The fall and rise of Re­liance

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US$ loan dis­pute in­volv­ing Alexan­der House Ltd and the Re­liance Group

AN­OTHER IN­TER­EST­ING judg­ment com­ing out of the Supreme Court re­cently by the seem­ingly in­de­fati­ga­ble Mr Jus­tice David Batts is the case of Alexan­der House Lim­ited v Re­liance Group Lim­ited.

I re­mem­ber as a lit­tle girl watch­ing a hi­lar­i­ous Bri­tish com­edy: The Fall and Rise of Regi­nald Per­rin, which fo­cused on the tri­umphs and misad­ven­tures of the ti­tle char­ac­ter.

As I read the judg­ment and fol­lowed the me­an­der­ing of the par­ties’ for­tunes, my mind went back to that point in my child­hood when I would wait up for The Fall and Rise of Regi­nald Per­rin to see what new fate would be­fall the erst­while Mr Per­rin.

Me­an­der­ing for­tunes aside, this lat­est judg­ment by Jus­tice Batts is in­ter­est­ing and im­por­tant be­cause it ex­plores the le­gal­ity of the very fre­quent prac­tice in Ja­maica of ev­ery Tom, Dick and Harry buy­ing, sell­ing, or lend­ing for­eign ex­change cur­rency.

BACK­GROUND

The rul­ing arose from an ap­pli­ca­tion by Alexan­der House Lim­ited (the claimant) for the court to is­sue an un­con­di­tional in­junc­tion re­strain­ing the pow­ers of sale of Re­liance Group Lim­ited (the de­fen­dant) over cer­tain prop­erty owned by the claimant but mort­gaged to the de­fen­dant.

Had the claimant suc­ceeded with the ap­pli­ca­tion as worded, this would have meant that the de­fen­dant would have been re­strained from sell­ing the mort­gaged prop­erty be­fore a full trial of the mat­ter but without the ben­e­fit of the claimant hav­ing to first make a pay­ment into court – or oth­er­wise – of the sum al­leged to be owed (in this case more than US$700,000).

In a nut­shell, the facts of the case are as fol­lows:

The claimant bor­rowed monies from the de­fen­dant in US dol­lars.

The loan to the claimant was se­cured by a mort­gage over prop­erty owned by the claimant.

The claimant failed to re­pay the loan at all, or as agreed.

Aris­ing from the fail­ure of the claimant to re­pay the loan, the de­fen­dant had sig­nalled its in­ten­tions to sell the mort­gaged prop­erty.

Sec­tion 22A of the Bank of Ja­maica Act (the act) for­bids any­one other than an “au­tho­rised dealer” from car­ry­ing on the busi­ness of buy­ing, sell­ing, lend­ing or bor­row for­eign cur­rency.

The de­fen­dant was not an au­tho­rised dealer of for­eign ex­change cur­rency.

At the hear­ing be­fore Jus­tice Batts, se­nior coun­sel, Abe Dab­doub, who rep­re­sented the claimant, con­tended that the loan con­tract, hav­ing been is­sued in US dol­lars, al­beit the de­fen­dant not be­ing an au­tho­rised dealer un­der the act, was il­le­gal and, there­fore, un­en­force­able, and as such, the claimant did not need to make a pay­ment into court to ob­tain the in­junc­tion it sought.

Queen’s coun­sel Pa­trick Fos­ter, on the other hand, con­tended that the ev­i­dence in the case raised no ar­guable case of il­le­gal­ity and, there­fore, no in­junc­tion should be granted.

IIIIIIREASONABLE PROSPECT OF SUC­CESS

While the is­sue be­fore Jus­tice Batts was an in­terim ap­pli­ca­tion only, which Jus­tice David Batts

meant that it did not fall to him to make a fi­nal de­ter­mi­na­tion on the mer­its of the claimants claim, he, nev­er­the­less, had to rule on whether the in­junc­tion be­ing sought should be granted, and to this end, he had to de­ter­mine whether the claimant’s claim had a rea­son­able prospect of suc­cess at a trial.

