Bank of Saint Lucia Ltd v Anne Felicien

• Jurisdiction: St Lucia
• Judge: St Rose-Albertini, J.
• Judgment Date: 14 October 2019
• Neutral Citation: LC 2019 HC 52
• Docket Number: CLAIM NO. SLUHCM2018/0028
• Court: High Court (Saint Lucia)

EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE

COMMERCIAL DIVISION

Before:

The Hon. Mde. Justice Cadie St Rose-Albertini High Court Judge

CLAIM NO. SLUHCM2018/0028

Between:

Bank of Saint Lucia Limited

Claimant

and

1. Anne Felicien

2. Bernadette Jacob

Defendants

Appearances:

Ms Diana Thomas with Ms Cleopatra McDonald for the Claimant

Mrs Carol Gideon-Clovis for the Defendants

1 St Rose-Albertini, J. [Ag]: On 13 ^th March 2018, the claimant, Bank of Saint Lucia Limited (“the Bank”) filed a claim against (1) Anne Felicien (“Anne”) as principal debtor and (2) Bernadette Jacob (“Bernadette”) as surety, for recovery of debts allegedly owed to the Bank, together with interest and costs.

2 The defendants admit that they are indebted to the Bank but deny the quantum claimed as principal and interest. They say the provisions of the Moneylending Act 1 (the “MLA”) present a case for reopening the transaction because the interest rate applied to the debt is excessive and the transaction harsh and unconscionable. Additionally, the Bank wrongfully continued to accrue interest, after they defaulted on the loan payments, contrary to the stipulations in the Eastern Caribbean Central Bank (the “ECCB”) Prudential Credit Guidelines (the “Guidelines”).

3 The issues to be determined are:-

• 1. Whether the Bank is entitled to the sums claimed?

• 2. Have the defendants presented a case for re-opening the transaction on the grounds that the interest rate was excessive?

• 3. Was the loan transaction harsh and unconscionable?

• 4. Was the Bank under an obligation to direct the second defendant to obtain independent legal advice?

Background

4 The Bank's claim against the defendants is for the sum of $322,496.48 inclusive of interest in the sum of $41,282.36 for periods up to and including 20 ^th February, 2018, together interest on the principal sum of $281,214.12 at the rate of 8% per annum from 21 ^st February 2018 to the date of payment and costs. The claim is premised on a loan agreement between the parties dated 2 ^nd July, 2010 and the principal sum comprised three loans which were consolidated as follows:-

• 1. The sum of $37,497.00 secured by Hypothecary Obligation registered as Instrument No. 259 /2003 over Parcel No. 1256C 8 2

• 2. The sum of $295,136.00 secured by Hypothecary Obligation registered as Instrument No. 3630 /2010 over Parcel No.1256B 727 3

• 3. The sum of $50,733.00 secured by Second Hypothecary Obligation registered as Instrument No. 5761 /2010 over Parcel No. 1256C 8 4

5 The Bank pleaded that a term of the loan agreement was that the defendants would repay the loan by monthly installments over a period of 216 months. It was also agreed that the interest rate would be subject to variation at the Bank's discretion. At Anne's request the loan was restructured and the interest rate reduced from 10.5% to 9% per annum by a loan agreement dated 3 ^rd July, 2012. Upon further request, the loan was again restructured, and interest reduced further to 8% by a loan agreement dated 3 ^rd March, 2013. The Bank avers that the defendants breached the terms of that loan agreement by failing or refusing to pay the monthly installments as and when they became due. Demand letters were issued to the defendants requesting full payment of the balance of the loan, which the defendants have failed to pay, and remain indebted to the Bank for the sums claimed.

6 The Defendants defence, 5 in summary, admits that they are indebted to the Bank but denies the sums claimed as principal and interest and puts the Bank to strict proof thereof. They aver that the Bank (i) failed to issue a demand for the debt before filing the claim, (ii) charged an interest rate which was excessive, harsh and unconscionable contrary to the MLA, (iii) continued accrual of interest after the loan was 90 days in arrears contrary to the requirement of the Guidelines which govern the Bank's conduct in such transactions (iv) failed to explain the manner in which the loan would be repaid at the time that it was granted, and (v) failed to further refinance the loan taking into account a fall in the income of the first defendant.

