IN THE HIGH COURT OF JUSTICE GARY LEGGE AND MAUREEN LEGGE. Between CHRIS RAMSAWACK AND WESTERN SHIP AND RIG SUPPLIES LIMITED

Transcription

1 THE REPUBLIC OF TRINIDAD AND TOBAGO CV No IN THE HIGH COURT OF JUSTICE GARY LEGGE 1 st Claimant AND MAUREEN LEGGE 2 nd Claimant Between CHRIS RAMSAWACK 1 st Defendant AND WESTERN SHIP AND RIG SUPPLIES LIMITED 2 nd Defendant Before the Honourable Mr. Justice Frank Seepersad Appearances: 1. Mr. Bullock instructed by Mr. Al Rawi for the Claimants 2. Mr. Sanguinette for the Defendants. Date of Delivery: 7 th July, 2015 Page 1 of 16

2 DECISION 1. In this claim the Claimants sought the following reliefs: a. A Declaration that they are discharged from further performance of the Agreement; b. A Declaration that they are entitled to retain the deposit under the Agreement; c. Damages for breach of contract; d. Interest, pursuant to section 25 of the Supreme Court of Judicature Act, for such term and at such rate as the Court deems just; and e. Further and other relief. 2. At the trial both Claimants testified and Counsel for the Defendants elected not to call the 1 st Defendant on whose behalf a witness statement had been filed. 3. Three agreements were entered into by the Defendants with each Claimant in relation to the purchase by the Defendants of lands owned by the Claimants. These agreements were as follows: a. By an Agreement in writing between the 1 st Claimant and the 1 st Defendant dated March 27 th 2010 (hereinafter referred to as the 1 st Claimant s Principal Agreement ) the 1 st Claimant agreed to sell and the 1 st Defendant agreed to buy the 1 st Claimant s one half share and interest in Lot No. 185 and Lot No. 185A for a total purchase price of THREE MILLION SIX HUNDRED AND FIFTY THOUSAND DOLLARS ($3,650,000.00). b. Clause 3(f) of the Principal Agreement provided that the 1 st Defendant was to pay to the 1 st Claimant the sum of THREE HUNDRED AND SIXTY FIVE THOUSAND DOLLARS ($365,000.00) as a deposit to the 1 st Claimant on or before 24 th March, Page 2 of 16

3 c. By an Agreement in writing between the 2 nd Claimant and the 2 nd Defendant dated March 27 th 2010 (hereinafter referred to as the 2 nd Claimant s Principal Agreement ) the 2 nd Claimant agreed to sell and the 1 st Defendant on behalf of the 2 nd Defendant agreed to buy the 2 nd Claimant s one half share and interest in Lot No. 185 and Lot No. 185A for a total purchase price of THREE MILLION SIX HUNDRED AND FIFTY THOUSAND DOLLARS ($3,650,000.00). d. By a Supplemental Agreement in writing dated 29 th March, 2010 between the 1 st Claimant and the 1 st Defendant (hereinafter referred to as the 1 st Claimant s Supplemental Agreement ) the 1 st Claimant and 1 st Defendant agreed to vary the 1 st Claimant s Principal Agreement in the following manner: i. Reduce the purchase price to THREE MILLION TWO HUNDRED AND EIGHTY FIVE THOUSAND DOLLARS ($3,285,000.00). ii. iii. The 1 st Defendant was to pay to the 1 st Claimant the sum of FIFTY THOUSAND DOLLARS ($50,000.00) as a deposit (the receipt of which was acknowledged) on or before 29 th March, The 1 st Defendant was to pay the sum of THREE HUNDRED AND FIFTEEN THOUSAND DOLLARS ($315,000.00) to the 1 st Claimant on or before 5 th April, 2010 towards the new purchase price. iv. Completion of the sale was due to take place on 30 th June, e. By a Supplemental Agreement in writing between the 2 nd Claimant and the 2 nd Defendant (hereinafter referred to as the 2 nd Claimant s Supplemental Agreement ) dated 29 th March, 2010 the 2 nd Claimant and 1 st Defendant on behalf of the 2 nd Defendant agreed to vary the 2 nd Claimant s Principal Agreement in the following manner: Page 3 of 16

