First Bank Puerto Rico v The Scotsman Ltd et al

EASTERN CARIBBEAN SUPREME COURT TERRITORY OF THE VIRGIN ISLANDS IN THE HIGH COURT OF JUSTICE (CIVIL) CLAIM NO. BVIHCV 2013/0328 BETWEEN: FIRST BANK PUERTO RICO Claimant and THE SCOTSMAN LIMITED VIOLA LLOYD BEVERLY DIAN TOOMAN Defendants Appearances: Mrs. Hazel-Ann Hannaway-Boreland for the Claimant Mr. Glenroy Forbes and Ms. Tamara Hodge for the Defendants 2014· July 16'h 2014 October 281h JUDGMENT

[1]BYER J.: In 2000 the Frrst named Defendant purchased the unexpired term of a fifty year lease dated the 291h May 1980 from the Second named Defendant

[2]The lease was in relation to a portion of a parcel of land registered as Parcel 93/1 Block 2638B West Central Registration Section (""the Property"") measuring twenty one thousand two hundred and n1nety seven square feel (21.297 sq.fl).

[3]In 2000 at the trme that the F1rst Defendant acquired the leasehold interest Jn the Property, he also purchased a building that had been constructed on the land from the previous Lessee Little Apple Bay Company for the sum of $389,500.00 wh1ch sum he originally borrowed from Barclays Bank PLC

[4]In 2006, without any reason given as to why, the First Defendant refinanced his outstanding liability to Barclays Bank PLC with the Claimant Bank in the sum of $260,000.00 and executed a charge as Debenture Instrument #425/2006 and a charge was placed on the leasehold interest of the First Defendant in the said Property which was registered as 272512006 in the Land RegiStry and dated 4th October 2006 ("the charge') in favour of the Claimant

[5]During the currency of the lease and the charge in favour of the Claimant, the freehold interest was conveyed to the Third Defendant herein on 2nd June 2008. which led to the inevitable result of her becoming proprietor subject to the lease in favour of the First Defendant.

[6]From the evidence that was led before the Court at tnal of the matter, it was apparent that the First Defendant who never appeared in the matter was consistently late or entirely failed to pay the rent due to the Third Defendant prior to her becoming registered proprietor as lawful attorney for the Second named Defendant and then in her own right subsequent to 2008

[7]As a result, the Third Defendant relying on the terms of the lease on 8th March 2012, gave the First named Defendant notice to quit and deliver up the leasehold interest 1n the property with an expiration date of 14th September 2012

[8]Subsequent to the service of the notice to quit and before its expiration, the First Defendant also fell into arrears under his loan agreement with the Claimant. [9) By letter dated 13th April 2012 the Claimant wrote to the Ftrst Defendant seeking payment of the outstanding sums, all of which was at this time unknown to the Thtrd Defendant.

[10]The First Defendant failed to make any payments to the Claimant or the Thrrd Defendant and at some time between May and June 2012, the First Defendant was no longer operational and its Managing Director Mr. Alan Anderson had absconded from the Territory.

[11]Subsequent to the notice to quit having expired, the Third Defendant entered into possession of the Property and effected termination of the leasehold interest of the First Defendant and proceeded to undertake repairs of the said building on the leased premises. [12[ Some two weeks subsequent to the re-entry effected by the Third Defendant, on the 25'" September 2012, the Claimant's representative attended at the property upon the Claimant utilizing its receivership powers under its charge and met the Third Defendant in possession of the same effecting repairs.

[13]Upon the Claimant's real1zat1on that the Third Defendant had entered the premises and was relying on her rights under the lease agreement for forfeiture the Claimant made overtures to the Third Defendant during the course of the latter part of 2012 and the first half of 2013 in an apparent attempt to settle the matter. [14[ Specifically between March 2013 and the filing of the claim some six months later in November 2013. the Claimant sought to cure the arrears to avoid forfeiture but the sa1d plan was not accepted by the Third Defendant who up to the tnal dale remained in possession of the said Property.

[15]The Cla1mant therefore sought the intervention of the Court to forestall the complete forfe'1ture of the lease and filed the'1r claim by F1xed Date Claim Form on 14th November 2013.

[16]The First named Defendant was never served with the process and the Second Defendant who had no interest in the property at time of filing never participated in the proceedings and subsequently died.

[17]The Claim of the Claimant was therefore as follows (i) An order pursuant to the Registered Land Ordinance, Cap 229 s. 57 against the Second and Third Defendant for relief from forfeiture; (ii) An order pursuant to the CPR Part 66(1)(d) against all Defendants to deliver possession of the parcel9311 Block 26388 West Central Registration Section (Property) to the Cla1mant tor the execut1on of the charge registered as Instrument Number 272512006 (Charge); (iii) An order for the Claimant to execute such charges, guarantees and other encumbrances entered into between the parties by the sale of the Property pursuant to CPR Part 66(1)(g); (iv) Judgment summarily pursuant to CPR Part 66:3; (v) Such further or other order as the Court deems f1t; and (vi) Costs

[18]The tnal of the matter between the Claimant and Third Defendant proceeded in July 2014 and JUdgment was reserved.

