Thelston L Connor v Ishlayn Smith v Scotiabank Anguilla Ltd

• Jurisdiction: Anguilla
• Judge: GEORGE-CREQUE, J.
• Judgment Date: 07 December 2009
• Judgment citation (vLex): [2009] ECSC J1207-1
• Date: 07 December 2009
• Court: High Court (Saint Christopher, Nevis And Anguilla)
• Docket Number: CLAIM NO. AXAHCV 2006/0043

[2009] ECSC J1207-1

THE EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE

(CIVIL)

CLAIM NO. AXAHCV 2006/0043

Between:

Thelston L Connor

Claimant

and

Ishlayn Smith

Defendant/Ancillary Claimant

and

Scotiabank Anguilla Ltd.

Ancillary Defendant

APPEARANCES:

Mr. Collin Meade for the Claimant

Mr. Gerhard Wallbank and Miss Tameka Davis for the Defendant/Ancillary Claimant

Mrs.Tara Ruan and Miss Ruth Wigley for the Ancillary Defendant

Property Law — whether parties are joint proprietors or proprietors in common — whether land held on resulting trust — whether land transfer was procured by actual undue influence and ought to be set aside — whether land transfer contained falsities or was improperly executed and ought to be set aside — whether business was jointly owned — whether party entitled to an accounting of expenditure and income

Tort Law — whether instrument of charged was obtained by fraud — whether fraud to be specifically pleaded — whether Bank had duty to explain credit facility — whether Bank had duty to advise as to prudence of credit facility — whether Bank had duty to ensure that defendant received independent legal advice — whether defendant stood as surety for the debts of the claimant

The claimant ("Mr. Connor") and the defendant ("Ms. Smith") were engaged to be married and lived together at a house in Island Harbour, a short distance from the home of Ms. Smith's parents. The land in dispute ("the Land") adjoins Ms. Smith's father's land in Island Harbour and was owned by her cousin. The asking price was $10,000–$12,000 but Ms. Smith, because of her family connection, was able to negotiate a price of $8,000. Mr. Connor and Ms. Smith were unsuccessful in obtaining a loan to purchase the Land. Mr. Connor provided the purchase price of $8,000 through the use of his Scotia bank credit card. Upon payment, the Land was transferred to Ms. Smith, as owner.

The parties commenced development of the land. Ms. Smith, her father, uncle and others did work on the Land. Mr. Connor paid for certain works and improvements or provided payment in kind. In February 2005, Mr. Connor obtained a loan of $13,500 to pay off the credit card debt incurred in advancing money for the purchase of the Land. The Land attached as security "when purchased" by Mr. Connor. Work began towards the establishment of a business on the Land, Koko's, which opened for business in August 2005. Mr. Connor and Ms. Smith operated as a team in developing, outfitting and running the business.

In May 2005, Mr. Connor approached Scotiabank Anguilla Ltd. ("the Bank") about obtaining financing for Koko's. On 8^th June 2005, Ms. Smith executed a transfer of the Land to herself and Mr. Connor, allegedly by coercion or on account of undue influence. For the purpose of obtaining access to the Land, Ms. Smith was granted an easement over her father's land. Neither the document of transfer nor the grant of easement was witnessed or certified as required by law.

In October 2005, Mr. Connor and Ms. Smith obtained a $50,000 credit facility from the Bank which was used to develop and upgrade Koko's. A charge was registered in favour of the Bank in November 2005, although the Bank failed to have Ms. Smith execute the charge.

Mr. Connor and Ms. Smith's relationship ended in April 2006, whereupon she ceased working at Koko's, allegedly on account of threats by Mr. Connor. Mr. Connor continued to operate Koko's but it closed for some time due to a dispute over the Land access granted by Ms. Smith's father. The Bank later gave Ms. Smith the option of removing her name from the credit facility, but she declined.

In July 2009, Mr. Connor commenced legal proceedings claiming to be entitled to an undivided beneficial interest in the Land and sole ownership of Koko's. By way of defence, Ms. Smith claimed to be the owner of both the Land and the business. The Bank was joined as an ancillary defendant by Ms. Smith who claimed that she was unduly influenced or misled into entering into the credit facility which was not properly explained to her and for which she received no independent advice. Ms. Smith also claimed that the charge and caution in favour of the Bank were made fraudulently and ought to be set aside.

Held: allowing the claim in part with no order as to costs and dismissing the ancillary claim with prescribed costs in favour of the Bank:

• (1) A resulting trust may arise at the time of acquisition of property where it is shown that a party has made a substantial contribution to its acquisition or in its improvement in circumstances where the court may reasonably infer a common intention on the part of the legal owner that by reason of such contribution, the legal owner is to hold the property on a resulting or constructive trust in favour of that party to the extent of that party's contribution.

