Nelson and others v First Caribbean International Bank (Barbados) Limited

A hypothec secures a debt but does not replace the debtor’s personal obligation. A creditor may therefore pursue a personal action for repayment while leaving the security unrealised. Statutory hypothecary remedies concern enforcement or preservation of the security and do not exhaust the remedies available for enforcing the underlying debt. Where periodic loan payments are missed, commencement of proceedings may place the debtor in default and permit recovery of the sums due as damages. Prescription applies according to the character and maturity of the relevant claim. Interest claims may prescribe separately from principal. New prescription and mitigation arguments will generally not be entertained on final appeal where they were not properly raised and evidenced below.

The appellants borrowed two sums from the respondent bank, secured by a registered hypothec over two properties. A landslip later made the principal property uninhabitable and substantially reduced its value. The borrowers stopped making payments, purported to surrender the properties in satisfaction of the debt, and resisted the bank’s personal claim for repayment.

The High Court found the borrowers liable. The Court of Appeal of St Lucia held that the bank could recover personally, but reduced recoverable interest to five years under article 2129 of the Civil Code. Before the Privy Council, the borrowers challenged personal liability, the availability of a personal action, recovery of the full loan balances, the adequacy of the Court of Appeal’s hearing and reasons, prescription, and mitigation.

1. Appeal dismissed. The facility letter and the personal undertakings in the hypothecary obligation were to be read together. They imposed personal obligations on the borrowers to repay the loans. The larger loan was additionally payable on demand under clause 3 of the hypothecary obligation (para [11]).
2. A hypothec is a real right accessory to the debt. The personal obligations and the security were distinct. The personal obligations could be enforced by a personal action, and the bank was entitled to choose that remedy without first realising the security. Article 1942 concerned enforcement or preservation of the security and did not exhaust the remedies for enforcing the debt. Article 1946 described the object of the hypothecary action as surrender of the immovable for sale. Because the bank had not pursued that action, the borrowers had no right to surrender the properties under article 1960. The landslip and purported surrender did not affect the bank’s personal action (paras [12]–[15]).
3. The borrowers’ failure to make periodic payments constituted default. Under articles 999 and 1001, commencement of the proceedings was sufficient to place them in default and enabled the bank to claim the full sums outstanding as damages for breach of contract (para [16]).
4. The Court of Appeal had fairly addressed the grounds argued before it. Interest payments due before 14 March 2002 were prescribed under article 2111. The smaller loan was a single commercial debt maturing on 30 June 2001; its six-year prescription period under article 2121(4) therefore expired on 30 June 2007, after proceedings had been commenced (paras [17]–[18]).
5. The wider prescription argument concerning the larger loan could not be raised for the first time before the Board. The Board observed, without deciding, that article 2121(4) might not govern damages for contractual default and that article 2103’s thirty-year period might apply. Article 917A imported English common law on obligations, not English statutory limitation provisions (paras [19]–[20]).
6. The proposed negligence and mitigation defence concerning insurance was unsupported by evidence, had not been raised in the Court of Appeal, and involved unresolved causation issues. It could not be advanced at that stage (para [21]).

• Privy Council: The appeal was dismissed. The Board advised Her Majesty accordingly, affirming the bank’s entitlement to pursue personal repayment, subject to the limitation of interest claims.
• Court of Appeal of St Lucia: In an oral decision dated 26 June 2012, the court held that the bank could recover the debts by personal action but reduced recoverable interest to five years under article 2129 of the Civil Code.
• High Court: Belle J’s judgment dated 14 July 2011 found the borrowers liable for EC$358,723.09 plus costs.