VSN Investments Ltd v Seasons Ltd ((in Receivership))
| Jurisdiction | Trinidad & Tobago |
| Judge | Gillian Lucky, J.A. |
| Judgment Date | 26 May 2021 |
| Neutral Citation | TT 2021 CA 20 |
| Docket Number | Civil Appeal S-334 of 2016 Civil Appeal S- 335/2016 CV 2012-04599 Civil Appeal S-336/2016 CV 2006-01349 |
| Court | Court of Appeal (Trinidad and Tobago) |
IN THE COURT OF APPEAL
A. Mendonça J.A.
N. Bereaux J.A.
G. Lucky J.A.
Civil Appeal S-334 of 2016
CV 2006-01349
Civil Appeal S- 335/2016
CV 2012-04599
Civil Appeal S-336/2016
CV 2006-01349
Mr. F. Hosein S.C. and Mr R. Dass instructed by Mr A. Maraj for Dai Tech Limited, Dev Debideen, Debby Debideen and VSN Investments Limited.
Mr. T. Bharath instructed by Mr A. Le Blanc for Maraj Gold Limited and Seasons Limited (In Receivership).
Delivered by Gillian Lucky, J.A.
The appeals in this matter originate from the deterioration of a business and personal relationship between Mr. Om Parkash Maraj (hereinafter referred to as “Maraj”) and Mr. Dev Debideen (hereinafter referred to as “Debideen”).
In 1996, Maraj and Debideen established an air-conditioning business, which they incorporated into a company called ‘Seasons Limited’ (hereinafter referred to as “Seasons”). Both Maraj and Debideen were directors of Seasons.
At the time of the incorporation of Seasons, Maraj was a director of Maraj Gold Limited (hereinafter referred to as “Maraj Gold”) while Debideen was the owner of VSN Investments Limited (hereinafter referred to as “VSN”) and a director of Dai Tech Limited (hereinafter referred to as “Dai Tech”). Debideen's wife, Debby Debideen was also a director of both VSN and Dai Tech.
After the incorporation of Seasons, Maraj and Debideen agreed that Debideen would manage the daily operations of Seasons, while Maraj would be responsible for the injection of capital into the business.
Maraj claimed that there was a mutual understanding that the funds advanced to Seasons were loans by his company Maraj Gold and that the sums advanced carried interest at the prevailing bank rate. Debideen claimed that he was unaware firstly, that the funds belonged to Maraj Gold and secondly, that the funds constituted a loan to be repaid with interest. Debideen claimed that the funds were provided by Maraj as Maraj's personal investment in Seasons.
In 1998, it was agreed by Maraj and Debideen that Seasons would expand its business to include real estate. In November 1998, both Maraj and Debideen incorporated another company called Signature Properties Limited. Properties identified by Debideen were purchased in the name of Seasons, using funds provided by Maraj. Debideen maintained that the funds injected by Maraj represented Maraj's personal injection and were not a loan from Maraj Gold.
Three High Court Actions were commenced by various parties. These three actions were referred to by the judge as —“ The Debenture Claim”, “ The Trespass Claim” and “ The Guarantee Claim”.
The Trespass Claim was not appealed, therefore, that matter is not relevant to these proceedings.
The three appeals in this matter relate to the Debenture Claim and the Guarantee Claim. The appeals were not consolidated but have been heard together because of the interrelation of the issues raised and the evidence relied upon.
According to Debideen, sometime in 1998, he was made aware that the funds injected into Seasons were loans from Maraj Gold. A deed of debenture, registered as No. 7420 of 1998 was issued by Seasons as the borrower, in favour of Maraj Gold as the lender. Debideen claimed that he was coerced into signing the document and had no opportunity to consider it properly.
On 4th July 2001, Maraj presented a promissory note for execution by Debideen, in the latter's capacity as a director of Seasons. The promissory note stated that Seasons was indebted to Maraj Gold in the sum of Seven Million, One Hundred and Ninety-Five Thousand, Seven Hundred and Seventeen Dollars and Five Cents ($7,195,717.05) together with interest thereon at the rate of 15% per annum. Debideen claimed that he had no choice but to sign the document.
In April, 2002, by virtue of sales arranged by Debideen, Seasons sold to Dai-Tech (owned by the Debideens), stock in trade and goods for the price of One Million and Forty-One Thousand, One Hundred and Eighteen Dollars and Twenty Cents ($ 1,041,118.20).
