BDC Ltd v Brown and Brown 1993 Civil Jurisdiction No. 356

• Jurisdiction: Bermuda
• Judgment Date: 15 February 1994
• Date: 15 February 1994
• Docket Number: Civil Jurisdiction 1993 No. 356
• Court: Supreme Court (Bermuda)

In the Supreme Court of Bermuda

Ground, J

Civil Jurisdiction 1993 No. 356

BETWEEN:

Bdc Ltd

Plaintiff

-and-

Arnold Roosevelt Brown

and

Anita Virginia Brown

Defendants

Ms. B. Harvey for the plaintiff; and

Mrs. L. Browne-Evans for the defendants.

Birmingham Citizens Permanent Building Society v CauntELR [1962] 1 Ch 883

Mendl v Smith (1943) LJ Ch 279

Conveyancing Act 1983 s. 30

Mortgage — Action for possession of mortgaged property — Two mortgages — Settlement agreement — Express power of sale — Construction of mortgage deed — Power of attorney granted in respect of executing mortgages — Conduct and duty of attorney

JUDGMENT

This is a mortgage action brought by second mortgagees for possession of the mortgaged property. The plaintiff's already have a judgment by consent against the second defendant for payment of the principal (although it does not seem to have been drawn up), and the second mortgage with which this action was concerned was entered into, as part of the settlement of the civil action in which that judgment was obtained, to secure its payment.

The mortgage is dated 30th October 1992. The plaintiffs sensibly ensured that the first mortgagees were a party to it. It purports to be by way of a conveyance of the fee simple in the property concerned, but as that had presumably already been conveyed to the first mortgagees, it can only operate in equity as an equitable mortgage. This probably does not have any significant consequences for this action, although it means that the first mortgagee will have to join in any sale in order to be able to give title to the purchaser.

The mortgage document recites that it is pursuant to an agreement of 24th August 1992, whereby, it is said—

‘… the Mortgagors agreed to execute a second mortgage on the mortgaged property to the Second Mortgagee for the sum [of] One hundred and fifty two thousand three hundred and eighty four dollars ($152,384 00) (hereinafter called ‘the mortgage amount’) as payment towards their indebtedness to the Second Mortgagee on having the repayment thereof with interest at the rate of Seven per cent (7%) per annum and a credit or service charge thereon at the rate of Two per centum (2%) per annum secured to the Second Mortgagee in the manner hereinafter expressed.’

The agreement referred to was in settlement of Civil Action 1989 No. 233, which the plaintiff company had brought against the second defendant to recover monies which it alleged she stole from it. The action was settled in the sum of $645,645.20, of which the agreement recorded that $355,645.20 had been paid. Under the agreement the defendants in this action both agreed that the balance of $290,000 would be paid, and that second mortgages would be executed over two named properties to secure that obligation. There was a provision, which I will come to later, to ensure that these securities were executed. The plaintiff agreed not to make any demand until 30th November 1992. One of the mortgaged properties was to be offered for sale forthwith, and there was an agreement that if there was a shortfall on its sale which did not exceed $50,000 and the Browns were able to pay such shortfall within a reasonable time which was not to exceed ten months, then the second property should not be sold. That was the extent of the agreement. In particular it should be noted that it did not contain any terms for the payment of interest or administration charges, and contained no provision for the postponement of repayment, beyond the provision concerning any shortfall on the first sale.

In view of the way that the security was eventually provided, I should record that I take the agreement concerning the shortfall to mean that if, on the sale of the first property, there was a shortfall on payment of the whole sum owing (i.e. the $290,000), then there would be an immediate sale of the second property if the shortfall exceeded $50,000. If the balance on the whole debt was less than $50,000 then a postponement of sale would be allowed if the defendants offered, and were able, to pay that balance within ten months. If they did not so offer, or if they did not in fact pay the outstanding balance within ten months, then the second property would have to be sold.

It is that second property, the defendants' home, with which this possession action is concerned. The mortgage document before me bears little relation to the scheme provided for in the settlement agreement. Instead of $290,000 being secured on each property, with some provision to prevent double recovery, it appears to have been apportioned between the two, with $142,230 being placed upon the first property and the balance of $152,384 placed on the second. The total of those two sums is slightly in excess of $290,000 but I have no idea why, unless it represents the costs of preparing the mortgages, or possibly accrued interest.

The deed provides for the payment of interest on the principal outstanding at the rate of 7% per annum, together with a 2% ‘credit or service charge,’ and there is a provision allowing the rates to be increased if the maximum rate of interest permissible under statute were to be increased. The provisions as to sale being postponed if a shortfall occurred on the sale of the first property are not reflected in the mortgage deed at all, but instead there is the following, novel scheme:

‘… AND if the mortgage amount shall not be paid on the due date [lst December 1992] THEN thereafter [the mortgagors] will pay unto the Second Mortgagee interest thereon or so much thereof as shall for the time being remain unpaid at the said interest rate and the said credit or service charge … rate by equal payments on the 1st days of each calendar month in every year for a term of Five years (5) callable thereafter on three months notice …’

I read that as amounting to a postponement of payment for five years, with interest being paid monthly during that period, and the debt only becoming payable upon being called, after the expiry of that five year period, on three months notice. That is the only meaning I can attribute to the stipulation of a five year period coupled with the phrase ‘callable thereafter on three months notice.’ There is no provision that, in the event of default in the payment of interest, the whole sum due shall become payable forthwith.

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