British American Bank (1993) Ltd v Ellis II
| Jurisdiction | Bahamas |
| Judge | Lyons, J. |
| Judgment Date | 01 September 2004 |
| Court | Supreme Court (Bahamas) |
| Docket Number | Equity Side/1375 of 2002 |
| Date | 01 September 2004 |
Supreme Court
Lyons, J.
Equity Side/1375 of 2002
Mrs. D. Stewart with Mrs. Turner for the plaintiff.
Mr. E. Lockhart for the defendant.
Real Property - Mortgagee action for vacant possession — Defendant owner of 2 lots — Defendant mortgaged lots to the plaintiff — Defendant stopped paying mortgage installments — Whether the mortgagee had a common law right to possession — Whether the prepaid installments should be treated as payments in principal or prepayments of installments — Whether the plaintiff could consolidate the mortgages — Whether the plaintiff had committed an act of misbehaviour in respect of a mortgage which could raise a serious issue to be tried — Judgment that the plaintiff had a right if possession at common law — Argument that defendant had prepaid the installments was rejected — Section 19 (2) of the Conveyancing and Law of Property Act applied to render the argument against consolidation untenable — Defendant failed to demonstrate a serious issue to be tried in respect of the mortgage — Plaintiff made out case for vacant possession.
(1) This is a mortgagee action for vacant possession.
(2) The general rule in these actions is that once the mortgagee satisfies the court that the security should be impeached, then, unless the mortgagor can show a serious issue to be tried “involving either the validity of the mortgage transaction itself or fraud on an irregularity in the exercise of the power of sale, the courts will not intervene to prevent a mortgagee from exercising his lawful rights under the mortgage deed” (see Citibank N.A. v. P. D. Major Court of Appeal 28 of 1996 at p 8).
(3) Certain facts are not in dispute.
(4) The lot in question is Lot 82, Ferguson Manors, Western District, New Providence.
(5) The defendant is the owner of Lot 82.
(6) The defendant mortgaged Lot 82 to the plaintiff.
(7) The defendant also owned, with one Patricia Jasmine Ellis, Lot 12 in Block 37, Skyline Villas Subdivision, Western District, New Providence.
(13) Lot 12 was also mortgaged to the plaintiff.
(14) On the 18 May 1989, the defendant requested the plaintiff refinance his existing mortgages being over Lot 12 and Lot 82.
(15) Patricia Ellis, for her part, agreed to this. The appropriate documentation was prepared and signed by both the defendant and Mrs. Ellis.
(16) At the request of the defendant and Mrs. Ellis, further money was advanced to them and secured by the mortgages over Lot 12 and Lot 82. Lot 12 was sold. The net amount of $95,000.00 was applied in reduction of the over all mortgage debt as was agreed by the defendant.
(17) The defendant has stopped paying the mortgage installments. On 26 October 2001 a letter of default was sent to the defendant. He has not recommenced payments.
(18) These are the salient facts, as are agreed. I will bring attention to other facts as and when necessary.
(19) The first matter to be established is that the mortgagee (plaintiff) has a common law right to possession.
(20) In National Westminster Bank PLC v. Skelton [1993] 1 All E.R. 242 at page 248, Slade, L.J. delivered in the leading judgment said: -
“The general rule established by long-standing authority is that, except in so far as his rights are limited by contract or statute, a mortgagee by way of legal charge is entitled to seek possession of the mortgage property at any time after the mortgage is executed: see e.g. Mobil Oil Co. Ltd. v. Rawlinson (1981) 43 P 8 CR 221, Barclays Bank plc v. Tennet [1984] CA Transcript 242 and Citibank Trust Ltd. v. Ayivor [1987] 3 All E.R. 241, [1987] 1 W.L.R. 1157.
In Birmingham Citizens Permanent Building Society v. Caunt [1962] 1 All E.R. 163 at 168, [1962] Ch 883 at 890 Russell, J. cited with approval a passage from the judgment of Harman, J. in Fourmaids Ltd. v. Dudley Marshall (Properties Ltd. [1957] 2 All E.R. 35 at 36, [1957] Ch 317 at 320 in which he put the matter thus:
‘… I said [in an earlier case] and I repeat, that the right of the mortgagee to possession in the absence of some specific contract has nothing to do with default on the part of the mortgagor. The mortgagee may go into possession before the ink is dry on the mortgage unless by a term expressed or necessarily implied in the contract he has contracted himself out of that right. He has the right because he has a legal term of years in the property. If there is an attornment clause, he must give notice. If there is a provision express or to be implied that, so long as certain payments are made he will not go into possession, then he has contracted himself out of his rights. Apart from that, possession is a matter of course.’