Since there was a charge on the assets of Seasons, Maraj Gold, in its capacity as debenture holder, wrote to Seasons on 1st May 2002 demanding payment of $8,113,997.69, then due and owing under the debenture. On 2 nd May 2002 Maraj Gold appointed Mr. Victor Herde as receiver and manager of Seasons (then in Receivership) after Seasons defaulted in its repayment obligations.
The debenture claim was initiated in the High Court by Maraj Gold and Seasons (In Receivership) against Dai Tech and the Debideens. In that claim, Maraj Gold and Seasons (In Receivership) sought declaratory relief that all the assets of Seasons, including the stock in trade and goods sold to Dai Tech, were subject to the debenture.
In their defence, Dai Tech and the Debideens claimed that they were coerced into the execution of both the deed of debenture and the promissory note. In essence, the defence was one of undue influence.
The judge determined that the central issue was whether Dai Tech and the Debideens were liable under the debenture executed in favour of Maraj Gold. A sub-issue raised was whether the relief sought by Maraj Gold was barred by illegality since, if the funds were in fact loaned to Seasons by Maraj Gold, in the latter's capacity as a moneylender, there had to be compliance with the provisions of the Moneylenders Act.
The judge was of the view that the submissions of Dai Tech and the Debideens departed from the original defence of coercion. The submissions instead focussed on the illegality of the transaction (which was not specifically pleaded), resulting in the unenforceability of the debenture.
The judge found that there was no evidence that Maraj Gold was in the business of moneylending for the year when the debenture was signed nor was there evidence that Maraj Gold was in the business of moneylending during the period 1996 to 1998, when the funds were advanced to Seasons.
The judge further found that Dai Tech and the Debideens failed to prove the defence of illegality, therefore Maraj Gold and Seasons were entitled to the declaratory relief sought.
By Notice of Appeal CA S335/2016, Dai Tech Limited and the Debideens (hereinafter together referred to as “Dai Tech”) appealed from the decision in relation to the Debenture claim.
The debenture claim was instituted under the Rules of the Supreme Court 1975 (RSC). The matter was converted from the RSC to the Civil Proceedings Rules 1998 (CPR). Dai Tech submitted, that because the action was converted from the RSC to the CPR, it meant that the latter rules applied to the entirety of the claim, that is, from the time of its filing to its conclusion. Dai Tech relied on the cases Assoon v Petrotrin CV 2006–01194 and Trinidad Express and Ors v Conrad Aleong CA 122 of 2009 to support its position on the converted matter being subject to the CPR.
Dai Tech submitted that unlike the position under O. 18 r. 8 of the RSC, there was no need to specifically plead any fact showing illegality under the CPR. In this regard, Dai Tech submitted, that illegality arose ‘ ex facie’ by virtue of the evidence in the trial. Dai Tech relied on Halsbury's Laws of England, Volume 22 (2012), at paragraph 426 which states:-
“426 Establishment of Illegality Where a contract on the face of it is illegal the court will take notice of that fact and refuse to enforce the contract even though the vitiating factor has not been pleaded, and even though the defendant does not wish to raise the objection”
Dai Tech argued that once there is evidence to establish illegality, a Court is bound to take notice of that matter, even if illegality is not pleaded or the transaction is not ‘ ex facie’ illegal. Dai Tech further relied on the text Illegal Transactions, (1998) (LLP) by Dr Nelson Enongchong. Page 20, paragraph 1—5 which states:-
“Where the evidence which emerges at trial shows conclusively that there is illegality, the court will allow the issue to be raised since no further evidence by the other party could show that the transaction is legal. Where the illegality does not appear in the pleading, the court may raise it of its own motion if “the evidence adduced by the plaintiff proves the illegality”. For, as the Privy Council pointed out in Chettiar v Chettiar, once evidence is disclosed which proves the illegality, the courts are “bound to take notice of it … though not pleaded”.
Dai Tech submitted that the debenture purported to secure an illegal debt and was unenforceable because it was in breach of sections 11, 12 and 14 of the Moneylenders Act, Chapter 84:04 (hereinafter referred to as “the Act”). Sections 11, 12 and 14 of the Act state:-
“11(1) No contract for the repayment by a borrower of money lent to him or to any agent on his behalf by a moneylender licensed under this Act or for the payment by him of interest on money so lent and no security given by the borrower or by any such agent in respect of any such contract is enforceable, unless a note or memorandum in writing of the contract is made and signed personally by the borrower, and unless a copy of the note or memorandum is delivered or sent to the borrower within seven days of the making of the contract; and no such contract or security is enforceable if it is proved that the note or memorandum was not signed by the borrower before the money was lent or before the security was given,...
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