Common use of Prejudice Clause in Contracts

Prejudice. From my review of the evidence, it is only the Claimant who has asserted that it has a specific interest in the subject property separate and apart from a pecuniary interest. All the other parties’ interest lies principally in the financial value that the property holds. The 1st Defendant’s aim is to transfer it so he can satisfy his indebtedness. The 2nd and 3rd Defendants have not stated that they have any interest in the property. The 4th and 6th Defendants wish to acquire it in lieu of the debt owed to the 4th Defendants. If the property were to be transferred to the 4th and 6th Defendants, any opportunity the Claimant would have to exercise its rights under the ROFR would be thwarted. The 4th and 5th Defendant have already demonstrated that they intend to make some changes to the property. To allow them to remain in possession would afford them the opportunity to make additional changes which may also inure to the prejudice of the Claimant if the Claimant were to succeed at trial. In considering whether any prejudice would be occasioned to the 4th to 6th Defendants, I bear in mind that if the injunction were granted this would restrict the 4th to 6th Defendants from continuing with the transfer of the subject property during the life of the injunction and the delay could mean that the debt will continue to escalate and that the 1st Defendant may have a greater debt to settle. Additionally, considering the indication by ▇▇. ▇▇▇▇ that they took up possession of the property in December 2022 they would now be required to give up possession. I do note however, that there is no indication from any of the Defendants that there is any intention to use the property for residential purposes. From all indications, the property was being used as a villa housing guests, which is indicative of a commercial venture which strengthens the Claimant’s position that the 4th to 6th Defendants’ interest is primarily financial. In all these circumstances, any prejudice occasioned to them could therefore be remedied by an award of damages. However, were the inunction not granted, the Claimant would lose forever a valued family heirloom which could not be remedied by an award of damages. This outweighs any prejudice the Defendants may suffer in having to await the determination of the matter to recover any financial loss. It is therefore my opinion that the Claimant is the only party who will face irremediable prejudice if the injunction were not granted. Based on the available evidence, the 1st Defendant did not abide by the terms of the ROFR and so it appears uncontroversial that the ROFR has been breached by the 1st Defendant. Such a right operates firstly as a contractual right and although it is no more than a pre-emptive right, it imposes an obligation on the owner if he chooses to sell or first offer it to the other party and it prohibits him from disposing of the property without taking this first step. The decision of the City of Halifax, although not binding, provides guidance. It enunciates the principle that “a right of pre-emption will be specifically enforced, and its violation restrained by injunction”. The Canadian Court accorded recognition to the creation of an equitable interest in the property arising as a consequence of the agreement granting the right of first refusal. Not only would the Claimant have a contractual right which they are entitled to seek to enforce, but they could also have acquired an equitable interest by virtue of the right of ROFR. This case lends credence to the Claimant’s view that they may be entitled to Specific Performance of the contract if successful. On the other hand, the 4th to 6th Defendants may also have firstly the right to an equitable mortgage and consequently and by virtue of their alleged assumption of possession of the property an equitable right to possession. In my research on the point, I located the authority of ▇▇▇▇▇ ▇▇▇▇▇▇ v Brilliant Investments Limited and Ors [2022] JMSC Civ 67, ▇▇▇▇▇▇▇▇ J at paragraph 20 opined that: From the authority cited above it would be that the 4th to 6th Defendant could have obtained an equitable mortgage and in the normal scheme of things would have all right to proceed with the transfer of the subject property from the 1st Defendant to the 4th to 6th Defendants. In addition to that, by virtue of the Settlement Agreement and their taking up possession of the property and assertion of the rights of ownership, they may have secured for themselves and equitable interest in the property. So therefore, both parties would have a claim in equity. In considering the strength of the parties’ case, the question as to the competing equities would arise. On behalf of the 4th to 6th Defendants the authority of Lookahead Investors Limited was relied on. ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ ▇ as she then was faced with the issue of determining whether a pre-emption agreement is invalid and or illegal and therefore void and unenforceable. The judgment is instructive. She reviewed the often cited maxim that where there is a competition between two equities the first in time prevails, but not without highlighting the criticism of the rule as seen in ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ v ▇▇▇▇▇▇▇ ▇▇▇▇ et al 61 ER. 646 (1853) 2 Dewry 73 at paragraph 26 of the judgment. She highlighted that preference was given to the rule that “As between persons having only equitable interests, if their equities are in all respects equal, priority of time gives the better equity; or, qui prior est tempore potior est jure”. ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ did find that the pre-emption right did not provide the holder with an equitable interest but rather it is a contractual obligation to offer the property. I find this case to be distinguishable on the facts because of the allegations regarding fraud and illegality but the principles remain useful. However, the case of ▇▇▇▇▇▇▇▇▇ v ▇▇▇▇▇▇ suggests that while the right of pre-emption did not initially confer an interest in land, it was converted to an equitable interest as soon as the owner decided to dispose of the property. While the view is not unassailable, it puts the Claimant in a strong position to argue that his interest should be given priority over that of the interests of the 4th to 6th Defendants. Although it is impossible to stop the world pending trial, the preservation of status quo is important. The current state is that the transfer has not been perfected and so the 1st Defendant is still the beneficial owner and the individual with the legal right to possession. Incidental to possession would be the right to preserve and maintain the property or to direct others to do so. Incidental to this right he could chose to put anyone he desires in possession. However, it is his position that consequent upon the position in which he found himself he signed an Instrument of Transfer for the property and ▇▇ ▇▇▇▇ has taken up possession, but the property is yet to be transferred. He has in no way stated that he has given any permission for early possession or how it is that ▇▇ ▇▇▇▇ came to take up possession. The injunction being sought against the 1st to 3rd Defendants would operate to prevent them from exercising their usual rights to possession. The 5th and 6th Defendants have deponed to the fact that the agents of the 4th Defendant have entered the property to take control of it, but this alone may not be sufficient to establish any right to possession and to displace the possession of the 1st Defendant who remains the beneficial owner until the transfer takes effect. It is only upon registration of the transfer, that the estate and interest of the registered owners would pass to the transferees. In light of the Order of the Court making the 1st Defendant the beneficial owner he has the legal right to possession. I am of the view that the current status quo should remain until after the determination of the matter. Taking into account, all the factors discussed, I have formed the view that the balance of convenience weighs in favour of the Claimant. The registered owners as reflected on the Certificate of Title remain the 2nd and 3rd Defendants and so even though they are owners on Title only they cannot seek to distance themselves from issues regarding the grant of the injunction. The Claimant has satisfied the test for the grant of an interim injunction against all the Defendants therefore my orders are as follows: