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JUDGMENT
THE ISSUE
[1] A company needs to borrow significant sums of money and a Bank or other
financial institution is happy to lend the requisite sums so long as it has
security for the loans it will be making. The company enters into a loan
agreement with the Bank and issues a debenture to provide security by way of
a charge over identified immovable and movable property so as to cover its
financial obligations to the Bank. The debenture deed specifies events of
default and confers power on the Bank on any such default to appoint a
receiver and manager, with specified management powers and power to sell any
of the charged property, while also irrevocably conferring a power of
attorney upon any appointed receiver to sell the charged property.
[2] Despite these provisions in the debenture, the Appellant contends that
the receiver does not have power to take possession of the charged land and
sell it because he had been appointed not by the Court in the course of some
legal proceedings but merely by the Bank.
[3] The Appellant submits that a debenture can only confer a valid security
interest in respect of land if the land in question has been the subject of
a mortgage passed and executed before the Registrar of Deeds in accordance
with sections 12, 14 and 16 of the Deeds Registry Act, Cap 5:01. In the
conventional mortgage, where the mortgagor expressly consents to a willing
condemnation being adjudged against him, such process before the Registrar
amounts to a money judgment in favour of the mortgagee[FN1] which, upon any
default by the mortgagor, enables the mortgagee to go to the Court to
foreclose the interest of the mortgagor in the mortgaged land and obtain an
order for its sale (organized by the Court) to recover the money owed.[FN2]
It is contended that this involvement of the Court upon traditional
principles of Guyanese Roman-Dutch law cannot be circumvented by a privately
appointed receiver under a secured debenture that does not provide the
relevant security by way of a conventional mortgage.
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[FN1] British Guiana Electric Lighting Co Ltd v Conrad [1897] LRBG 115,
Tinne v Tebbutt [1921] LRBG 14, Dhanraj v National Bank of Industry &
Commerce Ltd Civ App No 70/2001, 6 Aug 2002
[FN2] FWH Ramsahoye, Land Law of British Guiana p 238, Deeds Registry Act ss
28-31, Rules of the High Court Ord 36 rr 8,17, 51,52,53
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[4] For the reasons that follow we reject this view and endorse the validity
of receivers' powers of sale under debentures that are secured otherwise
than by a separate mortgage under the Deeds Registry Act, so long as the
debentures have been duly created and registered under the Companies Act,
Cap 89:01.
THE FACTUAL BACKGROUND
[5] In view of the narrowing of the issues as this case has progressed from
the High Court to the Court of Appeal to this Court, the relevant background
can be treated as follows.
[6] L.O.P. Investments Investments Limited ("LOP") issued two debentures in favour of
Demerara Bank Limited ("the Bank) to secure loans of $85 million and then a
further $15 million. On LOP's default in making repayment the Bank duly
appointed Mr. Garrett Ward ("Mr. Ward") as Receiver. Later he duly resigned
and in his place the Bank duly appointed Mr. Ramon Gaskin ("Mr. Gaskin") as
Receiver.
[7] LOP refused to co-operate with the Receivers and issued proceedings
claiming that the debentures contravened the law relating to mortgages and
hypothecs so as to be invalid or unenforceable, or could only be enforced by
court foreclosure proceedings required for mortgages and hypothecs. LOP
further claimed that Mr. Ward and Mr. Gaskin had not been duly appointed or,
even if they had been, they had no power to interfere in the management of
LOP's property unless authorized by the Court or LOP. Injunctive relief was
sought and damages in excess of $100 million were claimed.
[8] The Bank, Mr. Ward and Mr. Gaskin strenuously denied LOP's claims.
Indeed, the Bank and Mr. Gaskin filed a writ themselves against LOP
complaining of unlawful interference by LOP in the conduct of the
receivership and claiming damages and injunctive relief.
