The Judicial Committee of the Privy Council Decisions

Royal Bank of Trinidad and Tobago v. Persad & Anor (Trinidad and Tobago) [2003] UKPC 21 (17 March 2003)

ADVANCE COPY

Privy Council Appeal No. 62 of 2001

The Royal Bank of Trinidad and Tobago Appellant

v.

(1) Bobby Vashista Persad and

(2) Dipchand Lakhan Respondents

FROM

THE COURT OF APPEAL OF

TRINIDAD AND TOBAGO

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JUDGMENT OF THE LORDS OF THE JUDICIAL

COMMITTEE OF THE PRIVY COUNCIL,

Delivered the 17th March 2003

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Present at the hearing:-

Lord Bingham of Cornhill

Lord Hoffmann

Lord Hutton

Lord Millett

Lord Walker of Gestingthorpe

[Delivered by Lord Millett]

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1. These proceedings are concerned with a two-bedroom house with garage and an acre or so of land at Kelly Village, Cunupia, Trinidad ("the Property"). The Property was formerly owned by one Daniel Boodram, a building contractor. He was in dispute with the first respondent, Mr Persad, over a building contract. It was eventually agreed that he owed Mr Persad $80,000, and that he should enter into a mortgage of the Property to secure payment of such a sum to Mr Persad. On 11th June 1980 he duly mortgaged the Property to Mr Persad to secure the sum of $80,000 and interest. By the deed Mr Boodram conveyed the legal estate in the Property to Mr Persad for an estate in fee simple subject to the proviso for redemption therein contained. Mr Boodram subsequently defaulted on his obligations under the mortgage. On 21st August 1981 he conveyed the Property to Mr Persad free of his equity of redemption for the sum of $80,000. Payment of the sum was satisfied by the release of Mr Boodram's covenant to repay. The Conveyance was duly registered on 11th September 1981.
2. Mr Persad completed what was then a partially built house on the Property but did not go into occupation. Instead he put it into the hands of agents to sell or let.
3. Meanwhile on 9th July 1981 the appellant, the Royal Bank of Trinidad and Tobago Ltd ("the Bank"), had obtained judgment against Mr Boodram for the sum of $33,387.69 with interest and costs. The Bank registered the judgment on the following day. By section 5 of the Remedies of Creditors Act (Ch 6 No 2 of 1940) ("the Act") a judgment to be entered up against any person operates as a charge upon all lands to which the judgment debtor is then or afterwards becomes entitled. At that date Mr Boodram was entitled to an equity of redemption but no longer had any legal estate in the Property.
4. Section 28 of the Act entitles a judgment creditor to "an order for the sale of any beneficial interest of the execution debtor in any lands" in Trinidad and Tobago. On 16th March 1982 the Bank issued a summons for "an order for sale of the beneficial interest" of Mr Boodram in the Property. By that date Mr Boodram had no beneficial interest in the Property capable of being sold under the provisions of the Act.
5. The Court appointed Conveyancing Counsel to report on Mr Boodram's title to the Property on 3rd June 1983. He reported that "at the time of registration of the said judgment [Mr Boodram] was and is seised in fee simple in possession [of the Property] free from all encumbrances" except for the judgment. This was not true either at the date of the judgment (when the Property was subject to the mortgage in favour of Mr Persad) or at the date of the report (by which time Mr Boodram no longer had any interest in the Property at all). No explanation has been forthcoming as to how these errors came to be made.
6. On 20th July 1983 Narine J made an order that "the beneficial interest" of Mr Boodram in the Property be sold by public auction. Since Mr Boodram had no beneficial interest in the Property, this Order was without content.
7. On 29th August the Property (and not merely Mr Boodram's interest in the Property) was offered for sale by public auction in purported pursuance of Narine J's Order. It was sold to the second respondent, Mr Dipchand Lakhan, for $54,020. For some reason, which has also not been explained, the sale was not screened or confirmed pursuant to section 55 of the Act and no conveyance to Mr Lakhan was ever executed. The time never came for Mr Lakhan to pay the purchase price.
8. Immediately after the auction Mr Lakhan went to the Property and changed the locks. There was a confrontation between him and Mr Persad, who told him that he was the true owner of the Property. On the following day Mr Persad sent Mr Lakhan a letter before action. In the letter Mr Persad confirmed that he had bought the Property from Mr Boodram and that the conveyance had been duly registered. He said that he was the sole owner of the Property, and added:

"You indicated to me that you bought this property yesterday through the Court, but the Court has no authority to sell my property. Therefore I cannot understand how you bought my property, which obviously is wrong".