4 i. Reduce the purchase price of THREE MILLION TWO HUNDRED AND EIGHTY FIVE THOUSAND DOLLARS ($3,285,000.00). ii. iii. The 2 nd Defendant was to pay to the 2 nd Claimant the sum of FIFTY THOUSAND DOLLARS ($50,000.00) as a (the receipt of which was acknowledged) on or before 29 th March, The 2 nd Defendant was to pay the sum of THREE HUNDRED AND FIFTEEN THOUSAND DOLLARS ($315,000.00) to the 2 nd Claimant on or before 5 th April, 2010 towards the new purchase price. iv. Completion of the sale was due to take place on 30 th June, f. By a Second Supplemental Agreement in writing between the 1 st Claimant and the 1 st Defendant (hereinafter referred to as the 1 st Claimant s Second Supplemental Agreement ) dated 29 th April, 2010 it was acknowledged that the 1 st Defendant had paid to the 1 st Claimant the sum of $62, and the 1 st claimant and 1 st Defendant agreed to vary the 1 st Claimant s Principal and Supplemental Agreement in the following manner: i. The purchase price was varied to THREE MILLION SIX HUNDRED AND FIFTY THOUSAND DOLLARS ($3,650,000.00). ii. The 1 st Defendant was to pay to the 1 st Claimant the sum of FIFTY THOUSAND DOLLARS ($50,000.00) as a deposit (the receipt of which was acknowledged) on or before 30 th April, iii. The 1 st Defendant was to pay the sum of FIFTY TWO THOUSAND AND FIVE HUNDRED DOLLARS ($52,500.00) to the 1 st Claimant on or before 17 th May, Page 4 of 16

5 iv. The 1 st Defendant was to pay the balance of the purchase price of THREEE MILLION FOUR HUNDRED AND EIGHTY-FIVE THOUSAND DOLLARS ($3,485,000.00) to the 1 st Claimant on or before 4 th June, v. The completion of the sale was due to take place on 4 th June, g. By Second Supplemental Agreement in writing between the 2 nd Claimant and the 1 st Defendant on behalf of the 2 nd Defendant (hereinafter referred to as the 2 nd Claimant s Second Supplemental Agreement ) dated 29 th April, 2010 it was acknowledged that 2 nd Defendant had paid to the 2 nd Claimant the sum of $62, and the 2 nd Claimant and 1 st Defendant on behalf of the 2 nd Defendant agreed to vary the 2 nd Claimant s Principal and Supplemental Agreements in the following manner: i. The purchase price was varied to THREE MILLION SIX HUNDRED AND FIFTY THOUSAND DOLLARS ($3,650,000.00). ii. The 2 nd Defendant was to pay to the 2 nd Claimant the sum of FIFTY THOUSAND DOLLARS ($50,000.00) on or before 30 th April, iii. The 2 nd Defendant was to pay the sum of FIFTY TWO THOUSAND AND FIVE HUNDRED DOLLARS ($52,500.00) to the 2 nd Claimant on or before 17 th May, iv. The 2 nd Defendant was to pay the balance of the purchase price of THREE MILLION FOUR HUNDRED AND EIGHTY-FIVE THOUSAND DOLLARS ($3,485,000.00) to the 2 nd Claimant on or before 4 th June, The Defendants did not complete the sale, and as a result, the Claimants subsequently sold the land to another purchaser and commenced this action. Page 5 of 16

