SJ Construction Ltd v Simons and Adderley
| Jurisdiction | Bermuda |
| Judgment Date | 15 January 2015 |
| Neutral Citation | [2015] SC Bda 7 Civ |
| Date | 15 January 2015 |
| Docket Number | CIVIL JURISDICTION 2011: No 98 |
| Court | Supreme Court (Bermuda) |
[2015] SC (Bda) 7 Civ
In the Supreme Court of Bermuda
CIVIL JURISDICTION 2011: No 98
Ms Simone N Smith-Bean, Charter Chambers Bermuda Ltd, for the Plaintiff
Mr Edward I King, Edward Ishmael-King Barristers and Attorneys, for the Second Defendant
The First Defendant did not appear and was not represented
(In Court)
The Plaintiff is a construction company. It seeks judgment against the Second Defendant for unpaid invoices in respect of building works which it carried out at the property known as 2 Scenic Heights Lane in Southampton (‘the Property’). The amount claimed is $169,103.73, together with costs and interest. The Plaintiff has previously obtained summary judgment against the First Defendant for the same amount, but he is a man of straw. The Second Defendant disputes liability.
The First and Second Defendants are brother and sister. The Property was formerly owned by their mother. In around 2006 she was diagnosed as having Alzheimer's disease. She moved in with the Second Defendant and executed a power of attorney in her favour, so that the Second Defendant could help her manage her affairs.
The First Defendant, who gave evidence for the Plaintiff, described himself as a ‘ speculative contractor’ who bought, developed and sold property, although he said that he did not do any construction work in the course of business. He had suggested to the Second Defendant that they renovate the Property, which included three apartments for letting to tourists, to increase its rental income for their mother. The renovation work was to include two additional apartments.
The Second Defendant agreed. She persuaded their mother to add the First and Second Defendants' names to the Property so that they could raise a mortgage against it in order to fund the renovations. There is no suggestion that the First or Second Defendants thereby sought or obtained any beneficial interest in the Property.
The First Defendant approached Capital G Bank (now Clarien Bank) (‘the Bank’) on behalf of both Defendants and their mother to request a mortgage. At the First Defendant's behest, the borrower was to be a company called Ocean Terrace Ltd (‘the Company’) to which the Property was to be transferred. The Company had not yet been incorporated.
In March 2008 the Bank authorised a loan to the Company of $876,000. The amount was calculated on the following basis: $336,000 to repay the existing mortgage against the Property with another lender; $373,500 to carry out the renovations; $37,350 as a 10% contingency amount in case of cost overruns; $106,665 to convey the Property to the Company; and $21,565 estimated closing costs. This came to $875,080, which the Bank rounded up to $876,000 in case of any unforeseen expenses.
In May 2008 the Bank agreed to lend an additional $17,000 to pay the outstanding fees of the architects whom the First Defendant had engaged on the project.
The First Defendant advised the Bank that the works to be performed were to convert the garage into a bedroom, add a studio apartment, and split two bedrooms into two units, so as to create a total of seven units for tourist accommodation. He also advised the Bank that he would be the contractor on the project through what he described as his ‘company’, Signature Homes, although I accept the Second Defendant's evidence that that was simply a trading name. All the monies were lent on the basis of those representations.
In or around October/November 2008, the attorneys for the Defendants advised the Bank that the Company would not in fact have the power to own any property. The Property therefore remained in the names of both Defendants and their mother, and they became the Borrowers. They signed a mortgage facility letter on 8 th November 2008. The Defendants signed on behalf of the Company as guarantor, although it had not yet been incorporated.
The mortgage facility letter contained a requirement that the Borrowers provide the Bank with a copy of the approved plans and an undertaking by the Borrowers not to make changes to the plans that would incur any cost overruns without the prior written approval of the Bank.
On 16 th December 2008 the Borrowers and the Bank executed a deed of mortgage (‘the Mortgage Deed’) conveying the Property to the Bank as security for the mortgage loan.
The Defendants finally incorporated the Company on 28 th January 2009. They were both directors. They intended that once the renovations were complete the Company would manage the apartments at the Property.