9. On 4th September 1984 Mr Persad issued the Writ in these proceedings claiming a declaration that he was the owner in fee simple of the Property and damages for trespass. Mr Lakhan served a defence and counterclaim in which he asserted that he had purchased the Property pursuant to a judicial sale and that he had forthwith entered into possession of the Property which was vested in him free from any interest of Mr Persad.
10. In or about August 1985 Mr Persad noticed, while passing, that the Property was unoccupied and had been vandalised.
11. During 1988 the Bank was joined as second defendant to the action and Mr Lakhan issued a third party notice against the Bank for an indemnity against Mr Persad's claim.
12. On 1st December 1994, in circumstances which remain unclear, the Assistant Registrar signed the Bank's default judgment against Mr Boodram and entered it in the Cause Book.
13. The trial of the action took place before Warner J in June 1996. During the trial Mr Lakhan was granted leave to amend his defence and counterclaim to withdraw his claim that the Property was vested in him free from any interest of Mr Persad and his assertion that he had entered into possession of the Property on 29th August 1984, though he still admitted that he had changed the locks. He also withdrew his counterclaim.
14. By her judgment dated 4th July 1996 Warner J held:

(i) the Order for sale made by Narine J on 20th July 1983 was valid because the entering up of the Bank's default judgment on 1st December 1994 related back to 9th July 1981 and perfected the Bank's statutory charge;

(ii) Mr Lakhan was entitled to have the sale set aside on the grounds of misrepresentation by the Bank;

(iii) accordingly Mr Persad was entitled to a declaration that he was the owner in fee simple of the Property;

(iv) Mr Persad should have taken steps to re-enter the Property in August 1985 when he discovered that it was unoccupied and accordingly was entitled to damages for trespass for a period of 15 months only;

(v) damages for making good the vandalism should be assessed at 50% of the current cost of carrying out the necessary work. This was on the footing, which has not been challenged, that this would approximate to the cost of doing the work in 1985;

(vi) the defendants' evidence that the current cost of the work was $92,000 inclusive of VAT was accepted;

(viii) Mr Persad was accordingly entitled to damages of $46,000 for the cost of repairs and mesne profits of $9,000 (at the rate of $600 a month for 15 months), making a total of $55,000 altogether;

(ix) the Bank was bound to indemnify Mr Lakhan against his liability to Mr Persad;

(x) the Bank should pay the costs of both Mr Persad and Mr Lakhan.

