Legal Update – BVI High Court Reinforces Rights of Mortgagees Exercising Power of Sale


In BVIHCV 2013/128 Betteto Frett v National Bank of the Virgin Islands (the Bank), the BVI High Court reinforced the principle that injunctive relief would not be easily granted against a bank validly exercising their power to sell real property used as security for bank loans.

On the eve of an auction in exercise of the Bank’s power under its Charge (security instrument similar to a mortgage), to sell real property in order to recover a debt, the debtor made an ex parte application for injunctive relief to stop the sale. The court noted there was good sense in the established rule that mortgagees would not be restrained by a debtor from exercising their power of sale, unless the entire sum owed to the mortgagee is paid into court. To do otherwise would be to greatly diminish the benefit of having security for a debt and would have “no small impact on the commercial lending industry as a whole.” In reviewing a number of authorities on the case, including the Jamaican Court of Appeal case of Mosquito Cove Ltd v Mutual Security Bank Limited [2010] J.M.C.A. Civ 32, the court accepted that the rule was further governed by “the special rules that have been developed over many years to protect a mortgagee” by affording him the “equivalent safeguard” that an order of payment into court provides. The rule is only departed from in exceptional cases which might possibly include the existence of a fiduciary relationship or forgery.

In the absence of such exceptional circumstances, there was no justification for granting an injunction without requiring that the undisputed sum, or the sum that the mortgagee claimed was owed, be paid into court. An injunction was therefore granted on the basis of full payment on the sum owed into court within 72 hours, failing which the injunction would be automatically discharged. In the event, the debt was not paid and the injunction was discharged. The Bank is now free to exercise its power of sale under its Charge and to apply the proceeds towards satisfaction of its debt.

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