[9] These two actions were consolidated by consent. After hearing the case
Moore J. made the following declarations:
(a) The two Debentures issued by L.O.P. Investments Investments Limited in favour of
Demerara Bank Limited are good, valid and subsisting securities;
(b) The appointments of Garrett Ward and Ramon Gaskin under the aforesaid
Debentures were/are valid in law;
(c) The present Receiver Ramon Gaskin is entitled to take possession of the
charged assets of L.O.P. Investments Investments Limited and to discharge the other
duties of Receiver under the Debentures.
[10] Moore J. further ordered LOP to pay to Mr. Gaskin the sum of $350,000
damages for obstructing him in the execution of his duty as Receiver and
awarded costs against LOP in the sum of $300,000.
[11] The Court of Appeal affirmed the judgment of Moore J, dismissed LOP's
appeal and ordered that the sum of $450,000 lodged in court by LOP as
security for costs be applied in satisfaction of the order for damages and
costs made by Moore J, with the balance, if any, being applied towards the
costs of the appeal which were fixed in the sum of $75,000.
[12] The Court of Appeal heaped scorn on the submission of counsel for LOP
that the effect of the Civil Law of Guyana Act, Cap 6.01, was to require any
security provided for in a debenture to be passed before the Registrar of
Deeds, as in the case of a conventional mortgage, if it was to be valid and
enforceable. The two debentures were clearly intended to take effect as
secured debentures under the Companies Act and not as conventional mortgages
under the Deeds Registry Act. Effect should be given to the terms of the
debentures, in particular as to the general powers of the Receiver and the
particular power under the irrevocable power of attorney.
[13] LOP applied to the Court of Appeal for leave to appeal to this Court,
but the Court of Appeal refused leave to appeal even though it was accepted
that the property in dispute was worth more than Guyana $1,000,000 and
therefore there was an appeal "as of right" under s 6(a) of the Caribbean
Court of Justice Act.
[14] LOP then applied to this Court for special leave to appeal and, for the
reasons explained in a judgment delivered by the President of this Court,
this Court[FN3] held that the Court of Appeal had misdirected itself in
refusing leave to appeal and in exercise of its own discretion granted
special leave to appeal to the appellant.
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[FN3] L.O.P. Investments Investments Ltd v Demerara Bank Ltd [2009] CCJ 4 (AJ)
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[15] Before examining the technical arguments, it is necessary to outline
the terms of the debentures.
THE DEBENTURES ISSUED BY LOP TO THE BANK
[16] Following upon due notice of the debenture as advertised in the
official Gazette and a daily newspaper, a document headed "PARTICULARS OF A
MORTGAGE OR CHARGE CREATED BY A COMPANY REGISTERED IN GUYANA" and giving
particulars of a First Debenture securing $85 million over specific charged
property, was duly registered in the Deeds Registry as Debenture No 1593.
[17] Following upon due notice of the debenture as advertised in the
Official Gazette and a daily newspaper, a document with the same heading as
in [16] above and giving particulars of a Second Debenture securing $15
million over specific charged property, was duly registered in the Deeds
Registry as Debenture No 1693.
[18] Apart from the amounts of money secured, the property charged and the
relevant dates, the two Debentures were the same except for clause 6
commencing "The Company HEREBY ESTABLISHES THE FOLLOWING CHARGES". In
respect of the First Debenture clause 6 continued "(a) A FIXED FIRST CHARGE
RANKING AS A FIRST MORTGAGE on ...", while in respect of the Second
Debenture, clause 6 continued "(a) A FIXED SECOND CHARGE RANKING AS A SECOND
MORTGAGE on ..."
