Hackett v Inverugie Investments Ltd
| Jurisdiction | Bahamas |
| Judge | Luckhoo, P. |
| Judgment Date | 08 July 1982 |
| Neutral Citation | BS 1982 CA 23 |
| Docket Number | Civil Side No. 17 of 1981 |
| Court | Court of Appeal (Bahamas) |
| Date | 08 July 1982 |
Court of Appeal
Luckhoo, P.; Smith, J.A.; DaCosta, J.A.
Civil Side No. 17 of 1981
Mr. Mowbray Q.C. and Mr. Pyfrom for the appellant
Mr. Cecil Wallace-Whitfield and Mr. Wallace-Whitfield for the respondent
Real property - Purchase of property — Whether constructive notice of existing lease existed
The main question in this appeal turns on whether or not a lease dated 5th June 1970 granted by Myra Industries Ltd. (Myra) to the appellant Richard Hackett for a term of 99 years in respect of 30 apartments in a property called Silver Sands Hotel (originally known as Kismet Apartments) in consideration of the sum of $300,000 is valid and existing as against the respondent Inverugie Investments Ltd. (Inverugie).
Silver Sands Hotel is situated in Freeport, Grand Bahama,, and consists of two main buildings containing altogether 144 apartments erected by Myra and financed out of funds received by advanced sales of apartments at a premium before the buildings had been completed which took the form of printed contracts to grant leases for 99 years upon the completion of the buildings or where the consideration was paid by instalments, upon payment of all money due.
By November 1969 Myra were in financial difficulties. They mortgaged the land and the partly completed buildings to Alliance Services Industrial and Commercial Corporation Ltd. (Alliance) to secure the sum of $695,000 (Canadian). The mortgage deed dated 15th November 1969 in clause 4(e) prohibited Myra from leasing apartments without the consent in writing of Alliance.
By May 1970 Myra were again in dire need of funds to complete the two main buildings which at that time were 80% and 90% complete respectively.
At that time the president of Myra was Z.W. Radomski with Capps of Dawson Roberts and Co. as their lawyer, and R.S. Tower, a lawyer with Dupuch and Turnquest was the president of Alliance.
Radomski approached Hackett for a loan. Hackett at first refused but later agreed to advance $300,000 to complete the erection of the main buildings provided the money was applied to paying the contractors, tradesman and workmen. For this consideration Myra agreed to lease to Hackett 30 apartments for a term of 99 years.
By a letter dated 2nd June 1970 from Alliance to Myra signed by Tower as president of Alliance it was agreed between them to vary the terms of the mortgage as to repayment of principal and interest. It was also stated that the variation was
“subject to the following conditions:–
1. That the sum of $200,000 be paid to us (Alliance) on or by 1st September 1970
2. That all moneys received by you (Myra) on the sale of suites, whether before or after the date of this letter (save and except the 30 apartments being sold to Richard Hackett) is to be repaid directly to us in reduction of the first mortgage.
3. That on the purchase of the 30 apartments by the said Richard Hackett for the sum of $300,000 that you direct him to make payment on or by 15th June 1970 to the order of Messrs. Dupuch and Turnquest our attorneys to bona fide sub contractors, tradesmen labourers on proper written authorisation of Z.W. Radomski.”
and the letter continued:
“We would stress that the said sum of $300,000 is in no way being used to reduce our first mortgage but is being allocated towards completion of the co-operative apartment building.”
On 3rd or 4th June 1970 Hackett was shown this letter in Myra's office by Radomski and Capps but Hackett was unwilling that his $300,000 should be distributed through Dupuch and Turnquest and in the event after Radomski and Capps had gone to see Tower Hackett himself distributed the $300,000 through Myra to the contractors, tradesmen and workmen concerned in the construction of the buildings in two portions one of $150,000 in June and another $150,000 in August. The main buildings were completed in November 1970.
The 30 apartments were furnished by Myra from $60,000 provided by Hackett and there was a further sum of $30,000 for customs dues in respect thereof.
Myra acted as Hackett's letting agent and had possession of the keys of the apartments and Hackett himself occupied some of the apartments from time to time. He went into possession of the 30 apartments in 1971 and continued in possession until November 1974 when Inverugie entered the apartments and changed the locks on the doors.
As to the variation of the mortgage of 15th November 1969 set out in the letter of 2nd June 1970, the terms thereof were subsequently negotiated afresh as between the mortgagor Myra and the mortgagee Alliance and eventually agreed sometime in 1971, the variations being contained in an indenture which was executed by 25th June 1971 but back-dated to 1st July 1970. The variations in this indenture were made unbeknown to Hackett.