The Claimant's Submissions

[19]The Claimant couched their submissions to this court around 3 main issues: (i) Does section 62 of the Registered Land Ordinance ("the RLO") have the effect of barring the Claimant from Section 57 relief from forfeiture. in view of the wording of Section 57? In any event, is there evidence that the Section 62 process has been undertaken by the Third Defendant for termination of interests under the lease? (ii) Was the Lessor's consent a pre-requisite of the perfecting of the Charge. or otherwise put can the Charge be invalidated by the absence of such consent? (iii) Did the Third Defendant have prior knowledge of the Claimant's rnterest? If so, what are the implications of the Third Defendant's conduct and position in this matter in the exercise of the court's powers in relief from forfeiture? [201 The Claimant argued that despite there not being any requrrement by the Third Defendant under the law as Lessor to give them as mortgagee notice of the intention to forfeit the lease or even having forfeited the lease, they were still entitled to apply for relief from forfeiture under Section 57 of the Registered Land Ordrnance ("Sectron 57"). [211 Sectron 57 as contended by the Claimant allows for parties to seek the Court's intervention from forfeiture, either where it is contemplated or where it is in fact completed. [221 The Clarmants therefore argued whether or not the Thrrd Defendant had completed the acts requrred for forteiture or were contemplating them; The Court pursuant to the legislation in the Territory slrll had the abrlrty to grant relief. [23[ Having that right to apply for relief, the Claimant then submitted that rn order to be entrtled to that relref, the Court must be satisfied that it is JUSt and equrtable to do SO. [24[ The Clarmant argued that neither the Thrrd Defendant nor anyone, through whom she was claiming, was required to give consent to the creation of the charge into which the First Defendant had entered with the Claimant [251 In fact it was submitted by the Claimant that that requrrement for consent which was normally part and parcel of any lease agreement was specifically excluded from the terms of the lease agreement under wh1ch the Third Defendant was entitled.

[26]The Claimant therefore submitted that the First Defendant not having obtained consent to charge his leasehold interest was of no moment due to the express exclusion of that requirement. All that was required by the terms of the lease was that the First Defendant had to give notice to his Lessor subsequent to the creation of the lease that the charge had been created. The Claimant submitted that as there was no definitive evidence as to whether this event actually occurred, it was clear to them that the charge must remain valid.

[27]Having thus established that the Charge was valid, that the Cla1mant was entitled to seek relief. the last issue for the Claimant was whether the Claimant would be entitled to the relief as sought. [28[ The Claimant therefore submitted that the Court had to be guided by equitable considerations in viewing the case at bar. They therefore submitted that even though no consent was obtained it was of no moment as the Third Defendant knew of the interest granted to the Claimant both by constructive notice and by formal disclosure in previous civil proceedings brought by the First Defendant

[29]The Claimant argued that the charge was registered as requ1red by Law in the Land Register since 2006. They therefore contended, that even if at the time of registration in 2006 the Third Defendant may not have had notice, she must have at the very latest, had had such notice when the transfer to her of the entire parcel 1n 2008 was affected. [30[ The Claimant further submitted and relied upon authont1es, proferred that in the instance where the person who purports to enforce forfeiture not only knows of the interest of another but also could be adequately compensated in damages for any inconvenience or other trampling of their rights, then, the Court is entitled to exercise its discretion as being a proper case to grant relief_

[31]The Claimant submitted that there was no intention on their part to obtain any advantage greater than what would have obtained by the First Defendant as Lessee but that they merely wanted the opportunity to make things nght with the Third Defendant and be entitled to recoup as much as they can under the defaulted obligation.

The Third Defendant's Submissions

[32]The 1ssues for the Third Defendant were framed differently from the Cla1mant in many regards and were as follows: (1) Whether or not the Lease was forteited by the Scotsman and the effect of that forfeiture; and/or alternatively; (ii) Whether Ms. T adman was at l1berty to take vacant possession of the Property after the Lease was forteited by the Scotsman; or alternatively, after the principal of the Scotsman had absconded the Territory; (iii) Whether Ms. Todman had notice of the Bank's interest and, if so. whether the effect of such notice has any effect on the forfeiture of the Lease and repossession of the Property by Ms. Todman, and (iv) Whether the Bank's interest 1n the Property ceased to exist when the Lease was forfeited and/or terminated

[33]The Thrrd Defendant's first submission was that without any further act on the part of the Third Defendant, that once there was the issuance of the notice to quit the First Defendant delivered vacant possession to her in September 2012.

[34]Upon receiving such vacant possession the Third Defendant contended she was entitled lo exercise her rights of forteiture pursuant to Section 55 of the RLO. The Third Defendant submitted that once she invoked the powers provided for under Section 55(4) of the RLO in particular seeking to forfeit the lease. "every ... interest appearing in the register relating to that lease" was terminated [35} The Third Defendant submitted that she being so entitled to exerc1se her nght of forte1ture did so by following the procedure set 1n Section 56 of the RLO and her re-entry which took place in September 2012 completed such action of forfeiture. [36} Havmg so undertaken re-entry the Third Defendant contended she had no notice of the Claimant's interest in the property. She was therefore able to proceed to effect forfeiture and ensure that the lease was brought to an end There was no requirement to give notice to anyone save and except the lessor to bring the lease to an end and having not given the Claimant notice of her intention did not in any way affect the efficacy or legitimacy of her act.