The Company in its capacity as ‘ owner’ entered into a written agreement dated 4 th March 2009 with ‘ Signature Homes’ as ‘ contractor’ whereby the contractor, ie the First Defendant, undertook to carry out renovation work on the Property (‘the Agreement’). I accept that the parties to the Agreement did enter into it on or about that date, and note that Karen Brown, the Head of Lending at the Bank, gave evidence that the First Defendant had supplied the Bank with a copy of the document sometime in 2009.
The Agreement purported to be a standard form American Institute of Architects document. Having heard the critical observations about the form of the Agreement made in evidence by Edward Pereira, the architect engaged by the Plaintiff in relation to the Property, I conclude that it was most probably a pirated copy, but nothing turns on that. The agreement was signed on behalf of the Company by both Defendants.
When cross-examined, the Second Defendant appeared to accept that the fact that the Company was not the owner of the Property somehow invalidated the Agreement. I disagree. I am satisfied that as both Defendants had signed the mortgage facility letter they would both have known when they incorporated the Company and signed the Agreement that the Company was not going to own the Property. I am therefore satisfied that the Agreement was not an oversight – although the description of the Company as ‘ owner’ was mistaken. To be clear, under the Agreement the First Defendant agreed with the Company that he would renovate the Property as contractor.
The Agreement provided that the Company should pay the First Defendant a ‘contract sum’ of $459,000 for the performance of the contract. I take the contract sum to be the budget for carrying out the renovation to the Property. This figure is very close to that of $459,520.31 which was drawn down from the loan account on 16 th December 2008 to redeem the existing mortgage on the Property and pay legal fees and other expenses. However the monies available for renovations were only $427,850 (ie $373,500 to carry out the renovations; $37,350 as a contingency amount; and $17,500 as architect's fees).
Both Defendants gave evidence that they had agreed that the First Defendant could draw a salary of $6,000 per month for his role on the project. In light of the Agreement I infer that the Second Defendant gave her agreement on behalf of the Company. The First Defendant initially accepted in evidence that he was paid that sum, then stated that he was not, but that he was paid $500 per week, although not every week. The First Defendant made a number of drawdowns from the loan monies, many of which were certified for payment by the independent project manager whom the Bank had stipulated must be hired. Although I was not referred to a breakdown of the monies which were drawn down, I infer that they included whatever the First Defendant paid himself, and that he paid himself something. I am therefore satisfied that the Company agreed to and did pay the First Defendant for his role as contractor under the Agreement.
Sometime later in 2009 the First Defendant made an oral contract with Steven Pacheco, the president and manager of the Plaintiff, whereby the Plaintiff would renovate the Property. Mr Pacheco gave oral evidence that the First Defendant told him that the Property belonged to him, ie the First Defendant, his sister and mother, and that he would be contracting on their behalf. In his witness statement he had merely said that the First Defendant had told him that he, ie the First Defendant, and his sister were undertaking renovations to the Property, which they owned, and that he, ie the First Defendant, would be the contact for the project.
Mr Pereira said in evidence that the First Defendant did not state that he was instructing the Plaintiff on behalf of himself and his sister but that he, Mr Pereira, had assumed that was the case because the First Defendant had mentioned that he and his sister were the joint owners of the Property. The conversation took place at a site meeting before the Plaintiff started any work at the Property. This account is consistent with the account in Mr Pacheco's witness statement. I conclude that it is most likely what the First Defendant told both Mr Pacheco and Mr Pereira, ie that the Defendants were joint owners of the Property but not that he was instructing the Plaintiff on behalf of them both.
The First Defendant, who was called as a witness for the Plaintiff, gave evidence that he instructed the Plaintiff on behalf of the Company but that, as is common ground, he did not mention that to Mr Pacheco. Indeed Mr Pacheco did not learn of the existence of the Company until the start of these proceedings. The Plaintiff, as noted above, has already obtained summary judgment against the First Defendant, and the Second Defendant, although not bound by that finding, does not dispute her brother's liability.
The evidence of the First Defendant was that he instructed the Plaintiff after discussion with the Second Defendant and with her agreement. Whereas the evidence of the Second Defendant was that she was not made aware of the Plaintiff's...
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Figureido v Laws
...(a firm) v Costello [2012] QB 244, EWCA, per Etherton LJ, giving the judgment of the Court, at para 23, which was followed in SJ Construction Ltd v Simons [2015] SC (Bda) 7 Civ (15 th January 2015). The Plaintiff's claim 41 The Plaintiff gave evidence that he had more than 40 years' experie......