The mortgage in the present case contains no attornment clause and no express provision restricting the bank's right to take possession. Does it contain any implied provision? Having regard to the particular clauses in the mortgage instrument in Caunt's case, Russell, J. implied a provision restricting the mortgagee's right to possession until there was default on the part of the mortgagor. However, the court will not readily imply any such restriction. As Buckley, L.J. said in Western Bank Ltd. v. Schindler [19761 2 All E.R. 393 at 396, [1977] Ch 1 at 9:
‘A legal mortgagee's right to possession is a common law right which is an incident of his estate in the land. It should not, in my opinion, be lightly treated as abrogated or restricted’.”
(21) This case was approved by the Court of Appeal in Citibank v Major (supra).
(22) Mr. Lockhart, in his argument, drew my attention to clause 5 at page 10 of the mortgage. These are the default provisions. He argued that clause 5 restricts the right to possession only to those factors enumerated in clause 5 (a to b inclusive).
(23) This submission was misleading. Mr. Lockhart failed to draw the court's attention to clause 6 (page 13) of the mortgage, which preserves the mortgagee's common law powers, including by Slade, L.J. speech the right to possession “before the ink is dry” - see Harman, J. in the Fourmaids case (above).
(24) In my judgment, the mortgagee (plaintiff) has a right to possession at common law and this is preserved in the mortgage at hand. The mortgagor (defendant) must therefore satisfy the court of the test laid down by the Court of Appeal in Citibank and Major at page 8 (referred to earlier).
(25) Furthermore I am satisfied that on the evidence from Mr. Gardiner (a witness for the plaintiff) that the defendant is in default of his installments. Thus clause 5 (a) (page 10) of the mortgage is operative.
(26) The defendant argues that he is not in default. According to the authorities, which are binding on this court, he does not have to be in default for the plaintiff as mortgagee to exercise its common law right to possession.
(27) I need not consider the question of the defendant's default or otherwise. I will discuss the argument advanced by the defendant, though. It needs to be laid to rest.
(28) The defendant argues that he has prepaid all installments up to June 2006. By paying the plaintiff ninety-five thousand dollars ($95,000.00) upon the sale of lot 12 on the 7 May 1999 and by adding an earlier payment of seventeen thousand and forty-seven dollars ($17,047.00) made by the defendant on the 21 September 1998, it is argued that these should not be treated as payments in principal but as prepayments of installment.
(29) Mr. Lockhart referred the court to Clause 13 of the mortgage (at page 15). It reads: -
“(13) The Borrower may at any time without notice make additional payments in respect of the Principal Sum and such payments shall be applied by the Lender in the reduction of the Principal Sum included in each monthly installment then remaining payable hereunder.”
(30) Counsel's argument was that the clause stipulates that additional payments without notice go to the deduction of principal. Therefore any other additional payments made with notice must go, so it is argued, not to reduction of principal but to be treated as forward payments of the regular and set monthly installments.
(31) I find this an astonishing argument particularly when considering the evidence at hand,
(32) Firstly, the payment of seventeen thousand and forty-seven dollars ($17,047.00) on the 1 September 1998 was not an additional payment. The defendant's own evidence clearly show that the payment was for outstanding arrears of installments. It was a payment made in bulk representing payments the defendant had to make pursuant to his contractual obligation but he had failed to do so.
(33) The payment of ninety-five thousand ($95,000.00) dollars was made with notice. But that notice was, according to the undisputed evidence, qualified.
(34) The evidence is that the defendant and Patricia Ellis consolidated their previous loans over lot 12 and lot 82. This meant that the defendant and his wife only had to make one payment per month to cover both previous mortgages. This was a common sense approach.
(35) In February 1999, they had a pending sale of lot 12. A payout figure for lot 12 was sought. On the 12 February 1999 the plaintiff advised that the payout figure was ninety-five thousand dollars ($95,000.00). This was clearly to have been lot 12 so that it could be release free and unencumbered to the purchaser.
(36) On the 7 May 1999 the cheque for ninety-five thousand dollars ($95,000.00) was paid.
(37) This was a payment made in redemption of the mortgage over lot 12. As such, by virtue of clause 13 of the appropriate mortgage (exhibit 3 to Mr. Gardiner's affidavit of the 17 September 2002) it was to be treated as a pay off of principal. I note that clause 13 in the mortgage of lot 12 is identical to clause 14 in the subject...
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