[19] After the Debenture deeds set out details as to the principal of the
loan and as to interest and the events of default making the principal and
interest become due and payable, clauses 9(e),10 and 11 of each deed
conferred extensive powers upon the Bank as follows:
"9. (e) at any time after the principal monies secured by this debenture
shall become immediately payable, [the Bank] may appoint by writing a
Receiver of the property hereby charged upon such terms ... as it shall
think fit and may from time to time remove any Receiver as appointed and
appoint another in his or her stead. A Receiver so appointed shall be the
agent of [LOP] and [LOP] shall be responsible for such Receiver's acts and
defaults, and for his or her remuneration, costs, charges and expenses to
the exclusion of any liability on the part of [the Bank]. Any reference to a
Receiver so appointed shall be deemed to include a reference to a Receiver
and Manager.
10. A Receiver so appointed shall be entitled to exercise all powers
conferred on a receiver by the Laws of Guyana and by way of addition to and
without limiting those powers such Receiver shall have power:
(a) to enter into and upon and take possession of and get in the property
hereby charged;
(b) to carry on or concur in carrying on the business of [LOP] (and for this
purpose to borrow money on the security of the property hereby charged in
priority to any debenture, mortgage, bill of sale or other form of
securities given in accordance with the terms of the Loan Agreement or
otherwise);
(c) to sell or concur in selling any of the property charged as aforesaid or
otherwise deal therewith on such terms in the interests of [the Bank] as the
Receiver shall think fit;
(d) to make any arrangement or compromise which the Receiver shall think
expedient in the interests of [the Bank]; and
(e) to do all such acts and things as may be considered to be incidental or
conducive to any of the matters and powers aforesaid and which the Receiver
may or can lawfully do as agent for [LOP].
11. For the purpose of the exercise of any of its powers under this
debenture and in particular the provisions of clauses 9, 10, and 11 hereof [LOP]
hereby irrevocably appoints [the Bank] and any Receiver appointed by [the
Bank] jointly and also severally the Attorney or Attorneys of [LOP] for [LOP]
and in its name and on its behalf to do all or any of the aforesaid acts and
deeds and to execute transfers of any of the said assets and otherwise
execute or perfect any transfer deed, assurance, agreement, instrument or
act which may be required or may be deemed proper for any of the purposes
aforesaid."
DEALING WITH THE SUBMISSIONS OF LOP'S COUNSEL
[20] At the heart of counsel's submissions was that the Civil Law of British
Guiana Ordinance, 1916, now replaced by the Civil Law of Guyana Act, Cap
6:01, in dealing with immovables and mortgages thereof expressly preserved
the traditional Roman- Dutch law. The vigour of this remains such that where
the substance, form and effect of a security instrument bears all the
hallmarks and characteristics of a mortgage, then, despite its appellation
as a debenture, the law and practice applicable to its creation, its
attachment to particular security, and its perfection must be the
Roman-Dutch law and practice for conventional mortgages.
[21] Roman-Dutch law coupled with the Deeds Registry Act (replacing the
Deeds Registry Ordinance) requires a mortgage to be advertised in the
Gazette and, like a transport (or conveyance) of land, be passed before the
Court, nowadays in the person of the Registrar of Deeds.[FN4] After
advertisement there is a period of thirteen days in which creditors who
object can file a notice of opposition to the proposed mortgage or transport,[FN5]
and then follow this up within a prescribed time[FN6] by issuing legal
proceedings. As Bernard C. has stated,[FN7] "A mortgage under this system is
one of 'voluntary and willing condemnation' and is in reality a judgment."
On default, the mortgagee goes to the Court to have foreclosure of the
mortgagor's interest in the mortgaged property and a sale carried out by
officers of the Court, who use the proceeds to discharge the debt due to the
mortgagee and pay any balance to subsequent mortgagees or the mortgagor.
After the Court orders foreclosure an application is made to the Registrar
for sale in execution[FN8] by auction after advertisement of the sale has
been published in the Gazette for three consecutive weeks[FN9]. Within
fourteen days after the first advertisement any person having a right of
opposition must enter opposition in a book kept for this purpose by the
Marshal in charge of sales in execution[FN10]. Within a further fourteen
days the opposer must bring an action to restrain the sale or the sale will
go ahead[FN11]. As a result there is no need for any subsequent
advertisement of the proposed transport to a purchaser[FN12].
