Hotel De Health (Caribbean) Inc. v James Ronald Webster and another HCVAP 2008/004

Transcription

1 Page 1 Eastern Caribbean Supreme Court Reports/ 2010 / Anguilla / Hotel De Health (Caribbean) Inc. v James Ronald Webster and another - [2010] ECSCJ No. 379 [2010] ECSCJ No. 379 Hotel De Health (Caribbean) Inc. v James Ronald Webster and another HCVAP 2008/004 EASTERN CARIBBEAN SUPREME COURT; COURT OF APPEAL; ANGUILLA Rawlins, C.J., Baptiste, J.A., Gordon, J.A. [Ag.] 17 November August 2010 Mr. Mark Brantley with Ms. Dahlia Joseph for the Appellant Mrs. Joyce Kentish-Egan with Ms. Nicola Byer for the Respondents Civil Appeal - Contract Law - agreement for the purchase of land - rectification of agreement - whether respondents prevented the appellant from exercising its right to prepay as provided for under Clause 7 of the Agreement - whether appellant's default in payment invoked clause 12 of the Agreement - whether payment of commission, in the circumstances, permissible under clause 13 of the agreement. The appellant (Hotel de Health) executed an agreement with the respondents (the Websters) to purchase from them various parcels of land. The Agreement provided for the payment of a principal sum of US$1,090,000 and interest over a period of 12 years which would yield a total sum of US$3,300,000. Clause 7 of the Agreement permitted Hotel de Health to make early payment of the purchase price. Payments eventually were short or late. Circa July 1998 the appellant's agent expressed an intention to make early payment of the balance of the purchase price as permitted under Clause 7. The Websters expressed their intention to refuse prepayment and subsequently filed an action seeking rectification of the agreement. Following this, 5 years of litigation ensued during which time no payments were made by Hotel de Health. The Websters were unsuccessful. The Websters filed a second suit in March 2005 after refusing a

2 Page 2 proposal from Hotel de Health to pay out early. There they claimed payment from Hotel de health in accordance with the provisions for default outlined in Clause 12. The learned trial judge found that the power to prepay under Clause 7 was not exercised by Hotel de Health as it made no payments after expressing the desire to invoke the clause. She also found that the appellant provided no evidence to prove the Websters prevented it from pre-paying as permitted under Clause 7. In addition, she permitted the Websters' claim for commission under Clause 13 of the Agreement. Hotel de Health appealed against her decision on 10 grounds, the most important of which for the purposes of this appeal is as follows: whether it was prevented by the Websters from exercising its rights to prepay. Held: dismissing the appeal, except that the commission was set aside and awarding costs on appeal to the respondents: 1. The learned trial judge was correct in finding that Clause 7 could only effectively be invoked by actual payment of the principal and interest then due and owing. No such payment was made. The fact that Hotel de Health expressed an intention to prepay, without actually doing so, is of no moment. 2. The court is unconcerned with the commercial prudence of Hotel de Health's refusal to pay while litigation was ongoing. Its own decision to make no further payment until adjudication of the dispute denied it the benefit of early payout. 3. The learned trial judge was correct in concluding that the power to prepay having not been exercised, the appellant stood in default of the Agreement as from 1 st August, 1998, which had the effect of invoking Clause The entitlement of the respondents to claim commission under Clause 13 of the Agreement arises only upon the commission being paid by the respondents to their solicitors. There being no evidence of such a payment, the Court cannot award commission. JUDGMENT 1 GORDON, J.A. [AG.]: The parties have been involved in hard fought litigation over these past twelve years. The issue for present resolution is a narrow one and concerns an alleged default under an agreement executed by the parties. If the appellant, Hotel de Health, is successful on the appeal it will be liable to the respondents, the Websters, in a sum of about US$900,000 plus interest. If Hotel de Health fails, its liability will be approximately three times that amount, that is, US$3,039,000 with interest from 1998, which would render its success in earlier litigation something of a pyrrhic victory. The appeal will be considered against a brief background. Background 2 By an agreement dated 26 th April, 1996 ("the Agreement"), Hotel de Health agreed to purchase from the Websters various parcels of land in Anguilla for US$1,090,000. The Agreement provided for the payment of this principal sum with interest over a twelve year period which would yield a total sum of US$3,300,000 comprising principal and interest. A schedule to the Agreement set out the amortized payment amounts and the dates that such payments would fall due. Clause 7 of the Agreement, however, permitted Hotel de Health to prepay, without penalty, the balance of the purchase price and any interest which then was due. 3 Hotel de Health made timely payments in accordance with the Agreement until November, 1997 when short, and thereafter late, payments were made. On 22 nd May, 1998 a cheque in the sum of US$157,500 was tendered against the outstanding arrears which is said to have brought payments current under the schedule, that is, up to 30 th April, The next instalment was to become due on 31 st July, At a meeting in July, 1998 between Mr. Webster and Mr. Talbot on behalf of Hotel de Health, Mr. Talbot asserted that Hotel de Health intended to make early payment of the purchase price in accordance with clause 7 of the Agreement. The Websters expressed an intention to refuse prepayment and the meeting ended without the parties