6 5. After the First Supplemental Agreements were executed, the 1 st Defendant by letter dated 7 th April, 2010 wrote to the 1 st Claimant and indicated that would be able to deposit $100, as an initial payment within 6-8 weeks and the complete balance would be paid within 6-8 weeks. 6. By letter dated 8 th April, 2010 the Claimants wrote back to the 1 st Defendant and on the 17 th April, 2010 and the 1 st Defendant countersigned the said letter agreeing to the terms contained therein. The said letter stated as follows: Thursday, 08 April 2010 Attention: Mr. Chris Ramsawack Dear Chris, Gary & Maureen Legge 185 Morne Coco Road Goodwood Pard Extension Point Cumana I received your letter date 7 th April, 2010 and hasten to respond accordingly. Based upon the terms of our original agreement, I gave certain irrevocable undertakings to my creditors and variation of such proposed, compared to our original agreement signed 27 th Marc, places me in a very embarrassing and financially bound position. While I fully appreciate your position, so as not to place me in a negative light with my Bankers/Creditor, I now wish to propose the following payment plan. April 8 th.. $ 125, ) April 30 th. $ 100, ) May 17 th. $ 105, ) June 4 th $ 400, ) June 4 th.$6,970, ) Total...$7,3000,000.00) Page 6 of 16

7 The amended deposit 1 st ) 2 nd ) & 3 rd ) above totals $330, and represents a 45% down payment, of what was originally agreed, see attached, a substantial $400, payment reduction plan with varying date features. The 4 th ) payment above, would be held by, and in the name of, EC SIRJOO & CO. and would be returned to you, once the full and final payment 5) is effected June 4 th 2010 which is exactly 8 weeks from today s date as per your letter. We would require that you urgently post date 3 cheques, for the above payments 2) & 3) in my name, and payment 4) be made out to E C SIRJOO & CO which will be held in trust at his good office, while waiting on the finalization of the legal process. I have bend backwards to facilitate you tot the best of my ability, and I trust that you are cognizant of same, on reflection I feel it is only fair that you should respect me in a similar manner. Respectfully Gary Legge 7. In the said letter a payment plan was proposed that provided for the payment of $730, and the balance of the purchase price by the 4 th June. Subsequent to the 1 st Defendant s acceptance of the terms of the said letter on the 17 th April, 2010 the parties executed the Second Supplemental Agreements both of which were dated the 29 th April, Page 7 of 16

8 8. In the said agreements each Claimant acknowledged that they had received the sum of $62, and the said agreements stated that a payment of $50, was to be paid to each Claimant by 30 th April, 2010 and that the sum of $52, was to be paid by each Claimant by the 17 th May, 2010 with the balance to each Claimant in the sum of $3,485, was to be paid on or before the 4 th June, The said agreements made no reference to the payment of $400, to EC Sirjoo & Co. and the other terms of the letter of the 8 th April, 2010 were not incorporated into the Second Supplemental Agreements. All the terms of the Principal and First Supplemental Agreements were however incorporated into the Second Supplemental Agreements. 10. After the execution of the said Second Supplemental Agreements the Defendants paid $50, to each Claimant on the 30 th April, 2010 and on the 31 st May, 2010 the Defendants paid to the Claimants the further sum of $105, As at the 31 st May, 2010 the sum of $330, had been paid by the Defendants. On the 21 st June, 2010 a further payment of $50, was made and consequently as at the said date the Defendants paid the total sum of $380, By letter dated 25 th June, 2010 the 1 st Defendant informed the Claimants in writing that he could not complete the sale and requested a refund of the sum of $380, which was not returned. Thereafter, the Claimants proceed to sell the lands for $890, US in December of The uncontradicted evidence is that the Defendants failed to pay the purchase price and they breached the contract of sale with the Claimants. Accordingly, the Claimants are entitled to damages as a result of the said breach of contract. The Court, however, had to determine the appropriate quantum of damages and had to consider the aspects of damages claimed for by the Claimants as well as the effect and purport of Clause J contained in the Principal Agreements being a clause that was incorporated into the Second Supplemental Agreements. Page 8 of 16

