Garet O Finlayson and another v Caterpillar Financial Services Corporation (The Bahamas)

A mortgagee exercising a power of sale must take reasonable precautions to obtain the best price reasonably obtainable at the time of sale. In an ordinary sale, the mortgagor bears the burden of proving breach; the burden shifts where the mortgagee’s conflict of duty and interest makes that necessary. An appellate court will not reopen concurrent factual findings on a second appeal absent exceptional circumstances involving a fundamental departure from judicial procedure. A revenue statute has no extra-territorial effect. Delay in delivering judgment does not justify intervention where no error attributable to the delay is identified.

The appellants guaranteed a loan made to Kurc Limited for construction of a yacht secured by the vessel. Following default, the respondent took possession and sold the yacht, then sued the appellants for the remaining balance under their guarantees.

Hanna-Adderley J found that the respondent had taken reasonable care to obtain the best price reasonably obtainable. The Court of Appeal of the Commonwealth of The Bahamas dismissed the appeal. Before the Privy Council, the appellants challenged the burden of proof, relied on section 18 of the Stamp Act 1925, and alleged prejudice from delay in delivering judgment. The central issues were whether the concurrent factual findings could be reopened, whether the agreements required stamping, and whether the delay undermined the judgment.

Lord Stephens gave the judgment of the Board. The appeal was dismissed, and the Board advised His Majesty accordingly.

1. Mortgagee’s duty and burden of proof. A mortgagee exercising a power of sale must take reasonable precautions to obtain the best price reasonably obtainable at the time of sale. The burden of proving breach ordinarily rests on the mortgagor. The burden rested on the mortgagee in Tse Kwong Lam v Wong Chit Sen [1983] 1 WLR 1349 because the sale there was to a company in which the mortgagee had an interest, creating a conflict of duty and interest. That exceptional situation did not arise here.
2. Concurrent findings. The Board’s settled practice is not to entertain a second appeal challenging concurrent findings of fact, including an appeal as of right, save in exceptional circumstances. Apart from errors of law, the exception requires such a departure from rules permeating judicial procedure that what occurred cannot fairly be described as judicial procedure. The appellants could not demonstrate that threshold. The documentary evidence supported the lower courts’ findings.
3. The Board also noted, relying on Aodhcon LLP v Bridgeco Ltd [2014] EWHC 535 (Ch) at para 151(v), that a mortgagee was not under a duty to improve the property by spending a further $500,000 on repairs before sale.
4. Stamping. The Stamp Act 1925 was a revenue statute without extra-territorial effect. Section 18 therefore did not require the loan agreement or guarantees, made outside The Bahamas and governed by foreign law, to be stamped before they could be pleaded or admitted in evidence.
5. Delay. The 14-month delay was inexcusable, but it did not affect the quality or reliability of the judgment. The appellants identified no error probably or even possibly attributable to the delay, and the case turned principally on clear documentary evidence rather than recollection or demeanour.

1. Privy Council. The appeal as of right under article 105 of the Constitution of the Commonwealth of The Bahamas and section 23 of the Court of Appeal Act 1964 was dismissed.
2. Court of Appeal of the Commonwealth of The Bahamas. The appellants’ appeal from the trial judgment was dismissed.
3. Trial court. Hanna-Adderley J found for the respondent and granted liberty to enter judgment against the appellants on their guarantees.