THE REPUBLIC OF TRINIDAD AND TOBAGO IN THE HIGH COURT OF JUSTICE HCA No S-496 of 2005/ CV 2007-01692 BETWEEN REPUBLIC BANK LIMITED CLAIMANT AND SELWYN PETERS DEFENDANT BEFORE THE HONOURABLE MR JUSTICE R. BOODOOSINGH APPEARANCES: Mr Farees Hosein for the Claimant instructed by Hobsons Ms Kamini Persaud for the Defendant Delivered: 03 February 2012 JUDGMENT 1. By Writ of Summons and Statement of Claim filed on 23 March 2005 the claimant claimed against the defendant money due and owing under two loan accounts. Under the first loan the sum claimed is $ 112, 605.12, while under the second loan the sum of Page 1 of 16
$ 4, 535.08 is claimed. Interest on both sums is also claimed at a rate of 16.5% until payment or judgment. 2. By his Amended Defence and Counterclaim filed on 5 November 2007, the defendant denied liability for the sums claimed and counterclaimed for damages for breach of trust and breach of contract. 3. In closing submissions, counsel for the defendant conceded that the defendant failed to establish his case on the counterclaim and submitted only on the issue of whether the claimant s claim is statute-barred. Consequently, this was also the only issue addressed by the claimant in its submissions in response. The issue for decision, therefore, is whether the claimant s action for the recovery of sums of money owed under the two loan accounts is statute-barred. 4. The defendant contends that the claims are statute-barred having been brought more than 4 years after the causes of action accrued. He submits whether time runs from default of payment or on demand, the claimant s claim is barred. Regarding the first loan, he says time started to run by at least 25 January 1995 the date, according to the defendant, of the first known demand for repayment. On the second loan, he says time ran from 31 October 1996, the stipulated time by which that loan was to be repaid. Page 2 of 16
5. The claimant submits that, the debts being secured by a mortgage bill of sale and a deed of mortgage respectively, the claims arise from specialty contracts/contracts under deed and are therefore not ordinary debts under ordinary contracts subject to the 4 year limitation period laid down by statute for these types of actions. FACTS 6. The first loan of $ 68,412.00 was granted on 12 December 1991 for the purposes of refinancing a previous loan and for repairs to the defendant s maxi taxi. The loan was secured by a mortgage bill of sale executed on the same date and registered as No BS 25602 of 1991. Under the bill of sale the defendant assigned the maxi taxi HAE 1617 as security for payment of the sum of money loaned. By the terms of the loan and bill of sale, the loan was to be repaid by monthly instalments commencing on 30 December 1991, the final sum being due on 30 November 1995. 7. The defendant defaulted in his payments, and by its powers under the bill of sale the claimant seized the maxi taxi in May 1994. By letter dated 23 January 1995, the claimant wrote to the defendant informing him that his account was deemed due and payable and requested his proposals for repayment. Following continued default, the claimant sold the maxi taxi for $ 13,500.00 and informed the defendant by letter of 19 July 1995 that he would remain liable for the amounts still due on the account. Page 3 of 16
8. From the evidence it appears that the last payment made towards the outstanding balance on this account was on 21 July 1997. 9. The second loan was granted on 22 October 1992 in the sum of $ 31,624.00 to assist with farming expenses and further repairs to the maxi taxi. It was to be repaid by monthly instalments of $ 659.00 for 48 months to expire on 31 October 1996. The loan was secured by a mortgage over property owned by the defendant by way of Deed of Mortgage registered as Deed No 15676 of 1992. Under the mortgage deed, executed on 18 September 1992, before the loan was taken, the property was assigned as security for advances or further advances that the claimant may make to the defendant. No terms and conditions are however stipulated on the deed. 10. The defendant also defaulted in the repayment of this loan, the last payment being made towards it on 20 May 1999. 11. By way of letters dated 23 July 2004 to the defendant, the claimant formally demanded the payment of the outstanding liabilities on both loan accounts. Page 4 of 16
STATUTORY PROVISIONS 12. On the defendant s submissions, the right of action to recover the sums owing on both loans would have accrued before 1997 and, therefore, the provisions of the Limitation of Personal Actions Ordinance Chap. 5 No. 6 (the Ordinance) would apply. This is so because although the Limitation of Certain Actions Act Chap. 7:09 (the Act) repealed the Ordinance, by section 20 (1) of the Act, the provisions of the Ordinance continue to apply for rights of action accruing before the commencement of the Act, i.e. 17 November 1997. 13. Section 3 of the Ordinance limits the right to bring an action to recover money secured by a mortgage, judgment or specialty to 12 years next after a present right to receive or have the same shall have accrued to some person capable of giving discharge for or release of the same By section 5, all actions founded on simple contract without specialty were to be brought within 4 years after the cause of such actions. 14. Section 3 (1) (a) of the Act states: The following actions shall not be brought after the expiry of four years from the date on which the cause of action accrued: (a) actions founded on contract (other than a contract made by deed) on quasicontract or in tort; (my emphasis). Page 5 of 16
