THE Court of Appeal has held in favour of Bridgeton Management Services Limited (BMSL) against Mayberry Investments Limited in a case centred on margin maintenance calls and their respective rates.

Sunday Finance placed a phone call to Mayberry Investments’ CEO Gary Peart on Thursday evening to garner a response as to this decision by the Court of Appeal. He opted not to comment, citing that this was a legal matter.

The appellant, Mayberry Investments, and the respondent, Bridgeton Management Services Limited (BMSL), entered into two Client’s Opening Margin Agreements for accounts held by BMSL with Mayberry.

The first agreement was on 14 September 2004 for account 709246 (Margin Agreement 1) and the second for account 700083 (Margin Agreement 2).

These agreements allowed BMSL, as an investor, to borrow against the value of the eligible securities in the accounts to purchase or sell securities.

The agreements included a margin maintenance requirement which stipulated that BMSL had to maintain a certain market value in these accounts, failing which they would be subject to a “margin maintenance call” by Mayberry.

A margin maintenance call requires an investor to repay debt owed in cash or deposit, or to sell sufficient securities to achieve the margin maintenance requirement.

The agreed Margin Rate (interest rate to be charged on Margin Agreement 1) was based on the current 30-day Bank of Jamaica Treasury Rate plus 5 per cent to be charged against BMSL’s account for the period of time that the margin position is held with Mayberry. Account for the period of time that the margin

As it relates to Margin Agreement 2 the Margin Rate was to be based on the current 315-day Bank of Jamaica Treasury Rate plus 5 per cent to be charged against BMSL’s account for the period of time that the margin position is held with Mayberry.

Contention arose when BMSL alleged that since September 2004, Mayberry incorrectly applied a higher margin rate than applicable under the margin agreements, with BMSL claiming the rate to be 18.5 per cent while Mayberry is holding firm that it should be 21.5 per cent.

Mayberry made it clear that BMSL was in default thus triggering margin calls and allowing Mayberry to sell stocks to restore the margin rate requirement.

BMSL countered that it was not a default as the lower rate should have been applied and so there was no need for margin calls.

A resolution on this disagreement could not be agreed on for five years and in 2010 both parties met and held extensive discussions. There was a misunderstanding as to what was decided from these meetings with Mayberry contending that a mere proposal was proffered which never concretised into an agreement, while BMSL asserted that a settlement was arrived at.

Unable to agree upon rates, and getting no closer to a resolution, BMSL served a Notice of Arbitration Proceedings on Mayberry on June 29, 2016.

Disagreeing with this method of settling the matter, Mayberry, through their lawyers, responded on July 12, 2016 indicating that any claims flowing from disputes that arose in 2004 and 2005 were statute barred and as such it would not submit to arbitration.

Pressing the arbitration route, BMSL applied to the Supreme Court to appoint Justice Roy Anderson as the arbitrator to settle the dispute.

Before Justice Batts BMSL argued that the arbitrator should be appointed as the claim was not statute-barred and in any event, the determination as to whether it was should be made at the arbitration proceedings. In response Mayberry submitted that the claim was statute-barred and therefore appointing an arbitrator “would be an exercise in futility”.

On April 7, 2017 Justice Batts appointed Justice Anderson (retired) as sole arbitrator to determine the matters in dispute. Mayberry, in turn, challenged Batts’s decision to appoint an arbitrator with the matter going to the Court of Appeal.

Earlier this month the Court of Appeal concluded that “Mayberry failed to show that the trial judge (Batts) misapprehended the facts, misapplied the law or exercised his discretion injudiciously in making the appointment of Justice Anderson as arbitrator in this matter.

“The challenge on all the rounds of appeal therefore fails. The appeal should be dismissed, the judgement of Batts J affirmed and costs awarded to BMSL,” the Court of Appeal ruled.