3 Page 3 reaching any further agreement as to the way forward. Hotel de Health did not pay the instalment which fell due on 31 st July, 1998; neither did it pay the balance of the purchase price and interest then due. 5 In November, 1998, the Websters filed an action seeking rectification of the Agreement to show the purchase price as being US$3,000,000 with nominal interest of US$300,000. Rectification was ordered in the court below but that decision was overturned on appeal. In the course of the litigation which lasted some five years, no further payments of any kind were made in accordance with the agreement or at all. 6 Upon Hotel de Health's success in the first action, Hotel de Health entered into discussion with the Websters to ascertain the sum payable on the basis of its right to pay out early under clause 7. That right had been vindicated on appeal. Hotel de Health proposed a payout schedule which took into account interest from August April, The Websters rejected the proposal. 7 The Websters filed the second action in March 2005, claiming payment in accordance with the default provisions under clause 12 of the Agreement, as well as prescribed costs. The Websters sought to argue, in effect, that Hotel de Health's right to pay out early had been overtaken by its default so that the whole sum of principal and interest and the additional penalties stipulated in the Agreement were then due and owing. Hotel de Health however continued to insist on its right to pay out early and asserted that it had been prevented from exercising its right by the Websters' refusal to accept payment. 8 It is against the findings of the learned judge in this second action that Hotel de Health now appeals. The decision in the court below 9 The learned trial judge observed that the single issue which arose for determination was "whether the Websters prevented Hotel de Health from exercising its rights to prepay." 1 10 The learned judge, having rejected Hotel de Health's submission that the first and second actions were inextricably connected 2 and having reviewed the evidence of Mr. Talbot on behalf of Hotel de Health and Mr. Webster, 3 noted that the clauses pertinent to the resolution of the present dispute were clauses 7 and 12. Clause 7 provides: "The balance of the Purchase Price of Nine Hundred and Ten Thousand Dollars United States Currency (US$910,000.00) will be paid to the Sellers in accordance with the terms set forth in Schedule 2 attached hereto and incorporated herein. The Purchaser agrees to pay interest at the rate of ten per cent (10%) per annum on the outstanding balance of the Purchase Price until the final payment with power to repay (sic) without penalty." Clause 12 provides: "If default be made in the payment when due of any part or instalment of principal or interest, then the whole sum of principal and interest shall become immediately due and payable at the option of the Sellers without notice. Notwithstanding any other provision of this Agreement, if default be made in the payment when due of any part or instalment of principal and interest, the Purchaser agrees to pay a delinquency charge for each instalment in default of ten (10) days in an amount equal to five percent (5%) of each instalment and any amount payable at the same time." 11 The learned judge observed that no written or verbal notice was required for the exercise of the power to "repay without penalty" under clause 7 and all that was required was payment of the balance of the purchase price. Hotel de Health made no payment of the balance (or any amount calculated as being the balance) notwithstanding the expression of an intention to prepay as early as July, It was accordingly found that the power under clause 7 was not exercised so that there could be no issue of the Websters having prevented payment. It was held further that: "There is not a scintilla of evidence from which it can be inferred that the Websters either refused or returned any payment. As Mr. Webster said in his evidence "I did not refuse any money from Mr. Talbot." Mr. Talbot accepts this as being so...i do not accept

