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Court rules against local commercial bank – Part III

RBTT bank now ACB GRENADA BANK is located on Wall Street in the south of the island

Attorney-at-law Derrick Sylvester has won an important case for a New Hampshire, St. George resident against a major commercial bank on the island.

High court judge Justice Raulston Glasgow ruled for Sylvester’s client, Erron Williams who was taken to court by RBTT Bank Grenada Limited, formerly known as the Grenada Bank of Commerce Limited after he defaulted on mortgage payment.

The bank took possession of the property and allegedly sold it for less than the market price.

Justice Glasgow ordered the bank to pay Williams the sum of $105,260.00 in special damages, with Interest at the rate of 3% per annum from the date of service of the claim to the date of trial, as well as Interest at a rate of 6% per annum from the date of judgment to the date of payment.

The case was a claim for monies due and owing pursuant to a mortgage between the claimant, RBTT Bank Grenada Limited, formerly known as the Grenada Bank of Commerce Limited (the bank) and the defendant, Erron Williams.

On 11th May, 2011, Williams executed a mortgage in favour of the bank in the sum of $120,000.00 together with interest at the rate of 10.5% per annum.

Williams’ property is situated at Annandale in the parish of Saint George and was used as security for the mortgage.

Williams defaulted in his repayment obligations under the mortgage and the bank exercised its power of sale under the mortgage and sold the property on 12th May 2017 for the purchase price of $49,000.00.

The bank contends that notwithstanding the sale of the property, the proceeds of sale were insufficient to satisfy the debt and claimed that Mr. Williams still owed the sum of $87,210.31 to the bank.

By letter dated 23rd August 2017, the bank informed Mr. Williams that it was seeking payment of the balance of $87,210.31 failing which it would commence legal proceedings against him to recover the sum.

The bank told the court that Williams has failed, refused and/or neglected to make payment towards the outstanding debt and claimed in court for relief against Williams in the sum of $99,104.27 together with costs.

As a public service, THE NEW TODAY reproduces in full the counterclaim made by the New Hampshire resident against the bank and the arguments put forward by both sides.

Discussion and Analysis
[28] The common law duties of a mortgagee in exercising its power of sale are well-established. Salmon LJ in Cuckmere Brick Co. Ltd and Another v Mutual Finance Ltd stated at page 966 that:

“There are some dicta which suggest that unless a mortgagee acts in bad faith he is safe. His only obligation to the mortgagor is not to cheat him. There are other dicta which suggest that in addition to the duty of acting in good faith, the mortgagee is under a duty to take reasonable care to obtain whatever is the true market value of the mortgaged property at the moment he chooses to sell it: compare, for example, Kennedy v. de Trafford [1896] 1 Ch. 762; [1897] A.C. 180 with Tomlin v. Luce (1889) 43 Ch.D. 191, 194. The proposition that the mortgagee owes both duties, in my judgment, represents the true view of the law.” (My emphasis)

[29] This principle was adopted by our Court of Appeal in Caribbean Banking Corporation v Alpheus Jacobs, where Carrington JA stated at paragraph 9 of the judgment that “there is judicial dicta that the obligation to take reasonable care to obtain the proper market value is also part of the duty to act in good faith.”

[30] The Privy Council in Tse Kwong Lam v Wong Chit Sen and others held that:

“…the mortgagee and the company had to show that the sale was made in good faith and that the mortgagee had taken reasonable precautions to obtain the best price reasonably obtainable at the time, namely by taking expert advice as to the method of sale, the steps which ought reasonably to be taken to make the sale a success and the amount of the reserve. The mortgagee was not bound to postpone the sale in the hope of obtaining a better price…” (My emphasis)

[31] The question then arises whether the bank discharged its duty to obtain a true market value of the property. The bank has put forward the following in discharge of its duty:

(1) Enlisted the independent services of Terra Caribbean Grenada (Terra), who are qualified valuators and appraisers, to value the property;

(2) Enlisted the services of Terra to list the property for sale;

(3) The property was listed and advertised for sale by Terra on its website which meant that the property was exposed to potential buyers both locally and internationally;

(4) Terra also used display flyers to advertise the property locally;

(5) The property was advertised from 6th October 2016 to on or about May 2017 when the sale was closed. During that period, Terra visited the property with four potential purchasers in order to ascertain the best price for the sale of the property.

(6) The property was sold in May 2017 for the exact value placed on it by Terra and was not done in bad faith.

Findings on the Terra Caribbean Valuation report
[32] The property was originally purchased by the defendant, Mr. Williams for $60,000.00 on 28th July, 2000. Generally, land tends to appreciate in value and in my view, barring negative circumstances, it is presumed that the property would have increased in value since its sale to the defendant in July 2000. It is noteworthy that the property was valued by Kenrick Gabriel & Associates Ltd in April 2011 for the sum of $152,460.00.

