(1) Erwin Jose Dobnig Galtier Lupo; (2) Marianna Suzanna Galtier v Alsace Lorraine Investment Services Ltd (also known as Alsace-Lorraine Investments Services Ltd)

• Jurisdiction: Caribbean States
• Court: Eastern Caribbean Supreme Court
• Judge: HARIPRASHAD-CHARLES J
• Judgment Date: 28 January 2005
• Neutral Citation: VG 2005 HC 2
• Docket Number: Claim No. BVIHCV2004/0185
• Date: 28 January 2005

IN THE EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE (CIVIL)

Claim No. BVIHCV2004/0185

IN THE MATTER OF THE INSOLVENCY ACT 2003 (AS AMENDED)

AND IN THE APPLICATION OF

(1) Erwin Jose Dobnig Galtier Lupo

(2) Marianna Suzanna Galtier

Applicants

and

Alsace Lorraine Investment Services Limited (also known as Alsace-Lorraine Investments Services Limited)

Respondent

Appearances:

Mr. Andrew J. Jones QC with him Mr. Colin McKie for the Applicants

Mr. Gerard St. C Farara QC for the Respondent

HARIPRASHAD-CHARLES J

1 This is an application by Erwin Jose Dobnig Galtier Lupo and his mother, Marianna Suzanna Galtier (‘the Applicants’) to appoint joint liquidators and wind up Alsace Lorraine Investment Services Limited pursuant to their application dated 20 ^th December 2004.

The Relevant Facts

2 Alsace Lorraine Investment Services Limited (‘the Company’) is a duly registered Company incorporated in the British Virgin Islands under the International Business Company Act 1984.

3 The Company issued two promissory notes dated 6 ^th July and 24 ^th September 2004 payable to the Bank of Europe (‘the Bank’) for a total of approximately US$2.8 million. The promissory notes matured and became payable, without demand on 3 ^rd November and 25 ^th October 2004 respectively.

4 The promissory notes are expressed to be governed by the laws of Antigua & Barbuda with the result that the evidence includes an affidavit of foreign law sworn by Benedicta Samuel, an Attorney-at-Law admitted to practise in that jurisdiction. She opined that the total amount of approximately US$2.8 million has become due and payable by 25 ^th November 2004.

5 The Bank, acting by their authorized signatories, Mr. Arcaro and Mr. Blair indorsed over the promissory notes to the Applicants and delivered the originals to their agent, Mr. Ricardo de Melo Vieira on 25 ^th November 2004.

6 The Company defaulted. It failed to pay on the due date. On 8 ^th December 2004, the Applicants, through their British Virgin Islands solicitors, Maples and Calder, wrote to the Company informing it that the Bank had indorsed two promissory notes to the order of the Applicants on 25 ^th November 2004 and that the Applicants be paid the sums due under the promissory notes on or before 4.00 p.m. on 15 ^th December 2004.

7 The Company did not budge. On 21 ^st December 2004, the Applicants obtained a freezing order against the Company prohibiting it from dealing with the assets up to the value of US$2,793,988.49. Eight days later, the Company was notified of this order.

8 The Applicants allege that they are unpaid creditors of the Company within the meaning of section 162 (2) (b) of the Insolvency Act 2003 (‘the Act’) since 25 ^th November 2004 and by virtue of section 8 (1) (c) (ii) of the said Act; the Company is insolvent since it is unable to pay its debts as they fall due. The Applicants therefore seeks an order for the appointment of joint liquidators and winding up of the Company.

9 The Company objects to the application on the basis that the Applicants are not their creditors. Consequently, they are not entitled to present this application and they have no locus standi before the Court.

The Law:

(i) Appointment of Liquidator

The Law:

10 Section 162 (1) (a) of the Insolvency Act provides that the Court may, on application by a person specified in subsection (2) appoint a liquidator of a company if the company is insolvent. Subsection (2) lists the persons who may apply to the Court to appoint a liquidator of a company. Subsection (2) (b) empowers a creditor to make such an application.

(ii) Are the Applicants creditors of the Company?