9 Liquidated damage Clause 13. The principal agreements contained a Clause J, which expressly provided that the deposit made by the purchaser may be forfeited and retained by the vendor as liquidated damages. This clause was incorporated into each of the second supplemental agreements. Liquidated damages clauses serve a useful purpose in that they outline the obligations as between the parties and this can result in the avoidance of litigation and promotes commercial certainty. 14. In Robophone Facilities Ltd. v. Blank[1966] 3 AER 128 Diplock L.J. said at page 142: It is good business sense that parties to a contract should know what will be the financial consequences to them of a breach on their part, for circumstances may arise when further performance of the contract may involve them in loss. And the more difficult it is likely to prove and assess the loss which a party will suffer in the event of a breach, the greater the advantages to both parties of fixing by the terms of the contract itself an easily ascertainable sum to be paid in the event. Not only does it enable the parties to know in advance what their position will be if a breach occurs as to avoid litigation at all, but, if litigation cannot be avoided, it eliminates what may be the very heavy legal costs of proving the loss actually sustained which would have to be paid by the unsuccessful party. The Court should not be astute to descry a penalty clause: in every provision of a contract which stipulates a sum to be payable by one party to the other in the event of a breach by the former. 15. In Phillips (Hong Kong) Ltd. v. The Attorney General of Hong Kong [1993]UKPC 3 Lord Woolf at page 11 said: The Court has to be careful not to set too stringent a standard and bear in mind that what the parties have agreed should normally be upheld. Any other approach will lead to undesirable uncertainty especially in commercial contracts. Whether the true measure of loss is greater or small than the amount prescribed, it therefore has benefits for both parties to the contract, rather than being one-sided in its protection. Page 9 of 16

10 16. The Claimants in their submissions indicated that the Court should not consider the issue as to whether the contract between the parties made provision for the payment of damages beyond the retention of the deposit, as the Defendants never pleaded same. The Court is of the view that this argument is flawed. The agreements that defined the contractual relationship between the parties are before the Court and the Court has an obligation and duty to interpret and apply the provisions of same. 17. The wording of Clause J is clear and unequivocal. The parties agreed that the deposit may be forfeited and retained as liquidated damages for breach of contract and there was no agreement for the payment of any other sums as liquidated damages. It was within the contemplation of the parties that in the event of a breach by the Defendants, the Claimants could elect to retain the deposit paid as liquidated damages and in this case the Claimants did in fact do so and they refused to refund same when a request for a refund was made. Accordingly the Court is of the view that for the reasons outlined the Claimants are only entitled to retain the deposit that was paid as Clause J expressly outlined the sums that were to be retained as liquidated damages. The Deposit 18. The Claimants claimed that they were entitled to an outstanding deposit sum of $350, A deposit is usually paid under a contract of sale and counts as part payment of the purchase money and is also viewed as security for the performance of the contract. The contract of sale usually provides that if the purchaser fails to observe the conditions of the contract the deposit is to be forfeited to the vendor. Such a provision is not, however, absolutely necessary and unless the contract taken as a whole shows an intention to exclude forfeiture, the vendor is entitled to forfeit the deposit, if the contract is not completed because of the purchaser. In Howe v. Smith (1884) 27 Ch1 89, the Court established that a deposit is generally irrecoverable and the Board of the Privy Council in Page 10 of 16

11 Workers Trust and Merchant Bank Ltd. v. Do Jap Investments Ltd. (1993) AC 573 held that a 10% deposit was in fact customary in matters involving the sale of land. 20. It was acknowledged in the Second Supplemental Agreements that as at the 29 th April, 2010 each Claimant had received the sum of $62, and at Clause ii, each agreement expressly provided for the payment of the sum of $50, to each Claimant on or before 30 th April, 2010 and the further sum of $52, had to be paid by the 17 th May, The Defendants by virtue of the submissions filed on their behalf, accepted that these sums were treated as deposit payments. Accordingly, the Defendants under the written agreements and by virtue of their mutual agreement made a total deposit of $330, Accordingly, the Claimants are entitled to retain the said sum. The issue that had to be next considered was whether there was an agreement to pay a further $400, by way of a deposit and whether the $50, paid by the Defendants on the 21 st June 2010 amounted to a part payment of this further deposit, thereby leaving an unpaid balance of $350, On the evidence the Court found that neither Claimant truly appreciated or understood the effect of the written agreements. The said agreements may not have given effect to their actual intention however these agreements were prepared by their lawyer and they are therefore bound by the terms of same. 21. The law recognizes that in relation to unpaid portions of a deposit, the rescission of the contract by the vendor does not affect accrued rights and therefore the unpaid deposit remains payable. 22. At paragraph 24 of their Statement of Case the Claimants pleaded that the Second Supplemental Agreements were orally varied at the request of the 1 st Defendant and that it was agreed that $400, was to be paid by two installments each in the sum of $200, to be paid on the 18 th June, 2010 and on the 25 th June, 2010 it was further stated that the completion date would be extended to the 30 th June, This paragraph was admitted by the Defendants in their defence filed on the 27 th March, Page 11 of 16

