Canadian Imperial Bank of Commerce v Gypsy International Ltd and Beepat
| Jurisdiction | Caribbean States |
| Judge | Hayton, J. |
| Judgment Date | 12 November 2015 |
| Court | Caribbean Court of Justice |
| Docket Number | CCJ Application No. BBCV 3 of 2015; BB Civil Appeal No. 27 of 2012 |
| Date | 12 November 2015 |
Caribbean Court of Justice
Nelson, J.CCJ; Saunders, J.CCJ; Hayton, J.CCJ; Anderson, J.CCJ; Rajnauth-Lee, J.CCJ
CCJ Application No. BBCV 3 of 2015; BB Civil Appeal No. 27 of 2012
Mr. RogerC Forde, QC and Ms Sherica Mohammed-Cumberbatch for the appellant
Sir Fenton Ramsahoye, SC, Mr. Alrick Scott, Mr. Roopnarine Satram, Mr. Chandrapratesh Satram and Mr. Mahendra Satram for the respondents
Company Law - Appeal — Whether the appointment of a receiver by the appellant pursuant to a demand debenture over the assets of the first respondent was validly made — Whether the respondents were estopped from claiming that the receiver's appointment was not valid — Whether the bank was liable for the receiver's conduct.
Amazingly, in October 2015 we are determining whether or not the respondents can impeach the validity of the appointment of a receiver made in April 1984 and ceasing in May 1988 pursuant to a debenture dated February 23rd, 1983. In June 1988, the appellant, after crediting the net amount realised on sales of the security, made a written demand on the Second respondent (as guarantor of moneys due from the First respondent) for $324,060.78, comprising a principal sum of $109,969.18 plus $214,091.60 interest. The debenture provided for payment of compound interest not exceeding a rate of two and a half per cent per annum over the appellant's minimum lending rate ‘as well after as before judgment’, such liability over an extensive period being capable of dwarfing the amount of principal due. The demand for payment was followed by legal proceedings initiated in August 1988, provoking the respondents to claim that the receiver had not been validly appointed so that they were entitled to counterclaim damages in trespass and conversion and for loss of profits.
Chandler, J. heard the case over thirteen days commencing December 5th, 2003 and finishing July 12th, 2010, his judgment not being delivered until May 29th, 2012 ( Canadian Imperial Bank of Commerce v. Gypsy International and Beepat, Unreported, No. 1130 of 1988, (High Court of Barbados, 29th May, 2012)) when being subject to submissions of counsel as to costs and interest that led to a consent order thereon on 11th June, 2012. The Court of Appeal heard the appeal on January 13th and 14th, 2014, delivering judgment on November 14th, 2014. ( Gypsy International and Beepat v. Canadian Imperial Bank of Commerce, Unreported, Civil Appeal No. 27 of 2012 (Court of Appeal of Barbados, 14th November, 2014))
Chandler, J. found that the receiver had been validly appointed, but if he erred in that conclusion the Bank would have been liable to pay damages amounting to $177,104.42 but no award would have been made for loss of profits.
The Court of Appeal, however, held the receiver's appointment to be invalid and found the Bank liable to pay damages for inadequate realization of assets amounting to $2,551,302.77 and liable for loss of profits in the sum of $3,559,402.50.
The appellant appealed to this Court and the respondents cross-appealed. The appellant maintains it acted properly and is entitled to repayment of its money with interest as under the Order of Chandler, J., but, otherwise, the damages are excessively high and there should be no liability for lost profits. The respondents claim the appellant acted improperly and the amounts awarded for inadequate realization of assets and for loss of profits are inordinately low so that they should receive a sum in the region of $300 million.
A dispute over a relatively small sum has thus escalated into a $300 million dispute which could easily have been prevented. If the respondents had straightaway indicated that they considered the appointment of the receiver invalid because no demand for payment had been made before the receiver took possession of the security, the Bank would immediately have put things right by making the demand.
The parties must accept some blame when under the old rules of Court they took a leisurely approach so that the 1988 suit was not heard till 2003. This was despite directions given by the Chief Justice in the hearing of a Summons for Directions on February 5th, 1991 that provided for various steps to be taken to lead to setting down the case for hearing twenty eight days after those steps had been taken. After 2003, it is surprising that the case was part-heard for such a lengthy period and then there was an inordinate delay of twenty-two months before the judge delivered his judgment. This is the seventh case from Barbados where adverse comment has had to be made on judicial delay. We strongly endorse the recent three paragraphs of the judgment of Byron, P. in Walsh v. Ward [2015] CCJ 14 (AJ) [68]–[70] deploring excessive and systemic delay in the administration of justice and which concluded, ‘We urge the judiciary to take steps to address the problem of delay in the judicial process and ensure that citizens enjoy the benefit of the constitutional promise of fair and expeditious resolution of disputes.’
