George Damianos d/b/a Damianos Sotheby’s International Realty v Bank of the Bahamas Limited et al 2018/CLE/gen/01129
This case highlights a dilemma which a realtor can sometimes face. His remuneration is dependent upon his finding a buyer for property. He is protected by a prohibition generally found in such agreements that, should the property be sold during the currency of the Agreement, he is entitled to commission even to a Purchaser he did not introduce. In turn, he spends money and other resources marketing the property. In this case, the realtor had substantial international connections and advertised globally.
A prominent local real estate agent was engaged by a Bank selling a large property development under its power of sale. The Listing Agreement provided that the real estate agent would get a 6% commission on the sales price on a sale of the property during the currency of the agreement. The real estate agent spent considerable sums marketing the property locally and internationally.
The delinquent borrower joined forces with another developer who provided the Borrower with the financing to satisfy the loan. In turn, the borrower and the new lender requested that the Bank transfer the Mortgage Debenture to the new lender. In the result, the Bank executed the transfer and notified the real estate agent that the mortgage debt had been satisfied by the Borrower.
One of the “eccentricities” of Bahamian land law is that it is substantially the pre-1926 British Land Law. A mortgage or a transfer of mortgage, though in substance a charge on the Borrower’s title, is expressed in the mortgage and in any subsequent transfer in the form of a conveyance of the land.
If the transaction was a “sale” of the land, the real estate agent would have been entitled to a commission of $432,000.00.
The Real Estate Agent commenced action against the Bank, claiming breach of contract and payment of his commission. He also joined the Borrower and the new Lender alleging that that they had unlawfully conspired and tortiously interfered with the contract between the Bank and him.
The Court began with the proposition that, in interpreting a contract, the Court must identify what the parties meant through the eyes of a reasonable reader and, in most cases, words are to be given their plain and ordinary meaning.
The Plaintiff asserted that “sale” is the exchange of property for money. Money is paid and the property is expressed to be transferred by a Conveyance.
The Conveyancing and Law of Property Act Ch 138 distinguishes between a conveyance of property by way of sale and a conveyance of property by way of mortgage.
A Conveyance of land by way of sale transfers the full ownership, the fee simple in the land to the Purchaser. On a conveyance by way of mortgage, the property is conveyed subject to the Borrower’s equity of redemption, i.e., that if he repays the debt, he is entitled to have the property reconveyed to him. Notwithstanding the transfer of mortgage, the Borrower remains the beneficial owner of the property, entitled to a reconveyance whenever he repays the debt.
This distinction was also recognized by the Stamp Act (now the VAT ACT), which calculates stamp duty on a conveyance by way of sale based on the value of the land as opposed to the stamp duty on a mortgage (or transfer of mortgage) on the value of the loan.
Having found that the transaction was not a sale, the Court was of the view that this was determinative of the action.