Bennet Holdings Ltd v Schooner Bay Ventures Ltd

• Jurisdiction: Bahamas
• Judge: Charles J
• Judgment Date: 23 January 2020
• Court: Supreme Court (Bahamas)
• Docket Number: 2016/CLE/gen/000845

IN THE SUPREME COURT

Before:

The Honourable Madam Justice Indra H. Charles

2016/CLE/gen/000845

Between

(1)Bennet Holdings Limited

(2)Thomas Ingersoll Scheerer

(3)Arunas Pleckaitis

(4)Marilyn Pleckaitis

(5)Teofilo Victoria

(6)Maria Mercedes De La Guardia

(7)Destination Schooner Bay Ltd

Plaintiffs

and

Schooner Bay Ventures Limited

Defendant

APPEARANCES:

Mrs. Gail Lockhart-Charles with Mrs. Lisa Esfakis of Gail Lockhart Charles & Co. for the Plaintiffs

Ms. Courtney Pearce-Hanna and Ms. Philisea Bethel of Callenders & Co. for the Defendant

Contract Law — Alleged violation of Declaration of Covenants Conditions and Restrictions — Interpretation and construction of articles contained in the Declaration — Claim for loss of opportunity — Illegality — Sections 2, 4 and 40 Real Estate (Brokers and Salesmen) Act 1995

The crux of the dispute between the parties to this action is whether or not the Plaintiffs are in violation of the Declaration of Covenants, Conditions and Restrictions (“Declaration”) governing the out-island real estate development project of Schooner Bay located in Abaco.

The First through Sixth Plaintiffs are homeowners in Schooner Bay. The Seventh Plaintiff (“DSB”) is the property manager for their homes and claims to have been authorized by the Defendant to operate a property management business within Schooner Bay.

DSB asserts that it was in the process of having the homes advertised in the prestigious Coastal Living Magazine (“Coastal Living”) and placed in its Vacation Rental Program when the Defendant interfered by contacting Coastal Living and informing them that the Plaintiffs were in violation of the development's Declaration. Coastal Living reacted by putting the process on hold until the dispute between the Plaintiffs and the Defendant was resolved.

The Plaintiffs maintain that because of the authorization given to DSB by the Defendant, they are not in violation of the Declaration governing Schooner Bay and thus commenced this action against the Defendant seeking various declarations and a claim for damages for loss of opportunity and rental income.

The Defendant denies that DSB received any such authorization and challenges DSB's operation of a business managing properties in Schooner Bay on the basis that it did not obtain a business licence in accordance with the Declaration.

The Defendant counterclaims seeking various reliefs including an injunction and damages for losses on the basis that the Plaintiffs willfully violated the Declaration causing the Defendant harm. The Defendant asserts that it previously advised all home and property owners in writing that DSB and its principal Mr. James Malcolm were not authorized agents of the Defendant.

During the trial, the Defendant raised the issue of illegality and amended its pleadings accordingly to assert that DSB's operation of a property management business without the requisite real estate broker licence is in contravention of the Real Estate (Brokers and Salesmen) Act 1995 and consequently the Plaintiffs are precluded from bringing this action.

HELD: Dismissing the Plaintiffs claim as well as the Defendant's counterclaim with no order as to costs.

• 1. Although there is some confusion in the contemporaneous documentary record with regards to the various names on the licences, all parties knew that DSB was the vehicle which was incorporated by Mr. Malcolm for the conduct of his property management services. DSB is therefore a proper party to these proceedings: Metaxides and Silver Point v Swart and others [2015] UKPC 32 relied upon.

• 2. The contracts entered into between the First through Sixth Plaintiffs and DSB prior to Mr. Malcolm receiving his real estate salesman's licence (30 May 2014) are illegal contracts which are void and unenforceable pursuant to section 40 of REA. Cope v Rowlands (1836) 2 M. & W. 149 applied.

• 3. DSB's property management business was not operating under the direction, control or management of a licenced broker as mandated by REA and therefore the contracts entered into are also void and unenforceable: See sections 2 and 4 of REA.

• 4. Plain and ordinary meaning of words used in commercial contracts should only be displaced if it produces a commercial absurdity: Thompson and another v Goblin Hill Hotels Ltd [2011] UKPC 8 considered.

• 5. The exclusivity clause contained in Clause 5.5 of the Declaration was for eight (8) years from the date that the Declaration was recorded (17 June 2009) which is 17 June 2017. The Defendant cannot shift the goal post to a date at its own whim and fancy. Any amendment to that date has to be specific and a general amendment to the Declaration will not suffice. Clause 5.5 in the Declaration has expired by an effluxion of time and the Defendant cannot rely on it.

Charles J

Introduction

1 This action concerns a dispute between the Defendant (“SBV”) as property developer/vendor and owner of property and certain homeowners, the First through Sixth Plaintiffs and their property manager, the Seventh Plaintiff (“DSB”) (collectively “the Plaintiffs”) with regards to alleged violations of the Declaration of Covenants Conditions and Restrictions governing an idyllic out-island harbour community located in the real estate development known as “Schooner Bay” on the Eastern Coast of Great Abaco Island.

2 Essentially, the Plaintiffs seeks a declaration that:

• 1. DSB is entitled to operate a property management business managing the properties owned by the Homeowners in Schooner Bay;

• 2. The Homeowners have the right to place their properties in the Coastal Living Rental Pool; and

• 3. The Homeowners have the right to advertise the Schooner Bay properties owned by them in Coastal Living Magazine and other publications and to use the words “Schooner Bay” in such advertisements as part of the legal description of their properties and description of the geographical locations.

3 The Plaintiffs also seek damages for loss of opportunity to be assessed.

4 On the other hand, SBV seeks confirmation and enforcement of the restrictive covenants contained in the Amended and Restated Declaration of Covenants, Conditions and Restrictions which grants exclusive rights to market and manage rental properties in Schooner Bay and to which the Homeowners agreed. In its Counterclaim, SBV also seeks damages for losses suffered due to the third party management of the Homeowners’ properties in breach of the Declaration as well as a permanent injunction against DSB from (i) operating a business in Schooner Bay without a business licence issued by the Board; (ii) holding itself out to be an authorized representative of the Schooner Bay Development and its property owners and (iii) listing or advertising the rental, sale or property management of any Schooner Bay Properties.

5 SBV also raised the issue of illegality in its Amended Defence asserting that DSB's operation of a property management business without the requisite real estate licence is in contravention of the Real Estate (Brokers and Salesmen) Act 1995 and, consequently, the Plaintiffs are precluded from bringing this action.

Salient facts

6 Most of the salient facts are agreed by the parties. To the extent that there is a departure from the agreed facts, then what is expressed must be treated as positive findings of fact made by me.

7 SBV is a company incorporated in The Bahamas carrying on business as a property developer and vendor of property located in the development known as “Schooner Bay”.

8 The First through Sixth Plaintiffs (collectively “the Homeowners”) purchased individual lots in Schooner Bay from SBV and erected homes on their properties. The First Plaintiff's home is located on Lot U13 and is known as “Carioca”. The Second Plaintiff's home is located on Lot R2 and is known as “Zanzibar”. The Third and Fourth Plaintiffs’ home is located on Lot S4a and is known as “Crosswinds”. The Fifth and Sixth Plaintiffs’ home is located on Lot U31 and is known as “The Jib”.

9 The Conveyances of their properties are subject to the Declaration of Covenants Conditions and Restrictions dated 5 May 2009 (and recorded on 17 June 2009), as amended by an Amended and Restated Declaration of Covenants, Conditions and Restrictions dated 4 March 2010 along with a Rectification for an Amended and Restated Declaration of Covenants, Conditions and Restrictions dated 5 May 2010 and further amended by the Fourth Amendment to Declaration of Covenants, Conditions and Restrictions dated 7 March 2014 (“the Declaration”).

10 The Homeowners’ properties are being managed by DSB, a Bahamian company which was said to be incorporated on 9 January 2013 to provide property management services to the Homeowners. The principal of DSB, James Malcolm (“Mr. Malcolm”) is a Bahamian citizen and is also a homeowner in Schooner Bay. Mr. Malcolm was also a former sales and marketing employee of Lindroth Development Company (“LDC”) where he held the position of Marketing Director and Public Relations for Schooner Bay.

11 By letter dated 19 December 2013, SBV's General Counsel, Tina Gascoigne (“Ms. Gascoigne”) wrote to Mr. Malcolm terminating the Agreement which SBV had with him. The letter states:

“…. James,

This letter shall serve as notice of our intention to terminate your agreement. You will be paid through December 31 ^st the 3-month review point of your agreement with Lindroth Development Company.

The original intent of the agreement was for you to continue to help in a sales capacity while you worked on DSB. With the change in direction with sales at Schooner and new sales team on site, which was not contemplated at the time your agreement was entered into, we must now terminate your agreement. We know and understand you have already been phased out of sales program and we therefore need to formalize that.

We also hereby request that you move out of the space you have been using as your DSB office, by...