Royal Bank of Canada v Claytus Prevost

The Eastern Caribbean Supreme Court In the High Court of Justice Commonwealth of Dominica DOM HCV 199910561 Between: ROYAL BANK OF CANADA Claimant and ClAYTUS PREVOST Defendant Before the Hon. Justice Brian Cottle Appearances: Mr. Lennox Lawrence Counsel for the Defendant Mrs. Joan Prevost Counsel for the Claimant 2012: 9th March ON WRITTEN SUBMISSIONS

[1]COmE J: The Defendant negotiated an equitable mortgage on certain properties in 1994 to secure two loans from the Claimant bank. To protect its interest the bank registered a caveat against the property in 1994. The Defendant defaulted in repaying the loans and the Bank instituted the present claim on 18th October 1999. The Defendant did not file adefence and on 20th April 2000 the Claimant obtained judgment in default

[2]Subsequenijy to the filing and service on him of the claim, the Defendant executed aMemorandum of Transfer of the mortgaged property to George O'Shaugnessy and Mary Austrie. This document was executed on 1()th February 2000. It has never been registered. The transferees occupied the property. They made payments towards the mortgage loans on behalf of the Defendant They also say that they effected cosijy renovations and repairs to the property.

[3]In July 2000 the bank converted the equitable mortgage to a legal mortgage. They entered upon the property on 27th December 2000 and seized it in enforcement of the judgment obtained. In February 2006 the transferees notified the bank that the Defendant had agreed to sell the property to them at a price equivalent to the then outstanding mortgage debt They indicated that the defendant had executed aMemorandum of Transfer to them.

[4]Acting under the Power of Sale in the legal mortgage, the bank sought and obtained the leave of the Court to sell the property to the Government of Dominica by private treaty. It is to be noted that the Government had already expressed its intention to acquire the property compulsorily to facilitate the building of the national stadium. The property was sold to the Government for .5 million dollars At the time of the sale the debt on the mortgage was said to stand at $778,900.00 but the bank was willing to forego the balance of the debt The Government was thereupon registered as proprietors.

[5]The Defendant is now deceased. This matter concerns the application of the transferees to be substituted as Defendants. They wish to apply to set aside the judgment in default The transferees wish the Court to determine the following issues 1. Whether Claytus Prevost as transferor could properly transfer to the applicants as transferees that property registered in Book P10 Folio 20 while a caveat securing the mortgage loan was registered on the said title. 2. Did the Applicants as transferees under the Memorandum of Transfer dated 1(J1h February, 2000 obtain and interest in the property registered in Certificate ofTitle Book P10 Folio 20; and ifso, whether the interest of Claytus Prevost as transferor, and his equity ofredemption, did pass to the transferees upon the due execution ofthe Memorandum ofTransfer. 3. Whether the Applicants as transferees were the proper owners of the sai d property and/or entitled to the equity of redemption in 2006 at the date that the property was sold. 4. Whether the bank as mortgagee owed any duty of care to the Applicants as transferees at the date that the said property was sold in enforcement of the default judgment and whether the bank breached its duty of care to the applicants as owners of the property which was sold and of the equity ofredemption therein. 5. Whether the applicants as transferees of the said property do have an interest in determining the quantum and lor proper balance which forms the default judgment and lor in the proper judgment that may be enforced in any possible sale of that property of which they were the transferees as at 1(J1h February, 2000.

[6]The bank identifies the issues as : Whether the Applicants have made out a case to satisfy the conditions for substitution instead ofthe Defendant. Rrstly did any interest in the property ofthe Defendant in question pass to the Applicants? And secondly are there matters between Claytus Prevost and the Applicants or between the Respondent and Defendant with regarrJs to the enforcement of the default judgment and the sale of the property that to can be resolved more effectively by substituting the applicants for Claytus Prevost? The Law It is common ground that the property in question, being registered property, is governed by the TiUes by Registration Act Chap 56:50 of the Laws of the Commonwealth of Dominica. Section 6(1) of the Act reads "From and after the time when any land is bought under the operation of this Ac~ all dealings with the said land shall be in the fonns and governed by the prinCiple set forth in this Act; and all such dealings shall take effect from the date and act of registration, and not from the date of the execution or delivery of any instrument or documen~ or othelWise, save as in this Act provided. It shall not be necessary to register under the provisions of the Registration and Records Ac~ dealings with lands brought under the operation of this Ac~ which are in accorrJance with the provision ofthis Act ,. Under section 20 (1) it provides as follows; When land has been brought under this Ac~ the registered proprietor thereof if he desires to transfer it on sale or otherwise, shall execute a Memorandum of transfer in Fonn 5, and the memorandum of transfer shall be presented to the Registrar of Titles [l] A procedure is laid out that a registered proprietor must follow to transfer the land. Counsel for the transferees crgues that this section authorizes an owner to transfer his land with or without a caveat He points to section 24 of the Act which is these terms: Where any mo1fgages or incumbrances are noted on the certificate oftitle issued to a transferee, the covenant shall be implied that the transferee has accepted the land subject to the mortgages and incumbrances, and that he will pay the interest accruing thereon, and dischalTle the principle sums for which the mortgages and incumbrances have been granted, and indemnify the transferor from the payment of the same in all time to come.