After the variations, Myra again defaulted on the mortgage and on 29th June 1972 Alliance served Myra with notice to pay principal and interest, otherwise Alliance would exercise its powers of sale. Myra failed to comply and in October 1974 Alliance agreed to sell the property to Gleneagles Investment Co. Ltd. (Gleneagles), clause 8 of the contract for sale dated 28th October 1974 stated:–
“It is understood certain parties may be claiming leases on portions of the said hereditaments. The vendor (Alliance) hereby represents that these leases never received the vendor's written consent and are therefore in breach of the said mortgage (between Alliance and Myra).”
On 4th November 1974 Gleneagles assigned its rights thereunder to Inverugie and the conveyance from Alliance to Inverugie was executed on 5th November 1974.
It is now common ground that Alliance did not consent in writing to the lease by Myra to Hackett of 5th June 1970. The learned judge so found and commented that ‘Hackett can only succeed in this action on the basis of estoppel by encouragement or acquiescence or what is now called “proprietary estoppel”. Having set out the principles stated by Lords Cranworth, Wensleydale and Kingsdown in Ramsden v. Dyson (1866) L. R., 1 H.L. 129 at pp. 140 - 141; 168 and 170, the learned judge went on to consider and apply the five probanda of Fry J. in Wilmott V. Barber 1880, 15 Ch. D. 96 at pp. 105, 106. The learned judge then considered the evidence, and on his findings of fact held that the first three probanda of Fry J. had been established, namely:–
- Hackett thought he was getting a valid lease not knowing at the maternal time that the consent of Alliance was required thereto in writing. 2. Hackett laid out his money on, the faith of the mistaken belief that the lease which was executed on 5th June 1970 was valid and that it would have borne fruit when the project was completed. 3. Alliance knew that their consent in writing to the lease by Myra was necessary.
The fourth and fifth probanda of Fry J. in Willmott v. Barber were:–
“Fourthly, the defendant, the possessor of the legal right, must know of the plaintiffs mistaken belief of his rights. If he does not there is nothing which calls upon him to assert his own rights.
Lastly (i.e. fifthly) the defendant the possessor of the legal right must have encouraged the plaintiff in the expenditure of money or in other acts he has done, either directly or by abstaining from his legal rights.”
As to proof of the fourth and fifth probanda the learned trial judge was of the view, quote:
“It must be established that between 3rd June and the end of August 1970 Alliance knew what Hackett was about, and during that time encouraged him to continue, either actively or passively by abstaining from asserting their own incumbent right.”
And after discussing the evidence in relation to the dicta of Lords Cranworth and Wensleydale in Ramsden v. Dyson and those of Thesiger L.J. in De Busohe. v. Alt 1878 8 Ch. D. 286 at p.314 which read:
“If a person having a right and seeing another person about to commit an act infringing upon that right stands by in such manner as really to induce the person committing the act, and who might otherwise have abstained from it, to believe that he assents to its being committed, he cannot afterwards be heard to complain of the act.”
the learned judge found:
“There is not a shred of evidence to show that during the period June to August 1970 Myra took any steps to acquaint Tower or any other agent of Alliance that Hackett had entered into the lease of 5th June. Hackett had no direct dealings with Alliance before 2nd June. He never advised Alliance after 5th June that he had taken a lease ………..
But no evidence has been led to prove that any such receipts (of payments by Hackett to contractors) were at anytime submitted to Tower or any other officer or agent of Alliance by Radomski or Capps or Hackett ……………… There is no evidence that anyone from Alliance visited the site whilst the payments were being made and as a consequence discovered that Hackett was spending money on the buildings.”
The learned judge concluded that in the absence of this evidence, “the case for Hackett collapses. He has failed to establish the fourth and fifth essentials of the estoppel by acquiescence or encouragement laid down in Willmott v.Barber” and added that it was true Alliance got the benefit of Hackett's expenditure which improved their security and that Inverugie had “in a sense reaped where they have not sown”. Finally the learned judge said: “unfortunate though it may be for Hackett, hard cases make bad law and I am obliged to observe and honour the law as I understand it.”
While the instant case has been argued primarily on the basis of the five probanda of Fry J. in Willmott v. Barber, doubts have been expressed by judges from time to time whether all five probanda are essential to the proof of estoppel by acquiescence or encouragement. Oliver J....
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