[37]Thus having pursued her right of forte1ture the Third Defendant contends that the interest of the Claimant in the property was now at an end.

[38]It was submitted on behalf of the Third Defendant that the Claimant having failed to ensure that their mortgagor was adhering to the terms of the lease meant that they naturally ran the risk of having their security being jeopardized with the result of now not being able to recover their debt.

[39]The Third Defendant therefore submitted that 1t was unfortunate that the Cla1mant has found itself in the position where they now stand to be disadvantaged but the Third Defendant, was entitled to enforce her rights and there was no behaviour on her part which could properly result in her being prevented from enforcing her rights.

Court's Consideration and Analysis

[40]In looking at this matter, the issue for this Court is quite simple - Whether the Claimant claiming an interest in the property as mortgagee is entitled to relief from forfeiture as provided for by the RLO?

[41]Section 57 of the RLO g'1ves this Court the jurisdiction to enterta'1n this claim on the part of the Claimant.

[42]Section 57 (2) rn particular speaks to any person other than a lessee who has the right to seek relref.

[43]Sectron 57 (2) in its entirety states as follows: ''The court on application by any person claiming as sub-lessee or chargee any interest in the property or part of the property comprised in the lease forfeited or sought to be forfeited, may make an order vesting the property or such part in such sub-lessee or chargee for the whole period of the lease or any loss period, upon such conditions as the court in the circumstances of the case thinks fit. (my emphasis) "

[44]It 1s therefore clear to this Court that once a party who is entitled to forteiture invokes that right, any person affected by the operation of that intention to so forteit can apply to divert the dire results that may ensue For as Section 55 (4) of the RLO states "The forfeiture of a lease shall terminate every sublease and every other interest appearing in the register relating to that lease."

[45]It is therefore clear that this rrght must be we1ghed in each and every case with all the circumstances that present themselves, as agamst the resulting end.

[46]Therefore 11 is incumbent upon the Court to undertake the exercise mindful of the need to ensure that there is an adequate balancing act

[47]In order for the Court to so determine it may be helpful for me to address my mind to the nature of the evidence that was led before this Court at trial.

The Evidence

[48]There were only three witnesses in this matter. There were two for the Claimant who were officers of the Bank who gave evidence of the establishment of the Claimant's interest by way of the charge entered into by the First Defendant- Mr. Harold Jones and Mr. Paul Carty. They led the evidence of what transpired up to the discovery of the re-entry by the Third Defendant and the negotiation that they reported was entered into with the Third Defendant in an attempt to settle matters and recoup their losses.

[49]The third witness was the Third Defendant herself. Her evidence centered around the history between herself as lawful attorney for her aunt and then as sole proprietor of the Property with the First Defendant when he was in occupation. She also spoke to her lack of knowledge of the interest of the Claimant and the actions she took subsequent to the notice to quit including the expending of her life savings on repairs of the building which had been occupied by the First Defendant previous to the termination of the lease.

[50]Upon an assessment of this evidence in general, I found by and large the Third Defendant to be a witness of truth. However, I am hard pressed to believe her on a balance of probabilities that she had no notice of the Claimant's interest before September 2012 when she mel the Claimant's witness Paul Carty on the property conducting an inspection. [51[ I do believe she had knowledge of the Claimant's Interest bull also find thatlhis does not assist the Claimant to any great extent.

[52]With regard to the Claimant's witnesses, they essentially related factual occurrences and I make no finding as to their participation and responses to questions on cross examination however suffice it to say, despite their attempt to try and convince thiS Court that they had done all they could to obv1ate the need for this trial or even to ensure that there was compliance by their mortgagor, this Court was anything but convinced. [53[ In fact Mr. Harold Jones the Commercial Loans Manager of the Cla1mant. admitted in cross examination that the breach of the lease by the First Defendant in 2012 which led to the act of forfeiture, was not the first time that he was aware that the Ftrst Defendant had done so.

[54]This alone IS telling tn the Court's mind that thts Claimant's position that the Third Defendant is not entitled to rely on her right of forteiture for breach of the lease agreement is untenable.

[55]It cannot be, for this Court, that the Claimant can come to it and say, we may have failed in what may not have been our strict duty but certainly our responsibility to ensure that this mortgagor, knowing his history of default remained within his covenants; however we must be allowed to recoup our losses and seek to refrain that person who has the legal right to bring the lease to an end from so enforc'lng it.

Relief from Forfeiture

[56]It is widely accepted and without diSpute that relief from forte1ture statutorily or by common law remains a discretionary equitable determination on the part of the Court. [57[ In so makmg lhat decision the court must cons1der "the proceedings, and the conduct of the parties and the circumstances of the case" 1

[58]Thus in the case at bar, the Claimant herein became an interested party by the execution of a charge in its favor by the First Defendant of his interest in the land

[59]It is therefore pellucid that the Claimant cannot claim or be entitled to anymore or any less than the First Defendant as lessee. The Claimant must step into the shoes of the First Defendant, holes, sole-less and all [60[ They must take both the benef1ts and the burdens of the person though whom they are claiming. Indeed I do not get from either party that it was an issue whether the Claimant is entitled to make the claim but rather whether they are entitled to succeed on the claim

[61]So therefore in order for the determination to be made the conduct of the party through whom the Claimant is claiming must be examined.

