be the law by Amphlett,

L.J., in the Croydon Gas Company v. Dickenson 2 C. P. D. at p. 51”: Holme v

Brunskill (1877) 3 Q.B.D. 495 Page 506, Cotton LJ.

141. It is the argument of the First and Second Defendants that the alteration in this

case was staggering. That the 1998 mortgage was increased by more than 200 percent

and that the sureties were never consulted. The evidence on this is clear and

uncontroverted by the witnesses of the Claimant.

Submissions of the Third Defendant

142. It is the case of the Third Defendant that he is in possession of the property.

Therefore, it was his argument that the Claimant ought to have obtained his

permission and that the Claimant’s failure to obtain his consent for the further loan

42

would negate the Claimant’s ability to claim possession in default of payment on the

said extension of the 1998 mortgage.

Submission in reply by the Claimant

143. It is the argument of the Claimant that the consent of the sureties, Fitzroy and

Elise was not required for the Second Demand loan to be secured by the continuing

security of the property under the 1998 Deed of Mortgage. Further, that the consent of

the Third Defendant was also not necessary since he, the Third Defendant was not

involved in any degree with the mortgage.

144. Counsel for the Claimant submitted that the property was conveyed to the

Claimant by the sureties as a continuing security for such monies then due and owing

to the Claimant by the Company. That contrary to the submissions of the First and

Second Defendants, the express terms of the 1998 mortgage illustrated that this was

not a Deed of Mortgage to secure the First Demand loan alone. For this submission

the Claimant relied on the following clauses of the 1998 mortgage:

i. Clause 1 which stipulated that the borrower is to pay on demand the balance

that is “due and owing to the Bank in respect of all moneys now or from time

to time hereafter owing by the Borrower…”

ii. Clause 3 of the second part which provided that the security is “a continuing

security to the Bank notwithstanding any settlement of account or other matter

or thing whatsoever and shall not prejudice or affect any security which may

have been created…”

iii. Clause 10 which stated that “this security shall not be considered as satisfied

or discharged by any intermediate paying of the whole or any part of the

moneys owing by the Borrower to the Bank as aforesaid but shall constitute

and be a continuing security to the Bank for the payment of all moneys hereby

43

covenanted to be paid notwithstanding any settlement of account or other

matter or thing whatsoever.”

145. It was submitted that while it may have been initially stamped to secure a value of

$300,000.00, the obligations upon the Company pursuant to the 1998 mortgage were

not referable to the First Demand loan but rather any monies whatsoever due and

owing from the Company to the Claimant. That the further monies advanced to the

Company by the Claimant fell comfortably within the terms and meaning of the 1998

mortgage so as to be thereby secured. See Re Smith, Lawrence v Kitson [1918] 2 Ch.

405.

146. Counsel for the Claimant submitted that in Triodos Bank supra, the guarantee

was expressly referable to two loan agreements made with the subject Company (see

paragraph 7 of the decision of the Honourable Lord Justice Longmore). That the case

at bar, on the other hand, does not concern a Deed of Mortgage which was intended to

secure a particular loan at all. That recital B of the 1998 Deed of Mortgage stated as

follows:

“The Borrower has requested the Bank to make and/or continue to make advances

and/or give and/or continue to give accommodation to the Borrower and the Bank

may hereafter in its discretion and if so long as it shall think fit so to do make and/or

continue to make advances and/or give and/or continue to give accommodation to the

Borrower upon having the same and such other moneys as are hereinafter mentioned

secured to the Bank in manner hereinafter appearing.”

147. Thus, it is the argument of Counsel for the Claimant that Triodos Bank supra is

inapplicable to the Claimant’s claim as is the case Holme supra. In Holme, the nature

of the secured surety itself was sought to be changed, no fact of which bore any

resemblance or relevance to the case at bar.

44

148. Further, the Claimant submitted that paragraph 9 of the Honourable Lord Justice

Longmore in Triodos Bank supra provides support for a proposition which does not

assist the Defendants’ case. Paragraph 9 stated as follows:

“As a matter of principle there is no reason why the right of the Bank under clause

2.4.1 to agree amendments or variations to the loan agreement without reference to

the guarantor should be confined to amendments or variations which are expressly

contemplated by the agreement the clause must mean that anything rightly termed a

variation or an amendment is a matter which can be agreed without reference to the

guarantor.”