[33] Neither the bank nor Terra Caribbean Grenada have led any evidence to justify or explain the depreciation or reduction in value of the property when it was valued for $49,000.00. While the court appreciates that a valuation is “not an exact science18” and that valuations will differ in value, no sufficient justification has been provided for the depreciation in the property’s value. The valuation in this case proposes a comparative analysis of other properties in the area. But this, in my opinion, should have formed the beginning and not the totality of the assessment of the value of the property in question. Clearly, the mere fact that other properties in the area sold for between $1.80 and $2.00 should not been the end of matters. The bank’s valuers should have considered the assessment of the previous value to explain the vast differentiation in the value that was being proposed a mere 5 years later.

Duty to obtain true market value
[34] The duty to exercise reasonable care to obtain the true market value also imposes a duty to properly advertise the property for sale. This principle has been restated by our Court of Appeal in Caribbean Banking Corporation v Alpheus Jacobs, where Carrington JA [Ag.] stated at paragraph 25 of the judgment that:

“There can be little dispute that proper compliance with the bank’s statutory duties required it to advertise the sale, to describe the properties properly in the advertisements and ensure that the advertisements were sufficient in number and content to reach the appropriate market. The advertisements should also have been sufficiently in advance of the sale to permit prospective purchasers to attend the auction and the auction should have been held under reasonable conditions.” (My emphasis)

[35] With respect to the bank’s duty to properly and adequately advertise the property, I am of the view that the bank has failed to lead evidence that the property was properly advertised. Apart from the assertions that the property was placed on Terra Caribbean’s website, the bank has failed to produce in evidence the contents of the actual advertisement or flyer displaying the property on Terra Caribbean’s website. Equally, aside from the statement that the property was advertised by Terra Caribbean for approximately seven months, the bank has failed to plead the length of time that the actual advertisement was placed on Terra Caribbean’s website. Further, the bank has failed to indicate where the flyers were displayed and to whom the target audience were.

[36] Furthermore, in the affidavit of Nikisha Alexander20 (Ms. Alexander) filed in support of the bank’s case, I note that there is no evidence of the capacity in which Ms. Alexander tendered her evidence, whether on behalf of the bank as an employee or on the behalf of Terra Caribbean. CPR 30.3(1) prescribes that “…an affidavit may contain only such facts as the deponent is able to prove from his or her own knowledge.” Apart from Ms. Alexander’s statement that “the facts and matters herein deposed are true and correct and within my personal knowledge”, Ms. Alexander has failed to show that the information on the advertisements contained in her affidavit came from her own personal knowledge and information. Therefore, I am of the view that very little weight can be attached to Ms. Alexander’s evidence in relation to the discharge of the bank’s duty to properly advertise the property.

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[37] The foregoing analysis leads me to conclude and I so find that on a balance of probabilities that the bank did not take reasonable care in obtaining the true market value of the property when it sold the property in May 2017.

Relief
[38] With regard to the remedy available for the defendant, Mr. Williams, the Privy Council in Tse Kwong Lam v Wong Chit Sen and others21 stated at page 63 of the judgment that:

“Where a mortgagee fails to satisfy the court that he took all reasonable steps to obtain the best price reasonably obtainable and that his company bought at the best price, the court will, as a general rule, set aside the sale and restore to the borrower the equity of redemption of which he has been unjustly deprived. But the borrower will be left to his remedy in damages against the mortgagee for the failure of the mortgagee to secure the best price if it will be inequitable as between the borrower and the purchaser for the sale to be set aside.” (Underlining supplied)

[39] In view of the fact a sale has been made to a purchaser for value without knowledge of the bank’s missteps, it will not be proper to set aside the sale. Mr. Williams’ relief will lie in damages which are measured in the difference between the market value at 2011 at $152,460.00 less the sale price of the property in 2017 at $49,000.00. This method is calculated based on the amount he would have received if a proper sale had been conducted. Accordingly, Mr. Williams is entitled to the sum of $105,260.00 in special damages.

My thoughts on the B M Horsford & Co. Ltd valuation
[40] On 4th October 2021, the company of B M Horsford & Co. Ltd prepared a valuation report for the property on behalf of Mr. Williams. The report states that the property was inspected on 14th August 2021 and its interest was valued as at October 2021. The report discloses that the company did not have sight of the survey plan for the property and therefore could not comment on the shape, depth and road frontage.

[41] Further, the report states that there is an incomplete concrete structure on the property which is still in the initial stage of construction. In analysing sales data with the area of the property, Mr. Horsford states that he has conducted at least four appraisals all within the 400-yards radius of the property and the average value per square foot is $6.00. Mr. Horsford is of the opinion that a fair market value of the property is in the region of $263,403.00 with a forced sale value ranging between $171,212.00 and $184,382.10.