[62]From the evidence before the Court it is clear that the First Defendant was habitually in breach of the covenant to pay his rent -"in the days and in the manner" required from as far back as 2000 when the First Defendant took over the unexpired portion of the lease from the original lessee Little Apple Bay Company Limited

[63]This evidence was not refuted by the Claimant and in fact Mr. Jones in his cross examination admitted that the Claimant was aware that the First Defendant had breached his lease at least one time previous to the 2012 breach

[64]The evidence of the Third Defendant was that this failure was a continuous event that she battled with, resulting 1n legal action be1ng taken as far back as 2008 including the issuance of a notice to quit and letters of demand

[65]None of this conduct has been disputed by the Claimant and indeed they indicated that they were not in a position to speak of a habitual pattern as they were only ever concerned "with ... making sure that the property and the contents were always maintained and that the actual payments were made to the bank. "2

[66]It is also quite clear that for over a period of 12 years the Third Defendant forbore w1th the F1rst Defendant and by 2012 had had enough A Not1ce to qu1t was issued and she, from both her evidence and the grudging admission by the Claimant, took possession of the property. [67[ On the ev1dence it was therefore apparent that the person though whom the Claimant seeks this order did not fulfill his required obligations of his side of the bargain. [68[ It cannot be that a discretionary remedy must be used to force a party to the bargain to remain in the bargain which has obviously over a period of time, fallen apart.

[69]It is clear that in exercising that discretion there are no rigid rules guiding its usage3 However generally it is recognized that each case must stand in its own circumstances.

[70]The Court has assessed the factual matriX that was presented whereby the Third Defendant consistently was bombarded by the default of the First Defendant which must be weighed against the interest of the Claimant who assumed the risk to mortgage a mere leasehold interest.

[71]The Court is not satisfied that the fact (which the Court accepts) that the Third Defendant knew of the charge before the act of re-entry is sufficient to tip the scales in favour of the Claimant.

[72]The Court is satisfied that the knowledge of the Third Defendant cannot upstage the risk that had to be absorbed by the Claimant for "in the case of a mortgage by sub-demise, that mortgagee is always at risk of the lessor obtaining re- entry for breach of covenant ... Every mortgagee therefore knows that this is the risk he runs ... that is one of the risks of the game."4

[73]The Claimant by their Counsel also sought to rely on the alleged factthatthey had tr'1ed to negotiate a settlement w'1th the Third Defendant wh'1ch was proffered as an example of unconscionable conduct upon which the Court should act and deny the Third Defendant her nghl.

[74]This Court is not in agreement w1th that assessment.

[75]The Third Defendant in her evidence admitted that overtures had been made to her but in her words "the Bank did not try to make good on the lease in a timely manner when from 2011 Mr. Anderson was in breach ... He was asked to leave and by September 2012 there was nothing from the Bank or Mr. Anderson between there and then 2013 which would be two years later, ... they didn't make an effort to remedy the breach for two years."s

[76]This Court does not accept that this was an unreasonable position to be taken by the Third Defendant who by which time had expended "all [her] savings and all [her] livelihood"' [77[ The lmal ground upon which the Claimant has sought to show that the conduct of the Third Defendant should result in her being barred from her right of remedy was that the Third Defendant should not be entitled to benefit from the acquisition of a building wh1ch was not part of the lease agreement and to which the Claimant had provided the funds to refurbish. [78[ By clause E 1 (5) of the Lease Agreement, it is stated qurte clearly that the Lessee would "at the expiration or sooner determination of the said term peaceably ... surrender and yield up to the Lessor the Leased Land with any improvements thereto in accordance with the foregoing covenants" (my emphasis).

[79]It is therefore clear, without more, that any improvements to the leased land remained to the benefit of the lessor at the determination of the lease.

[80]Further it has been clear smce the 1960s 1n the seminal case of Mitchell v Cowie' that Wooding CJ made it quite clear that what cannot be removed from the land runs with and forms part of the land

[81]To this Court it therefore seems that th1s argument must dismally fail.

[82]In looking at this matter therefore in totality it is indeed unfortunate that the events transpired as they did.

[83]The First Defendant absconded and left these two partres facing serious financial implications.

[84]However as much as this Court commensurates with the Claimant, I am unable to apply any of the equitable principles in favour of the Claimant whose only claim can be made through the same undrsputedly culpable First Defendant. They seek "an equitable remedy in circumstances where it has come to the court against the backdrop of culpable and willful non observance of ... obligations leaving the Defendant to incur responsibilities."S

[85]The parties are not of even standrng and the Clarmant being preoccupied by their only concern as to whether the First Defendant was paying them, failed to ensure or at least monitor the stability of their security.

[86]The unfortunate consequence is therefore that I find the Claimant is not entitled to their prayers and I dismiss the Claim.

[87]The order of the Court is therefore as follows- 1. The Claim is dismissed in its entirety. 2. Costs to the Third Defendant to be assessed if not agreed within 21 days of this order.