Hav­ing con­sid­ered the law and all the ev­i­dence be­fore him, Jus­tice Batts agreed with Dab­doub that the claimant’s claim had a rea­son­able prospect of suc­cess.

The essence of the claimant’s claim was that the de­fen­dant had loaned the funds in ques­tion to the claimant, not as a one-off trans­ac­tion to a friend/as­so­ciate, but as part of a busi­ness of lend­ing for­eign cur­rency, and in so do­ing, had breached the Bank of Ja­maica Act, which in turn meant that the loan to the claimant was il­le­gal.

In ar­riv­ing at the con­clu­sion that the claimant had a rea­son­able prospect of suc­cess at trial, Jus­tice Batts ap­peared to have weighed heav­ily ev­i­dence led by Dab­doub, which was ad­mit­ted by the other side, that in ad­di­tion to the claimant, the de­fen­dant had given for­eign cur­rency loans to six other named per­sons.

Less weight ap­peared to have been ap­plied by the learned judge to ev­i­dence led on be­half of the de­fen­dant in the form of an af­fi­davit sworn to by Gordon Te­wani.

In his af­fi­davit, Te­wani de­nied that the de­fen­dant’s com­pany was in the busi­ness of lend­ing for­eign cur­rency, rather, he in­fre­quently as­sisted friends and as­so­ci­ates with loans over the years, the in­stances be­ing both in­fre­quent and iso­lated.

In his af­fi­davit, Te­wani also sought to ex­plain that four of the six per­sons named by the claimant were ei­ther friends or as­so­ci­ates. Te­wani’s af­fi­davit did not speak to the other two per­sons named by the claimant, how­ever, and this omis­sion may have hurt the de­fen­dant, as the claimant was able pro­vide an af­fi­davit from one of the two per­sons, who swore not only that he was not a friend of Te­wani, but also that at all ma­te­rial times he had formed the view that Te­wani was in the busi­ness of lend­ing for­eign cur­rency.

Hav­ing ar­rived at the con­clu­sion re­gard­ing prospects of suc­cess, and be­ing sat­is­fied with other key in­gre­di­ents nec­es­sary to grant an in­junc­tion, Jus­tice Batts, there­fore, pro­ceeded to grant the claimant’s re­quest for an in­junc­tion re­strain­ing the sale of the real es­tate in ques­tion.

PAY­MENT INTO COURT

While Dab­doub was able to per­suade the judge to the view that an in­junc­tion should be granted, it was the sub­mis­sions of Fos­ter, on the mat­ter of pay­ing the dis­puted sum into court, that the learned judge clearly found more con­vinc­ing.

On the ques­tion of pay­ing the dis­puted sum into court or oth­er­wise, Dab­doub had es­sen­tially ar­gued that the mort­gage in­stru­ment was il­le­gal and un­en­force­able and, there­fore, not only should an in­junc­tion be granted, but it should be granted without any pay­ment into court.

But Fos­ter had ar­gued that even if the loan con­tract was il­le­gal, that did not nec­es­sar­ily mean it was un­en­force­able and, there­fore, to pre­serve the de­fen­dant’s po­si­tion, if an in­junc­tion was deemed nec­es­sary, a pay­ment into court should also be or­dered.

While Jus­tice Batts clearly grap­pled with Fos­ter’s sub­mis­sion in this re­gard, and did ad­mit that the mat­ter was not without dif­fi­culty, he pro­ceeded to give Fos­ter the nod over Dab­doub on this score.

His Lord­ship, there­fore, ul­ti­mately or­dered that the de­fen­dant be re­strained from ex­er­cis­ing its pow­ers of sale over the mort­gaged prop­erty, but only upon the pay­ment by the claimant into court or into a joint in­ter­est-bear­ing ac­count, the sum of US$747,908.51, on or be­fore Au­gust 12, 2016,

Les­son to be learnt? Per­sons who buy, sell, loan, etc, for­eign cur­rency without be­ing an au­tho­rised dealer un­der the Bank of Ja­maica Act do so at the peril of their re­turn on in­vest­ment be­ing oblit­er­ated for want of le­gal­ity.

I

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