7 The Bank, in its reply 6, avers that a formal demand of the debt was served at the address which the defendants provided to the Bank. The loan was restructured twice at Anne's request and in any event the Bank was under no obligation to reduce the interest or monthly installments which were agreed by the parties to the loan agreement. Accrual of interest against the debt is permissible under the Guidelines and in any event, the Guidelines do not create a justiciable right or cause of action capable of being invoked by the defendants as a defence. The amortization of the loan is in line with the provisions of the Civil Code 7 (the “Code”), interest is not excessive, and the defendants have not pleaded any issue to warrant reopening the transaction.

The Claimant's Evidence

8 At trial, Daniel Eugene, Recoveries Manager testified on behalf of the Bank. He explained that he was familiar with the loan negotiation process and inquiries on loan accounts in relation to recovery of bad debts. He is the officer responsible for recovery of the debt allegedly owed by the defendants under Mortgage Loan No. 575052061. He gave the instructions for demand and subsequent litigation in the matter. His witness statement provided details of the history of the loan and several documents were tendered in support of the claim. He also addressed the process engaged by the Bank in assessing the risk related to the loan, to arrive at the interest rate initially charged, the subsequent reductions in interest rates, accrual of interest after default, amortization of the loan and the requirement for independent legal advice. He stated that in all of the circumstances, the rate of interest was reasonable, amortization of the loan was in line with the relevant laws and the Guidelines, and the Bank was entitled to the principal and interest claimed, for which the defendants remain indebted.

The Defendants' Evidence

9 Anne and Bernadette are sisters and they testified on their own behalf. Anne ordinarily resides in Canada and is a registered nurse. She stated that she has been doing business with the Bank for over 12 years and has had 3 loans for the following sums:- (i) $37,497.00 in 2002; (ii) $30,000.00 in 2006; and (iii) $295,136.00 in 2010. In 2012 and 2014, the Bank restructured her loans and the interest rate was reduced from 10.5% to 9% and then to 8% respectively. The properties offered as security for the loans belong to her and she executed a Power of Attorney to have Bernadette sign documents on her behalf whenever she is out of the jurisdiction. She claims that the Bank advised her to include Bernadette's name on the property which she purchased at Bay Street, Gros Islet when she took the first loan in 2002, for the purchase of that property. Whenever she did business at the Bank, she would be asked to ensure that Bernadette was also present. She observed on one of the loan agreements that Bernadette signed as surety but stated that could not be correct as she (Bernadette) had nothing to offer as security. She stated that Bernadette was required to sign these documents in her capacity as Attorney and not as surety. She surmised that Bernadette was made to sign documents as surety without proper explanation or a directive from the Bank to seek independent legal advice.

10 In cross examination, she agreed that in 2002 she wanted to purchase the Bay Street property and approached the Bank for a loan, though she was not residing here at the time. When she applied for that loan she was the one who wanted the property and she completed the loan application. She did not have the full deposit required by the bank, so Bernadette agreed to assist her. She informed Bernadette that she would include her name as joint owner of the land and allow her to operate the property on her behalf. She agreed that both their names are on the land register as the owners of the Bay Street property but insists that although Bernadette's name is included, she does not own that property.

11 She stated that although the 2010 loan agreement shows that the Bank lent her $47,000.00 to refinance an earlier loan for purchase of beach umbrellas and to pay loan fees in 2008, she recalls that she obtained a loan for $30,000.00 and not $47,000.00. She says she did not understand the contents of the 2010 loan agreement but did not ask for clarification. She agreed that she commenced payment of the consolidated loan from 2010. Subsequently, she experienced a reduction in her hours of work at her place of employment in Canada which led to a reduction in her monthly income. She kept the Bank abreast of these matters when in 2012 and 2014 she fell behind on repayments. At her request, the Bank reduced the interest rate to 9% in 2012 and 8% in 2014. She understood that the Bank was under no obligation to do so but had heard her cries and was sympathetic. However, she did not agree that by reducing the interest rate, the Bank was being generous to her.

12 In 2016, her income continued to decline and with her other commitments she again experienced a financial strain in meeting the monthly repayments on the loan. She returned to the Bank seeking a further reduction in the monthly installment but was told that the loan had already been renegotiated twice therefore further restructuring was not possible. The bank advised that she was to continue the repayments at the agreed rate or risk being taken to court. Thereafter, the Bank filed this action to recover the amounts claimed.

13 She believed that the Bank was unfair to her as she had been a customer for over 10 years, from whom the Bank had earned tremendous interest over the years. She proposed a monthly payment of $1,500.00 but the Bank refused to consider the offer...