Villa Cornucopia Ltd v Esther Developments Ltd

• Jurisdiction: British Virgin Islands
• Judge: Ellis JA
• Judgment Date: 08 December 2023
• Judgment citation (vLex): [2023] ECSC J1208-3
• Docket Number: BVIHCVAP2023/0001
• Court: Court of Appeal (British Virgin Islands)

Between:

Villa Cornucopia Limited

Appellant

and

Esther Developments Limited

Respondent

Before:

The Hon. Mde. Vicki Ann Ellis Justice of Appeal

The Hon. Mr. Trevor Ward Justice of Appeal

The Hon. Mr. Gerard St. C Farara Justice of Appeal [Ag.]

BVIHCVAP2023/0001

THE EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Interlocutory appeal — Interim injunction — Restrictive covenants — Whether the master applied a flawed approach of the American Cyanamid principles — Adequacy of damages as a remedy — Whether the master erred in failing to hold that the respondent did not provide an adequate undertaking as to damages — Whether the master erred in resolving the balance of convenience in favour of granting the interim injunction

Villa Cornucopia Limited (“the appellant”) is the owner of a parcel of land known as Parcel 15 Block 4739B (“Parcel 15”) in a subdivision in Virgin Gorda known as Little Trunk Bay (“the Estate”). Esther Developments Limited (“the respondent”) was the original developer of part of the Estate. When the respondent made a transfer of Parcel 15 in 1987, the original transferee at that time agreed to various covenants which were noted on the land register, including one in which she agreed, ‘[t]o use the site for residential purposes only and to erect thereon no building other than one single family dwelling house…’. Through a series of sales, Parcel 15 was sold to the appellant in January 2021. The appellant is a successor in title to the original transferee and was deemed to have had notice of the restrictive covenants on its title as to, inter alia, user of Parcel 15. Around February 2022, the appellant began operating an Inn on Parcel 15. The appellant also applied for a liquor licence to sell intoxicating liquor at the premises.

The respondent communicated to the appellant both verbally and by letters on behalf of the Little Trunk Bay Homeowners, before and after the appellant began operations, that these actions were breaches of the restrictive covenant as to user of the premises. Despite this, the appellant did not cease operations of the Inn.

On 14 ^th November 2022, the respondent filed a claim against the appellant for a permanent injunction to restrain the appellant, whether acting by itself, its directors, employees, agents or otherwise howsoever from conducting the operations of an Inn on Parcel 15 or from otherwise using the property in a manner inconsistent with the restrictive covenants attached to the property. On the same date, the respondent filed a notice of application for an interim injunction to similarly restrain the appellant pending the determination of the claim.

The appellant opposed the application arguing that it was aware of the restrictive covenants, however after seeking legal advice, it was its understanding that the registered covenants were not enforceable. Therefore, the appellant asserted that it was not in breach of any covenant as the covenant sought to be enforced is not binding on it. The appellant further argued that other homeowners within the estate rented out their villas, accordingly, they have been used as a commercial operation and as such Little Trunk Bay is not a purely residential area.

The learned master, in his judgment dated 6 ^th February 2023, granted the interim injunction and granted the respondent its costs in the claim. On 16 ^th February 2023, the appellant filed a notice of appeal challenging the decision of the learned master.

Held: dismissing the appeal; affirming the judgment in the court below and ordering costs of the appeal to the respondent, to be assessed, if not agreed by the parties within 21 days that:

• 1. The judgment in American Cyanamid v Ethicon Ltd contains no more than a set of useful guidelines which a court may apply in many cases. There is no rigid four stage or ‘box-ticking’ approach by which a court is to exercise its discretion when considering whether to grant an injunction. The overarching principle is the statutory power of the court to grant interim injunctions when it is just and convenient to do so. In this case, the fact that the master's analysis of the adequacy of damages sequentially followed his assessment of the balance of convenience was not indicative of a misdirection or flawed approach or that he ‘skipped a step’. Accordingly, the Court finds no merit in the submission that the master adopted a flawed approach in considering the principles under the American Cyanamid test.

  Section 24 of the Eastern Caribbean Supreme Court (Virgin Islands) Act Cap 80 of the Laws of the Virgin Islands applied; Rule 17.1(1)(b) of the Eastern Caribbean Supreme Court Civil Procedure Rules, 2000 applied; American Cyanamid Co. v Ethicon Ltd [1975] AC 396 (HL) considered; N.W.L Ltd v Woods [1979] ICR 867 considered; Cambridge Nutrition Ltd v British Broadcasting Corp [1990] 3 All ER 523 considered; Apotex Fermentation Inc v Novopharm Ltd [1994] 7 W.W.R. 420 considered; National Commercial Bank Jamaica Ltd v Olint Corpn Ltd. [2009] 1 WLR 1405 considered.