149. Therefore, it was submitted that while the value of the Company’s indebtedness

was varied, at no point in time did the nature of the obligation upon the Company to

re-pay such monies to the Claimant change in any way. Moreover, unlike in Triodos

Bank supra, this was not a case where a guarantee was specifically made referable to

an agreement which was ultimately replaced by another.

Finding

150. The court agrees with the submissions of the Claimant on this issue. The terms of

the Deed of Mortgage are clear. The mortgage was clearly a continuing security for

further sums provided by the Claimant whether they were in fact new loans or loans

taken to consolidate outstanding balances. In Triodos Bank NV v Dobbs Longmore

LJ stated at paragraph 16 and 19:

“16. First it is important to distinguish between a true variation of an existing

obligation and the entering of what is in fact a different obligation even though it

may purport to be no more than a variation. In that sense it is perfectly possible

(and, indeed, right) to put a “limit to the power to vary”. Secondly the proviso to

the guarantee ensured that in any event Mr Lord's mother-in-law was never going

to be liable for more than whatever she would have been liable for under the

45

guarantee in its unamended form. This is an even tighter proviso than a monetary

limit such as that provided for in Mr Dobbs' guarantee. The tightness of the

proviso would, no doubt, be one justification for giving a wide construction to the

variation provision and enabling the new arrangement to be regarded as a

variation of the old one.

In the light of all these authorities, the question that has to be answered is

whether the new 1999 Facility is an amendment or variation of the original loan

agreement which is within the purview of that original loan agreement. The fact

that the intermediate 1998 agreements were “replacements” of the 1996

agreements is not conclusive of that matter since a replacement could be

contemplated by a original agreement (as the 1998 rescheduling was) or a

replacement might be so similar to the original agreement that it can truly be said

to be a variation of it, as in the British Motor case. In this case, however, the

1999 facility was substantially different from the original two loan agreements

and even if it could be said to be, on one view, a variation or amendment of those

original 1996 agreements, it is certainly not a variation or amendment within the

purview of the 1996 agreements.”

151. The approach that this court must therefore adopt is an examination of the

agreement to determine whether the new facility which consolidated the balances

outstanding is a variation of an existing obligation or a different obligation all

together. Having done so and without repeating ad verbatim the terms of 1998

mortgage as far as the obligation undertaken by the sureties are concerned which have

been fully set out in the Claimant’s submissions above, the court is of the view that

the sureties’ agreed to have their property secured not only for the charge of the

original loan but also in respect of further advancements which were to be made by

the Company (Controlled by their son).

152. It follows that when the outstanding loan balances were consolidated because they

were being sporadically serviced and had fallen into arrears, whether by way of

46

overdrafts extended or otherwise, (as admitted by the First Defendant), the obligation

remained the same for the sureties under the clear terms of the mortgage. It must have

been within the contemplation of the parties by virtue of the terms of the mortgage in

1998 that the business of the company would require further funds from time to time

and that the Guarantee would secure the provision of those funds.

153. Had the original loan been fully liquidated in keeping with the terms as set out by

the mortgage and a wholly new loan granted the argument of the First and Second

Defendants may have carried more weight. But the evidence in this case demonstrates

that the mortgage loan had in fact gone into arrears payments having not been made

in keeping with the agreed terms of payment. In such circumstances, the provision of

additional money by the bank would have been made in respect of arrears on the

original mortgage amongst other debts owing. The obligation being the same the

security was a continuing one and was not rendered unenforceable when the loans

balances were consolidated. It follows therefore that the expressed consent of the

sureties were not required in respect of the increase in the sum secured on the asset

used for security.

154. It is not to say that the Claimant did not have a duty to inform the sureties of the

increase in the sum secured. The witnesses for the Claimant have admitted that they

failed so to do in cross-examination and have admitted quite correctly in the court’s

view that such conduct on their part was unprofessional. Be that as it may, their

conduct in that regard is however not relevant to the issue before this court in the

particular circumstances of this case.

