Julius Sämann Ltd v Just Add Bermuda and Others

• Jurisdiction: Bermuda
• Judgment Date: 28 November 2019
• Date: 28 November 2019
• Docket Number: Civil Jurisdiction 2019 No 167
• Court: Supreme Court (Bermuda)

[2019] Bda LR 100

In The Supreme Court of Bermuda

Civil Jurisdiction 2019 No 167

Between:

Julius Sämann Ltd

Plaintiff

and

Just Add Bermuda Ltd

Faith Bridges

Neil Moncrieff

Defendants

Mr K Taylor for the Plaintiff

Mr P Harshaw for the 2^nd Defendant

The following cases were referred to in the judgment:

Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896

Holman v Johnson (1775) 1 Cowp 341

Caletti v DeSilva [2017] Bda LR 102

E&C Well Drilling Services Ltd v Hayward [2011] Bda LR 1

Patel v Mirza [2016] UKSC 42

Application for summary judgment — Meaning of “Federal Reserve Prime Rate” — Whether loan unenforceable as not supported by consideration — Defence of illegality

JUDGMENT of Hargun CJ

Introduction

1. These proceedings relate to a Loan Agreement dated 17 December 2014 between Julius Sämann Ltd, (“the Plaintiff”), on the one part and Just Add Bermuda Limited, the First Defendant, Faith Bridges, the Second Defendant and Neil Moncrieff, the Third Defendant (collectively “the Defendants”). By that Loan Agreement the Plaintiff agreed to lend to the Defendants the aggregate principal sum of US dollar $1,400,000.

2. The relevant terms of the Loan Agreement provided, inter alia, as follows:

“1. The draw-down of funds shall be made at such time and in such increments (but not being less than US $100,000 as [the First Defendant] shall require until the total of US $1,400,000 shall have been advanced”.

“5. All parties listed under the definition of JAB hereinabove (i.e. the First, Second and Third Defendants) shall jointly and severally be liable for the Loan, the accrued interest, and any fees or penalties hereunder…”

“6. JAB hereby agrees to deposit the title deeds to the Property with JSL [the Plaintiff] and to execute at its own cost (whenever called upon to do so) a proper Equitable Mortgage of said Property to JSL to secure any and all funds advanced under this Agreement and any and all monies for the time being due or to become due to JSL, on the security hereof, together with interest due thereon in such form and containing such powers and provisions as the Lender may reasonably require including reservation of the right of consolidation of mortgages and including provisions for repayment of the sums advanced hereunder or to be advanced hereunder”

“7. The interest rate under this Agreement shall be set annually on the first day of each calendar year for all funds due and owing as of that date under this Agreement, including accrued but unpaid interest from the previous calendar year (if any), and for any additional draw down of funds during the calendar year. The interest rate for each calendar year shall be determined as the United States Federal Reserve Prime Rate on the first day of relevant Calendar year plus one percent (1%).”

“8. Interest shall accrue from the day of the draw down payment is affected by JSL's bank, irrespective of when the funds are credited to JAB.”

“9. Interest Payments on the outstanding balance of the Loan shall be due on the last day of each calendar year, with the first payment due on or before the 31^st day of December, 2015”.

3. In accordance with the Loan Agreement, the Plaintiff made the following principal advances to the Defendants:

i. The sum of US $700,000 on 19 December 2014;

ii. The sum of US $1,700,000 on 27 January 2015; and

iii. The sum of US $150,000 on 11 May 2015.

4. For each of the payments made as set out above, the Defendants executed a written acknowledgement of receipt.

5. On 17 February 2016, the Plaintiff and Defendants agreed a written Addendum to the Loan Agreement whereby the Plaintiff agreed to lend to the Defendants further US $300,000 which was to be treated as an addition to the Loan. The Plaintiff advanced the additional US $300,000, as agreed in the Addendum, in January 2016 and the Addendum was executed on 17 February 2016.

6. The Third Affidavit of the Plaintiff deposes to the fact that the entirety of the amount of US $2,850,000 advanced remains outstanding and as at 1 July 2019 the accrued interest stands at US $255,987.17. Judgment in default has been entered against the First and Third Defendants for the principal amount outstanding together with interest calculated to the date of judgment.

The application against the Second Defendant

7. By Summons dated 15 July 2019, the Plaintiff seeks an order that paragraphs 8, 9, 10, 14, 19, 20 and 21 of the Defence of the Second Defendant be struck out pursuant to RSC 18, the rules 19(1)(a) and (b) and/or under the inherent jurisdiction of the Court. The Plaintiff seeks summary judgment to be entered in its favour for the principal amount outstanding together with accrued interest.

8. In her Defence, the Second Defendant raises two points for the purposes of this application. First, by paragraph 8, the Second Defendant refers to clause 7 of the Agreement providing that the “interest rate for each calendar year shall be determined as the United States Federal Reserve Prime Rate on the first day of the relevant calendar year plus one percent (1%)” and asserts that the United States Federal Reserve Bank does not determine the “Prime Rate”, and therefore the mechanism chosen for determination of the interest rate is incapable of performing the function ascribed to it.

9. Second, by paragraph 14 of the Defence, the Second Defendant asserts that the document headed “Addendum to the Loan Agreement” and dated 17 February 2016 is not supported by consideration and therefore is not a contract on which the Plaintiff can sue the Second Defendant.

10. At the hearing of this application on 25 November 2019 counsel for the Second Defendant, Mr Harshaw, opened his response to this application by...