The Judicial Committee of the Privy Council Decisions

O'Meara Food Products Ltd & Ors v. Agricultural Development Bank of Trinidad and Tobago (Trinidad and Tobago) [2005] UKPC 6 (28 February 2005)

ADVANCE COPY

Privy Council Appeal No. 21 of 2004

(1) O'Meara Food Products Limited

(2) Marie Kavanagh and

(3) Sharif Mohammed Appellants

v.

Agricultural Development Bank of Trinidad and Tobago Respondent

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 28th February 2005

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Present at the hearing:-

Lord Hoffmann

Lord Hope of Craighead

Lord Scott of Foscote

Lord Walker of Gestingthorpe

Baroness Hale of Richmond

[Delivered by Lord Walker of Gestingthorpe]

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1. The Agricultural Development Bank of Trinidad and Tobago ("the Bank"), the respondent in this appeal, is a statutory body incorporated by the Agricultural Development Bank Act 1968 (Ch 79:07). The Bank loaned $2,030,000 to the first appellant O'Meara Food Products Ltd ("O'Meara") repayable in one year with annual interest at the rate of 12%. The loan was secured by an instrument of charge dated 18 August 1994, the security being plant and equipment used in O'Meara's fish-processing business. The second and third appellants, Marie Kavanagh and Sharif Mohammed, joined in the charge as sureties.
2. O'Meara defaulted on the loan and the sureties failed to discharge it when called on to do so. The Bank sought summary judgment on their covenants against all three appellants and Tam J gave summary judgment against them on 3 May 2002. The Court of Appeal (Jones, Kangaloo and John JJA) dismissed their appeal on 31 July 2003, except that the judge's order was varied on a point not material to this appeal. The appellants now appeal to the Board.
3. The main issue in the appeal is whether the instrument of charge dated 18 August 1994 was ineffective as being outside the Bank's statutory powers. Both courts below held that the charge was within the Bank's powers. The Court of Appeal also considered (but did not find it necessary to rule on) a fall-back submission made by the Bank, that the appellants could not in any event set up the Bank's alleged lack of authority as a defence. The same submission is included, again very much as a fall-back position, in the Bank's written submissions to the Board.
4. The main issue calls for the examination of the provisions of the Act, and of the Rules and Regulations made under sections 27, 33 and 49 of the Act. Part III of the Act ("Business of Bank, Deposits, Loans etc"), comprising sections 34 to 47, contains most of the relevant provisions. Section 34(b) gives the Bank power to make or underwrite loans for the development of agriculture and commercial fishing. Sections 35 and 42 are both in wide terms with some overlap between them. Section 35 provides as follows:

"Loans which the Bank may make shall be on such terms and conditions and for such periods as the Board [of Directors of the Bank] may consider appropriate."

Section 42 (as amended by section 7(1) of the Agricultural Development Bank (Amendment) Act 1989) provides as follows:

"(1) Every loan shall be made within such limits as may be prescribed and shall be made subject to such security as the Board may think sufficient.

(2) Every loan shall bear interest at such rate as the Minister, on the advice of the Board, determines.

(3) Every loan, together with interest thereon, shall be repayable within such period as may be prescribed or fixed by the Board, as the case may be."

5. Sandwiched between these two general provisions are a number of specific provisions (all, so far as now material, expressed to be "Subject to this Act and to the Regulations made hereunder") which provide for three classes of loan to be secured on agricultural crops, stock or land. Section 36 provides for short-term loans (not exceeding 18 months); section 37 (supplemented by sections 38, 39 and 41(2)) provides for medium-term loans (over 18 months but not exceeding 10 years); and section 40 (supplemented by section 41(1)) provides for long-term loans (exceeding 10 years but not exceeding 30 years). The provisions as to security are, unsurprisingly, more elaborate in the case of medium-term and long-term loans. Section 37(5) expressly provides that an agricultural charge (the form of security appropriate to most medium-term loans) may have sureties as parties to it. Section 36 does not contain such a provision, although Rule 10 of the Agricultural Development Bank Rules (GN 105/1969) gives the Bank power to require a surety in respect of "any loan".
6. Sections 36(3) and 37(2) provide for security to be given in a prescribed form. The prescribed form in relation to section 36(3), Form 18, is a very simple charge under hand, without sureties: see paragraph 5 of and Form 18 in the First Schedule to the Agricultural Development Bank Regulations (GN 119/1969) (made under section 49 of the Act). The prescribed form in relation to section 37(2), in the case where sureties are required, is Form 19. It is an instrument of charge in a more elaborate form.
7. Finally section 45 empowers the Bank to make loans for the purposes of commercial fishing, including (section 45(2)(b)) the processing of fish products. Section 45(3) provides as follows:

"Subject to subsection (2), the provisions of this Part which relate to the grant of loans for agricultural purposes shall apply mutatis mutandis to loans granted under this section."

8. The appellants' joint and several covenants in the instrument of charge were to repay $2m in a year, by 12 monthly instalments, and to repay $30,000 (described as a service charge) within a concurrent period of 6 months, by six monthly instalments. It was therefore, in terms of its duration, a short-term loan rather than a medium-term loan. The only point relied on by the appellants in resisting the Bank's claim, at any stage in the litigation, is that the instrument of charge executed by the appellants is in Form 19, and was not an appropriate form in respect of a 12-month loan. They argue that the charge was therefore ineffective as beyond the scope of the Bank's statutory powers.
9. The courts below unanimously rejected that defence, and their Lordships are satisfied that they were right to do so. The courts below, in deference to the arguments addressed to them, embarked on discussion of the well-known distinction between mandatory and directory provisions in a statute. Their Lordships do not find it necessary to go into that distinction. A statute must of course be read as a whole, but where a statutory body has several powers which overlap, there is no principle of construction which restricts its powers to the limited area common to all the powers. Sections 36 to 41 of the Act, and the prescribed forms, contain a fairly detailed code which is no doubt of great practical utility in enabling the officers of the bank and their customers to arrange a considerable volume of relatively small loans without incurring unduly large legal costs. But these detailed provisions cannot cut down the width of the general powers granted by sections 35 and 42. There were no doubt good reasons which led the Bank to decide that a 12-month period was appropriate for its loan to O'Meara, but that it was also appropriate to require sureties and to use the relatively elaborate form of charge (Form 19) appropriate for use when there were sureties.
10. The Bank's fall-back position would, if needed, be sound (see the decision of the Court of Appeal in In re Coltman (1881) 19 Ch D 64). But the Board need not go further into that point.
11. It should perhaps be recorded, for the sake of completeness, that Regulation 3(1) of the Regulations in its original form (the only form before the Board) provided for interest to be payable at a maximum annual rate of 9%. No point was taken below on the rate of interest under the instrument of charge being 12%. The most probable explanation is that Regulation 3(1) has been varied, perhaps at about the same time as section 42(2) of the Act was amended. In any event the rate of interest is not a ground of appeal.
12. The appeal must therefore be dismissed with costs.