What is the nature of the debts owed under the two loan accounts? 15. The claimant submits that whether the provisions of the Ordinance or the Act are applied, the claims are not statute-barred. This is because the debts owed arise from specialty contracts which, under the Ordinance, are subject to a 12 year limitation period, and, under the Act, subject to no limitation period. 16. A contract to loan money is, subject to provisions such as the giving of security in various forms, governed by the ordinary law relating to contracts see Halsbury s Laws of England 4 th ed Reissue Vol. 28 at para 115. 17. The two principal loan agreements by themselves are simple contracts that would normally be subject to the 4 year limitation period for actions arising from their breach. However, it is not in dispute that the loans were secured by a mortgage bill of sale and a deed of mortgage respectively, both of which are contracts made by deed/specialty. The question is whether this makes the debts owed under both loans specialty debts as submitted by the claimant. 18. The general rule is that where a debtor enters into a covenant contained in a deed to secure a debt existing under a simple contract, the remedy on the simple contract is merged in the superior remedy on the covenant and is extinguished in law Halsbury s Page 6 of 16
4 th ed Reissue, Vol. 9 at para 211. The merger of a simple contract debt into a specialty debt depends undoubtedly on the intention of the parties, and their intention is to be gathered from the documents they have signed - see Barclays Bank Ltd v Beck [1952] 1 All ER 549 at 552, 553 per Denning LJ. Where a debt is therefore merged, an action brought to recover money owing on both the simple and specialty contracts is really an action on the specialty itself. 19. Regarding the first loan, the claimant s claim is brought alternatively, under the terms and conditions set out in the bill of sale and on the loan agreement. It is clear from the terms of both documents that they reflect collateral obligations entered into by the defendant in connection with taking the loan. Both documents were also executed on the same day and the terms and conditions of the loan are specifically set out in the bill of sale and not on the loan agreement. I am of the view that the debt on this account was clearly intended to be merged and was merged into the covenants under the bill of sale and is therefore a specialty debt recoverable pursuant to the bill of sale. 20. The fact that the security was realised also does not affect the nature of the contract or the limitation period applicable -see West Bromwich Building Society v Wilkinson [2005] UKHL 44. The defendant contends that the sale of the maxi taxi was a culmination of the demand for the liquidation of the loan under the bill of sale. However, the sum outstanding remains a specialty debt and is recoverable on an action on the bill of sale. Page 7 of 16
21. The claim on the second loan is brought under the terms and conditions as set out in the loan agreement only. The claimant, however, relies on the fact the loan was secured by a mortgage deed to say that the debt under the loan is not an ordinary debt. While it is not disputed that the deed of mortgage was provided as security for the second loan, this by itself does not make the debt owed under the loan a specialty debt. It only means that the deed is collateral security for the repayment of the loan see Barclays Bank Ltd v Beck at page 553. 22. In my view, it was always contemplated under both the Ordinance and the Act that an action to recover money secured by deed or other specialty must be founded or brought further to the specialty itself and not on the simple contract alone. Under the Act at least this seems clear. In fact, there is no longer any express provision in the Act for the bringing of actions to recover money secured by deed. The Act simply provides for actions founded upon contracts made by deed. As such, under the Act, a mortgagee s action to recover money secured would have to be founded on the mortgage deed itself to not be subject to the usual 4 year limitation period applicable to simple contracts. 23. Although the claimant submits that the second loan is subject to the terms and conditions of the security, no terms of repayment are set out in the mortgage deed itself. The mortgage deed was also executed before the taking of the loan. The type of mortgage here is characteristic of an all moneys mortgage where the terms of repayment are set out in the loan agreement which the mortgage secures and not on Page 8 of 16