4 Page 4 that the Websters launching of the first action in any way prevented or blocked Hotel de Health from pre paying." 4 12 With respect to the application of clause 12, the learned judge found that: "Having arrived at the conclusion that power to prepay was not exercised nor had the Websters prevented its exercise, it follows that Hotel de Health has been in default of making the instalment payments under the Agreement as from 1 st August 1998 and has continued in default. This default triggers the operation of Clause 12 of the Agreement which provided that the whole sum of principal and interest has now become due and payable." 5 13 Having decided that Hotel de Health was in default, the learned judge also considered the Websters' claim to US$300,000 as collection commission under clause 13 of the Agreement. Clause 13 provides, in effect, that in the event of default by Hotel de Health the latter was to pay the Sellers' legal cost and "any other costs of collection by way of commission...paid by the Sellers." 14 The learned trial judge observed that commissions were recognised and chargeable in the various states and territories of the jurisdiction 6 and took judicial notice of the fact that it was the norm throughout the OECS jurisdiction to charge a collection fee based on 10% of the amount of the debt claimed and collected. Noting the argument of Hotel de Health that there was no evidence that such commission had been "paid" as required by clause 13, the learned judge opined that it was not open to Hotel de Health to pry into any fee or commission arrangements in place between the Websters and their solicitors, and found further that "there is nothing preventing the solicitor upon obtaining judgment from charging a sum by way of commission on collection of the judgment debt as contemplated by the Agreement." 7 The trial judge held therefore that there was no good reason for disallowing the claim for commission once it was in keeping with the approved rate and practice of the Anguilla Bar Association. 15 Hotel de Health was accordingly held liable to pay: (i) US$2,895,000, being the full balance of principal and interest owed pursuant to clause 12; with interest at a rate of 5% from 1 st August, 1998 until payment; (ii) US$144,750, being delinquency charges equal to 5% of each default instalment pursuant to clause 12; (iii) Such sum by way of commission as accords with the approval and practice of the Anguilla Bar Association, as contemplated by clause 13; and (iv) Prescribed costs under CPR 65.5(2). The appeal 16 Hotel de Health has appealed on some 10 grounds. The central issue however remains "whether the Websters prevented Hotel de Health from exercising its rights to prepay." 17 Counsel for the appellant submits that insofar as Hotel de Health had invoked its right to prepay in July 1998, which was refused by the Websters, and the right to prepay subsequently challenged in litigation, time could not run for the purpose of the accrual of interest under the Agreement and recourse could not be had to the default provision under clause I agree with the learned judge's finding that clause 7 could only effectively be invoked by the actual payment of the principal and interest then due and owing. The parties are agreed that no such payment was made. The fact that Hotel de Health expressed an intention to prepay and the Websters apparently expressed an intention to refuse such prepayment, is of no moment. 19 Further, as found by the learned judge, the filing of the first action to obtain rectification of the Agreement cannot be said to have operated to prevent Hotel de Health from making prepayment. It was open to Hotel de Health, at any time,

