Fri | Jul 3, 2020

Sagicor Bank ordered to absorb loss for selling property below market

Published:Monday | April 23, 2018 | 12:00 AMMcPherse Thompson/ Assistant Editor - Business
A branch of Sagicor Bank in Kingston.

The Supreme Court has ordered Sagicor Bank Jamaica Limited to absorb the losses on outstanding debt owed by a Montego Bay couple, whose home it took over and sold below market value.

Although at least one offer of US$1.15 million was made for the property known as The Lagoons - a price that Chief Justice Bryan Sykes found would have satisfied the couple's debt and leave a surplus - the bank ended up selling it for US$852,173 in 2015.

Sagicor sold the property for US$297,827 less than it could have fetched - which is about $38 million at current exchange rates.

Khiatani Jamaica Limited, director Sunil Khiatani, and his wife Sheila Khiatani sued Sagicor Bank for breach of duty over the transaction, while the bank countersued the Khiatanis for outstanding debt owed by their company.

However, in his decision handed down in March, Justice Sykes noted that there would have been no outstanding debt had the bank acted differently and accepted the US$1.15 million offer.

Sagicor Bank said last week that it has filed an appeal against the ruling.

In the case summarised in the Sykes judgment, Khiatani Jamaica Limited borrowed $49.16 million and US$575,000 from Sagicor between June 2010 and January 2012, which was secured by a mortgage over the Khiatanis home, known as The Lagoons.

The loans fell into arrears in 2012. As part of efforts to clear the debt, Sunil Khiatani had The Lagoons valued. It was assessed as having a market price of US$1.2 million, with a forced sale value of US$1 million.

The bank retained an auctioneer to have the property sold by public auction, but the sale fell through.

In October 2014, the Khiatanis were told advised that a couple, the Campbells, were interested in purchasing the property for US$1.15 million. The Campbells made a deposit of US$300,000 on the property after reaching an agreement with the Khiatanis in December of that year. The bank was kept abreast of the negotiations via the Khiatanis' attorney.

 

Struck a deal

 

Justice Sykes noted that while Sagicor had struck a deal to sell the property for US$852,173 or $98 million in September 2014, the bank only advised Khiatani that it had found a purchaser that December. The purchaser was identified in the judgment only as Mr Hamilton, but his full name, the Financial Gleaner understands, is Colin Lloyd Hamilton.

The Khiatanis were advised of the agreement with Hamilton after the agreement with the Campbells, but up to that point the contract with Hamilton had not been executed.

On January 19, 2015, Sagicor wrote to Hamilton's lawyer to say that the 120 days within which the sale should have been completed had expired and that the sale was cancelled. But, the very next day, the bank wrote to Hamilton's attorney again stating that the bank's position was that the sale had not been completed within the specified period, but it was extending the time to finalise the transaction.

Justice Sykes found there was nothing to suggest that the Campbells were not able to complete the purchase by January 16, 2015, if permitted. Sagicor's decision to pursue the sale to Hamilton was not businesslike, and showed disregard for the mortgagor's interest, the judge ruled.

"Had the bank considered the mortgagor's interest, which the law requires it to do, there was, in the circumstances of this case, only one decision that could reasonably be made: rescind the contract for failure to pay the money on the date specified and give permission for the sale to the Campbells," Sykes held.

Sykes dismissed Sagicor's counterclaim for the balance of the mortgage, and ordered the bank to pay interest on the loss of US$297,827 to the Khiatanis. He also ruled that the bank was not entitled to collect any interest from the Khiatanis from January 17, 2015.

Lord Anthony Gifford represent-ed the Khiatanis, while attorney Charles Piper represented Sagicor Bank.

mcpherse.thompson@gleanerjm.com