Submissions on the B M Horsford & Co. Ltd valuation
Claimant’s submissions
[42] Counsel for the bank, Ms. Johnson notes the following from the Horsford’s valuation report:

(1) The property was inspected some four plus years after it was sold by the bank;

(2) Mr. Horsford was not provided with the “legal property data”, that is the title deed or conveyance proving ownership of the property;

(3) The “property information” in the report failed to identify any boundaries for the property;

(4) The lot size is incorrectly stated; and

(5) The property comprises of an incomplete structure which is in its initial stage of construction.

[43] In the premises, Ms. Johnson objects to the court’s use of the valuation on the grounds that that there is no proof that what was inspected by B.M Horsford & Co. Ltd. was in fact the property which was sold. Ms. Johnson also posits that even if the property inspected could possibly be considered as the property sold, there is evidence of obvious improvements which could have affected the assessed value.

Defendant’s submissions
[44] It is the defendant’s case that, having regard to increased value of the property as appraised by Mr. Horsford in his valuation report, he remains steadfast in his contention that the bank is not able to justify the depreciation in the value of the property since the Kenrick Gabriel valuation of $152,460.00. Counsel for Mr. Williams, Mr. Sylvester commends the B M Horsford report as exhibiting the constant appreciation of the value of the property over time. Therefore, Mr. Sylvester concludes that the bank ought to have investigated the Terra Caribbean report or at the very least consult with Terra about this disparity or request another valuation report.

Analysis
[45] I note that Mr. Horsford acknowledges that he was not provided with a copy of the survey plan for the property. This, in my view, suggests that Mr. Horsford was not able to fully identify and appreciate the features of land, including its boundaries, road frontage, size and depth. Indeed, this would have affected the value he estimated for the property.

[46] Moreover, it is noteworthy that the property has an incomplete concrete structure affixed to it. Further, the report does not contain a separate value for the land and the incomplete concrete structure thereon. It is reasonable to conclude that the value of the incomplete concrete structure would have been considered by Mr. Horsford in his report in assessing the market value of the property. Indeed, I agree with counsel for the bank that the improvements to the property have certainly increased its value.

[47] Equally, the court notes that the property was valued on 14th August, 2021, some four years and three months after the property was sold on 12th May, 2017. The report was not done contemporaneously with the sale of the property. It therefore does not assist the court in determining whether the bank obtained a fair market value for the property at the time of the sale. Further, given the length of time since the sale, it is reasonable to form the view that the property would have appreciated in value since then. Therefore, having regard to the totality of the evidence, I am of the view that very little to no weight can be placed on value ascribed to the property by Mr. Horsford.

Agency
[48] Counsel for the defendant, Mr. Sylvester, in his submissions discussed the principle of agency and whether Terra Caribbean was an agent of the bank. While comprehensive, the discourse does not take the disposition of this matter much further. For one thing, it is not disputed that the bank enlisted the services of Terra Caribbean to value the property. It is the bank’s case that it utilised Terra Caribbean’s services in order to advertise and expose the property for sale to potential purchasers. Further, it is the bank’s evidence that Terra Caribbean advertised the property for seven months and showed the property to four potential purchasers22. Accordingly, in light of the above, there can be no dispute that Terra Caribbean Grenada was the bank’s agent in the conduct of the sale of the property.

General Damages and Declaratory orders
[49] Mr. Williams in his defence and counterclaim seeks both general damages and declaratory orders. General damages seek to compensate a party for non-pecuniary losses they suffered as a result of a breach in duty. In the case at bar, the defendant, Mr. Williams has not pleaded the non-pecuniary losses he suffered as a consequence of the bank’s negligence during the conduct of the sale of the property. I am of the view that special damages will provide an adequate remedy to Mr. Williams for the bank’s negligence. Indeed the Privy Council stated in Tse Kwong Lam v Wong Chit Sen and others that “…the borrower will be left to his remedy in damages against the mortgagee for the failure of the mortgagee to secure the best price if it will be inequitable as between the borrower and the purchaser for the sale to be set aside”. Accordingly, the prayers for declaratory orders and general damages for negligence, breach of statutory duty and or contract or trust or equitable duty are refused.

Conclusion
[50] For all these reasons, judgment is entered for the defendant. Accordingly, the defendant is awarded:

(1) Special damages in the sum of $105,260.00.

(2) Interest at a rate of 3% per annum from the date of service of the claim to the date of trial.

(3) Interest at a rate of 6% per annum from the date of judgment to the date of payment.

(4) Prescribed costs in accordance with CPR 65.5 to be paid within 21 days of today’s date.

Raulston L.A. Glasgow
High Court Judge
By the Court

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