Malmaison Properties LLC v Jeffrey Coyne
| Jurisdiction | St Lucia |
| Judge | Thom JA |
| Judgment Date | 13 December 2019 |
| Neutral Citation | LC 2019 CA 14 |
| Court | Court of Appeal (Saint Lucia) |
| Docket Number | SLUHCVAP2018/0015 |
EASTERN CARIBBEAN SUPREME COURT
IN THE COURT OF APPEAL
The Hon. Mde. Gertel Thom Justice of Appeal
The Hon. Mr. Paul Webster Justice of Appeal [Ag.]
The Hon. Mr. Humphrey Stollmeyer Justice of Appeal [Ag.]
SLUHCVAP2018/0015
(In Receivership)
(In Receivership)
Mr. Leslie Prospere for the Appellants
Mr. Deale Lee for the Respondents
Civil appeal — Interlocutory appeal — Preliminary issue — Sale of on-going business — Doctrine of merger — Interpretation of contractual documents — Intention of parties to contract — Whether learned judge erred in applying doctrine of merger in conveyancing law — Acquisition Agreement — Express survival clause in Acquisition Agreement — Execution of Deeds of Sale — Whether Acquisition Agreement merged by virtue of subsequent execution of Deeds of Sale — Whether Acquisition Agreement and Deeds of Sale substantially covered the same ground
The second and third named respondents, Doubloon Hotel Limited (“Doubloon Hotel”) and Doubloon Marina (St. Lucia) Limited (“Doubloon Marina”), were indebted to the Bank of Nova Scotia (the “Bank”) by virtue of a hypothec, mortgage debenture and floating charge. As a result of being unable to meet their debt repayments, the Bank, by deed of appointment made pursuant to the mortgage debenture, appointed the first named respondent Mr. Jeffrey Coyne (“Mr. Coyne”) as Receiver and Manager of both Doubloon Hotel and Doubloon Marina.
The first named appellant Malmaison Properties LLC (“Malmaison”) entered into negotiations with Mr. Jeffrey Coyne to purchase the assets of Doubloon Hotel and Doubloon Marina through the Acquisition Agreement which was executed by the parties on 16 th March 2012 and subsequently amended on 25 th May 2012 and 25 th December 2012 (the “Agreement”). The Bank signed a letter of undertaking dated 16 th March 2012 addressed to Malmaison that it would comply with the stipulations outlined therein. Both Doubloon Hotel and Doubloon Marina remained fully operational between the execution of the Agreement and the transfer of their assets to the appellants.
The appellants visited and inspected the property prior to the consummation of the sale. Following the closing, the appellants again inspected the property and determined that Doubloon Hotel and Doubloon Marina misrepresented the condition of the property and had not performed their covenant obligations during the period from 16 th March 2012, through the closing, including the covenant obligation to “repair and maintain” the property.
The appellants filed a claim against the respondents for, inter alia, breach of contract arising under the terms of the Agreement. The appellants, with the respondents' agreement, applied to the High Court for the separate trial of a number of preliminary legal issues, one of which was, whether the Acquisition Agreement was merged and extinguished in two Deeds of Sale and Assignments of Lease (“the Deeds”) executed on 31 st July 2013.
The learned trial judge found that: (1) with respect to representations, warranties and covenants concerning unencumbered and good marketable title to the properties conveyed in the Deeds, the Deeds contain the completed contract; (2) in relation to those concerning assets that were not transferred in the Deeds and which had survival clauses, the parties must look to the Agreement; and (3) any matters which do not fall into either of the two categories are merged and extinguished.
The appellants, being dissatisfied with the finding of the learned judge that the doctrine of merger applied, appealed to this Court. The sole issue before this Court is whether the warranties, representations, covenants and agreements contained in clause 5 (bb) of the Agreement in relation to repair were merged in the Deeds.
Held: allowing the appeal, setting aside sub-paragraph 3 of the learned judge's order and awarding costs in the sum of $3,000.00 to the appellants to be paid within 21 days, that:
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1. It is not automatic where there is a contract for sale which is followed by the execution of a deed that the doctrine of merger applies so that the provisions of the contract would be merged in the deed. The court must seek to determine what was the contract according to the true intention of the parties. In ascertaining this intention when dealing with the sale of property, the court is required to consider whether the deed covered the whole ground of the agreement and whether the agreement was intended to continue after the execution of the deed. Though the Agreement and the Deeds covered the same ground in relation to unencumbered good and marketable title, they did not cover the same ground in every respect. The Agreement is concerned with more than the sale of property and so contained a myriad of provisions not only related to the immovable properties but other assets as well. Therefore, it cannot be said that the Agreement and the Deeds covered the same matters at the same time. The representations, warranties, covenants and agreements in relation to repair were not covered in the Deeds. Accordingly, the parties did not intend that the Agreement as it relates to immovable property would be merged and extinguished.
