Barbados Mutual Life Assurance Society Appellant v [1] Michael Pigott [2] West Mall Ltd Respondents [ECSC]

JurisdictionAntigua and Barbuda
JudgeBARROW, J.A. [AG.],Justice of Appeal [Ag.],Chief Justice [Ag.],Denys Barrow, SC,Brian Alleyne, SC,Michael Gordon, QC,Justice of Appeal
Judgment Date27 June 2005
Judgment citation (vLex)[2005] ECSC J0627-3
CourtCourt of Appeal (Antigua and Barbuda)
Docket NumberCIVIL APPEAL NO.12 OF 2004
Date27 June 2005
[2005] ECSC J0627-3



The Hon. Mr. Brian Alleyne, SC Chief Justice [Ag.]

The Hon. Mr. Michael Gordon, QC Justice of Appeal

The Hon. Mr. Denys Barrow, SC Justice of Appeal [Ag.]


Barbados Mutual Life Assurance Society
[1] Michael Pigott
[2] West Mall Limited

The trial Judge found that the Appellant's failure to disburse a loan of $2.25 million to West Mall Limited (the Respondent) was a breach of contract for which the Respondent was entitled to damages that included compensation for losses resulting from the failure of the specific project for which the loan funds were to be used. The appeal is against findings of facts, the evaluation of those facts, the inferences drawn from them, and the interpretation of the loan agreement. The appeal is also against the measure ofdamages and the order that damages were to be assessed by the Master on further evidence, by affidavit.

The Factual Outline

Michael Pigott owned 5 acres of land at American Road, St. John's, Antigua. The land was charged to Antigua Commercial Bank (ACB). Three companies that Mr. Pigott controlled, which conducted businesses on the land, were in financial difficulties and he decided to restructure. He decided to convert the user of the land to a shopping mall to be called West Mall and to form a company, to be called West Mall Limited, to operate the mall.


The Appellant, by letter dated 20th April 1999, offered to lend $2.25 million on certain terms and conditions and the Respondent accepted that offer.1 The letter (the loan letter) specified that loan funds were to be used for two purposes — the initial drawdown of $1.5 million was to clear liabilities charged on the land and the remainder of $750 thousand was to construct and renovate buildings. Mr. Pigott personally committed $450 thousand, to be spent on the construction; these were funds that he expected from an insurance claim. In May 1999, with the knowledge of the Appellant, Mr. Pigott commenced building work on the project.


Shortly after he commenced work, Mr. Pigott requested disbursement of loan funds. This was not forthcoming. On or about 1st July 1999 the Respondent obtained bridging finance in the amount of $450 thousand from Barclays Bank. That financing was obtained on the strength of irrevocable instructions that the Respondent gave in a letter of that date to the Appellant to pay that sum to Barclays "from proceeds of loan approved under your commitment letter dated 20th

April 1999." The Appellant signed and returned a copy of the letter to indicate its acceptance of those instructions and to confirm that it would "act as directed."

The Judge found as a fact that by the end of July 1999 the Respondent had complied with all conditions of the agreement so as to be entitled to performance by the Appellant. It is a finding that the Appellant vigorously disputed.


The Mall did not open on the scheduled date, 31st August 1999. The continued efforts of the Respondent to have the loan disbursed did not succeed. Events occurred that increased the costs of the project. The Respondent applied for additional funding and this was rejected. The Respondent ceased work on the mall in October 1999.


In two letters to the Respondent, dated 21st December 1999 and 19th January 2000, the Appellant adverted to the change of circumstances, in that the project cost had increased, and required to be satisfied that the Respondent had sufficient funds to complete. The Appellant referred to clause M in the loan letter that gave it the right to withdraw its offer or delay disbursement. It requested information on the funding of a shortfall in the loan funds and a valuation. The Respondent provided both. The Appellant did not respond to any of Mr. Pigott's representations. ACB grew tired of waiting and exercised its power of sale as chargee. A forced sale proved disastrous for Mr. Pigott's businesses. Barclays demanded repayment of the bridging loan and obtained a judgment against the Respondent. In May 2000 the (claimants) Respondents filed the claim from which the present appeal now lies.

Borrower's obligation to provide security

In defending against the Respondent's claim the Appellant contended that it had no obligation to disburse loan funds because the Respondent did not and could not satisfy the condition that they were to provide unencumbered land as security for the loan. The Appellant argued that it was only after the land was dischargedfrom its charge in favour of ACB and transferred to the Respondent, that the Appellant could become obliged to disburse loan funds. As the land was never discharged the condition was never satisfied, the Appellant argued.


The Judge observed that as a matter of standard legal practice what takes place in situations such as this is for contemporaneous transactions to take place with all necessary parties represented at a physical exchange of documents. The usual scenario, as I understood what the Judge described, would have been for ACB to deliver a discharge of charge against payment of the Appellant's cheque for $1.5 million. At the same time Mr. Pigott, the title-holder of the land, would have delivered a transfer of land in favour of the Respondent, to the Respondent. Also at the same time the Respondent would have delivered that transfer as well as a charge created by the Respondent in favour of the Appellant, to the Appellant. In the experience of the members of this Court that sort of arrangement happens routinely. The Judge described as circuitous and disingenuous the Appellant's argument that the Respondent needed, before it was able to qualify for disbursement from the Appellant of the loan funds, to first pay to ACB the very sum that the Respondent was borrowing from the Appellant to pay to ACB.


On appeal Dr. Cheltenham repeated and expanded on this argument at length. I found no merit in the arguments advanced. I do not agree that the Judge found that the Appellant was obliged to advance money before the security was in place; that is not what she said. The Judge said that there would be nothing "naïve and unbusinesslike"2 in the Appellant disbursing funds before the security was in place. She said this in the context of the scenario of the exchange of documents just described above. I understood her to mean 'before the security was registered', when she referred to 'before the security was in place. I confess to sharing the view of the Judge.

Sufficiency of loan funds to discharge charge

On another limb of this argument, I find that it was not in issue, as Counsel sought to make it on appeal, whether the money to be advanced was sufficient to obtain the release of the charge on the land held by ACB. The premise of the agreement that the first drawdown should be used to repay the moneys charged on the land was that it was sufficient for the purpose. As a matter of business sense one cannot conceive that the Appellant would ever have agreed to lend money that was insufficient to discharge the encumbrance on the land and so leave the Appellant unable to get that land as security. This is clearly borne out by the letter of offer from the Appellant that specified the purposes and amounts of the disbursements of the loan. The Appellant specified that there would be a first advance of $1.5 million'or the stipulated amount due to clear the liabilities at [ACB] against the property.' There can be no mistaking the import of that wording: the Appellant was quite specific that it would disburse whatever amount it took to obtain the release from ACB. The sufficiency of the earmarked funds was not an issue and can provide no justification for the failure of the Appellant to disburse loan funds.

Request for a second charge

Dr. Cheltenham also argued that the request by ACB to the Appellant for the latter's consent to ACB taking a second charge on the property was justification for the Appellant's refusal to disburse loan funds. There is no evidence that this ever became a sticking point. The evidence is that in its letter dated December 21, 1999 the Appellant stated that what was delaying disbursement was information from the Respondent stating how it proposed to finance the completion of the building. The absence of any reference to a second mortgage indicates that this was not the reason for the Appellant's failure to disburse. The absence from that letter of...

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