15. The Bank and Mr Persad both appealed from the judgment. Mr Lakhan did not.
16. The appeals were heard by the Court of Appeal (Sharma, Jones and Nelson JA) in April 2000. At the hearing an application by Mr Lakhan for leave to appeal out of time was dismissed. He thus remained a party to the appeal as a respondent only and with no appeal of his own.
17. In its judgment dated 21st July 2000 the Court of Appeal dealt with three issues. The first issue was concerned with the validity of the sale to Mr Lakhan. The Court of Appeal held that the Bank's default judgment was not valid until signed and entered on 1st December 1994 and, although it then took effect from the date of filing on 9th July 1981, it could not prejudice the accrued rights of third parties acquired in the meantime. Accordingly both Narine J's Order and the sale to Mr Lakhan were invalid. The second issue was concerned with the quantum of damages. The Court of Appeal held that there was no evidence that Mr Lakhan's trespass had caused or contributed to the vandalism of the Property and no admissible evidence to support the award of mesne profits. Mr Persad was accordingly entitled to nominal damages only. The third issue concerned the Bank's liability to indemnify Mr Lakhan against Mr Persad's claim for damages. Although Mr Lakhan had entered the Property as a trespasser, this was not the Bank's responsibility. Even if the Bank had been able to convey a good title to him, Mr Lakhan had no right to take possession before completion, and this never took place because he never took a conveyance.
18. Accordingly the Court of Appeal affirmed the declaration of title in favour of Mr Persad, reduced the award of damages to $100, and discharged the order that the Bank indemnify Mr Lakhan against his liability in damages to Mr Persad.
19. The Court of Appeal did not disturb the Judge's order that the Bank pay the costs up to trial of both Mr Persad and Mr Lakhan. It ordered the Bank to pay 50% of Mr Persad's costs of the appeal and Mr Persad to pay 50% of Mr Lakhan's costs of the appeal. It made no order of the costs of the appeal as between the Bank and Mr Lakhan.
20. With the leave of the Court of Appeal both the Bank and Mr Persad now appeal to the Board. Mr Lakhan does not appeal.
21. Their Lordships will deal first with the validity of the sale to Mr Lakhan. They observe that the Bank's appeal on this issue is academic save insofar as it may affect the proper orders for costs below. The Bank has never sought any relief against Mr Persad. It contended for the validity of the sale only in order to justify Mr Lakhan's taking possession of the Property and thus avoid any liability to indemnify him against Mr Persad's claim for damages. But the Court of Appeal discharged the indemnity for reasons which their Lordships are satisfied are unassailable, and Mr Lakhan has not appealed.
22. In these circumstances their Lordships do not consider it necessary to examine the reasons given by the Court of Appeal for holding that Mr Persad's title to the Property was not affected by the subsequent entry of the judgment in December 1994. They would, however, make the following comments. The Act authorises the Court to order the sale of the execution debtor's beneficial interest only, and Nerine J's order was properly limited to Mr Boodram's beneficial interest in the Property. The order was therefore intrinsically valid but had no content, for at the date of the order Mr Boodram no longer had any beneficial interest in the Property. Moreover, even if the judgment had been entered up in July 1981, it could not have affected the legal estate which had previously been conveyed to Mr Persad subject only to Mr Boodram's equitable right to redeem on payment of a sum substantially greater than the price which the Property later fetched at auction. Unless the Property was sold at a gross undervalue, which has not been suggested, the Bank's second charge had no economic value.
23. In reliance on counsel's report, however, it was assumed by those acting for the Bank that Mr Boodram's interest in the Property was a freehold interest free from incumbrances, and accordingly it was this that was offered for sale. If the Bank had taken proper precautions by serving the Summons upon Mr Persad, of whose existence it was aware, and screening the sale, the truth would have been discovered at once. As it was, it came to light within 24 hours when Mr Lakhan visited the Property. At that stage the sale lay in contract only; it was plain that the Bank could not convey title; and it is difficult to understand why first Mr Lakhan and later the Bank persisted in their claims.
24. On the quantum of damages, their Lordships will deal separately with Mr Persad's claim to damages for the vandalism and his claim to mesne profits.
25. The Court of Appeal held that there was no evidence of any causal link between Mr Lakhan's trespass and the vandalism. This was not an argument which any of the parties advanced at the trial; and in any case their Lordships do not accept it. The evidence showed that at the time of the judicial sale Mr Persad had completed the house and had placed it on the market for sale or letting as a dwelling house. But for Mr Lakhan's intervention, the Property would in all probability have been sold or let to a residential occupier before the vandalism occurred. Mr Lakhan's appearance put paid to that. Then, having excluded Mr Persad from possession, Mr Lakhan left the Property vacant, a course of action which naturally invited vandalism or at least made it more likely. A causal connection was clearly established.
26. The Court of Appeal rejected the judge's award of mesne profits on the ground that it was not supported by admissible evidence of rental value. While that was strictly true, for the evidence which the judge accepted was given by a witness who was not an expert valuer, no one objected to his evidence or argued that it was inadmissible. In those circumstances the Judge was entitled to give it whatever weight she thought it deserved. Moreover, the judge had evidence from Mr Persad that before the sale his agent had put the Property on the market at a rent of $1,500 - $2,000 a month. That figure may, of course have been optimistic; but it was evidence of what a professional agent was prepared to ask for the Property, and the judge's figure allowed for a substantial margin for error.
27. There remains Mr Persad's appeal against the judge's decision (i) to assess the costs of the works of repair by reference to the costs in 1985 and (ii) to limit his award of mesne profits to 15 months only. The two issues are closely linked. Their Lordships find them troublesome. They recognise that, by changing the locks, Mr Lakhan excluded Mr Persad from possession, and that he continued to do so even after he had gone out of occupation. Moreover, he persisted in his claim to be the owner entitled to possession right up to the trial. In these circumstances their Lordships feel the force of Mr Persad's submission that he could not have been expected to have the repairs carried out until the ownership of the Property was determined, and that he should have an award of mesne profits up to the time that Mr Lakhan withdrew his claim to be entitled to possession.
28. Nevertheless, their Lordships are not satisfied that this would meet the broad justice of the case. Mr Persad knew that he was the owner and that his case was a strong one. In 1985 he discovered that the Property was vacant and had been vandalised. Yet he did nothing about it. His proceedings were already on foot. He could have made an application to the court to be allowed into possession and to do the works pending the trial, and thereby forced the issue. Moreover, he had the carriage of the action, and their Lordships are not impressed by the way he let it drag on for more than a decade while the costs of repair and his claim to mesne profits continued to increase day by day.
29. The trial judge could properly have awarded the costs of repair at the rates which were current at the time of the trial and mesne profits down to the same date; but she did not do so. The question is nicely balanced, but on the whole their Lordships consider that they would not be justified in interfering with her decision.
30. Their Lordships will dismiss the Bank's appeal and allow Mr Persad's cross-appeal. The trial judge's award of damages will be restored and subject thereto the orders made by the Court of Appeal affirmed. The Bank must pay Mr Persad 50% of his costs of the appeal to the Board. There will be no order for costs as between the Bank and Mr Lakhan.