Cochrane v Royal Bank of Canada et Al

• Jurisdiction: Antigua and Barbuda
• Judge: Mitchell, J.
• Judgment Date: 01 May 2003
• Neutral Citation: AG 2003 HC 43
• Docket Number: ANUHCV 0319 of 2000
• Court: High Court (Antigua)
• Date: 01 May 2003

High Court

Mitchell, J.

ANUHCV 0319 of 2000

Cochrane

and

Royal Bank of Canada et al

Appearances:

Justin Simon for the claimant.

Cosmos OR Phillips QC, William Archibald with him, for the 1st defendant.

Trevor Kendall for the 2nd defendant.

Civil practice and procedure — Whether the claimant could during the course of the trial make new allegations not found in his statement of case — Claimant held bound by his pleadings.

Mitchell, J.

1 This is a banker and customer dispute. Royal Bank of Canada has sold Mr. Cochrane's property at public auction and Mr. Cochrane is not satisfied. He has sued Royal Bank, and Royal Bank has joined its auctioneer, Mr. Archibald, to the proceedings to make him give his account.

2 The case raises questions as to the duty of care owed by a banker to its customer in exercising the powers of sale of charged property in the State of Antigua and Barbuda. The other major question is the responsibility of an auctioneer in conducting the public auction of charged properties. Other issues include: the law governing auctions generally; whether the claimant could during the course of the trial make new allegations not found in his statement of case; the reasonableness of the amount of the commission paid to the auctioneer; the proper procedure to be followed by a bank in giving instructions to an auctioneer; the duty to obtain a valuation of the property prior to sale; whether the delay in auctioning the property had caused loss; the setting of the reserve price for the auction; the duty of the bank to account; and the duty of the bank to pay the borrower the surplus after the debt has been satisfied; and, finally, the status of an auctioneer.

THE TRIAL

3 At the trial, Mr. Cochrane gave evidence on his own behalf. He called no witnesses. Royal Bank called two witnesses, Ms Ethlyn Maundy, Assistant Manager Lending, and Mr. William Archibald, the Bank's Solicitor. The Bank's Solicitor had been permitted, with the consent of both the claimant and Mr. Archibald, to sit in Court to assist Mr. Phillips QC, senior counsel for Royal Bank, and who was not in the best of health during the trial. Mr. Archibald, the auctioneer, was his only witness. There had been several witness statements filed on behalf of Royal Bank by other persons who were not called to testify. These were the experts Wayne Martin, Trevor Gonsalves, Johnathan Layne, and Ewald Samuel. Their witness statements were, accordingly, not allowed as evidence in the case. Their reports and valuations had, however, been common to the parties, and were considered, as were the valuations prepared for Mr. Cochrane by persons whom he did not call as witnesses. A large bundle of documents was put in evidence at the trial by Royal Bank with the consent of Mr. Cochrane and Mr. Archibald.

THE FACTS

4 This dispute has a long history, and it is best understood if the facts are set out in chronological order. Mr. Cochrane is an Antiguan businessman and property developer permanently resident in Canada since at least the year 1997. There, he is presently employed as a supervisor in a petroleum refinery. Royal Bank of Canada is an international bank with offices in St John's. Mr. Cochrane had inherited Parcel 19 from his father. He also owned other properties in Antigua.

5 Sometime in 1993, Mr. Cochrane conceived a project to construct twenty apartments in four separate buildings on Parcel 19. He had been a long-standing customer of Royal Bank. He approached the Bank for financing for the project. He hoped that the Bank would advance him a full 50% of the projected total development cost of $2,561,133.00. He took a chance that financing would become available, and in November 1993 began construction using his own funds. He provided Royal Bank with a feasibility study, a copy of which was in evidence. Initially, all he received in financing from Royal Bank was a loan of $250,000.00. Later, this loan was increased by $150,000.00 to a total of $400,000.00. As security for the loan, Royal Bank took legal charges over Parcel 19 and Parcel 375, another of Mr. Cochrane's properties.

6 By November 1994 there were three incomplete buildings on Parcel 19, and the fourth one had not yet been started. At that time, Mr. Cochrane had Davis Engineering Services prepare a valuation of the then incomplete buildings (“the First Davis Valuation”). It is dated 4 November 1994. This First Davis Valuation was in evidence, and, in summary, it gives the total market value of the land and buildings as $2,377,800.00. Hurricanes Luis and Marilyn of September 1995, the first major hurricanes of the current hurricane weather cycle, were still to strike.

