Leading cardiologist loses appeal over disputed loan agreement

Leading cardiologist loses appeal over disputed loan agreement

NASSAU, BAHAMAS – The appellate court has ordered a well-known cardiologist to pay Royal Fidelity Merchant Bank & Trust just under $300,000 after losing his fraudulent/negligent misrepresentation appeal over a disputed Margin Loan Facility Agreement.

The appeal centered around whether Royal Fidelity fraudulently or negligently induced the appellant Dr Conville Brown to enter the Margin Loan agreement, and whether Brown was required to pay the default interest rate pursuant to that agreement.

A lower court judge had ruled Brown pay Royal Fidelity Marchant Bank & Trust the sum of $86,112.80 together with interest at the rate of 14.25 percent until paid and also ordered that the bank its costs, to be taxed if not agreed.

Brown appealed the decision.

The appellate court noted the appeal was filed since 2010 “for reasons that are unclear, save that it seems that attempts were made to resolve the matter between the parties, the matter was not heard by us until 31 October 2019”.

In February 2000, Brown had entered into an agreement to borrow money from the investment bank nearly two decades ago.

Brown held a brokerage account with the bank containing equities valued at $329,751.00, and the bank agreed to make a Margin Loan Facility to the defendant for up to 50 percent of that amount, reportedly B$164,875.50.

A term of the agreement was that if the loan exceeded 50 percent of the value of the securities or if the market fluctuated reducing the value of the holdings, a margin call may be issued.

In such a case, Brown would have been required to immediately pay the excess or increase the value of the securities being held by the respondent within 14 days.

If the excess was not paid within that period, the Royal Fidelity Merchant Bank & Trust was entitled to sell the securities to cover the payment.

The interest rate was to be 4 percent plus prime which, at the time, was 6 percent. The agreement provided that in the event of default the interest rate would be 8.25 percent plus prime.

At the date of the loan agreement, it was noted that Bahamian economy was booming and the securities were tradable at the stated value.

However, after  September 11, 2001 terrorist attack  on New York City the securities market in The Bahamas declined significantly and so did the value of the equities in the brokerage account.

By letter dated October 4 2002, Royal Fidelity informed Brown that the securities had so declined in value that he was only eligible for a facility of $98,111.25 by which time he had an overdraft of $179,773.04.

The bank also informed him that either he had to increase the amount of securities in the brokerage account or pay the sum of B$81,661.79 to bring the loan down to 50 percent of the security value.

While Brown, the Bahamas Heart Center principal paid some of the loan due he refused to pay any further sum on the ground that the bank deceived him into entering into the agreement by representing that it was a market maker and would so manage his securities in his brokerage account that he would never have to provide any additional funds to secure his loan facility.

Royal Fidelity however denied this.

The appellate court noted Brown’s primary complaint was that he was told that he would not be risking any financial exposure beyond the contents of his portfolio.

The appellate court noted: “As submitted by Mr Parker the assertion by counsel for the appellant that “the evidence of the appellant was that the representations would have been made by Anwar Sunderji and Mike Anderson” is not supported by the transcript of the evidence at trial or by the pleadings.

Nowhere in his evidence or his pleadings did the appellant state with particularity who it is he claimed made the suggestions or representations to him.

All that this evidence shows is that the idea for the agreement was born out of these conversations but the details were documented between the appellant and Mr  (David) Slatter,”- a Royal Fidelity employee.

The court stated: “It is clear that the misrepresentations alleged by the appellant were said to be oral in nature. The documents evidencing the agreement contained no representation relied on by the appellant and there was no suggestion that Mr Slatter who conducted the interview and the formation of the agreement made any representations. In these circumstances, it was a matter for the judge to determine whether he believed that the representations were made. The judge did not find that a misrepresentation was made…”

Justice Evans stated: “Having reviewed the judge’s reasoning for his findings together with the pleadings and the evidence given at trial I cannot say that he was plainly wrong.

“The appellant’s pleadings were deficient in setting out the proper particulars of his claim. There was in fact as pointed out by Mr Parker no pleaded claim for negligent misrepresentation notwithstanding submissions being made relative thereto.

“The evidence given by the appellant did not meet the standard of proving the claims, which he asserted and the onus was on him to prove his claims. He had to prove that he was induced to enter the Agreement by misrepresentations which were made fraudulently.

Evans continhued: “As found by the judge there was insufficient material before the Court to establish the wording of the representations nor the state of mind of the persons alleged to have made those representations.

“At best, the appellant was only able to provide evidence of his understanding of the conversations and not what was actually said to him.”

Affirming Justice Neville Adderley’s decision, the appellate court has ruled that Dr Brown  pay Royal Fidelity the sum of $86,112.80 with interest thereon at the rate of 14.25 percent  (12,271) with effect from  October 4th 2002 when the demand was made, until paid.

The respondent should also be awarded its costs in the court below, as well as of the appeal, to be taxed if not agreed.

Royal Fidelity was represented by Khalil Parker and Roberta Quant.