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[FN4] Deeds Registry Act s 12 & 16
[FN5] Rules of the High Court (Deeds Registry) r 3
[FN6] Within ten days after the Registrar has certified the entry of
opposition: r 8 of above Rules
[FN7] Dhanraj v National Bank of Industry & Commerce Ltd Civ App No 70/2001,
6 Aug 2002, at p 4
[FN8] Rules of the High Court Order 36 rr 8 & 42
[FN9] Rules of the High Court Ord 36 r 51
[FN10] Ibid Ord 36 r 52
[FN11] Ibid Ord 36 rr 53, 54
[FN12] Deeds Registry Act s 28(1)
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[22] Thus, while the mortgagor has full absolute ownership of the mortgaged
property, he is subject to a personal money judgment so that, in the event
of non-payment by him, the mortgage debt can be repaid via recourse to the
mortgaged property by a judicial process. The registered mortgage, however,
unlike a right to specific performance of an immovable[FN13], ranks as a
"registered incumbrance" under the Deeds Registry Act ss 2, 23 (1)(b) and
40, so that a successor in title to the mortgagor will be bound by it as an
in rem right - if it has not been previously discharged by payment of the
money due.
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[FN13] On which see Ramdass v Jairam [2008] CCJ 6(AJ) at [33]
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[23] From 1st January 1917, the general rule under s 3(a) and (b) of the
Civil Law of Guyana Act is that Roman-Dutch law ceased to apply to Guyana,
so that the common law of Guyana became the common law of England as at that
date, but including the doctrines of equity as then administered or at any
time thereafter administered by the courts of justice in England.
[24] Exceptionally, under s 3(c) "the English common law of real property
shall not apply to immovable property in Guyana" so that under s 3 (d) there
shall, so far as possible, be one common law for both immovable and movable
property, namely the English common law applicable to personal property.
[25] There were however the following provisos:
"(i) immovable property may be held as heretofore in full ownership which
shall be the only ownership of immovable property recognized by the common
law ...;
(ii) the law and practice relating to conventional mortgages or hypothecs of
movable or immovable property, and to easements, profits a prendre, or real
servitudes, and the right of opposition in the case of both transports and
mortgages, shall be the law and practice now administered in those matters
by the Supreme Court."
[26] LOP's counsel assumed that this last clause of proviso (ii) preserved
the pure Guyanese Roman-Dutch law and practice relating to conventional
mortgages or hypothecs and opposition to mortgages, but the Bank's counsel
pointed out that one had to consider "the law and practice administered in
those matters by the Supreme Court" on 1st January 1917, taking account of
the Companies (Consolidation) Ordinance, Chapter 178, No XVII of 1913. On
examining this Ordinance, however, it appears that a company, instead of
securing a debenture by a conventional mortgage or hypothec according to the
law and practice administered in the Supreme Court, could secure a debenture
by duly registering it after notice of the intended registration had been
published in the Gazette and one local newspaper not less than seven days
previous to the registration.
[27] The 1913 Ordinance, based closely upon the English Companies
(Consolidation) Act 1908, in sections 91 to 104 sets out a special regime
for secured borrowings of companies that extend to debentures secured by
mortgages or charges, though "the holding of debentures entitling the holder
to a charge on land shall not be deemed to be an interest in land."[FN14]
Where a debenture is not secured by a separate conventional mortgage or
hypothec, a mortgage or charge securing the debenture must be registered or
the security becomes void against creditors and the liquidator. Section 91
(1) requires due registration of "every mortgage or charge created after 1st
January 1914 by a company registered in the colony, and being either
(a) a debenture not secured by any separate mortgage or charge; or
(b) a mortgage or charge for the purpose of securing any issue of
debentures; [or other mortgages or charges specified in (c), (d), (e), (f)
(g)]"
while proviso (e) provides that
"a debenture not secured by a separate mortgage or charge but which has been
duly registered after a notice of the intended registration has been
published in the Gazette and one local newspaper not less than seven days
previous to the registration, shall be valid and shall rank as a mortgage
notwithstanding that it has not been secured by any separate mortgage or
charge."