According to counsel this means that land can be transferred subject to amortgage

[8]It appears to me that this argument misses the point The issue is not whether land subject to a mortgage can be transferred but rather what is the effect of a Memorandum of Transfer which is not registered. A caveat forbids the dealing with the land while the caveat remains enforced. The clear words of Section 20 (1) require two elements in order to effect a valid transfer of registered land. Firstly there must be a Memorandum of Transfer in the appropriate form. Secondly that Memorandum of Transfer must be presented to the Registrar of Lands. It is this cd of registration which vests and divests title. This is the hurdle at which the transferees fall.

[9]The Privy Council case of Frazer v Walker 1967 1 AUER 649 makes it clear that this is the correct legal pOSition. The transferees, having failed to register the Memorandum of Transfer, can obtain no lights to the real property under it They may have personal remedies against the transferor but that is another matter [10) Having regard to my finding on this point it is clear that the application to be substituted as Defendants must fail. The C.P.R 2000 at part 19 (2) (5) "The Court may ordera new party to be substituted for an existing one ifthe (a) Court can resolve the mattelS in dispute more effectively by substituting the new party for the existing party; or (b) Existing party's interest or liability has passed to the new party No interest of the Defendant in the land has passed to the applicants. It is also to be noted that the personal representatives of the Defendant have taken no issue with the judgment in default That judgment has already been enforced. The property has been sold to a bona fide purchaser for value with the sanction of this court In my view there remain no matters in dispute between the Claimant and Defendant

[11]For the above reasons I decline ~ make an order substituting the Appellants as Dernda~~ (j/?11'h j ~(fs~~ c~\ ~::~o::u::e I ~~ i\, ~, \ "<:rf:~' '/ ~

The Eastern Caribbean Supreme Court In the High Court of Justice Commonwealth of Dominica DOM HCV 199910561 Between: ROYAL BANK OF CANADA Claimant and ClAYTUS PREVOST Defendant Before the Hon. Justice Brian Cottle Appearances: Mr. Lennox Lawrence Counsel for the Defendant Mrs. Joan Prevost Counsel for the Claimant 2012: 9th March ON WRITTEN SUBMISSIONS

[1]COmE J: The Defendant negotiated an equitable mortgage on certain properties in 1994 to secure two loans from the Claimant bank. To protect its interest the bank registered a caveat against the property in 1994. The Defendant defaulted in repaying the loans and the Bank instituted the present claim on 18th October 1999. The Defendant did not file adefence and on 20th April 2000 the Claimant obtained judgment in default

[2]Subsequenijy to the filing and service on him of the claim, the Defendant executed aMemorandum of Transfer of the mortgaged property to George O’Shaugnessy and Mary Austrie. This document was executed on 1()th February 2000. It has never been registered. The transferees occupied the property. They made payments towards the mortgage loans on behalf of the Defendant They also say that they effected cosijy renovations and repairs to the property.

[3]In July 2000 the bank converted the equitable mortgage to a legal mortgage. They entered upon the property on 27th December 2000 and seized it in enforcement of the judgment obtained. In February 2006 the transferees notified the bank that the Defendant had agreed to sell the property to them at a price equivalent to the then outstanding mortgage debt They indicated that the defendant had executed aMemorandum of Transfer to them.

[4]Acting under the Power of Sale in the legal mortgage, the bank sought and obtained the leave of the Court to sell the property to the Government of Dominica by private treaty. It is to be noted that the Government had already expressed its intention to acquire the property compulsorily to facilitate the building of the national stadium. The property was sold to the Government for .5 million dollars At the time of the sale the debt on the mortgage was said to stand at $778,900.00 but the bank was willing to forego the balance of the debt The Government was thereupon registered as proprietors.

