Jamaican Redevelopment Foundation Inc v The Real Estate Board

A statutory scheme regulating prepayment land sales must be construed as a whole. A contract made contrary to the vendor prohibition in the Real Estate (Dealers & Developers) Act 1987, section 26(1), is not automatically void. Under section 26(2), it remains binding on both parties unless the purchaser withdraws within a reasonable time. Such a contract can in principle support a valid regulatory charge, subject to fraud and statutory exceptions. The priority wording in section 31(5) does not demote a prior mortgage which section 26(1)(b) required the vendor to discharge before contracting. That mortgage retains its ordinary registered priority. Literal meaning cannot be applied in isolation where it conflicts with the Act’s structure and another express provision.

The mortgagor held development land subject to the appellant’s registered mortgages, which were not construction-finance mortgages. It entered prepayment contracts without first discharging them and later created a charge in favour of the respondent under section 31 of the Real Estate (Dealers & Developers) Act 1987. The appellant challenged the charge and its priority after the Registrar refused to register a sale transfer without the respondent’s consent.

Mangatal J held that the contracts were voidable, not void, that the charge was valid, and that the appellant’s mortgage had priority. The Court of Appeal of Jamaica unanimously reversed the decision on priority. The Board considered whether the contracts were void, whether they could support a valid charge, and whether section 31(5) gave the later charge priority.

Appeal allowed. The Board advised that the order of Mangatal J should be restored, subject to agreement or submissions on the form of order and costs.

1. Effect of contravening contracts. Although section 26(1) prohibits a vendor from entering into a prepayment contract unless the statutory conditions are satisfied, section 26(2) expressly contemplates that the purchaser may withdraw from the contract within a reasonable time and recover money paid. That provision assumes that the contract remains binding unless the purchaser exercises the statutory right. It could not be binding only on the vendor. The contracts were therefore not void ab initio.
2. Validity of the charge. Subject to fraud and other statutory exceptions, section 70 of the Registration of Titles Act 1889 establishes the ordinary priority of registered mortgages and charges. Since the prepayment contracts remained valid unless avoided by the purchasers, they could in principle be subject to a valid charge in favour of the Real Estate Board.
3. Priority. Section 31(5) had to be construed in the context of the statutory scheme, particularly section 26(1)(b). The reference to “all other mortgages or charges” did not include mortgages which section 26(1)(b) required to be discharged before a prepayment contract could be made. The proviso preserved pari passu treatment for authorised financial institutions whose advances financed construction. The appellant’s mortgages did not fall within that proviso and retained priority under section 70.
4. Statutory context. Section 33(c)(ii) reinforced this construction by assuming that the Board’s charge would not compete with an ordinary prior mortgage. The Board respectfully disagreed with the Court of Appeal’s application of the approach in Baker v The Queen [1975] AC 774, because the literal construction adopted below was inconsistent with the Act’s scheme and with section 33(c)(ii).

• Privy Council—Allowed the appeal and restored the order of Mangatal J, with the form of order and costs to be agreed or determined. [2014] UKPC 28
• Court of Appeal of Jamaica—Unanimously allowed the respondent’s appeal and declared that its charge ranked in priority to the appellant’s mortgage on 20 July 2012.
• Supreme Court of Jamaica—Mangatal J held on 12 May 2011 that the contracts were voidable rather than void, that the charge was valid, and that the appellant’s mortgage had priority.