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[FN14] See s 91(1) proviso (d)
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[28] It is clear that because s 91 does not apply to require registration of
unsecured or "naked" debentures eg debenture loan stock[FN15], and because
proviso (e) states that the debenture "shall rank as a mortgage," (which can
only be for purposes of priority), the proviso needs to be construed as if
its opening part contained the following italicized words
"a debenture not secured by a separate mortgage or charge but which is
otherwise secured and has been duly registered ..."
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[FN15] See s 90
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[29] Noticeably, the English 1908 Act did not contain the equivalent of s
91(1)(a) and proviso (e) that particularly deal with the Roman-Dutch
Guyanese situation. Under the adapted 1913 Ordinance, in Guyana a debenture
could be secured in one of two ways. As reflected in the distinction between
s 91(1) (a) and (b), it could be secured under traditional Guyanese
Roman-Dutch law by a separate mortgage advertised in the Gazette and then
passed and executed before the Court as a money judgment, so that on a
default by the mortgagor a judicial sale process would then be invoked for
the due debt to be repaid. Alternatively, as s 91(1)(a) and proviso (e)
indicate, the debenture could be secured by it containing provisions
charging identified property and by advertising the intended registration of
the debenture in the Gazette and a local newspaper not less than seven days
before going ahead with the registration under s 91.
[30] These two methods of protection continue to be available under the
current Companies Act 1991. Section 234 of this Act reproduces the wording
of proviso (e) to s 91(1) of the 1913 Ordinance in providing
"A debenture not secured by a separate mortgage or charge but which has been
duly registered after a notice of the intended registration has been
published in the Gazette and one local newspaper not less than seven days
previous to the registration, shall be valid and shall rank as a mortgage
notwithstanding that it has not been secured by any separate mortgage or
charge."
[31] If, however, default is made under a debenture not secured by a
separate mortgage, how is it going to be possible to have the security
realized? Section 92(1) of the 1913 Ordinance envisaged that this would be
possible, as in England[FN16], either by a court appointment of a receiver
or manager or by a private appointment under powers contained in the
debenture since it catered for both situations by providing
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[FN16] See Companies (Consolidation) Act 1908 ss 94 and 95
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"If anyone obtains an order for the appointment of a receiver or manager of
the property of a company or appoints that receiver or manager under any
powers contained in any instrument he shall within seven days from the date
of the order or of the appointment under the powers contained in the
instrument give notice of the fact to the registrar ."
[32] Section 93 (1) then provides safeguards by requiring "every receiver or
manager of the property of a company who has been appointed under the powers
contained in any instrument and has taken possession, shall, once in every
half-year while he remains in possession, and also on ceasing to act as
receiver or manager, file with the registrar an abstract in the prescribed
form of his receipts and payments ..."
[33] There is also the further safeguard that if the receiver sells the
charged land, the intended transport of the land will need to be advertised
in the Gazette so as to allow a notice of opposition to be filed. In
practice, so counsel informs us, it has to be admitted that such safeguard
is of very limited assistance due to problems in timely publication and
distribution of the Gazette. By way of contrast, publication in a local
daily newspaper of an intended registration of a debenture better serves its
intended purpose and will afford an objector the opportunity to take
interlocutory legal measures if appropriate. The key feature, however, in
the case of registered debentures is that registration enables anyone before
lending money or affording credit to a company to check how burdened the
company is with secured debts. There is public access for a prescribed fee
to the register of charges kept by the Registrar[FN17], while the debtor
company must keep copies of debentures for inspection by creditors and
shareholders free of charge[FN18].
