Clement Lawrence v First St. Vincent Bank Ltd

• Jurisdiction: St Vincent and the Grenadines
• Judge: Webster JA
• Judgment Date: 24 February 2020
• Neutral Citation: VC 2020 HC 10
• Date: 24 February 2020
• Docket Number: SVGHCVAP2014/0016
• Court: High Court (Saint Vincent)

EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Before:

The Hon. Mde. Louise Esther Blenman Justice of Appeal

The Hon. Mr. Mario Michel Justice of Appeal

The Hon. Mr. Paul Webster Justice of Appeal [Ag.]

SVGHCVAP2014/0016

Between:

[1] Clement Lawrence

[2] Cleopatra Ballantyne

Appellants

and

First St. Vincent Bank Limited

Respondent

Appearances:

Mrs. Kay Bacchus-Baptiste for the Appellants

Mr. Stanley John, QC, with him, Mr. Akin John and Ms. Keisal Peters for the Respondent

Civil appeal — The tort of negligence — Whether the bank owed a duty of care to the appellants — Whether the bank was negligent in the preparation of the mortgage — Undue influence — Whether the appellant entered into the mortgage as a result of presumed undue influence — Whether the finding of negligence or undue influence entitles the appellant to an order setting aside the mortgage

On 2 ^nd September 2004, the 1 ^st appellant, Mr. Clement Lawrence (“Mr. Lawrence”), executed a mortgage deed by which his residential home situated at Stoney Ground in Saint Vincent, was used to secure a loan of $70,000.00 from the First St Vincent Bank (“the Bank”). The loan was applied for and received by Mr. Selwyn McBarnett (“Mr. McBarnett”), who was at the time the fiancé of Mr. Lawrence's granddaughter, Ms. Belinda Lawrence (“Belinda”). Mr. Lawrence never went to the Bank, nor was he consulted by the Bank before signing the mortgage. Instead, he executed the mortgage document before a representative of the Bank at his home. The Bank did not advise Mr. Lawrence to get independent legal advice before signing the mortgage deed. Mr. McBarnett defaulted on the loan, and, as a result, the Bank sought to exercise its power of sale under the mortgage deed. On 23 ^rd June 2006, Mr. McBarnett signed an undertaking to repay the mortgage debt, but nevertheless failed to pay the same.

In the court below, the learned trial judge dismissed Mr. Lawrence's claim in negligence and found that the Bank had no duty of care to advise him in relation to the mortgage transaction. The judge also held that the particulars of undue influence were not properly pleaded by Mr. Lawrence since they concerned events that were unrelated to the execution of the mortgage deed. The judge granted the Bank's counterclaim and ordered Mr. Lawrence to pay the Bank the sum of $114, 975.00 plus interest.

Being dissatisfied with the decision of the learned judge, the appellants appealed to this Court. Three main issues arose for determination on the appeal, namely: (i) whether the Bank owed a duty of care to Mr. Lawrence and was negligent in processing the mortgage executed by him; (ii) whether Mr. Lawrence entered into the mortgage as a result of undue influence; and (iii) the relief, if any, to be granted to Mr. Lawrence.

Held: allowing the appeal; declaring the mortgage invalid; setting aside the orders made by the learned trial judge; and making an award of costs to the appellants, that:

• 1. The test to determine whether a duty of care exists in negligence is a three-way test. There must be (i) reasonable foreseeability of damage; (ii) a relationship characterised by proximity or neighbourhood between the wrongdoer and the person damaged; and (iii) that the law would consider it fair, just and reasonable to impose a duty of care. On the facts and circumstances of this case, it was foreseeable that the Bank, in allowing Mr. Lawrence to mortgage his property to secure Mr. McBarnett's loan, was likely to suffer damage if and when Mr. McBarnett defaulted on the loan.

  Karak Rubber Company Limited v Burden and Others (No. 2) [1972] 1 All ER 1210 applied; National Commercial Bank (Jamaica) Limited v Hew and Others [2003] UKPC 51 applied; Donoghue v Stevenson [1932] AC 562 considered; Caparo Industries Plc v Dickman and Others [1990] 2 AC 605 applied.

• 2. The relationship of mortgagor and mortgagee between the Bank and Mr. Lawrence was “equivalent” to contract or “only just short of a direct contractual relationship”. Mr. Lawrence was a person so closely and directly affected by the conduct of the Bank in taking the mortgage over his property, that the parties were in a sufficiently proximate relationship to result in the Bank owing a duty of care to Mr. Lawrence.

  Donoghue v Stevenson [1932] AC 562 applied; Hedley Byrne & Co. Ltd v Heller & Partners Ltd [1964] AC 465 considered; Junior Books Ltd v Veitchi Co. Ltd [1983] 1 AC 520 considered.