Nicola Byer

High Court Judge

EASTERN CARIBBEAN SUPREME COURT TERRITORY OF THE VIRGIN ISLANDS IN THE HIGH COURT OF JUSTICE (CIVIL) CLAIM NO. BVIHCV 2013/0328 BETWEEN: Appearances: FIRST BANK PUERTO RICO and THE SCOTSMAN LIMITED VIOLA LLOYD BEVERLY DIAN TOOMAN Mrs. Hazel-Ann Hannaway-Boreland for the Claimant Mr. Glenroy Forbes and Ms. Tamara Hodge for the Defendants 2014· July 16’h 2014 October 281h JUDGMENT Claimant Defendants

[1]BYER J.: In 2000 the Frrst named Defendant purchased the unexpired term of a fifty year lease dated the 291h May 1980 from the Second named Defendant

[2]The lease was in relation to a portion of a parcel of land registered as Parcel 93/1 Block 2638B West Central Registration Section (""the Property"") measuring twenty one thousand two hundred and n1nety seven square feel (21.297 sq.fl).

[3]In 2000 at the trme that the F1rst Defendant acquired the leasehold interest Jn the Property, he also purchased a building that had been constructed on the land from the previous Lessee Little Apple Bay Company for the sum of $389,500.00 wh1ch sum he originally borrowed from Barclays Bank PLC

[4]In 2006, without any reason given as to why, the First Defendant refinanced his outstanding liability to Barclays Bank PLC with the Claimant Bank in the sum of $260,000.00 and executed a charge as Debenture Instrument #425/2006 and a charge was placed on the leasehold interest of the First Defendant in the said Property which was registered as 272512006 in the Land RegiStry and dated 4th October 2006 ("the charge') in favour of the Claimant

[5]During the currency of the lease and the charge in favour of the Claimant, the freehold interest was conveyed to the Third Defendant herein on 2nd June 2008. which led to the inevitable result of her becoming proprietor subject to the lease in favour of the First Defendant.

[6]From the evidence that was led before the Court at tnal of the matter, it was apparent that the First Defendant who never appeared in the matter was consistently late or entirely failed to pay the rent due to the Third Defendant prior to her becoming registered proprietor as lawful attorney for the Second named Defendant and then in her own right subsequent to 2008

[7]As a result, the Third Defendant relying on the terms of the lease on 8th March 2012, gave the First named Defendant notice to quit and deliver up the leasehold interest 1n the property with an expiration date of 14th September 2012

[8]Subsequent to the service of the notice to quit and before its expiration, the First Defendant also fell into arrears under his loan agreement with the Claimant. [9) By letter dated 13th April 2012 the Claimant wrote to the Ftrst Defendant seeking payment of the outstanding sums, all of which was at this time unknown to the Thtrd Defendant.

[10]The First Defendant failed to make any payments to the Claimant or the Thrrd Defendant and at some time between May and June 2012, the First Defendant was no longer operational and its Managing Director Mr. Alan Anderson had absconded from the Territory.

[11]Subsequent to the notice to quit having expired, the Third Defendant entered into possession of the Property and effected termination of the leasehold interest of the First Defendant and proceeded to undertake repairs of the said building on the leased premises. [12[ Some two weeks subsequent to the re-entry effected by the Third Defendant, on the 25'" September 2012, the Claimant’s representative attended at the property upon the Claimant utilizing its receivership powers under its charge and met the Third Defendant in possession of the same effecting repairs.

[13]Upon the Claimant’s real1zat1on that the Third Defendant had entered the premises and was relying on her rights under the lease agreement for forfeiture the Claimant made overtures to the Third Defendant during the course of the latter part of 2012 and the first half of 2013 in an apparent attempt to settle the matter. [14[ Specifically between March 2013 and the filing of the claim some six months later in November 2013. the Claimant sought to cure the arrears to avoid forfeiture but the sa1d plan was not accepted by the Third Defendant who up to the tnal dale remained in possession of the said Property.

[15]The Cla1mant therefore sought the intervention of the Court to forestall the complete forfe’1ture of the lease and filed the’1r claim by F1xed Date Claim Form on 14th November 2013.

[16]The First named Defendant was never served with the process and the Second Defendant who had no interest in the property at time of filing never participated in the proceedings and subsequently died.

[17]The Claim of the Claimant was therefore as follows (i) An order pursuant to the Registered Land Ordinance, Cap 229 s. 57 against the Second and Third Defendant for relief from forfeiture; (ii) An order pursuant to the CPR Part 66(1)(d) against all Defendants to deliver possession of the parcel9311 Block 26388 West Central Registration Section (Property) to the Cla1mant tor the execut1on of the charge registered as Instrument Number 272512006 (Charge); (iii) An order for the Claimant to execute such charges, guarantees and other encumbrances entered into between the parties by the sale of the Property pursuant to CPR Part 66(1)(g); (iv) Judgment summarily pursuant to CPR Part 66:3; (v) Such further or other order as the Court deems f1t; and (vi) Costs

[18]The tnal of the matter between the Claimant and Third Defendant proceeded in July 2014 and JUdgment was reserved. The Claimant’s Submissions

