1ST National Bank Saint Lucia Ltd v Winston Paul

• Jurisdiction: St Lucia
• Judge: Ventose JA
• Judgment Date: 09 December 2024
• Neutral Citation: LC 2024 CA 19
• Docket Number: SLUHCVAP2024/0011
• Court: Court of Appeal (Saint Lucia)

Between:

1 ^ST National Bank Saint Lucia Limited (Qua Successor to Royal Bank of Canada)

Appellant

and

Winston Paul

Respondent

Before:

The Hon. Mde. Margaret Price Findlay Justice of Appeal

The Hon. Mr. Trevor M. Ward Justice of Appeal

The Hon. Mr. Eddy D. Ventose Justice of Appeal

SLUHCVAP2024/0011

THE EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Civil appeal — Article 1009.1 of the Civil Code of Saint Lucia — Interpretation of guarantee — Whether the learned judge erred in the interpretation of guarantee — Whether the learned trial judge erred in law in conflating the obligations under the Loan and the Guarantee and finding the Guarantee to be more onerous — Whether the learned trial judge failed to award interest by way of damages in accordance with the Guarantee by mischaracterising the interest payable on the Guarantee as compound interest

Held: allowing the appeal and setting aside paragraph 1(ii) of the Order of the learned judge and substituting the following: “As against the appellant the sum of $540,000.00 with interest at the rate of 7% per annum from 6th March 2023 until the date of payment”, that:

• 1. Interpretation of a guarantee involves ascertaining the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. Thus, the question in this case is whether the reasonable person would understand that the phrase “debts and liabilities” includes any principal amount owing by Trinity to the appellant under the Loan and any outstanding interest on that principal amount. The factual matrix in this appeal was that the Guarantee was to protect the appellant from any financial loss occurring by reason that Trinity was unable to pay its debts and liabilities to the appellant under the Loan. There is nothing in the Guarantee which leads to the conclusion that interest is to be paid on the sum (representing total debts and liabilities) only in respect of the amount representing the principal of the Loan. Properly read, the clause covers the payment of interest on the total sum of debts and liabilities of Trinity and it does not matter that that sum included any unpaid interest on the Loan. Nothing in the relevant clause is ambiguous as to whether the phrase “debts and liabilities” includes any unpaid interest and there is therefore no need to have recourse to the contra proferentem rule.

  Static Control Components (Europe) Limited v Egan [2004] EWCA Civ 392 applied; Reynolds v State Insurance Corporation Antigua and Barbuda HCVAP 2007/005 (delivered 8th February 2010, unreported) considered.

• 2. The effect of Article 1009.1 of the Civil Code is that interest from capital sums also bears interest when there is a special agreement to that effect. In this case, the Loan and the Guarantee are two separate agreements and the obligations under each are not the same. The Loan is relevant only in determining the total “debts and liabilities” of Trinity under the Guarantee. It is that sum that attracts interest under the Guarantee. It is technically not correct to refer to the portion of the debts and liabilities that represented “interest” under the Loan as “interest” under the Guarantee. For the purposes of the Guarantee, the respondent is not liable to pay compound interest as this would only be the case if the interest of 7 per cent was payable not only on the total sum of the debts and liabilities but also on any accumulated unpaid 7 per cent interest. Once it is accepted that for the purposes of the Guarantee, the only relevant interest is the 7 per cent to be paid by the respondent, the concerns of the learned trial judge that: (1) this results in an outcome which is more onerous to the guarantor, in compound interest being applied to a portion of the debt; (2) it is at odds with the facility which attracts interest only on a reducing balance; and (3) it is unreasonable to suggest that the liability of the guarantor in relation to interest should be different to that of the principal debtor, without a clear stipulation to that effect, are no longer live ones. The learned trial judge therefore erred in law in conflating the obligations under the Loan and the Guarantee. In any event, the trial judge's finding that the Guarantee is more onerous does not affect the obligations of the respondent under the Guarantee. Consequently, no compound interest was applied to a portion of the debts and liabilities under the Guarantee that comprised interest under the Loan and Article 1009.1 is therefore not engaged.

  Article 1009.1 of the Civil Code of Saint Lucia Chapter 4.01 of the Revised Laws of Saint Lucia 2015 considered.