In 1984 Canadian Imperial Bank of Commerce (the appellant or the Bank) was a Canadian bank registered in Barbados and Gypsy International Ltd. was a Barbadian company (the First respondent or the Company). Mr. Royston Beepat (the Second respondent or Mr. Beepat) was managing director of the Company which he and his brother had set up in 1981 to manufacture “high end” jeans. On November 24th, 1982 Mr. Beepat entered into a continuing guarantee with the Bank in respect of any existing or future liabilities of the Company. In December 1982 the Bank extended a line of credit to the Company in the form of an overdraft facility to the limit of $300,000 and a trade bills discount facility to the extent of $800,000. These facilities were secured by a debenture deed dated February 23rd 1983 which created a fixed charge over the Company's property, plant and equipment and a floating charge over its goodwill and other assets. The Barbados Development Bank also extended credit to the company, its security being an assigned insurance policy over the Company's assets, such security ranking pari passu with the Bank's demand debenture.
The event which precipitated the appointment of a receiver was a fire at the Company's premises on March 25th 1984 which damaged its machinery, equipment and stock and led to an insurance claim in the region of $900,000 to $950,000. On March 28th or 29th, 1984 Mr. Beepat was arrested and charged with arson, a charge which was subsequently dropped after many Court appearances. The Company's insurers on March 29th, 1984 cancelled the insurance policy from that date, though protecting the Bank's interest as mortgagee until April 7th, 1984.
On April 10th, 1984 the Bank, purportedly pursuant to its rights under the debenture, appointed as receiver Mr. Grenville Phillips (the Receiver), who that day took and delivered his notice of appointment to the Company's premises and immediately commenced the receivership. No demand was made for payment of moneys due to the Bank. The Receiver's focus was liquidation of the assets to try to discharge the Company's debts, the Company's business not restarting after the fallout from the fire. On June 15th, 1984 the Bank wrote to Mr. Beepat stating that it was ‘prepared to relieve the Receiver of his appointment upon liquidation of the present outstanding overdraft of $342,710.71’, though subject to the proceeds of the insurance claim being ‘used to liquidate any outstanding discounted Bills with the Bank.’
The Bank's offer was not taken up and the receivership ended on May 30th, 1988 without full discharge of the Company's debt to the Bank. Thus, on June 22nd, 1988 the Bank made a written demand on Mr. Beepat as guarantor calling for payment of the principal sum of $109,969.18 plus interest of $214,091.60. When no payment was forthcoming the Bank initiated legal proceedings against the Company and Mr. Beepat for such sums and further interest, leading to a counterclaim against the Bank for damages and loss of profits caused by the invalid appointment of the Receiver.
In the light of the cancelled insurance policy amounting to a triggering event for appointing a receiver, Chandler, J. held that the Receiver had been validly appointed under the terms of the debenture. Thus Mr. Beepat was liable under his guarantee for the principal sum of $109,069.18 and interest of $214,091.60, but the claim against the Company was dismissed since the Bank had made no demand on the Company for payment of outstanding moneys. The counterclaim was dismissed, though the judge indicated what sums he would have awarded to the Company if the Receiver's appointment had been invalid and the Bank had been responsible for his conduct. The relief sought by the Bank in its Notice of Appeal to this Court is that ‘the Order of the Court of Appeal is reversed and the Order of the Trial Judge be restored.’ Thus the Bank is content to leave the claim against the Company dismissed, but maintains that Chandler, J.'s judgment against Mr. Beepat as guarantor should stand.
Chandler, J. made orders as to costs by consent and it was further ordered by consent that:
6. The Second defendant [Mr. Beepat] pay the claimant contracted interest at the rate of 12.75% per annum on the sum of $109,969.18 in accordance with the debenture dated 23rd February, 1983 made between the First defendant and the plaintiff from the 11th day of June 2012 until payment.
The Court of Appeal held that the Receiver had not been validly appointed, reasoning that, as a matter of construction of the debenture, a demand for payment was required before there could be enforcement of the security by appointment of a receiver. Indeed, the Court stated that even if a...
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