Mauritius Commercial Bank
THE COURT OF APPEAL OF
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JUDGMENT OF THE LORDS OF THE JUDICIAL
COMMITTEE OF THE PRIVY COUNCIL
Delivered the 23rd May 2007
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Present at the hearing:-
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This appeal is concerned with three consolidated sets of proceedings for the enforcement of securities granted by the appellant,
The issues arise in the context of the largest corporate insolvency in the history of
The project did not prosper. The detailed facts as to the deterioration of Woventex’s financial position, and of relations between the parties, is a complicated and contentious matter, on which no court in
Apart from his shareholding (through Soltex) in Woventex
PR, the second group of garnishees and Mr Rajah can conveniently be referred to as garnishees but none of them is an ordinary trade debtor of
The letter of 27 October 1990 has given rise to a good deal of argument. It is a commercial document, unlikely to have been prepared by lawyers, and there is no agreement or finding as to its commercial context (although it is clear from the letter itself that there were problems caused by the need for further financing of a project which was proving unexpectedly expensive and difficult). The gist of the letter was that the Bank would provide bridging finance to Woventex until further equity and loan capital had been contributed by various participants. Details of these were given and the letter went on (with paragraph numbers inserted for ease of reference):
 “. . . being guaranteed by:
(a) a pledge of all shares owned and/or controlled by yourself directly or indirectly in Maurigarments Co Ltd for an amount of R50M.
(b) a pledge of all shares owned and/or controlled by yourself directly or indirectly in PR Ltd, owner of Le Grand Gaube Hotel, for an amount of R50M
(c) a floating charge on your other personal assets in Mauritius for a total amount of R15M.
 It is hereby agreed that the above guarantees will be terminated automatically and proportionately as soon as CDC, DEG and yourself (Soltex) actually disperse loans or subscribe to equity as per above Table I.
 Put another way, the above guarantees will only stand for all amounts which, at any point in time, would still be financed by us beyond our commitments which are as follows.”
There is then a list of items of equity and loan capital totalling R202m.
Leading counsel for the appellant submitted that the Bank’s attachment, so far as it depended on the floating charge, must fail for the simple reason that the claim was (apart from accrued interest) for much less than R202m. But that cannot be the correct interpretation of the words of paragraph  set out above. The Bank had permanent commitments to Woventex, in equity and loan capital, which by October 1990 amounted to R202m. Mr Benichou was not responsible for any of those sums. The Bank was then providing Woventex with further, temporary bridging finance which Mr Benichou was required to guarantee. He was to be liable for everything which the Bank advanced to Woventex beyond its existing commitments totalling R202m. Mr Malek’s suggested interpretation would in effect put in place not one limit, but two limits of R202m. That point is in their Lordships’ view perfectly clear. There are other more obscure points on the letter of 27 October 1990 which it will be necessary to return to.
In relation to the PR shares (only) the Bank also relies on two pledges (nantissements) of Mr Benichou’s 2,357m shares made on
Three applications by way of praecipe were made to the Supreme Court: (1) on
“Above all and furthermore, as submitted by learned Counsel for the attaching party, at no point in time has the defendant contested the validity of the charge in a separate action as provided by article
Their Lordships are not satisfied that the Supreme Court, which has great experience in these matters, has been shown to have erred in this view. But in deference to the detailed arguments put forward by both sides their Lordships think it right to address the other issues raised in relation both to the floating charge and to the pledges of PR shares. In relation to the floating charge Mr Benichou raised before the Supreme Court a point on community of goods which was not relied on before the Board. But counsel for Mr Benichou did before the Board rely on two grounds of appeal which were considered in detail by the Surpreme Court. Counsel also relied on four further points which were, they say, raised in the Supreme Court (at least in written submissions) but were not considered (or were only very briefly considered) by the Supreme Court. These can be summarised as follows:
(1) Article 1326 of the Civil Code;
(2) Article 551 of the Civil Code;
(3) the sale of the Reunion property;
(4) the beneficial ownership of the funds held by Mr Rajah;
(5) the letter of 27 October 1990 and the R15m limit on the floating charge; and
(6) the agreement of 14 April 1992.