12 23. At paragraph 23 of their Statement of Case the Claimant also pleaded that a cheque for $400, was in fact made payable to EC Sirjoo & Co. but that same was not encashed and the Defendants by their defence also admitted same. 24. In his witness statement, the 1 st Claimant said that the sum of $400, was due since the 4 th June, 2010 and that it was agreed that two payments of $200, would be made and that the completion date would be extended. The Court found that there was no documentary support for the Claimant s contention that any sum of $400, was due and owing as at the 4 th June, The letter dated 8 th April, 2010 provided for a payment of $400, which was to be held on trust and a cheque for $400, was in fact issued and the Second Supplemental Agreements made no provision for the payment of the sum of $400, as at the 4 th June, The Court had to determine whether the Defendants acceptance by virtue of their admission in the defence that there was an agreement to pay $400, amounted to an agreement to pay a further deposit or whether it was in fact an agreement to pay installment payments towards the purchase price. 26. The law recognizes that deposits have to be treated differently from installments, as installments may be recoverable. 27. As outlined above after the execution of the Second Supplemental Agreements, the Defendants accepted that they agreed to make two further payments each in the sum of $200, and for the completion date to be extended and subsequent to the said oral agreement they paid $50,000.00, on the 21 st June, Thereafter, they communicated their inability to continue with the purchase on the 25 th June, There is however no documentary evidence to support the Claimants assertion that the $400, was to be treated as a part of the deposit. Page 12 of 16

13 28. In the case of Hyundai Heavy Industries Co. Ltd. v. Papadapoulos (1980) 1 WLR at 1129, the House of Lords stated that a part payment (installment) would be recoverable only where it is clear from the contract that the payee will not have to incur reliance expenditure before completing his performance of the contract. In the instant case the Claimants have not adduced evidence so as to establish that any reliance expenditure, within the principles outlined in the Hyundai Heavy Industries case (supra), was incurred. The Court is of the view on a balance of probabilities that the oral agreement to pay the sum of $400, did not provide that the said sum was to be treated as a deposit payment and the said sum was in fact an installment payment. While the deposit paid of $330, was less than 10% of the purchase price, it was still a fairly substantial sum. Contracting parties are entitled to determine as a matter of contract, the quantum of the deposit and that agreed sum was $330, The sum of $350, being the balance of $400, which the Defendants agreed to pay was not due on account of the deposit but was in fact the unpaid balance on an installment on the purchase price and therefore it cannot be recovered as it does not fall within the ambit of clause J nor is it a sum that can be recovered in accordance with the principles outlined in the Hyundai Heavy Industries case. 29. The Court wishes to point out that although the $50, paid on the 21 st June, 2010 was also paid is as an installment payment, the Defendants however did not make a counterclaim and the Court can issue no order for the return of the said sum. 30. Having found that the Clause J limited the extent of damages that can be recovered, the Claimants are not entitled to recover the other sums claimed, as special damages. In the event that the Court s interpretation and application of clause J and its treatment of the agreement to pay the $400, is wrong, the Court also found that the items of special damages claimed could not be awarded to the Claimants, even in the absence of liquidated damages clause. The Court s rationale for holding same is as follows: Interest payments Page 13 of 16