[19]The Claimant couched their Submissions to this court around 3 main issues: (i) Does section 62 of the Registered Land Ordinance (“the RLO”) have the effect of barring the Claimant from Section 57 relief from forfeiture. in view of the wording of Section 57? In any event, is there evidence that the Section 62 process has been undertaken by the Third Defendant for termination of interests under the lease? (ii) Was the Lessor’s consent a pre-requisite of the perfecting of the Charge. or otherwise put can the Charge be invalidated by the absence of such consent? (iii) Did the Third Defendant have prior knowledge of the Claimant’s rnterest? If so, what are the implications of the Third Defendant’s conduct and position in this matter in the exercise of the court’s powers in relief from forfeiture? [201 The Claimant argued that despite there not being any requrrement by the Third Defendant under the law as Lessor to give them as mortgagee notice of the intention to forfeit the lease or even having forfeited the lease, they were still entitled to apply for relief from forfeiture under Section 57 of the Registered Land Ordrnance (“Sectron 57”). [211 Sectron 57 as contended by the Claimant allows for parties to seek the Court’s intervention from forfeiture, either where it is contemplated or where it is in fact completed. [221 The Clarmants therefore argued whether or not the Thrrd Defendant had completed the acts requrred for forteiture or were contemplating them; The Court pursuant to the legislation in the Territory slrll had the abrlrty to grant relief. [23[ Having that right to apply for relief, the Claimant then submitted that rn order to be entrtled to that relref, the Court must be satisfied that it is JUSt and equrtable to do SO. [24[ The Clarmant argued that neither the Thrrd Defendant nor anyone, through whom she was claiming, was required to give consent to the creation of the charge into which the First Defendant had entered with the Claimant [251 In fact it was submitted by the Claimant that that requrrement for consent which was normally part and parcel of any lease agreement was specifically excluded from the terms of the lease agreement under wh1ch the Third Defendant was entitled.

[26]The Claimant therefore submitted that the First Defendant not having obtained consent to charge his leasehold interest was of no moment due to the express exclusion of that requirement. All that was required by the terms of the lease was that the First Defendant had to give notice to his Lessor subsequent to the creation of the lease that the charge had been created. The Claimant submitted that as there was no definitive evidence as to whether this event actually occurred, it was clear to them that the charge must remain valid.

[27]Having thus established that the Charge was valid, that the Cla1mant was entitled to seek relief. the last issue for the Claimant was whether the Claimant would be entitled to the relief as sought. [28[ The Claimant therefore submitted that the Court had to be guided by equitable considerations in viewing the case at bar. They therefore submitted that even though no consent was obtained it was of no moment as the Third Defendant knew of the interest granted to the Claimant both by constructive notice and by formal disclosure in previous civil proceedings brought by the First Defendant

[29]The Claimant argued that the charge was registered as requ1red by Law in the Land Register since 2006. They therefore contended, that even if at the time of registration in 2006 the Third Defendant may not have had notice, she must have at the very latest, had had such notice when the transfer to her of the entire parcel 1n 2008 was affected. [30[ The Claimant further submitted and relied upon authont1es, proferred that in the instance where the person who purports to enforce forfeiture not only knows of the interest of another but also could be adequately compensated in damages for any inconvenience or other trampling of their rights, then, the Court is entitled to exercise its discretion as being a proper case to grant relief_

[31]The Claimant submitted that there was no intention on their part to obtain any advantage greater than what would have obtained by the First Defendant as Lessee but that they merely wanted the opportunity to make things nght with the Third Defendant and be entitled to recoup as much as they can under the defaulted obligation. The Third Defendant’s Submissions

[33]The Thrrd Defendant’s first submission was that without any further act on the part of the Third Defendant, that once there was the issuance of the notice to quit the First Defendant delivered vacant possession to her in September 2012.

[32]The 1ssues for the Third Defendant were framed differently from the Cla1mant in many regards and were as follows: (1) Whether or not the Lease was forteited by the Scotsman and the effect of that forfeiture; and/or alternatively; (ii) Whether Ms. T adman was at l1berty to take vacant possession of the Property after the Lease was forteited by the Scotsman; or alternatively, after the principal of the Scotsman had absconded the Territory; (iii) Whether Ms. Todman had notice of the Bank’s interest and, if so. whether the effect of such notice has any effect on the forfeiture of the Lease and repossession of the Property by Ms. Todman, and (iv) Whether the Bank’s interest 1n the Property ceased to exist when the Lease was forfeited and/or terminated

[34]Upon receiving such vacant possession the Third Defendant contended she was entitled lo exercise her rights of forteiture pursuant to Section 55 of the RLO. The Third Defendant submitted that once she invoked the powers provided for under Section 55(4) of the RLO in particular seeking to forfeit the lease. "every … interest appearing in the register relating to that lease" was terminated [35} The Third Defendant submitted that she being so entitled to exerc1se her nght of forte1ture did so by following the procedure set 1n Section 56 of the RLO and her re-entry which took place in September 2012 completed such action of forfeiture. [36} Havmg so undertaken re-entry the Third Defendant contended she had no notice of the Claimant’s interest in the property. She was therefore able to proceed to effect forfeiture and ensure that the lease was brought to an end There was no requirement to give notice to anyone save and except the lessor to bring the lease to an end and having not given the Claimant notice of her intention did not in any way affect the efficacy or legitimacy of her act.

[37]Thus having pursued her right of forte1ture the Third Defendant contends that the interest of the Claimant in the property was now at an end.

[38]It was submitted on behalf of the Third Defendant that the Claimant having failed to ensure that their mortgagor was adhering to the terms of the lease meant that they naturally ran the risk of having their security being jeopardized with the result of now not being able to recover their debt.