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[FN17] Section 91(9), now see s 471 of the 1991 Act
[FN18] Sections 98 & 99, now see s 247 of the 1991 Act
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[34] Provisions equivalent to sections 92(1) and 93(1) of the 1913 Ordinance
are found in s 248 of the 1991 Act so that where "any person ... appoints a
receiver of any of the property of a company", notice of the appointment and
of cesser of the receivership must be given to the Registrar. There is
however, a new Division C ("Receivers and Receiver- Managers") in Part III
of the 1991 Act which lays down detailed provisions as to the powers and
duties of receivers in sections 272 to 284 for the benefit of debenture
holders and for the protection of the debtor. Pervading these provisions is
extensive recognition that receivers or receiver-managers can be appointed
privately under the terms of a debenture, whereupon they have broad powers
to realise the security interests of the debenture holder(s) and, in the
case of receiver-managers, broad powers concerning the carrying on of the
debtor's business, though also being under significant duties: in
particular, see ss 273, 274, 277, 278, 280, 281. The underlying philosophy
appears to be that, in furtherance of commercial financial interests and
practices, companies can enter into debentures conferring on the lender
whatever powers they consider appropriate.
[35] This philosophy is also apparent in ss 250-271 of the new Division B
("Trust Deeds and Debentures") of the 1991 Act, which have no corresponding
provisions in the 1913 Ordinance and which deal exclusively with the
extensive modern phenomenon of companies issuing a class of debentures to
the public pursuant to a trust deed (see ss 250¬251); indeed, public
companies are required by s 265 to execute a trust deed to cover any issue
of debentures. Section 271(5) expressly recognises that the remedies
automatically conferred by the earlier subsections are in addition to and
not in substitution for any other powers and remedies conferred on the
trustee under the trust deed.
[36] LOP, a private company, entered into private debentures with the Bank
and not by way of trust deeds and so clauses 9 to 10 expressly confer
extensive powers of disposition and management on the appointed Receiver in
addition to expressly incorporating the powers conferred on a receiver by
the laws of Guyana (eg s 273 in Division C of the 1991 Act), while clause 11
supports these powers of disposition with an irrevocable power of attorney,
thereby protecting a purchaser under s 6 of the Powers of Attorney Act, Cap
5:08. There is thus no doubt that the Receiver can transfer good title to a
purchaser by virtue of this irrevocable power of attorney. Even without such
power the Receiver can transfer good title pursuant to clauses 9 and 10 of
the debenture deeds and Division C of the 1991 Act, which also entitle him
to carry on the business of LOP to protect the Bank's security interest.
CONCLUSION ON POWERS OF PRIVATELY APPOINTED RECEIVERS
[37] For these reasons we endorse the view of the Court of Appeal and Moore
J that the Receiver, Mr Ward and then Mr Gaskin, was acting within his
powers when improperly obstructed by LOP. It is, however, noteworthy that
the Roman-Dutch law and practice relating to the creation and enforcement of
mortgages and hypothecs can only be circumvented by a security transaction
on which validity is conferred by the Companies Act 1991. Thus, if an
irrevocable power of attorney were to be inserted into a conventional
mortgage passed and executed before the Registrar, then in the event of a
default by the mortgagor, this could not be exercised to circumvent the
integral procedure requiring court proceedings for foreclosure of the
mortgagor's interest in the mortgaged land and for organizing sale of the
land.[FN19] The election for the judicial transport procedure for a sale of
the mortgaged land precludes any attempt to rely upon a private procedure
for sale of the land.