• (2) Having regard to the totality of the evidence, namely, Mr. Connor's contribution of the full purchase price, Ms. Smith's role in obtaining a discounted price and the discussions and attempts by the parties to pool their resources for the development of the land, it is evident that, at the time of the purchase when the legal title to the Land was passed to Ms. Smith only, a resulting trust in favour of Mr. Connor arose. It is also clear that the intention was that Mr. Connor and Ms. Smith would be joint beneficial owners of the Land.

  Hussey v Palmer [1972] 1 WLR 1286 applied.

• (3) The Instrument of Transfer dated 8^th June 2005, should be set aside as having been obtained by actual undue influence exerted by Mr. Connor on Ms. Smith and having regard to the fact that the formalities for due execution were patently disregarded. Such finding however, does not affect the legal position as it was prior to the 8^th June Transfer, with the effect that both Mr. Connor and Ms. Smith continue to hold an equal beneficial interest in the Land.

• (4) On the totality of the evidence, it is clear that Mr. Connor and Ms. Smith were operating as a team and that the business, Koko's, was a joint venture undertaken for their long term mutual benefit. As such, the court is satisfied that Koko's is jointly owned by Mr. Connor and Ms. Smith. Ms. Smith, who ceased to participate in the management of Koko's from about March 2006, is entitled to an accounting of the expenditure and income of the business from at least 1^st April 2006, to the present.

• (5) It is a claimant's duty under CPR 8.7 to set out all the facts on which he/she relies with sufficient particularity as to enable a defendant to know the case he/she is required to answer. No particulars of fraud have been pleaded or particularised, either in Ms. Smith's statement of case or in her witness statement. The plea is accordingly defective and merits no further consideration.

  East Caribbean Flour Mills Limited v Ormiston Ken Boyea Saint Vincent and the Grenadines Civil Appeal No. 12 of 2006, applying Three Rivers District Council v Bank of England (No.3) [2001] 2 All ER 513, followed.

• (6) Having regard to the evidence, the court is satisfied that the Bank explained the credit facility to Ms. Smith as it was required to do. The Bank did not assume, and in the circumstances had no further obligation, to advise Ms. Smith as to the prudence of obtaining the credit facility.

  Lloyd's Bank v Cobb (Unreported) Court of Appeal 18^th December 1991, (Transcript Association) applied.

• (7) The Bank was not under a legal duty to ensure that Ms. Smith receive independent legal advice for Ms. Smith did not stand as surety for her fiancé's debt; the transaction was not, on the face of it, financially disadvantageous to Ms. Smith, and, she in fact derived a benefit; on the available evidence the Bank did not know nor was it aware of any undue influence being exercised by Mr. Connor on Ms. Smith; and, on the available evidence Mr. Connor did not act as agent for the Bank in procuring Ms. Smith's consent to the transaction. Further, the failure to have Ms. Smith execute the charge was due to inadvertence and was not part of a scheme between the Bank, Mr. Connor or any other person. The credit facility and the charge are accordingly valid and enforceable obligations of both Ms. Smith and Mr. Connor. Ms. Smith is ordered to comply with the terms of the commitment letter and to execute an instrument of charge in favour of the Bank.

  Barclays Bank v O'Brien [1993] 4 All ER 417 Royal Bank of Scotland v Etridge (No. 2) [2002] 2 AC773 and CIBC Mortgages PIc v Pitt [1993] 4 All ER 433 distinguished.

GEORGE-CREQUE, J.

1 This case is akin to those types of cases brought before the court for the determination of interests in matrimonial property following the breakdown of a marriage. It also has the flavour of those surety cases brought against banks where, normally, a wife without the benefit of legal advice stands as surety for her husband's debts secured by the matrimonial home and later, invariably at the stage where the Bank seeks to enforce its security, the wife seeks to set it aside.

The Action

2 The dispute in this action relates to the ownership of a parcel of land described on the land register as Registration Section East Central, Block 89319B Parcel 9 ("the Land"), and a restaurant business operated thereon known as KoKo's Beach Bar and Restaurant ("Koko's"). The Claimant, Mr. Connor, claims an undivided beneficial interest in the Land and asserts in effect that he is the sole owner of Koko's. The defendant, Ms. Smith, on the other hand, claims that she is the sole owner of the Land and the sole owner of Koko's. The ancillary defendant, Scotiabank Anguilla Ltd ("the Bank") holds a charge over the Land as security for a $50,000 line of credit ("the credit facility") made available to Mr. Connor and Ms Smith for the development of Koko's. Ms. Smith joined the Bank to the proceedings as an ancillary defendant and alleges against it that she was misled and...