[39]The Third Defendant therefore submitted that 1t was unfortunate that the Cla1mant has found itself in the position where they now stand to be disadvantaged but the Third Defendant, was entitled to enforce her rights and there was no behaviour on her part which could properly result in her being prevented from enforcing her rights. Court’s Consideration and Analysis

[42]Section 57 (2) rn particular speaks to any person other than a lessee who has the right to seek relref.

[40]In looking at this matter, the issue for this Court is quite simple – Whether the Claimant claiming an interest in the property as mortgagee is entitled to relief from forfeiture as provided for by the RLO?

[41]Section 57 of the RLO g’1ves this Court the jurisdiction to enterta’1n this claim on the part of the Claimant.

[43]Sectron 57 (2) in its entirety states as follows: ''The court on application by any person claiming as sub-lessee or chargee any interest in the property or part of the property comprised in the lease forfeited or sought to be forfeited, may make an order vesting the property or such part in such sub-lessee or chargee for the whole period of the lease or any loss period, upon such conditions as the court in the circumstances of the case thinks fit. (my emphasis) “

[44]It 1s therefore clear to this Court that once a party who is entitled to forteiture invokes that right, any person affected by the operation of that intention to so forteit can apply to divert the dire results that may ensue For as Section 55 (4) of the RLO states "The forfeiture of a lease shall terminate every sublease and every other interest appearing in the register relating to that lease."

[45]It is therefore clear that this rrght must be we1ghed in each and every case with all the circumstances that present themselves, as agamst the resulting end.

[46]Therefore 11 is incumbent upon the Court to undertake the exercise mindful of the need to ensure that there is an adequate balancing act

[47]In order for the Court to so determine it may be helpful for me to address my mind to the nature of the evidence that was led before this Court at trial. The Evidence

[52]With regard to The Claimant’s witnesses, they essentially related factual occurrences and I make no finding as to their participation and responses to questions on cross examination however suffice it to say, despite their attempt to try and convince thiS Court that they had done all they could to obv1ate the need for this trial or even to ensure that there was compliance by their mortgagor, this Court was anything but convinced. [53[ In fact Mr. Harold Jones the Commercial Loans Manager of the Cla1mant. admitted in cross examination that the breach of the lease by the First Defendant in 2012 which led to the act of forfeiture, was not the first time that he was aware that the Ftrst Defendant had done so.

[48]There were only three witnesses in this matter. There were two for the Claimant who were officers of the Bank who gave evidence of the establishment of the Claimant’s interest by way of the charge entered into by the First Defendant- Mr. Harold Jones and Mr. Paul Carty. They led the evidence of what transpired up to the discovery of the re-entry by the Third Defendant and the negotiation that they reported was entered into with the Third Defendant in an attempt to settle matters and recoup their losses.

[49]The third witness was the Third Defendant herself. Her evidence centered around the history between herself as lawful attorney for her aunt and then as sole proprietor of the Property with the First Defendant when he was in occupation. She also spoke to her lack of knowledge of the interest of the Claimant and the actions she took subsequent to the notice to quit including the expending of her life savings on repairs of the building which had been occupied by the First Defendant previous to the termination of the lease.

[50]Upon an assessment of this evidence in general, I found by and large the Third Defendant to be a witness of truth. However, I am hard pressed to believe her on a balance of probabilities that she had no notice of the Claimant’s interest before September 2012 when she mel the Claimant’s witness Paul Carty on the property conducting an inspection. [51[ I do believe she had knowledge of the Claimant’s Interest bull also find thatlhis does not assist the Claimant to any great extent.

[54]This alone IS telling tn the Court’s mind that thts Claimant’s position that the Third Defendant is not entitled to rely on her right of forteiture for breach of the lease agreement is untenable.

[55]It cannot be, for this Court, that the Claimant can come to it and say, we may have failed in what may not have been our strict duty but certainly our responsibility to ensure that this mortgagor, knowing his history of default remained within his covenants; however we must be allowed to recoup our losses and seek to refrain that person who has the legal right to bring the lease to an end from so enforc’lng it. Relief from Forfeiture

[62]from the evidence before the Court it is clear that the First Defendant was habitually in breach of the covenant to pay his rent -“in the days and in the manner” required from as far back as 2000 when the First Defendant took over the unexpired portion of the lease from the original lessee Little Apple Bay Company Limited

[56]It is widely accepted and without diSpute that relief from forte1ture statutorily or by common law remains a discretionary equitable determination on the part of the Court. [57[ In so makmg lhat decision the court must cons1der "the proceedings, and the conduct of the parties and the circumstances of the case" 1

[58]Thus in the case at bar, the Claimant herein became an interested party by the execution of a charge in its favor by the First Defendant of his interest in the land

[59]It is therefore pellucid that the Claimant cannot claim or be entitled to anymore or any less than the First Defendant as lessee. The Claimant must step into the shoes of the First Defendant, holes, sole-less and all [60[ They must take both the benef1ts and the burdens of the person though whom they are claiming. Indeed I do not get from either party that it was an issue whether the Claimant is entitled to make the claim but rather whether they are entitled to succeed on the claim

[61]So therefore in order for the determination to be made the conduct of the party through whom the Claimant is claiming must be examined.