• 2. In the context of a negative covenant, damages might not always afford a sufficient or satisfactory remedy and therefore equity would need to interfere to prevent a mischief. The courts have generally paid less regard to the question of the amount of damage or injury likely to be suffered by the applicant and more to the negative bargain which the parties would have freely made. While the potential change of character of the neighbourhood is not a necessary determinant of whether there is a breach of the restrictive covenant, it is a factor which the master could properly consider in the exercise of his discretion. Moreover, even if this Court were to hold a contrary view, this is not sufficient to set aside the master's decision.

  Doherty v James Clagston Allman and W.C. Dowden (1878) 3 App Cas 709 considered; Halsbury's Laws of England (2022) vol 87, Real Property and Registration considered; Chatsworth Estates Company v Fewell [1931] 1 Ch. 224 considered.

• 3. Before a court will grant an interlocutory injunction, the party seeking the order will almost always offer or be required to give to the court the ‘usual undertaking as to damages’. The fact that a claimant is funded by a third party or is of limited means would not preclude the grant of an injunction in a proper case. Each case turns on its own facts. In this appeal, it is clear that the respondent's financial resources were relevant to the court's exercise of discretion to make an interlocutory injunction and that in fact it did adduce evidence of its financial capacity to meet the undertaking. The learned master was clearly satisfied with the terms of the proposed undertaking and had no doubt as to the financial security of the funder. The Court sees no basis to interfere with that finding of fact especially when there was no evidence of the appellant actively seeking fortification of that undertaking.

  Allen and others v Jambo Holdings Ltd. and others [1980] 1 WLR 1252 considered; Cambridge Credit Corporation Ltd (Receiver Appointed) v Surfers' Paradise Forests Ltd [1977] Qd R 261 considered; Frank Industries PTY Ltd v Nike Retail BV and others [2018] EWCA Civ 497 applied.

• 4. The way in which courts apply the balance of convenience test varies from case to case. In cases of prohibitory injunctions enforcing negative covenants between parties, the courts have emphasised the need to enforce negative covenants expeditiously. However, in recent times the courts have prescribed a cautious approach. The court should take whichever course seems likely to cause the least irremediable prejudice and should seek to avoid irremediable damage and harm to either party while recognising that its decision, whether in favour or against the grant of an injunction, will inevitably involve some disadvantage to either party which damages cannot compensate. It is the extent of this uncompensable disadvantage which is a significant factor in determining the balance of convenience. The master's approach appears to be consistent with the case law. He clearly recognised that the dispute between the parties involved a negative covenant of some vintage which he was obliged to accord appropriate weight. However, the master did not stop there; he took into account other factors such as the appellant's bookings for November 2022 to February 2023 and concluded that the balance of convenience would not favour the grant of an injunction during this period. The master was clearly seised of the potential impact on the appellant. Accordingly, the Court is not satisfied that the learned master's exercise of discretion and the conclusion which the master reached in granting the interim injunction is blatantly wrong.

  Cayne and another v Global Natural Resources plc [1984] 1 All ER 225 considered; National Commercial Bank Jamaica Ltd v Olint Corpn Ltd. [2009] 1 WLR 1405 applied; Hampstead & Suburban Properties Ltd. v Diomedous [1969] 1 Ch. 248 considered; Digicel (Fiji) Ltd v Fiji Rugby Union and another [2017] 2 LRC 97 considered; Attorney General v Barker and another [1990] 3 All ER 257 considered; Michel Dufour and Others v Helenair Corporation Ltd [1996] 52 WIR 188 applied.

Appearances:

Mr. Tom Roscoe and Mr. Simon Hall for the Appellant

Mr. John Carrington, KC with him Ms. Reisa L. Singh for the Respondent

Ellis JA

1 This is an appeal by Villa Cornucopia Limited (“the appellant”) against the decision of the learned master dated 6 ^th February 2023 by which he granted Esther Developments Limited (“the respondent”) an interim injunction against the appellant and ordered that costs of the application for interim injunctive relief be the respondent's costs in the claim.

Background

2 In 2021, the appellant purchased a parcel of land; Parcel 15 Block 4739B (“Parcel 15”), in a subdivision in Virgin Gorda known as Little Trunk Bay (“the Estate”). The respondent was the...