155. In so finding on this issue the court has found the following facts in addition to

those already set out above:

a. That the First and Second Defendants and by extension the Company knew of

the existence of the overdraft facility and were aware that these facilities were

increased from time to time as the Company required to facilitate the payment

47

of cheques issued by the company, payroll and other matters in respect of

which funds were required.

b. That not only did he know about it, he also authorised it expressly and/or

implicitly by his continued use of the facility by the withdrawal and deposit of

cheques in circumstances where the account contained insufficient funds to

honour those cheques.

c. That his voluntary assignment of the proceeds from his contracts with third

parties is evidence of his acknowledgment of his indebtedness and continued

requests to the bank for the provision of financing to keep the business

running as a going concern.

d. That the First Defendant and by extension the Company enjoyed a close

commercial relationship with the Claimant so that he was readily facilitated

with advancements having regard to the needs of the Company.

e. That the First and Second Defendants knew that the mortgage facility was in

arrears or at the least they ought to have known having regard to the fact that

they were duty bound to liquidate same in the manner set out by their loan

agreement. That to say that they did not receive their bank statement because

they lived elsewhere is no defence in the context of their expressed obligation

to service the loan in the manner agreed.

f. That the original mortgage loan was in arrears and that the overdraft facility

provided was also not being serviced in the manner agreed.

g. That a proper demand was made by the bank which demand was not fulfilled

by the First and Second Defendants and/or the Company or the Sureties/

Guarantors.

h. That the First Defendant executed the promissory note in relation to the loan

provided to liquidate the consolidated balances voluntarily, being fully aware

of the purpose of the loan.

i. That the Bank was therefore entitled to act upon the continuing security.

156. In relation to the submission by the Third Defendant that his consent should have

been secured prior to increasing the amount secured, the court agrees that the Third

48

Defendant was not a party to any of the agreements or loan facilities and therefore his

consent could not have been a requirement. The fact that he resides in the premises is

of no moment to this issue.

The Fourth Issue

Submissions of the First and Second Defendants

157. According to the First and Second Defendants the new loan effectively subsumed

the 1998 mortgage for the sum of $300,000.00 for which the original guarantee was

given. It is their argument that the 1998 mortgage came to an end and the sureties

were no longer liable on this mortgage since it was effectively paid off by the new

loan of $815,000.00. Therefore, there was no money owed on the 1998 mortgage and

the executors of the estates of the late Fitzroy and Elise would be entitled to have the

release of the 1998 mortgage.

158. It is therefore the contention of the First and Second Defendants that it ought to be

obvious that no claim for possession can be made or allowed to be made on a

mortgage that has been paid off. That the uncontroverted evidence from all sides is

that the original loan for which the mortgage was made was paid off by the new loan.

Submissions of the Third Defendant

159. Counsel for the Third Defendant submitted that any refinancing performed by the

Claimant was not done following proper banking practices/procedures and effectively

released the guarantee. Therefore, the Claimant was under an obligation to formally

release the guarantee and the mortgage.

Submissions of the Claimant in reply

49

160. Counsel for the Claimant submitted that it is not in dispute that the monies

derived from the Second Demand Loan of $815,000.00 were used to pay of the First

Demand loan of $300,000.00, but this was certainly not equated with the discharge of

the 1998 Deed of Mortgage.

161. As illustrated above, it is the contention of the Claimant that the Second Demand

loan remained unpaid and protected since it was made by the continuing security of

the 1998 Deed of Mortgage.

162. The Claimant, as a matter of record, denied the Third Defendant’s submissions in

fact and in law. The Third Defendant failed to put forward any evidence of the

alleged banking practices to which he referred and/or any authority in law for

asserting a failure to comply with the same and to show how failing to comply with

these banking practices had the effect of releasing the guarantees.

Finding

163. This issue is inextricably linked to the court’s finding on the Third issue supra. It

follows that the court having found that the property was charged as a continuing

security, the liquidation of the original loan did not discharge the bank’s interest in

the security.

164. In relation to the submission of the Third Defendant, suffice it to say that the

failure to inform the sureties that the liability had increased does not provided a basis

for holding that the mortgage had been discharged and the court so finds. Such

wanton disregard for the sureties may have been unpalatable as a matter of disclosure

and banking courtesy and/or not in keeping with best practices (of which there is no

evidence before this court) but the property had been pledged as a continuing security

therefore it would have been clear to the sureties that they had provided security for

this purpose.