• 3. In determining whether it is fair, just and reasonable for the court to impose a duty of care, the question is largely a matter of public policy. The taking of a mortgage over Mr. Lawrence's property was entirely in the interest of the Bank with no benefit to Mr. Lawrence. Having regard to the reasonable foreseeability of damage to Mr. Lawrence, as well as his proximity to the Bank, it is fair and reasonable to impose a duty of care on the Bank in relation to Mr. Lawrence. The Bank acted negligently by failing to discharge its duty in that it allowed Mr. Lawrence to mortgage his property without obtaining written authorisation from him, failed to inform him that Mr. McBarnett was not in a financial position to service the loan, failed to ensure that Mr. Lawrence obtained independent legal advice, and failed to promptly inform Mr. Lawrence that the loan was in default.

  Osman and Another v Ferguson and Another [1993] 4 All ER 344 considered; Hill v Chief Constable of West Yorkshire [1988] 2 WLR 1049 considered.

• 4. Where the entire pleaded case discloses circumstances that are sufficient to raise the issue of presumed undue influence, it should be considered by the trial judge. Mr. Lawrence's claim form and statement of claim raised sufficient issues to alert the Bank that Mr. Lawrence could have been acting under influence. Therefore, the learned judge should have considered the evidence of the possibility that Mr. Lawrence was acting under presumed undue influence.

  Desir and Another v Alcide [2015] UKPC 24 considered; Section 20 of the Eastern Caribbean Supreme Court (Saint Vincent and the Grenadines) Act, Cap. 24 Revised Laws of Saint Vincent and the Grenadines 2009 considered.

• 5. In cases of class 2B presumed undue influence, the complainant will succeed in setting aside the impugned transaction by proof that he or she reposed trust and confidence in the wrongdoer without having to prove that the wrongdoer exerted actual undue influence or otherwise abused such trust and confidence in relation to the transaction impugned. On the facts, it is reasonable to infer that Mr. Lawrence reposed trust and confidence in his relationship with his granddaughter and her fiancé, so much so that he allowed them to make the arrangements for mortgaging his home to the Bank. The presumption of undue influence therefore arose and could have been rebutted by the Bank proving that Mr. Lawrence had obtained independent legal advice before signing the mortgage. There is no such evidence and therefore the Bank has not rebutted the presumption of undue influence. Accordingly, the Bank is fixed with constructive notice of the existence of presumed undue influence.

  Murray v Deubery and Another; (1996) 52 WIR 147 applied; Barclays Bank plc v O'Brien and another [1993] 4 All ER 417 applied; Hilda Elisabeth Stoutt et al v FirstBank Puerto Rico BVIHCVAP2010/016 (delivered 13th February 2012, unreported) considered.

• 6. When a trial judge does not make findings on an important issue in the trial, the appellate court has the option of remitting the case to the trial judge to make the necessary finding or to re-try the entire case, or to review the material that was before the trial judge and make the findings. This is not a suitable case to remit to the lower court because the main witness, Mr. Lawrence, is now deceased and the claim relates to facts that occurred over 15 years ago.

  Kathryn Ma Wai Fong v Wong Kie Yik et al BVIHCMAP2018/0001 and BVIHCMAP2018/0002 (delivered 27th March 2019, unreported).

Introduction

1 Webster JA [AG.]: This is an appeal by Mr. Clement Lawrence and Ms. Cleopatra Ballantyne (collectively referred to as “the appellants”) against the judgment of the learned judge dismissing the appellants' claim in negligence and undue influence against the respondent.

Background

2 Mr. Clement Lawrence (“Mr. Lawrence”) was the owner of a parcel of land situated at Stoney Ground in Saint Vincent and the Grenadines. Ms. Cleopatra Ballantyne is his daughter. The respondent, First St. Vincent Bank Limited (the “Bank”) is a commercial bank operating in Saint Vincent and the Grenadines. The other persons relevant to the determination of the issues arising on this appeal are Mr. Lawrence's granddaughter, Ms. Belinda Lawrence (“Belinda”) and Mr. Selwyn McBarnett (“Mr. McBarnett”), who were, in 2004, in a relationship and intended to get married.

3 The sequence of events culminating in this appeal, as found by the learned judge, began when Mr. McBarnett applied for a loan of $70,000.00 from the Bank for the purchase of a minivan. The Bank requested security for the loan as his salary was insufficient to service the loan. However, he had no security. On 2 ^nd September 2004, Mr. Lawrence executed a mortgage by which he put up his only property, the home he lived in at Stoney Ground, as collateral for the loan. Mr. Lawrence never went to the Bank. A representative of the Bank took the mortgage document to his home where he signed it. The Bank did not advise Mr. Lawrence to get independent legal advice before signing the mortgage. It is reasonable to infer that Mr. McBarnett and/or Belinda made the arrangements for the loan with the Bank. Mr. Lawrence did not sign a promissory note binding himself to repay the loan, nor did he hold himself out as a guarantor of the loan. The Bank paid the proceeds of the loan to Mr. McBarnett.

4 Mr. McBarnett did not repay the loan in accordance with the terms of...