14 31. The Claimants claimed interest on the mortgage payments made by them in the sum of $171, The written agreements contained no provisions whereby it was expressly stated that the Defendants would be liable for such interest charges in the event of a breach of contract. 32. In the case of Hadley v. Baxendale (1854) 9 Ex 341, the Court stated at paagraph 354: Where two parties have made a contract which one of them has broken the damages which the other party ought to receive to respect of such a breach of contract should be such as may fairly and reasonably be considered either arising naturally that is according to the usual course of things, from such breach of contract itself, or such as may reasonably supposed to have been in contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. 33. It cannot be said that the claim in relation to these mortgage interest charges is one that can be fairly and reasonably viewed as having arisen naturally or directly from the Defendants breach of contract nor is there any evidence to lead the Court to conclude on a balance of probabilities that the said charges were reasonably within the contemplation of the parties having regard to the special knowledge that the parties had in relation to such a circumstance as at the date of the contract. The letter dated 8 th April, 2010 made a general reference to financial obligations but such a reference was insufficient to bring the issue of interest on mortgage payments within the Defendants contemplation thereby making them liable for same in the event of a breach of contract. Legal Fees 34. The Claimants claimed that they expended $8, on legal fees in relation to the contract for sale with the Defendants. The Court is of the view that this sum does not fall within the ambit of rules laid down in Hadley (supra) and is not aspect of damages which arose naturally from the breach itself nor was it one that would reasonably have been within the contemplation of the parties. The incurrence of legal fees was not mandatory, the Claimants elected to retain the services of a lawyer and the Defendants were not Page 14 of 16

15 parties to the said arrangement. Accordingly, this sum cannot be recovered by the Claimants. The Court is also of the view that unlike the factual matrix that that operated in Essex.v. Daniell (1875) LR 10 CP 538, the interest on mortgage payments and the legal fees in the instanct case were not costs incurred in preparing to complete the sale with the Defendants, these fees were unilaterally incurred by the Claimants as they sought to protect and preserve their interest. Real Agent Fees 35. The Claimants also claimed the sums of $169, which it made to the Real Estate Company that facilitated the eventual sale of the lands in December This sum does not fall within the ambit of the rules in Hadley (supra) and accordingly this is not a sum that the Claimants can recover. Loss of Profit 36. The final sum claimed by the Claimants was a loss of profit being the difference between the purchase price of $7.3 million (TT) that it had with the Defendants and the $890, (US) that it received from the eventual sale and that difference was $1,649, The Court did not have the benefit of a valuation report that may have given an indication as to what the market value of the lands would have been in The Court however noted that the sale of the lands was in fact completed at $890, (US). The Board of Inland Revenue accepted stamp duty payments on a purchase price of $890, (US) and therefore treated with the said sum as being representative of the market value of the property. Accordingly if $890, (US) was the market value accepted by the BIR when the property was sold and in the absence of any other evidence to the contrary, the market value of the lands was in fact less than the purchase price that the Defendants had agreed to pay. Further there is no evidence that the sale was imposed upon the Claimants by virtue of the Defendants breach of contract, the Claimants elected to accept the sum of $890, (US) and voluntarily sold their property. There is also no evidence to Page 15 of 16

16 suggest there was a dramatic decrease in real estate values form June to December of On a balance of probabilities the Court finds that the Claimants were in fact selling the property at a price that was above market value to the Defendants and that would explain the many variations that were made to the agreements in an effort to facilitate the sale. In the circumstances it would not be fair, just or reasonable, nor would it accord with applicable principles of law to hold the Defendants liable for the sum of $1,649, For the reasons that have been outlined the Court declares that the Claimants are entitled to retain all the sums paid to them pursuant to the Agreements that were entered into with the Defendants. They are however not entitled to any of the other reliefs that were sought. Accordingly the Claimants shall retain the sum of $380, On the issue of costs the Court is of the view that the circumstances of the case justify a departure from the usual position that costs follow the event. The Claimants achieved only partial success in this action having obtained a declaration that their retention of sums received by them was justified. In the circumstances and in the exercise of its discretion, the Court orders that each party is to bear their respective legal costs. FRANK SEEPERSAD JUDGE Page 16 of 16