[5]The Defendant is now deceased. This matter concerns the application of the transferees to be substituted as Defendants. They wish to apply to set aside the judgment in default The transferees wish the Court to determine the following issues

[6]The bank identifies the issues as : Whether the Applicants have made out a case to satisfy the conditions for substitution instead ofthe Defendant. Rrstly did any interest in the property ofthe Defendant in question pass to the Applicants? And secondly are there matters between Claytus Prevost and the Applicants or between the Respondent and Defendant with regarrJs to the enforcement of the default judgment and the sale of the property that to can be resolved more effectively by substituting the applicants for Claytus Prevost? The Law It is common ground that the property in question, being registered property, is governed by the TiUes by Registration Act Chap 56:50 of the Laws of the Commonwealth of Dominica. Section 6(1) of the Act reads “From and after the time when any land is bought under the operation of this Ac~ all dealings with the said land shall be in the fonns and governed by the prinCiple set forth in this Act; and all such dealings shall take effect from the date and act of registration, and not from the date of the execution or delivery of any instrument or documen~ or othelWise, save as in this Act provided. It shall not be necessary to register under the provisions of the Registration and Records Ac~ dealings with lands brought under the operation of this Ac~ which are in accorrJance with the provision ofthis Act ,. Under section 20 (1) it provides as follows; When land has been brought under this Ac~ the registered proprietor thereof if he desires to transfer it on sale or otherwise, shall execute a Memorandum of transfer in Fonn 5, and the memorandum of transfer shall be presented to the Registrar of Titles [l] A procedure is laid out that a registered proprietor must follow to transfer the land. Counsel for the transferees crgues that this section authorizes an owner to transfer his land with or without a caveat He points to section 24 of the Act which is these terms: Where any mo1fgages or incumbrances are noted on the certificate oftitle issued to a transferee, the covenant shall be implied that the transferee has accepted the land subject to the mortgages and incumbrances, and that he will pay the interest accruing thereon, and dischalTle the principle sums for which the mortgages and incumbrances have been granted, and indemnify the transferor from the payment of the same in all time to come. According to counsel this means that land can be transferred subject to amortgage

2.Did the Applicants as transferees under the Memorandum of Transfer dated 1(J1h February, 2000 obtain and interest in the property registered in Certificate ofTitle Book P10 Folio 20; and ifso, whether the interest of Claytus Prevost as transferor, and his equity ofredemption, did pass to the transferees upon the due execution ofthe Memorandum ofTransfer.

[8]It appears to me that this argument misses the point The issue is not whether land subject to a mortgage can be transferred but rather what is the effect of a Memorandum of Transfer which is not registered. A caveat forbids the dealing with the land while the caveat remains enforced. The clear words of Section 20 (1) require two elements in order to effect a valid transfer of registered land. Firstly there must be a Memorandum of Transfer in the appropriate form. Secondly that Memorandum of Transfer must be presented to the Registrar of Lands. It is this cd of registration which vests and divests title. This is the hurdle at which the transferees fall.

[9]The Privy Council case of Frazer v Walker 1967 1 AUER 649 makes it clear that this is the correct legal pOSition. The transferees, having failed to register the Memorandum of Transfer, can obtain no lights to the real property under it They may have personal remedies against the transferor but that is another matter [10) Having regard to my finding on this point it is clear that the application to be substituted as Defendants must fail. The C.P.R 2000 at part 19 (2) (5) "The Court may ordera new party to be substituted for an existing one ifthe ­ (a) Court can resolve the mattelS in dispute more effectively by substituting the new party for the existing party; or (b) Existing party’s interest or liability has passed to the new party No interest of the Defendant in the land has passed to the applicants. It is also to be noted that the personal representatives of the Defendant have taken no issue with the judgment in default That judgment has already been enforced. The property has been sold to a bona fide purchaser for value with the sanction of this court In my view there remain no matters in dispute between the Claimant and Defendant

[11]For the above reasons I decline make an order substituting the Appellants as Dernda~~ (j/?11’h j ~(fs~~ c~\ ~::~o::u::e I ~~ i\, ~, \ "<:rf:~' ‘/ ~

1.Whether Claytus Prevost as transferor could properly transfer to the applicants as transferees that property registered in Book P10 Folio 20 while a caveat securing the mortgage loan was registered on the said title.

3.Whether the Applicants as transferees were the proper owners of the sai d property and/or entitled to the equity of redemption in 2006 at the date that the property was sold.

4.Whether the bank as mortgagee owed any duty of care to the Applicants as transferees at the date that the said property was sold in enforcement of the default judgment and whether the bank breached its duty of care to the applicants as owners of the property which was sold and of the equity ofredemption therein.

5.Whether the applicants as transferees of the said property do have an interest in determining the quantum and lor proper balance which forms the default judgment and lor in the proper judgment that may be enforced in any possible sale of that property of which they were the transferees as at 1(J1h February, 2000.