Jamaican Redevelopment Foundation Inc. v The Real Estate Board
| Jurisdiction | UK Non-devolved |
| Judge | Lord Clarke |
| Judgment Date | 03 September 2014 |
| Neutral Citation | [2014] UKPC 28 |
| Date | 03 September 2014 |
| Docket Number | Appeal No 0066 of 2013 |
| Court | Privy Council |
[2014] UKPC 28
Privy Council
From the Court of Appeal of Jamaica
Lady Hale
Lord Clarke
Lord Wilson
Lord Carnwath
Lord Hughes
Appeal No 0066 of 2013
Appellant
Sandra Minott-Phillips QC Maurice Manning Esq Tavia Dunn
(Instructed by Myers, Fletcher & Gordon Solicitors)
Respondent
Peter Knox QC Dr Lloyd Barnett
(Instructed by MA Law (Solicitors) LLP)
Heard on 12 March 2014
This appeal raises questions of some importance arising out of the Real Estate (Dealers & Developers) Act 1987 ("the Act") in Jamaica. The relevant part of the Act is set out in the Annex to this judgment. It sets out a detailed scheme for the development of land in Jamaica. The critical provisions of the Act are section 26, especially section 26(1)(b) and (2) and section 31, especially section 31(5). The most important question in the case is what is the true construction of section 31(5) of the Act, which must of course be construed in its context.
On 17 March 1994 New World Development Corporation Limited ("the mortgagor") applied to the respondent ("the REB") to be registered as a developer in respect of a development scheme in Jamaica in respect of certain land ("the land"). The mortgagor borrowed a total of $14,800,000 from Horizon Merchant Bank and Horizon Building Society under various loan agreements ("the loans"). The loans were secured by first legal mortgages over 24 acres of land of which the mortgagor was the registered proprietor. The mortgages in favour of the Horizon companies were registered in 1994, 1995 and 1996. The loans were not advanced in connection with the construction of any buildings or works on the land. In 1996 the mortgagor requested and was granted several splinter titles by The Registrar of Titles ("the Registrar"). The three mortgages were registered on all the splinter titles. Three of those splinter titles are relevant to this appeal. As the Court of Appeal observed, there is no evidence in respect of the others.
The Horizon companies both failed and in 1999 the mortgages were assigned to Refin Trust Limited ("Refin") pursuant to the assignment to it of the mortgagor's debt. The assignment was registered on the title to the land on 3 February 2000. Refin thereafter assigned the debt and the mortgages to the appellant ("JRF"). That assignment was registered on 29 October 2003. Thereafter JRF was the first and only mortgagee of all the land, having succeeded to all the mortgages previously held by the Horizon companies.
The mortgagor, as the Court of Appeal put it, pursuing its own interests, offered a number of lots which formed part of a sub-division for sale without first discharging the mortgages securing the loans. As a registered developer under the Act, the mortgagor entered into prepayment sale contracts with various purchasers for several of the lots. Under the prepayment contracts the mortgagor collected monies from the purchasers towards the purchase price. It was common ground between JRF and the REB that, as explained below, both the mortgagor's invitation to treat and its entry into the prepayment contracts were in contravention of the Act. In addition, the contracts were not in keeping with the proposed financing and payment plan that the mortgagor had declared and provided to the REB when it applied to be registered as a developer for the purpose of the particular development scheme.
The mortgagor defaulted in the repayment of the loans and in September 2006 statutory notices were sent by JRF to the mortgagor and its guarantors demanding payment of the sums outstanding and threatening realization of the security for recovery of the debt if no payment was made. Without JRF's knowledge or consent the mortgagor purported to lodge a charge in favour of the REB over four of the 40 splinter titles, including the three titles mentioned above, pursuant to section 31 of the Act, and collateral to the prepayment contracts entered into between the mortgagor and the purchasers of those four lots. It seems likely that the reason for the creation of the charge was that under section 31(3) of the Act the mortgagor, as developer, could not access deposits made by prepayment purchasers without creating such a charge. On 7 February 2007 that charge was registered on the titles of the four lots in favour of the REB. As the Court of Appeal noted at para 10, the charge specified that it was subject to the mortgages, which by then were held by JRF. The duplicate certificates of title of all the unsold sub-divided lots were in JRF's possession throughout and, accordingly, the registration was then effected only on the original certificates of title, which were kept at the Office of Titles.
The mortgagor did not repay the loans. So JRF exercised its power of sale under the mortgage in respect of the property comprised in the relevant certificate, which included the three lots. A sale agreement was concluded and a transfer executed and lodged with the Registrar on 13 November 2007. The Registrar refused to register the transfer and returned the documents to JRF on the ground that the consent of the REB was required. It was only then that JRF learned of the registration of the charge on the 4 lots in favour of the REB. The Registrar relied on section 31 of the Act and maintained that the charge to the REB ranked in priority to any of the other mortgages. The REB was unwilling to remove the charge or consent to the transfer unless JRF made arrangements to compensate the purchasers under the prepayment contracts. JRF then initiated these proceedings.
Section 26(1)(b) and (2) and section 31(4) and (5) provide:
"26(1) A person shall not enter into a prepayment contract as a vendor in connection with any land which is, or is intended to be, the subject of a development scheme to which section 35 applies unless –
…..
(b) such land is free from any mortgage or charge securing money or money's worth (other than a mortgage or charge in favour of an authorized financial institution referred to in the proviso to subsection (5) of section 31); …
(2) Where a contract is entered into by a vendor in contravention of subsection (1) the purchaser or any person succeeding to the rights of the purchaser under the contract may, within such time as may be reasonable in the circumstances of each case, withdraw therefrom and recover from the vendor any moneys paid to him under the contract together with interest thereon computed from day to day at the prime lending rate of commercial banks in Jamaica for the time being prevailing as certified by the Bank of Jamaica, but without prejudice however to the provisions of section 44(2) (relating to the penalty for contravention of subsection (1) of this section).
31 …
(4) The charge mentioned in paragraph (b) of subsection (3) shall be a charge upon the land on which the building or works in question is being constructed in favour of the Board charging the land with the repayment of all amounts received by the vendor pursuant to the contract which shall become repayable by him upon breach by him of the contract.
(5) Such charge shall rank in priority before all other mortgages or charges on the said land except any charge created by statute thereon in respect of unpaid rates or taxes, and shall be enforceable by the Board by sale of the said land by public auction or private treaty as the Board may consider expedient:
Provided that where a mortgage or charge of the said land has been duly created in favour of an authorized financial institution to secure repayment of amounts advanced by that financial institution in connection with the construction of any buildings or works...
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