Appearances:

Ms. Sardia Cenac-Prospere with her, Mr. Arthur Compass for the Appellant

Mr. Alvin St. Clair for the Respondent

Ventose JA

1 This is an appeal filed by the appellant on 8 ^th May 2024 appealing against the decision of the learned trial judge dated 26 ^th March 2024 in which the learned trial judge, among others, gave judgment against the respondent in the sum of $540,000.00, with interest continuing on the principal balance of $475,045.20 at a rate of 7 per cent per annum from 6 ^th March 2023 until the date of payment.

Background

2 The appellant, 1 ^st National Bank Saint Lucia Limited (the “ Bank”), filed a claim form and statement of claim on 4 ^th September 2023 in which it claimed against the respondent the sum of $540,000.00 with interest at a rate of 7 per cent or at a daily rate of $103.5616 from 6 ^th March 2023 until the date of payment and the sum of $632,970.01 against the then first respondent, Trinity St. Lucia Limited (“ Trinity”). The appellant stated that Trinity and the respondent were customers of Royal Bank of Canada (“ RBC”). The banking business of RBC, including the Loan (as defined below), was transferred to the appellant on 31 ^st March 2021.

3 The respondent and Trinity entered into two loan credit facilities with RBC; the first was dated 16 ^th September 2016 and the second was dated 1 ^st December 2016. The parties also entered into a Hypothecary Obligation dated 18 ^th January 2017. Pursuant to these, RBC loaned Trinity the sum of $540,000.00 with interest at a rate of 7 per cent per annum (the “ Loan”). The respondent entered into a guarantee with RBC whereby he agreed to guarantee the payment on demand of the debts and liabilities of Trinity up to $540,000.00, and also to pay interest on the sum of $540,000.00 at a rate of interest of 7 per cent from the date of demand to the date of payment, before as well as after judgment (the “ Guarantee”). The respondent failed to pay the sums as demanded by the appellant under the Guarantee.

4 On 22 ^nd September 2023, the respondent and Trinity filed their five-paragraph defence in which they: (1) denied that there are two loan facilities with the appellant, whether jointly or severally; (2) stated that the debt owed by them is overstated and that the debt is a single facility granted to Trinity and guaranteed by the respondent; (3) denied liability in respect of any loan facility but a loan facility with a principal starting amount of $540,000.00 with interest annually of 7 per cent on reducing balance; and (4) stated that they have made payments towards the loan facility but acknowledge that they have defaulted and are in default.

5 The matter came up for hearing before the learned trial judge on 22 ^nd November 2023 who adjourned the hearing to allow the parties to discuss and agree the appropriate terms for entry of judgment. At a further hearing on 30 ^th November 2023, the parties had not yet settled the terms of the judgment, and the hearing was adjourned again. The matter came up for hearing before the learned trial judge for case management and reporting on settlement discussions on 25 ^th January 2024. At that hearing, the learned trial judge noted that that the parties had reached agreement on the terms for entry of judgment against Trinity but, disagreed on the terms for the respondent based on a difference of opinion on the interpretation of relevant sections of the Guarantee, which was the basis for liability against the respondent. The learned trial judge ordered the parties to file submissions and authorities on, whether the liability of the respondent is limited to: (i) a total sum of $540,000.00 with no interest thereon, or (ii) the sum of $540,000.00, plus interest accruing from the date such sum becomes due and payable, until payment in full, based on the terms of the Guarantee.

The decision in the court below

6 The matter came up for hearing before the learned trial judge on 13 ^th March 2024 who delivered her ruling on the issue on 26 ^th March 2024. The learned trial judge did not deliver a written judgment on the issue. Instead, she made a detailed order running five pages with full recitals giving the background to the issue, the submissions of the parties and her decision on the issue, which were then followed by the actual orders. The entire document is referred to in this judgment as the “Order”. At para [7] of the Order, the learned trial judge stated that the issue for resolution was whether the plain meaning of the words used, and the language of the clause, gives rise to a special agreement between the appellant and the respondent such that accrued interest included in the limit, bears interest, in accordance with Article 1009.1 of the Civil Code of Saint Lucia (the “ Civil Code”). 1

7 In answering the question posed, the learned trial judge explained as follows:

“9. The Court notes that the limit is expressed in respect of the principal sum loaned to the first defendant. The Court further notes that there is nothing in the clause or the agreement which states categorically that in the event interest is included in this limit, at some time in the future, then such...