[63]This evidence was not refuted by the Claimant and in fact Mr. Jones in his cross examination admitted that the Claimant was aware that the First Defendant had breached his lease at least one time previous to the 2012 breach 1 Per Michel J in Attorney General v Ordinance Land Co. Ltd ANUHCV2007/0648 Jt pJrJ. 34

[64]The evidence of the Third Defendant was that this failure was a continuous event that she battled with, resulting 1n legal action be1ng taken as far back as 2008 including the issuance of a notice to quit and letters of demand

[65]None of this conduct has been disputed by the Claimant and indeed they indicated that they were not in a position to speak of a habitual pattern as they were only ever concerned "with … making sure that the property and the contents were always maintained and that the actual payments were made to the bank. "2

[66]It is also quite clear that for over a period of 12 years the Third Defendant forbore w1th the F1rst Defendant and by 2012 had had enough A Not1ce to qu1t was issued and she, from both her evidence and the grudging admission by the Claimant, took possession of the property. [67[ On the ev1dence it was therefore apparent that the person though whom the Claimant seeks this order did not fulfill his required obligations of his side of the bargain. [68[ It cannot be that a discretionary remedy must be used to force a party to the bargain to remain in the bargain which has obviously over a period of time, fallen apart.

[69]It is clear that in exercising that discretion there are no rigid rules guiding its usage3 However generally it is recognized that each case must stand in its own circumstances.

[70]The Court has assessed the factual matriX that was presented whereby the Third Defendant consistently was bombarded by the default of the First Defendant which 1 Official transcript of proceedmgs page 11 . . <Per Earl Loreburn LC in Hy[Tl<~flV Rose_ [1912] AC 523 <Jt G31 must be weighed against the interest of the Claimant who assumed the risk to mortgage a mere leasehold interest.

[71]The Court is not satisfied that the fact (which the Court accepts) that the Third Defendant knew of the charge before the act of re-entry is sufficient to tip the scales in favour of the Claimant.

[72]The Court is satisfied that the knowledge of the Third Defendant cannot upstage the risk that had to be absorbed by the Claimant for "in the case of a mortgage by sub-demise, that mortgagee is always at risk of the lessor obtaining reentry for breach of covenant … Every mortgagee therefore knows that this is the risk he runs … that is one of the risks of the game.”4

[73]The Claimant by their Counsel also sought to rely on the alleged factthatthey had tr’1ed to negotiate a settlement w’1th the Third Defendant wh’1ch was proffered as an example of unconscionable conduct upon which the Court should act and deny the Third Defendant her nghl.

[74]This Court is not in agreement w1th that assessment.

[75]The Third Defendant in her evidence admitted that overtures had been made to her but in her words "the Bank did not try to make good on the lease in a timely manner when from 2011 Mr. Anderson was in breach … He was asked to leave and by September 2012 there was nothing from the Bank or Mr. Anderson between there and then 2013 which would be two years later, … they didn’t make an effort to remedy the breach for two years.”s 4 Per Greene MR in Egerton v Jones [1939]2 KB 702 cited with approval in Smith v Spaul [2002]EWCA CW 1830 5 official Transmpt page 53

[76]This Court does not accept that this was an unreasonable position to be taken by the Third Defendant who by which time had expended "all [her] savings and all [her] livelihood"' [77[ The lmal ground upon which the Claimant has sought to show that the conduct of the Third Defendant should result in her being barred from her right of remedy was that the Third Defendant should not be entitled to benefit from the acquisition of a building wh1ch was not part of the lease agreement and to which the Claimant had provided the funds to refurbish. [78[ By clause E 1 (5) of the Lease Agreement, it is stated qurte clearly that the Lessee would "at the expiration or sooner determination of the said term peaceably … surrender and yield up to the Lessor the Leased Land with any improvements thereto in accordance with the foregoing covenants" (my emphasis).

[79]It is therefore clear, without more, that any improvements to the leased land remained to the benefit of the lessor at the determination of the lease.

[80]Further it has been clear smce the 1960s 1n the seminal case of Mitchell v Cowie' that Wooding CJ made it quite clear that what cannot be removed from the land runs with and forms part of the land

[81]To this Court it therefore seems that th1s argument must dismally fail.

[82]In looking at this matter therefore in totality it is indeed unfortunate that the events transpired as they did. r, Officiill Transcript page 53 (1964 7 WIR 178) !S

[83]The First Defendant absconded and left these two partres facing serious financial implications.

[84]However as much as this Court commensurates with the Claimant, I am unable to apply any of the equitable principles in favour of the Claimant whose only claim can be made through the same undrsputedly culpable First Defendant. They seek "an equitable remedy in circumstances where it has come to the court against the backdrop of culpable and willful non observance of … obligations leaving the Defendant to incur responsibilities.”S

[85]The parties are not of even standrng and the Clarmant being preoccupied by their only concern as to whether the First Defendant was paying them, failed to ensure or at least monitor the stability of their security.

[86]The unfortunate consequence is therefore that I find the Claimant is not entitled to their prayers and I dismiss the Claim.

[87]The order of the Court is therefore as follows-

1.The Claim is dismissed in its entirety.

2.Costs to the Third Defendant to be assessed if not agreed within 21 days of this order. Nicola Byer High Court Judge 8 Per Burgess 1 in Shah Din & Sons Ltd v Dorgan Properties ManagementJJ.Qj2012] NICL 34 at Para. 22(h)