11 The Applicants assert themselves to be creditors of the Company within the meaning of section 162 (2) (b) of the Act thus entitling them to apply to the court for a liquidator of the Company to be appointed. The Company vehemently opposes the application contending that the Applicants are not their creditors.

12 Section 9 (1) of the Act defines a creditor as ‘a person is a creditor of another person (the debtor) if he has a claim against the debtor, whether by assignment or otherwise, that is, or would be, an admissible claim in the liquidation of the debtor, in the case of a debtor that is a company…’

13 Learned Queen's Counsel, Mr. Gerard Farara appearing for the Company forcefully argued that for the reasons set out in the affidavit of Mr. Sydney Christian, QC dated 13 ^th January 2005 (‘the Christian affidavit’), the Applicants do not have a valid claim against the Company as the promissory notes were not validly indorsed under the applicable Antiguan law and thus, they are not entitled to the sum thereupon. Consequently, the Company asserts that there is no debt outstanding to the Applicants who are not their creditors.

14 It is therefore necessary for the Court to examine carefully the affidavit of Mr. Christian, distinguished Queen's Counsel of the Antigua and Barbuda Bar. At paragraph 9 of his affidavit, Mr. Christian stated:

‘There seem to be two signatories who have signed on behalf of Bank of Europe to give effect to the negotiation of the Notes in favour of the Applicants. However, neither of the Applicants have signed or indorsed the Notes. This is a significant problem.’

15 At paragraph 10, he continues:

‘Section 32 of the Bills of Exchange Act (Cap. 48 Laws of Antigua and Barbuda) lists in subsection (a) to (f) of that section the conditions which must be complied with in order for an indorsement to operate as a negotiation…. It is important to note that these provisions are mandatory. Subsection (c) states that:

“Where a bill is payable to the order of two or more payees or indorsees, who are not partners, all must indorse, unless the one indorsing has the authority to indorse for the others.”’

16 Mr. Christian states that since neither of the Applicants has indorsed the promissory notes, the purported negotiation on 25 ^th November 2004 of the notes in favour of the Applicants is invalid and consequently, the Bank remains the holder of the notes. Therefore, under Antiguan Law, the promissory notes could not found a valid claim brought by the Applicants.

17 Mr. Farara next submitted that what is material in this case is that the affidavit of Ms. Samuels did not consider section 32 (c) of the Bills of Exchange Act so there is really no expert evidence from the Applicants with regard to the correct interpretation under Antigua Law of that subsection. I agree. Mr. Farara also correctly pointed out that the Court does not have to accept expert evidence of law because it is a matter of fact for the Court to decide ultimately.

18 In order to fully grasp the legal issues, especially those contained in Mr. Christian's affidavit, it might be helpful to start by looking at section 31 of the Bills of Exchange Act of Antigua and Barbuda. Section 31 is headed “Negotiation of Bills”. And a bill for the purpose of this case includes both cheques and promissory notes.

19 Section 31 reads as follows:

• (1) ‘A bill is negotiated when it is transferred from one person to another in such a manner as to constitute the transferee the holder of the bill.

• (2) ………………………………………..

• (3) A bill payable to order is negotiated by the indorsement of the holder, completed by delivery.’

20 Section 32 deals with the requisites of a valid endorsement. Subsection (c) is critical because the Company relies heavily on the affidavit of Mr. Christian which states that the failure of the Applicants to sign or indorse the promissory notes renders them invalid under the applicable Antiguan Law.

21 I am in agreement with Mr. Andrew Jones, Learned Queen's Counsel for the Applicants that this argument is founded upon a fallacy and a fundamental misunderstanding of the law. In my view, what the section means is that where a note is payable to two persons who are not partners and those persons decide to endorse the note and negotiate it to a third party, both of them must sign. In the present case, there is a single payee of the notes which is the Bank It is the Bank which is endorsing the notes. And therefore, the Bank has to sign the notes. There is ample evidence that two duly authorized officers of the Bank did sign the promissory notes.

22 To say that the Applicants as the current holders of the notes have to endorse them seem far-fetched as there is no requirement in the ordinary course of banking for the recipient (third party) of a bill to sign at...