By NEIL HARTNELL
Tribune Business Editor
Royal Bank of Canada (RBC) has been blocked from pursuing damages twice over the same delinquent loan that a Bahamian jitney operator first defaulted on more than 12 years ago.
The Canadian-owned bank, almost 11 years after securing a $600,000-plus default judgment against Arthur Deal and Deal’s Bus Service, initiated fresh litigation against the duo again seeking “judgment for the sums outstanding under” the original mortgage.
The previous action, and default judgment, was not disclosed to the Supreme Court by RBC and its attorneys when they launched their new claim on June 29, 2022. That sought declarations and Orders for a receiver/manager to be appointed over the mortgaged property upon which Deal’s loan was secured, while giving the bank the power to take possession and sell it to satisfy the alleged outstanding loan sum.
However, Justice Carla Card-Stubbs, in a November 16, 2023, verdict ruled that the specific demand for “judgment for the sums outstanding under the said mortgage” must be struck from RBC’s 2022 claim given that it was “an abuse of process” as the bank already has such a verdict in its favour.
To do otherwise, she found, would be “untenable and inequitable” because it would result in a situation where delinquent borrowers could ultimately pay off the outstanding sums due under a loan only to be greeted by a lender’s judgment for payment of arrears at the end of the process. This, the judge found, would result in judgment holders obtaining what was due to them two or even three times’ over.
RBC, in its initial action, obtained a default judgment of $609,932 plus interest against Deal’s Bus Service on November 7, 2011. It also secured a $598,024 judgment plus interest against Mr Deal, who gad guaranteed the loan on August 7, 2009. Credit was initially extended to the company on January 5, 1996.
However, almost 12 years passed before RBC launched its latest action. Mr Deal and the company demanded it be struck out on the basis it was “showing no cause of action, and as being frivolous, vexatious and an abuse of process” because the mortgage in the original action had been “merged into the judgment” via the 2011 ruling. They also claimed it was statute-barred under the Limitation Act.
“This suit (the 2011 action) was never disclosed in any of the pleadings or affidavits filed by the claimant [RBC- in the 2022 action. However, its existence was not contested and the evidence of the suit as exhibited in the defendants’ affidavit was relied on by the claimant in its submissions,” Justice Card-Stubbs noted.
Mr Deal and the company argued that the “merger into the judgment” in 2011 meant RBC was barred from pursuing any further claim for monetary damages. RBC’s attorney, Audley Hanna, argued that the merger was “inapplicable” because the original 2011 action was a ‘money lending’ action based on the Supreme Court’s Order 73, while the 2022 variety derived from Order 77 and is now seeking a receiver and possession.
“In this case, the claimant [RBC] has been at pains to indicate that the reliefs sought in the 2022 action include vacant possession and a declaration of the right to exercise the power of sale. I find that the claimant is not estopped from pursuing these reliefs. These reliefs were not sought in the 2011 action nor pronounced upon. The claimant is entitled to pursue these reliefs in the 2022 action,” the judge ruled.
“[But] the claimant is estopped, as a result of the doctrine of merger, from pursuing any action for monetary damages. That cause of action was litigated upon, and that relief granted, in the earlier proceedings. the Claimant cannot by way of this 2022 action re-assert that same claim in these subsequent proceedings.
“Any action to recover such damages must be by way of enforcing the 2011 judgment which the claimant already holds,” Justice Card-Stubbs added. “I also find that any payment made by the defendants subsequent to the 2011 judgment are payments that must be applied to that judgment and accounted for as such.
“On the entering of judgment, the claimant substituted its rights to collect money on the mortgage with the right to collect under the judgment. Any payment made subsequent to the entry of judgment must apply to extinguishing that judgment.”
Setting out the consequences if the situation were otherwise, Justice Card-Stubbs said: “If one were to accept the vlaimant’s argument, then the defendants could very well pay off the balance of the mortgage by continuing their regular payments to the claimant and subsequently be met with enforcement of the judgment for the payment of the entirety of arrears at the 2011 date.
“By the claimant’s logic, a mortgagee can choose to sue for the entire balance in a first suit as due and owing on that date, and the mortgagee could receive judgment for sums outstanding together with contractual interest on the mortgage arrears and statutory interest on the judgment debt and the mortgagee could enforce the judgment while continuing to accept payments on the mortgage.
“What is more, the mortgagee would be able to bring a second suit and obtain a second judgment purportedly for the balance owing on the said mortgage at the date of the second suit, while holding a judgment for the amount owed on the said mortgage in a first suit, all the while collecting payments on the mortgage that were not being applied to extinguish the judgment debt in the previous suit,” she added.
“If one were to accept the claimant’s proposition, this state of affairs could carry on ad infinitum. This is untenable and inequitable. The mortgagee is entitled to receipt of the sums owing but not twice or thrice.” Justice Card-Stubbs thus agreed that RBC is “estopped” from pursuing any further monetary damages against Deal’s Bus Service.
However, she agreed that RBC can seek reliefs that were not addressed in the 2022 action, such as vacant possession and the receiver’s appointment. And Justice Card-Stubbs found the Canadian-owned bank’s 2022 litigation has “some prospect of success”.
“I decline to make a finding as to whether the claimant’s action is statute-barred since the court’s finding is that the claimant’s pleadings do not found a claim on the judgment in the 2011 action as asserted by the defendant,” she ruled.
“I find that the claimant is not barred from proceeding in this action (the 2022 action) to secure relief not previously sought or granted in the 2011 action. The court will exercise its power to strike out that part of the pleading that is an abuse of the process of this court.”