Bank of Butterfield International (Cayman) Ltd Plaintiff v Elwood Levy Arlane A. Levy Defendants
| Jurisdiction | Cayman Islands |
| Judge | Hon. Justice Henderson |
| Judgment Date | 02 March 2004 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO. 633 OF 2003 |
| Date | 02 March 2004 |
In the Matter of the Registered Land Law (1995 Revision)
Hon. Justice Henderson
The Plaintiff Bank of Butterfield International (Cayman) Ltd. (‘the Bank’) seeks a declaration that the defendants are in default of payment under a charge they granted to the bank, an order granting it possession of the charged properties, and the right to sell by private treaty. In resisting the application, the defendants argue that it is defectivebecause two notices required by the Registered Land Law (1995 Revision) were served at the same time and not sequentially.
The charge in question is collateral to a debenture payable on demand. It provides:
‘the chargor shall repay to the chargee on demand the principal sum or such portion thereof as shall have been advanced to or be payable by the chargor or the principal debtor and remains due and owing together with interest thereon at the rate or rates aforementioned.’
The debenture provides that the borrowers agree:
‘to repay the principal sum on demand together with such interest as is from time to time outstanding, at the rate provided for above and pending demand for the full amount, to make all payments in accordance with the lender's commitment letter dated November 4, 1998, the terms of which were accepted by the borrower November 8, 1998, or at such other times and in such other manner as the lender in its discretion requires …’
The commitment letter referred to in the debenture was amended; the amendment provides the following with regard to repayment:
‘During the course of construction interest is to be covered on a monthly basis. Following the final drawdown of this facility, monthly repayments are to commence within 30 days at a rate of CI $8,415.00 per month with payments amortized over a 12 year term. Notwithstanding the forgoing, this facility will be repayable upon demand.’
The defendant borrowers have not made any repayment at all.
The Bank sent two letters, each dated June 23, 2003, to each of the two defendants. The letters were served on August 2, 2003 upon Mrs. Levy and on August 11, 2003 upon Mr. Levy. For present purposes, I take the later of these two dates to be the operative one.
One letter (‘the section 64 letter’) is a demand for payment of the principal sum plus interest. The letter invokes section 64 (2) of theRegistered Land Law, which reads:
‘64. (2) A date for the repayment of the money secured by a charge may be specified in the charge instrument and, where no such date is specified or repayment is not demanded by the chargee on the date specified, the money shall be deemed to be repayable three months after the service of a demand in writing by the chargee.’
The second letter invokes section 72 of theRegistered Land Law and is a demand for payment of the arrears owing plus interest. Section 72 provides as follows:
‘72. (1) If default is made in payment of the principal sum or of any interest or any other periodical payment or of any part thereof, or in the performance or observance of any agreement expressed or implied in any charge, and continues for one month, the chargee may serve on the chargor notice in writing to pay the money owing or to perform and observe the agreement as the case may be.
(2) If the chargor does not comply within three months of the date of service, with a notice served on him under subsection (1), the chargee may –
(a) appoint a receiver of the income of the charged property; or
(b) sell the charged property:
Provided that a chargee who has appointed a receiver may not exercise the power of sale unless the chargor fails to comply, within three months of the date of service, with a further notice served on him under subsection (1).
(3) The chargee shall be entitled to sue for the money secured by the charge only—
(a) where the chargor is bound to repay the same;
(b) where, by any cause other than the wrongful act of the chargor or chargee the charged property is wholly or partially destroyed or the security is rendered insufficient and the chargee has given the chargor a reasonable opportunity of providing further security which will render the whole security sufficient, and the chargor has failed to provide such security; or
(c) where the chargee is deprived of the whole or part of his security by, or in consequence of, the wrongful act or default of the chargor:
Provided that
(i) in the case specified in paragraph (a)—
(a) a transferee from the chargor shall not be liable to be sued for the money unless he has agreed with the chargee to pay the same; and
(b) no action shall be commenced until a notice served in accordance with subsection (1) has expired; and
(ii) the court may, at its discretion, stay a suit brought under paragraph (a) or (b), notwithstanding any agreement to the contrary, until the chargee has exhausted all his other remedies against the charged property.
The borrowers say that the two sections must be read together and, properly understood, provide for a sequential notice process which is mandatory before legal action may be initiated to enforce the security. Since this is a charge which does not specify a date for the repayment of the sums secured by it, the money, in the words of section 64 (2),
‘shall be deemed to be repayable three months after the service of a demand in writing by the chargee.’
Since the section 64 letter was served August 11, 2003, the money secured by the charge is deemed to be repayable on November 11, 2003 and not earlier. The borrowers say that section 72 (1) of theRegistered Land Law can only be invoked after a default...
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