the security instrument itself. The bank s continuing security is provided by the mortgage which secures all money lent from the time of execution onward so that future loans or advances to the borrower are covered as being part of the all moneys which the mortgage secures. 24. The debt therefore was not created by the mortgage deed but by the loan instrument which is not a specialty but a simple contract. Further, the two instruments do not reflect any collateral obligations entered into between the bank and the defendant in connection with this particular loan. The mortgage deed was simply a collateral security to secure the defendant s future debt. As Denning LJ stated in Barclays Bank at pages 552-553: Future debts do not merge; they take their colour from the circumstances in which they arise. They are then either specialty debts or simple contract debts, and, as they start, so they go on. If they are created under and by virtue of a deed, they are specialty debts from their commencement, but if they are created by a simple contract outside a deed, they remain simple contract debts even though there is a deed in existence which gives collateral security for them. 25. In my view, to recover the money owing on the second loan as a specialty debt, the claimant ought to have sued on the mortgage deed. The claim having been being brought under the loan instrument only, the debt on the second loan account therefore remains a simple contract debt. Page 9 of 16
When did the cause of action accrue and which statute applies? 26. The defendant submits that by the letters of 23 July 2004 the claimant is seeking to extend the time within which it can bring this action in relation to both loan accounts. Inherent in the submissions is that the limitation of time ran from the date of a demand being made or from the stipulated time for repayment of the loan. 27. In contracts of loan, it is a matter of construction of the contract to determine the date from which time will run see generally Lloyds Bank Ltd v Margolis [1954] 1 All ER 734. The defendant submits that where there is a time fixed for repayment, the cause of action accrues and time runs from then - Reeves v Butcher [1891] 2 QB 509. However, in that case it was also held that it is a question of construction of the contract whether the occurrence of a stipulated event triggers the obligation to repay, or merely entitles the lender to demand early repayment. 28. It is therefore important to construe the terms of repayment under the bill of sale and the second loan contract. 29. Regarding the first loan, the terms and conditions of the bill of sale included: if any instalment or any part thereof shall not be paid when due the whole balance of the loan in addition to all unpaid interest on the loan then accrued due at the said rate of shall fall due. The defendant further covenanted by clause 6 of the bill of sale: That all Page 10 of 16
amounts paid by the Bank and charged to the Borrower hereunder shall be payable by the Borrower on demand at the aforementioned Branch of the Bank. 30. From the submissions of the parties, it appears that both sides agree that a demand was necessary in relation to this loan. I am also of that view. Default of payment would have entitled the claimant to demand repayment but a demand was necessary to trigger the immediate obligation to repay. 31. The English Court of Appeal decision of Thakore (t/a Sunil Credit Finance) v Malick (26 March 1982, unreported), CA, involved the construction of a similar clause as the clause in the bill of sale. In that case the contract of loan provided that, in the event of default by the borrower in the payment of some instalment, the whole amount of the principal was to become due and payable to the lender on demand. It was held that this required some overt demonstration of the lender s requirement that the borrower be held at once accountable for the whole residue of the loan; the term on demand meant more than immediacy. 32. Where a demand is necessary, time runs from the date of the demand - Lloyds Bank Ltd v Margolis. The defendant submits that a first demand was made by the claimant s letter of 23 January 1995 and therefore time ran from then. By that letter, the claimant wrote to the defendant informing him that control of his account had been transferred to another unit and stated: Page 11 of 16
As your account is deemed due and payable in full, (our letter dated 29.03.94 refers) we wish to know of your proposals for repayment and must ask you to call on us as soon as possible, but no later than February 6, 1995 to discuss. 33. I do not consider this letter of 23 January 1995 to be a demand. (The contents of the 1994 letter referred to was not produced in evidence and therefore could not be verified). While it stated that the account was deemed due and payable in full, the letter goes on to invite the defendant to discuss his proposals for repayment by a certain date. It does not indicate that payment was required or required immediately. There must be a clear and unconditional intimation that payment is required to constitute a demand see Financial Institutions Services Ltd v Negril Negril Holdings Ltd and Another (2004) 65 WIR 227, PC. 34. The letter of 23 July 2004 however was a clear and unequivocal demand requiring payment within 7 days. I therefore find that this letter was the only formal demand for repayment and time would have started to run on the claimant s ability to recover the sum owing on this account from 23 July 2004. The Act therefore applies to this claim. 35. The terms and conditions of the second loan agreement included at clause 1 (b)(i) to pay the entire sum on demand but until such demand is made by you to be repayable with interest by equal consecutive monthly instalments of until payment in full. Clause 1 (b) (iii) states: Further, in the event of either your making a demand for Page 12 of 16