Knight Sugar Company v The Alberta Railway and Irrigation Company [1938] 1 All ER 266 applied; Leggott v Barrett (1880) 15 Ch D 306 applied; Hissett et al v Reading Roofing Co. Ltd [1970] 1 All ER 122 applied; Benedict Montoute v Vitus Frederick SLUHCVAP2014/0019 (delivered 16th January 2017, unreported) distinguished.
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2. The doctrine of merger does not apply where the parties expressly state that the provisions would survive completion or where the nature of the provision, in its contractual and commercial sense, indicates that the provision is not merged into the later contract. The beginning of clause 5, in very clear language, preserves all the provisions which follow. There are also other provisions made throughout the Agreement beginning with the same express survival clause. The survival clauses clearly contemplate the continued existence of the Agreement after the freehold and leasehold interests were transferred. Therefore, the repetition of a particular sub-clause in the Deeds, which the parties knew would have had to be executed to transfer the freehold and leasehold interests, does not, in and of itself, nullify the express survival clauses in the Agreement.
Knight Sugar Company v The Alberta Railway and Irrigation Company [1938] 1 All ER 266 applied; Palmer v Johnson (1883) 12 Q.B.D. 32 applied.
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3. Contractual documents should be interpreted against the ‘factual matrix’ at the time the parties enter the contract. In this case, the appellants were purchasing businesses that were in a state of financial disarray. To safeguard their interests, the Agreement contains a number of representations, warranties, covenants and agreements made by the respondents and specifically, in relation to the real property, the purport of which is that they should survive the completion of the sale. Having regard to the factual background at the time of execution and the terms of the Agreement as a whole, it is difficult to clothe the parties, the appellants especially, with the intention to extinguish a clause which protects their financial and commercial interests. When viewed objectively, it would seem implausible to include said survival clauses and simultaneously intend that they should be extinguished by virtue of execution of the Deeds.
Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98 applied.
This appeal concerns the application of the doctrine of merger to the area of conveyancing law.
The relevant factual background to this appeal is that the second and third respondents, Doubloon Hotel Limited (“Doubloon Hotel”) and Doubloon Marina (St. Lucia) Limited (“Doubloon Marina”), were indebted to the Bank of Nova Scotia (the “Bank”) by virtue of a Hypothec, Mortgage Debenture and Floating Charge.
Doubloon Hotel and Doubloon Marina were unable to meet their debt repayments. The Bank therefore, by deed of appointment made pursuant to the Mortgage Debenture, appointed Mr. Jeffrey Coyne as Receiver and Manager of both Doubloon Hotel and Doubloon Marina. Mr. Jeffrey Coyne kept Doubloon Hotel and Doubloon Marina operating while seeking sale for the assets of the companies.
The first named appellant, Malmaison Properties LLC, entered into negotiations with Mr. Jeffrey Coyne to purchase the assets of Doubloon Hotel and Doubloon Marina. The parties entered into an Acquisition Agreement on 16 th March 2012. This Agreement was subsequently amended on 25 th May 2012 and 25 th December 2012 (the Acquisition Agreement and the amendments are collectively referred to as the “Agreement”). The Bank was not a party to this Agreement or any of its amendments.
The Bank, on 16 th March 2012, signed a letter of undertaking (the “Undertaking”) in favour of Malmaison Properties LLC (the “purchaser”). In the undertaking. the Bank agreed to issue, at its own expense, a title insurance policy, to utilise Mr. Coyne as Receiver of the Claims Fund and to defer receipt of any portion of the purchase price until Doubloon Hotel and Doubloon Marina had fully satisfied their respective obligations under the Agreement. The appellants allege that the Bank was an active participant in the transaction and the Agreement, by virtue of the Undertaking and its financial control over Mr. Coyne, 1 Doubloon Hotel and Doubloon Marina.
Both Doubloon Hotel and Doubloon Marina remained fully operational between the execution of the...
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