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Limitations Act no bar to recover mortgage owed

Published:Friday | January 1, 2016 | 12:00 AM
The Supreme Court on King Street, Kingston.

Limitations Act no bar to recover mortgage owed

Barbara Gayle

Justice Coordinator

The Supreme Court has ruled that the Limitations of Actions Act, which stipulates that legal action in transactions involving real estate must be brought within 12 years, is not a bar to financial institutions recovering outstanding balances on mortgages.

Justice David Batts so ruled this month when he made an order in favour of National Commercial Bank (NCB), the mortgagee on a property owned by Dagor Limited, which the Companies Office of Jamaica describes as a business trade organisation.

Dagor took the bank to court seeking an order that the mortgage was invalid, null and void or unenforceable and asked the court to rule that the mortgage should be discharged from the title.

Attorneys-at-law Maurice Long and L Phillipotts-Brown, who represented Dagor, made it clear that the alleged unenforceabliity of the mortgage was based on the operation of the Limitations of Actions Act.

Dagor was relying on the Act which states that claims, actions or proceedings involving land and mortgage transactions must be brought within 12 years after the last payment or acknowledgement of the debt.

A mortgage was registered on Dagor's title to a property in November 1995. The mortgagee was then Mutual Security Bank, which later came under the control of NCB. There was a dispute as to the amount owing and Dagor filed a suit in the Supreme Court in October 2000 against the bank. The matter was adjourned sine die, that is, without fixing a date for further hearing. Dagor said it was of the view that the debt had been written off.

NCB sent notices to Dagor and the guarantors in March 2014 informing them that the mortgage was in arrears. Dagor, through its lawyer, responded in May 2014 that its managing director, Pierre Chong, was resident overseas and was of the opinion that the account had been settled.

On October 7, 2014, property owned by the guarantors was sold and the proceeds applied towards the discharge of Dagor's debt but a balance remains due and owing.

Sandra Minott-Phillips, QC, instructed by Myers Fletcher and Gordon who represented NCB, argued that the Limitations of Actions Act applied only to a mortgagee's power to enter or bring an action or suit.

She said that since the passage of the Registration of Titles Act, the mortgagee has a power of sale and that was not contemplated by the Limitation of Actions Act. She said the power of sale could be exercised without the taking of possession and without commencing suit.

Justice Batts, in handing down his decision, said the bank's lawyer was on firmer ground with her construction of the limitation statute. He said there was no time limit on the exercise of the statutory power of sale contained in the Registration of Titles Act.

The judge said "the mortgage is a charge on the land. This is notified to the entire world. At anytime at which the premises are sold, the mortgagee is entitled to be discharged in priority to all others, even the mortgagor. It would be odd indeed if in such circumstances a mortgagee could lose its right to be paid merely because he elected to rely on the security of a registered interest (charge) rather than pursue litigation or force a sale of the premises."

He said that a mortgagor in possession for the requisite 12-year period, in circumstances where the mortgagee's right to possession has accrued, is entitled to rely on the Limitation of Actions Act.

However, Justice Batts ruled that in the case before him, Digor was in possession of the title, and the Registration of Titles Act allowed the mortgagee to transfer that title by way of sale. He said sale was only one of several methods to ensure the mortgagee's security.

It was the judge's finding that the Limitation of Actions Act did not apply to the bank's statutory provision of sale. On those bases Justice Batts dismissed the claim and awarded legal costs to NCB.