50

Fifth Issue

Can an order of possession be made against each Defendants.

Submissions of the First and Second Defendants

165. It is the argument of the First and Second Defendants that the Claimant has not

given any evidence as to who is in possession of the property and the evidence is that

the First and Second Defendants live in Tobago. That the Claimant might want to

pursue its claim against the actual occupier of the property.

Submissions of the Third Defendant

166. It is the argument of the Third Defendant that he is in possession of the property

since he inherited it from his mother, Elise. That the First and Second Defendants are

not in possession of the property. It is therefore the contention of the Third Defendant

that the burden of proof laid with the Claimant to elicit and lead this evidence and

since the Claimant failed to do such contrary to Rule 69.4(d) of the CPR, the

Claimant’s case should fail. Further, that recovery of possession of the property

cannot lie against him, the Third Defendant.

Submissions in reply by the Claimant

167. Counsel for the Claimant submitted that prior to the commencement of the trial of

these proceedings Counsel for the First and Second Defendants sought to rise as a

point in limine, the allegation that the First and Second Defendants were not in

occupation of the property and that the Claimant’s claim should fail on this basis

alone.

51

168. According to the Claimant it was brought to the attention of its witness and

employee, Mrs. John-Virgil that the First and Second Defendants were in unlawful

occupation of the property. Therefore, it is the Claimant’s argument that the First and

Second Defendant’s submission should fail.

169. It is the Claimant’s contention that the First and Second Defendants by way of the

First Defendant’s affidavit did not deny that they were not in possession of the

property.

170. Further, it is contended that Counsel for the First and Second Defendants sought

to rely on the First Defendant’s statement that he, the First Defendant resides in

Tobago in an attempt to say that if the First and Second Defendants reside in Tobago,

they cannot occupy the property. Counsel for the Claimant argued that this contention

of the First and Second Defendants did not make sense since their residence and

occupation would be independent of each other.

171. Moreover, Counsel for the Claimant submitted that Mrs. John-Virgil clearly

explained the circumstance in which the Claimant became aware of the First and

Second Defendants’ occupation of the property. That she was unshaken in cross-

examination relative to this point and that the First and Second Defendants have put

no evidence to contradict what she has said.

172. Counsel for the Claimant further submitted that the Third Defendant has failed to

establish any prior or valid right to possession of the property. That the Third

Defendant’s alleged right to possession stems from his mother’s Will in which he was

gifted the property. According to the Claimant, this benefit however remains subject

to the provisions of the mortgage in light of its priority and the fact that the legal title

to the property had already been conveyed to the Claimant. Further, that as a result of

the joining of himself to these proceedings, he, the Third Defendant has exposed

himself to be bound by any order of possession made by this Court against him as a

Defendant and as an admitted occupier.

52

173. Moreover, it is the argument of the Claimant that the Company defaulted in its

obligation under the Deed of Mortgage, thereby giving rise to the Claimant’s right to

exercise its powers as Mortgagee of the property. That the evidence before the Court

upon which the First and Second Defendants rely, included statements in respect to a

Current Account and a new Current Account showing the overdrawn balance

thereupon.

174. That despite certain statements made by the First Defendant in his affidavit, the

First and Second Defendants have put no evidence before the Court in support of their

view that the Claimant’s records were incorrect or that they did not default in their

obligations to re-pay the monies advanced to them on the Second Demand Loan.

175. Counsel for the Claimant submitted that Mrs. Melville’s affidavit is pellucid when

she stated that prior to the consolidation, the Current Account of the Company

became so far in overdraft that the Claimant stopped authorising further deductions,

including the standing order. That the obvious inference was that the stoppage of such

payments would no doubt explain the seventeen month gap for payments reflected in

the first table of the document exhibited as “KM9” (the summary sheet of the history

of the 1998 mortgage between 1998 to 2003 supplied by the Claimant to the First and

Second Defendants).

176. It is the submission of the Claimant that the evidence in respect of the Current

Account and the new Current Account elicited from the First Defendant during cross-

examination depicted that the First Defendant knew very well that the Company had

defaulted in its obligations to re-pay the Claimant for monies advanced to it.

