Firstcaribbean International Bank (Barbados) Ltd v Chemical Manufacturing and Investment Company Ltd

• Jurisdiction: St Lucia
• Judge: St Rose-Albertini, J.
• Judgment Date: 17 December 2021
• Neutral Citation: LC 2021 HC 12
• Docket Number: CLAIM NO. SLUHCM2020/0064 formerly SLUHCV2010 /0121
• 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. SLUHCM2020/0064 formerly SLUHCV2010 /0121

Between:

Firstcaribbean International Bank (Barbados) Limited

Claimant

and

1. Chemical Manufacturing and Investment Company Limited

2. The Roserie Company Limited

Defendants

Appearances:

Mr. Deale Lee with Ms. Zinaida McNamara for the Claimant

Mrs. Cynthia Hinkson-Ouhla with Mrs. Esther Green-Emest for the Defendants

1 St Rose-Albertini, J. [Ag]: In this action the claimant FirstCaribbean International Bank (Barbados) Limited 1 (“the Bank”) claims against the defendants Chemical Manufacturing and Investment Company Limited (“Chemico”) as principal debtor, and The Roserie Company

Limited (“Roserie”) as guarantor, debts due and owing together with interest and costs. The Bank asserts that despite demands for payment the debts remain outstanding

2 The defence to the claim is premised on the assertion that the Bank breached several express and implied terms of an agreement between the parties. The defendants deny owing the first of the two sums claimed, stating that they completed repayment of that loan. With respect of the second sum, they aver that the Bank without authorization, imposed an overdraft facility at higher than agreed interest rates, despite a requirement that Chemico's current account be operated strictly in credit.

3 The defendants further say that claim is prescribed, having been brought more than six years after the cause of action arose. In that regard it is to be noted that prescription of the claim was adjudicated as a preliminary issue and decided in favour of the Bank, in a decision of the Court delivered on 30 ^th June 2017. The decision was upheld on appeal.

The Pleadings

4 The Bank is incorporated as a company under the Companies Act 2 and at all material times was authorized to conduct banking business in Saint Lucia. The Bank claims that two sums are due and owing by virtue of two credit facilities between the Bank and the defendants as follows:

• 1. The sum of $4,918.68, together with interest on the outstanding principal balance of $1,520.06 at the rate of 13.5% per annum from 15 ^th October 2009 to the date of payment, by virtue of a loan for the principal sum of $120,000.00 granted by the Bank to Chemico and secured by Hypothecary Obligation, Mortgage Debenture and Floating Charge from Chemico 3 (“the Hypothec”) and an unlimited Guarantee by Roserie 4 (“the Guarantee”) in favour of the Bank.

• 2. The sum of $241,179.34, together with interest on the outstanding principal balance of $238,888.63 at the rate of 25% per annum from 15 ^th October 2009 to the date of payment, by virtue of a current account facility extended by the Bank to Chemico, also secured by the Hypothec and the Guarantee.

5 The Bank says these sums remain due and owing despite demands for payment.

6 The defendants say they were customers of the Bank from 1993 until 2003, when the Bank terminated the relationship by letters dated 28 ^th October 2003 (“the Demand Letters”) addressed to the Manager of Chemico and Roserie.

7 They admit the existence of the Hypothec, which secured a loan from the Bank to Chemico and state that it was an express term of the Hypothec that: (i) the secured loan would be repayable by installments and (ii) the debts shall become due and payable and the Hypothec enforceable immediately upon demand being made by the Bank. However, it was also an implied term of the Hypothec that the Bank would not exercise its power to demand repayment of the entire loan capriciously or arbitrarily. The defendants allege that the Bank, in the absence of any breach by them, terminated the agreement and demanded repayment of the entire outstanding balance of the loan, by issuing the Demand Letters.

8 The defendants also allege that it was a term of the agreement that they would operate their account on a strict credit basis. Despite this, after terminating the relationship and without the defendants' authority, the Bank continued to make payments and advances on their behalf, thus increasing the debt and imposing higher interest rates than agreed or existed on the date of termination of the relationship.

9 The defendants state that the Demand Letters were issued when relations broke down with the Bank over a dispute with Roserie concerning Customs Bond payments made by the Bank to the Customs and Excise Department, on behalf of Roserie. The Manager of Roserie had expressly instructed that the Bank should not pay the Bond as the matter was disputed and queried the debit which appeared on its operating account. The amount paid was for outstanding duties allegedly owed for under-invoicing of imported vehicles, as part of the business undertaken by Roserie.