repayment as aforesaid or the loan not being repaid in full by 31/10/96 then the whole amount of the loan then outstanding shall immediately become due and payable 36. In my view, the requirement for a demand under this agreement is qualified by the further condition at clause 1 (b) (iii) which stipulates in the alternative to a demand being made that the whole amount of the sum then due shall immediately become due and payable by 31 October 1996 the date fixed for repayment. The requirement of immediacy on default of payment by this date in my view distinguishes this clause from the clause in the bill of sale above. 37. No formal demand was made on this account until 23 July 2004. I therefore agree with the defendant that the cause of action would have first accrued on 31 October 1996 the date of repayment of the loan. However, after this, the defendant made a last payment on this account on 20 May 1999. This payment stopped time running regarding the claimant s remedies under the loan, and a fresh cause of action accrued as of this date. Section 12 (2) of the Act states where any action has accrued to recover any debt or other liquidated pecuniary claim and the person liable makes any payment in respect thereof, the right shall be deemed to have accrued on and not before the date of payment. Page 13 of 16
38. I therefore find the date of accrual of the cause of action on the second loan to be 20 May 1999 which also brings this claim under the Act. Are the claims statute barred? 39. On the claim on the first loan therefore, I find that the date of accrual of the cause of action was 23 July 2004 the date of the formal demand for repayment. The Act therefore applies. The claim was filed on 23 March 2005. Even if I am wrong on the date of accrual and the Ordinance applies, the claim would still fall well within the 12-year limitation period it being an action founded upon a contract by deed. This claim therefore is not statute-barred. 40. On the second loan, I find that the payment of 20 May 1999 operated to extend the date of accrual of the cause of action and this claim therefore also falls under the Act and not the Ordinance. Having been brought under the terms of the loan agreement only and having found the debt owing to be an ordinary debt, the claimant had 4 years from 20 May 1999 to commence an action for the recovery of the money due. The claim on this loan is therefore statute-barred. 41. On the limitation period applicable under the Act to actions founded on specialty (contracts made by deed), I am of the view that there is a lacuna in the law. Section 3 (1) of the Act preserves the 4 year limitation period for the bringing of actions based on Page 14 of 16
simple or ordinary contracts. Unlike the Ordinance, however, the Act does not expressly stipulate a limitation period for actions founded on contracts made by deed. The claimant submitted that there is therefore now no limitation period in relation to such actions. 42. An action is defined under the Act as meaning proceedings other than those relating to real property. As such, section 3 of the Act does not apply to actions for the recovery of land or rent which, under the Real Property Limitation Act Chap. 56:03, may be brought within 16 years after the right of action accrued. But what of a mortgagee s personal remedy to recover the debt owed under a mortgage, or actions to recover money founded on other specialty contracts such as bills of sale? Under the Ordinance, such actions would have become statute-barred after the expiry of 12 years. The Act however is silent. 43. There is nothing to suggest that Parliament intended to remove or not impose a limitation period for the bringing of such actions under the Act. This is more so when section 3 (2) maintains the 12-year period for the bringing of actions upon judgments There is a presumption against unclear changes in the law, whether statute or common law see generally Cross, Statutory Interpretation 3 rd edition at pages 167 169. Both the repealed Ordinance and the current UK Limitation Acts provide time limits for actions on specialty and to recover sums of money secured by such contracts. The wording of section 3 (1) of the Act appears to be an unfortunate omission as opposed to Page 15 of 16
any clear indication of an intention to alter the previous position under the Ordinance. I am therefore of the view that for consistency and certainty in the law, the 12-year limitation period should continue to be applied under the Act in relation to actions founded on contracts made by deed and to recover sums of money secured by such contracts. 44. The claimant is therefore entitled to judgment on the first loan agreement for the sum of $112,605.12. Interest is to run on this sum at the rate of 16.5 % per annum from 16 December 2004 until judgment. The claim regarding the second loan agreement is dismissed. The defendant must pay prescribed costs in the sum of $25,890.75. I am grateful to the attorneys and my Judicial Research Assistant, Mr Roshan Ramcharitar, for their assistance in this matter. Ronnie Boodoosingh Judge Page 16 of 16