177. Counsel for the Claimant submitted that the First Defendant made a valiant

attempt to suggest that the Second Demand loan was taken under duress. The

Claimant denies that the statement attributed to Ms. Tang Yuk ever took place.

Further, that the First and Second Defendants have shown nothing about the said

statements that were illegitimate so as to constitute actionable duress and justify their

avoidance of the effect of the security. See Universe Tankship Inc. of Monrovia v

53

International Transport Workers Federation [1938] 1 AC 366 at page 384 per the

Honourable Lord Diplock.

178. It was submitted that the First Defendant far from appreciating the Claimant’s

attempt to preserve his position by refinancing a non-performing account, is now

seeking to avoid the direct consequence of his financial default by making spurious

allegations against the Claimant. In this regard, it must be noted that there is no

dispute that the proceeds of the Second Demand Loan was used to discharge the First

Demand Loan.

179. Counsel for the Claimant submitted that as a result of the Company having

defaulted on its obligations under the Deed of Mortgage, the Claimant thereby

became entitled by virtue of its legal charge, to occupy and possess the property. In

this regard it was submitted that subject to contractual or statutory limitation, a

mortgage under a legal charge is entitled to possession of the mortgaged property at

any time after the mortgage is executed, by virtue of the estate vested in him. See

Birch v Wright (1786) 1 Term rep 378.

Finding

180. In the case of the Third Defendant, he has joined himself to these proceedings as a

person who is in possession of the property at the behest and through a purported gift

by one of the Sureties who is in fact a part under the Deed of Mortgage. The

Mortgage takes priority over the purported gift as the Surety would have been entitled

only to the equity of redemption the legal title having been transferred to the

Claimant. The Surety could not gift an interest which is more than she in fact held in

the property. That being the case, an order of possession can and will be made against

the Third Defendant.

181. In relation to the First and Second Defendants, the position is not quite the same.

They are not parties to the Mortgage in their personal capacity. The Claimant has

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chosen not to bring proceedings for possession against the Company which is in fact a

party to the mortgage and a defaulting party. The Claimant has chosen not to bring

suit against the estate of the sureties. Be that as it may, the Claimant is entitled to

possession of the property it being a legal mortgage. It follows that an order for

possession can only be made against the First and Second Defendants if there is

evidence that they are in possession of the property.

182. It is Mrs. John-Virgil’s testimony that Mr. Brown informed her that in attempting

to effect service on the First and Second Defendants, he was informed by a neighbour

that the First and Second Defendants did not currently reside at the property and that

the Third Defendant occupied the property with the permission of the First and

Second Defendants. That the Third Defendant frequently visited the property on

behalf of the First and Second Defendants to check the same and would spend the

night and leave the following morning. This of course is hear and is less reliable than

the direct evidence in this case. It is to be noted that the direct evidence of Ms. Virgil-

John under cross-examination is that she has information that the First Defendant

resides in Tobago. Indeed, the address set forth in his affidavit is a Tobago address.

That being said, one’s place of residence does not necessarily equate with one’s

possession of premises. Possession includes elements of exclusive control. There is

no direct evidence in this case that the First and Second Defendants are in possession

of the property. The hearsay evidence provided by Mrs. Virgil John is of insufficient

weight in the court’s view, to properly support such a finding. The direct evidence

from the Third Defendant appears to be to the contrary. This issue was traversed by

the parties from the early stages of this case but the Claimant took no steps to correct

same for reasons best known to it.

183. The court will therefore make the order sought in the Fixed Date Claim against

the Third Defendant, the Claimant having brought suit against none of the parties to

the mortgage and the Third Defendant having possession by virtue of the permission

of one of the sureties. In that regard, the learning appearing earlier on in this

judgment nears repeating. A Mortgagee’s application for an order for possession is

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simply an order for the recovery of land and is not proceedings for enforcing the

mortgage. Hence an order for possession can be made against a complete stranger to

the title who happens to be in actual possession in the total absence of the Mortgagor:

Esso Petroleum Co Ltd v Alstonbridge Properties Ltd [1975] 1 WLR 1474 AT 1481.

184. The parties will be heard on the issue of costs.

Dated the 26th day of April 2016

Ricky Rahim

Judge