10 The defendants make further and alternative allegations against the Bank as follows: (i) the Bank, by terminating the agreement and continuing to conduct transactions on behalf of the defendants, created a fiduciary obligation to the defendants; (ii) the interest rate that had been agreed was 13% per annum, thus, the demand for interest at the rate of 25% is unconscionable and amounts to a penalty; (iii) the demand clause under which the Bank exercised its right to call in the loan is an unfair contractual term and should not be relied upon; (iv) the Bank failed in its obligation to advise Roserie as guarantor to seek independent legal advice about the unusual terms which appeared in the agreement.

11 In its reply, the Bank states that allegations of breach of implied terms must be specifically pleaded and particularized. The defendants have failed to do so and as such those allegations are unsustainable. The Bank denies the allegation that it continued to make advances to the defendants without their express authority, thereby increasing their indebtedness and applying a higher interest rate than agreed.

12 In relation to the defendants' averment concerning the issue of the Bond payments, the Bank states that it is confusing and bears no relevance to the present claim. The claim concerns the two amounts identified therein and is devoid of any reference to any further amounts under a Bond or other additional advances made on the defendants' behalf.

13 Regarding the assertion that the Bank has imposed an unconscionable interest rate, the Bank says that the rate charged is the default interest rate in relation to overdrawn credit facilities. In charging this rate, the Bank was motivated purely by commercial considerations including the high level of default loans in Saint Lucia and the extent of risk it undertook in extending credit facilities of this magnitude to the defendants. The Bank denies acting dishonestly, capriciously, or arbitrarily in imposing the default interest rate.

14 The Bank further averred that the Hypothec was prepared by Chemico's Notary and signed by its directors, as having read, and understood the contents thereof. Chemico is therefore bound by same. Additionally, Roserie voluntarily signed a declaration declining independent legal advice. The Bank states that the demand clause is not an unusual or onerous term in these types of credit facilities or loans and is a well-known right within normal banking and commercial transactions.

The Issues

15 In relation to the Banks claim for $4,918.68 plus interest the defendants denied owing this sum and stated that if the amount relates to the loan granted to Chemico 5 the balance of which was stated to be $38,142.22 in the Demand Letters, they have completed repayment of that loan and there is no sum outstanding. It is noteworthy that during the case management stage of the proceedings, the Bank elected to discontinue this limb of the claim as contained in Court Order dated 16 ^th November 2017. This fact was further confirmed by Counsel for the Bank at the commencement of trial and in written closing submissions 6. It is therefore no longer an issue for determination by this Court.

16 The remaining issues for the Court's consideration are as follows:

• 1, Whether the Bank unlawfully charged to Chemico's current account the sum of $241,179.34 inclusive of interest, and whether by doing so the Bank owed fiduciary obligations to the Defendants, which were breached?

• 2. Whether interest charged at the rate of 25% per annum on the overdraft sums due on Chemico's current account is unlawful, and whether the Bank is precluded from claiming interest for periods exceeding five years, prior to the date of filing the claim

The Evidence

17 Mr. Curtis Small (“Mr Small”) was the sole witness for the Bank. He is the Senior Manager of the Special Loans and Credit Risk Management Unit of the Bank and well acquainted with the defendants' accounts and securities. He stated that at all material times, Chemico maintained demand loans and current accounts with the Bank.

18 He testified that on 24 ^th July 2001 the Bank issued a credit facility bearing account number 133450 to Chemico, for the purpose of transferring an overdraft on its operating account into a demand loan in the amount of $120,000.00 with interest at 14.5% per annum (“the Demand Loan”). The Demand Loan was secured by the Hypothec and Guarantee, and the latter was for an unlimited sum. The Demand Loan was additionally secured by a letter of undertaking dated 17 ^th July 1996 in which Chemico agreed that no dividends would be paid without the prior consent of the Bank. The credit facility letter and respective account statements, the Hypothec, the Guarantee, and the undertaking were exhibited to his witness statement.

19 Mr. Small stated that Chemico continued to maintain its current account number 1036143 (“the Current Account”), for daily operations of its business. Installment payments for the Demand Loan were made from the Current Account. Chemico also had a...