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[FN19] This is the position in South Africa where the law is similar to that
in Guyana: see Wille's Principles of South African Law 9th ed (2007) at p
636
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THE UNDERLYING CONDITIONS FOR A VALID SALE BY A RECEIVER
[38] The LOP First and Second Debentures, given under the seal of LOP in the
presence of two subscribing witnesses and a Notary Public, satisfied the
requirements for a valid security interest by way of a charge concerning
specific property when perfected by registration. A charge in respect of
particular property transfers no ownership or possessory interest in that
property, so that it "rests in contract: there is therefore no distinction
between a charge and an agreement for a charge" as Sir Roy Goode has
stressed[FN20]. Each debenture was a formal agreement by LOP for security to
be given to the Bank, adequately identified the particular property of LOP
that was to be security for the specified loaned money that LOP was obliged
to repay with interest, and was perfected by registration after
advertisement as required by the Companies Act. It is not disputed that due
notice was given under the Debentures before appointment of the Receiver.
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[FN20] Legal Problems of Credit and Security 3rd ed 2003, Sweet & Maxwell
para 2-04, page 61
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OBSERVATIONS ON MORTGAGES, CHARGES AND HYPOTHECS OF IMMOVABLES
[39] So far as concerns land within the Deeds Registry Act, "the law and
practice relating to
conventional mortgages or hypothecs" is that administered in 1917 by the
Supreme Court of Guyana[FN21] except for secured debentures of companies as
already explained. "Conventional" hypothecs or mortgages are simply those
created by express agreement.
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[FN21] S 3(d) proviso (ii) Civil Law Act
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[40] Conventional mortgages and hypothecs, like charges, confer no ownership
or possessory rights in land[FN22]. A Guyanese mortgage is totally different
from the traditional common law mortgage that confers ownership rights and,
unless ousted by the mortgage deed, also possessory rights. In Guyana there
cannot be equitable charges[FN23], only legal or statutory charges. The
Companies Ordinance 1913 and the Companies Act 1991 provide regimes for
companies to create charges to secure their borrowings, the charges being
perfected after due registration. Companies are assumed to be fully capable
of looking after their own interests, while in the interests of the ready
availability of finance for company borrowers, lenders to them need to have
efficient remedies to enforce their security. The Companies Act in Part III
therefore recognizes and endorses the commercial practices of lenders having
express powers and remedies for them to realize their security without
time-taking and expensive court proceedings. Hence a duly appointed receiver
can be empowered to sell the charged land and transfer good title to a
purchaser with or without the benefit of a statutory irrevocable power of
attorney, though marketability of the land is improved if a prospective
purchaser will be able to rely on the protection of s 6 of the Powers of
Attorney Act.
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[FN22] See FHW Ramsahoye, Land Law of British Guiana (1966) pp 237-240
[FN23] Re Sampson ex p Official Receiver (1922) LRBG 133, Ramdass v Jairam
[2008]CCJ 6 (AJ)
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[41] Whenever an instrument is an agreement whereby a landowner agrees with
a creditor that particular land that he owns will be available to secure a
loan from the creditor, this amounts to a contract for a "mortgage" or
"hypothec" or "charge", the particular terminology being immaterial. If
nothing more is done with this contract, if the debtor defaults, the
creditor can invoke the court's aid for a money judgment determining the
precise extent of the debtor's secured financial obligation[FN24] and then
for orders foreclosing the debtor's ownership of the mortgaged, hypothecated
or charged land and for selling the land to enable the creditor to be duly
reimbursed. If, however, the creditor passes and executes the mortgage,
hypothec or charge before the Registrar so as to obtain a money judgment and
a real right by registration in the Deeds Registry, he can later rely upon
the priority of this in the event of the borrower's default, so as to have
the court foreclose the borrower's ownership and arrange for an auction sale
of the land to enable the mortgagee to be duly reimbursed.
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[FN24] Under Deeds Registry Act s 35 the security will not extend to future
advances unless the instrument expressly provides for this and places a
maximum limit upon the amount of such advances
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DISPOSITION OF THE APPEAL
[42] The appeal is dismissed and the order of the Court of Appeal is
affirmed. The appellant, LOP, is to pay the respondent's costs of the appeal
to this Court, to be taxed unless agreed. |
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