5 Page 5 to pay the sum it alleged to be due into court or into an escrow account. Instead, Hotel de Health was determined not to commit itself to the course it advocated was legally open to it under clause 7 and took neither precaution. 20 Learned counsel for the appellant also sought to persuade this court that the learned judge failed to address her mind to the fact that the second action effectively results in the successful use by the Websters of litigation so as to guarantee to them US$3,300,000, the sum which they failed to obtain in the first action; whether or not that was the objective, that, undeniably, stated counsel was the result. I note that counsel for the appellant sought to strike out the claim in these proceedings as an abuse of process, but that application failed. No similar challenge was raised in respect of the amended claim. The appellant cannot therefore now seek to raise this issue on appeal. It cannot be gainsaid, in any event, that any such attempt on the part of the Websters to circumvent the ruling in the first action could have been thwarted by a simple act on the part of Hotel de Health, that is, payment. It is noteworthy that even in 2005, when Hotel de Health's right to prepayment stood vindicated by the decision of the court of appeal in the first action, no payment was made or attempted to be made. 21 It was strongly argued that Hotel de Health took a commercially prudent decision by making no payment until final resolution of the dispute. Counsel argued that Hotel de Health ought not to be penalised for exercising its option as it did while the Websters are allowed the benefit of litigating with impunity. Notably, counsel could provide no authority for the proposition that the court ought to address its mind to the commercial prudence of a party's actions in respect of an alleged breach of contract. The court can no more be concerned with such matters than with rescuing a party from a bad bargain. 22 With the greatest of respect to counsel for the appellant, it is not the decision of the court, or indeed the posture of the Websters, which has denied Hotel de Health the benefit of the early payout. Rather it was occasioned by their own decision to make no further payment under the Agreement until final adjudication of the dispute. Hotel de Health cannot at once claim to be entitled to the benefit of the disputed sums with the corresponding disadvantage to the Websters and thereafter claim to be entitled to have interest waived. Such an approach is entirely inconsistent and no more accords with the interests of justice. 23 In the premises, the learned judge properly held that the power to prepay was not exercised. Therefore, Hotel de Health was in default of the Agreement as from 1 st August 1998, which triggers the operation of clause 12. Counsel for Hotel de Health submits that the Websters' construction of clause 12 to require accelerated payment in the event of default is incorrect, and seeks to bolster this contention by recourse to the court of appeal's ruling in the first action. 8 This is misguided, as the court specifically declined to make a finding on the issue of default In my view, clause 12 is clear and unambiguous. It requires, upon default by Hotel de Health, payment of the whole sum of principal and interest. Pursuant to clause 12, the Websters are also entitled to claim delinquency charges at the specified rate. I accordingly uphold the findings of the learned judge in this regard. 25 Notably, the appellant's challenge to the applicability of the default provisions includes a challenge to the Webster's entitlement to commission. Whereas the Agreement clearly contemplated the payment of commission upon default, such entitlement to claim arises only upon the commission being paid by the Websters to their solicitors. There being no evidence of payment, the court cannot award commission pursuant to clause For the foregoing reasons, I would dismiss the appeal. Accordingly, the decision of the learned judge is affirmed, except that the declaration of entitlement to commission is set aside. Costs on the appeal are awarded to the respondents, the Websters, which is limited to two thirds of the prescribed costs awarded in the court below in accordance with CPR 65.13(b). Michael Gordon, QC Justice of Appeal [Ag.]

6 Page 6 I concur. Hugh A. Rawlins Chief Justice I concur. Davidson Kelvin Baptiste Justice of Appeal 1 At para. 4 of the judgment 2 At para. 6 of the judgment 3 At paras of the judgment 4 At para. 13 of the judgment 5 At para. 14 of the judgment 6 Watts & Associates v George Knowles Antigua and Barbuda ANUHCV 1995/0037, considered and distinguished 7 At para. 15 of the judgment 8 Appellant's Skeleton Submissions, para Hotel de Health (Caribbean) Inc et al v Ronald Webster et al Anguilla Civil Appeal No. 8 of 2003 (delivered 14 th February, 2005), paras

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