7 By letter of 2 November 1995, the manager of Royal Bank informed Mr. Cochrane that Royal Bank would not provide any more financing for the project. Mr. Cochrane had by this time run out of funds, and the first hurricanes had struck. His gamble in beginning the project before all of the financing was in place had not paid off. He was unable to complete the project, and he defaulted on the loan. The last loan payment he ever made was of $36,404.86 on 1 August 1996. From as early as the year 1996, Ms Mary White (“Mr. Cochrane's Solicitor”) assisted Mr. Cochrane in all of his negotiations with Royal Bank. She succeeded in putting off the fateful day for a commendable period of time. But, the result was that as time passed the amount of the debt continued to grow.

8 The loan being in default, Royal Bank placed the matter in the hands of its solicitors, Messrs Phillips, Phillips and Archibald, for collection. Mr. William Archibald, (“the Bank's Solicitor”) represented the law firm at all times in attempting to collect this defaulted loan. After having given Mr. Cochrane and his Solicitor as much time as he felt he could, he eventually prepared and served the statutory notices relating to the two securities. The amount due was to be paid in 90 days failing which the Bank would sell the charged properties by public auction. Around that time, Mr. Cochrane abandoned the project and moved to Canada where he took up residence.

9 The 3-month period of the statutory notices expired with Mr. Cochrane not making any payment. On 15 January 1997, the Bank's Solicitor wrote Mr. Cochrane's Solicitor advising that Royal Bank had instructed that the charged properties be advertised for sale.

10 The Bank's Solicitor then commissioned from Ewald Samuel Engineers, a firm of consulting and structural engineers, an investigation, analysis and appraisal report on each of the two properties. That for Parcel 375 no longer concerns us. It was originally part of the case as pleaded, but, at the trial, Mr. Cochrane testified that he had no quarrel with Royal Bank about how Mr. Archibald had conducted the auction of that property. The report of 20 January 1997 for Parcel 19 (“the First Samuel Report”) revealed that, in Mr. Samuel's view, its market value was $1,107,612.00, while the forced sale value was $900,000.00.

11 The evidence on this is confusing, but it appears that Mr. Samuel was persuaded to revisit his 20 January valuation of Parcel 19. On 2 February 1997, he prepared a second one (“the Second Samuel Report”). In this report, he marginally increased his estimate of the value of the buildings. He now placed a total market value of Parcel 19 and the structures on it at $1,410,680.00, with a forced sale value of $1,150,000.00. This is considerably less that Mr. Cochrane had originally valued it. But, there is no question as to the professionalism of either the First Samuel Report or the Second Samuel Report.

12 Mr. Cochrane not complying with the statutory notices of default, the Bank's Solicitor instructed Mr. Ira Archibald, the well-known Antiguan auctioneer (and brother of the Bank's Solicitor), to auction the properties. Mr. Archibald advertised the dates of the auctions in the local newspapers. The advertisements for the auctions were produced in evidence. They are noticeable for their brevity and lack of content. The only information given to the reader is the Block and Parcel number, the date of the auction, and the name of the auctioneer. They gave, to use Mr. Simon's phrase, scant information about the property. None of the details of the project or of the structures on it are mentioned, not even its acreage. There is no mention of the existence of Conditions of Sale or of Particulars of Sale, or that they might be examined at the Bank's Solicitor's or at Mr. Archibald's office. There does not even appear to have been a “For Sale” sign erected at any time on Parcel 19. Mr. Archibald, when pressed by counsel for Mr. Cochrane as to the inadequacy of the advertisements, explained that they had been prepared and published by the Bank's Solicitor, not by him.

13 The first attempt at an auction was on 13 March 1997. There was no successful bidder. Mr. Archibald advertised and held further auctions on 7 April, 17 April, 10 July, 25 September, and 29 October 1997.

14 One Tony Hadeed attended and bid at the last two auctions. Mr. Archibald had fixed the “start up bid” at the 25 September auction at $1,150,000.00, and, at the 29 October auction, at $1 million. At the last one, Mr. Archibald accepted a bid from Mr. Hadeed of $1,180,000.00. Mr. Hadeed signed the contract and paid the requisite 10% deposit of $118,000.00. Despite the First Davis Valuation, Mr. Cochrane later expressed satisfaction with the price that Mr. Archibald had obtained at this 1997 auction. And the active hurricane seasons of 1998 and 1999 were still to come, bringing with them Hurricanes Jose and Lennie.

15 The contract with Mr. Hadeed was put in evidence, It consists of two documents signed by Mr. Hadeed. I do not believe a lawyer ever saw either of them prior to execution. Neither, for example, gives the correct Parcel number. They describe the property as “Parcel 9.” The first document...