Their Lordships will consider these points in turn. They will then address the point taken by the appellant in relation to the pledges. Points (1) to (4) above, and the pledges, were argued by Mr Oakley, junior counsel for the appellant.
Article 1326 provides:
“L’acte juridique par lequel une seule partie s’engage envers une autre à lui payer une somme d’argent ou à lui livrer un bien fongible doit être constaté dans un titre qui comporte la signature de celui qui souscrit cet engagement ainsi que la mention, écrite par lui-meme, de la somme ou de la quantité en toutes letters et en chiffres. En cas de difference, l’acte sous seing privé vaut pour la somme écrite en toutes letters.”
It is common ground that the floating charge did not comply with this article, since although Mr Benichou signed it, the figure R15,000,000 was typed onto the printed form. The Supreme Court held that this did not make the instrument void. The appellant submits that that missed the point, which was that the charge, since it did not comply with article 1326, was not a titre executoire (enforceable security).
Before the Board Mr Sauzier (for the Bank) has put forward further arguments: that the floating charge, once registered, was enforceable under article
Article 551 provides:
“Il ne sera procédé à aucune saisie mobilière ou immobiliere, qu’en vertu d’un titre exécutoire, et pour des choses liquides et certaines: si la dette exigible n’est pas d’une somme en argent, il sera sursis, après la saisie, à toutes poursuites ultérieures, jusqu’à ce que l’appréciation en ait été faite.”
In short, an attachment is permitted only for a liquidated sum. If the sum claimed could be ascertained only by taking an account, attachment is not possible: Soomally v Soomally  MR 138. That was a case in which a complicated account had to be taken in the administration of an estate, and it was admitted that some vouchers (needed for taking the account) were not available. The principle is not in doubt but their Lordships do not accept that it applies in this case. The Bank’s claim is for the principal of, and unpaid interest on, monies advanced to Woventex. The necessary computation may be complex but the entire claim is for a liquidated sum.
In November 1992 the Bank agreed to Mr Benichou selling a property known as Reunion on condition that its proceeds of sale were (as it was put in the Bank’s letter dated
The point about the funds held by Mr Rajah must also be rejected. It was hardly mentioned in argument in the Supreme Court. There is no reliable evidence to support Mr Benichou’s claim that he was not the beneficial owner of the funds, and some documentary evidence contradicts it.
The letter of
In these circumstances it would not have made commercial sense if paragraph  of the letter (set out in para 6 above) had produced the result that Mr Benichou’s guarantee was drastically reduced in amount as soon as CDC and DEG complied with their obligations, even if (as happened) Soltex defaulted in its obligation. Leading counsel for Mr Benichou did not, as their Lordships understand it, press any argument to the contrary. Paragraph  of the letter, which their Lordships have already addressed, makes the position clear. It is also significant that in a recital (C) to a share subscription agreement dated
“[the Bank] has made available to [Woventex] against securities provided by [Mr Benichou] a bridging overdraft in the amount of R36m bearing interest at variable rates.”
Leading counsel did however argue that there was a limit of R15m on the principal sum secured by the floating charge. That figure appears both in the floating charge itself and in the letter of 27 October 1990. But in the floating charge it appears only as a recital (possibly for stamp duty purposes, although that is a conjecture) and the operative part of the charge is clearly unlimited in amount. Their Lordships recognise that the limit mentioned in the letter seems to present more of a problem. The Supreme Court did not refer to it directly, but repeated the point that Mr Benichou had not objected to the crystallisation of the floating charge. That point seems to carry special weight in a situation where Mr Benichou was relying on an informal, collateral document to vary the effect of a formal, registered charge, under a Civil Code and Code of Civil Procedure which accord considerable importance to formalities. Their Lordships are not therefore satisfied that the Supreme Court was in error in failing to deal with this point at greater length.
Finally, in relation to the floating charge, there is a point taken on a shareholders’ agreement dated 14 April 1992. This contained a recital (D) that it replaced and superseded the JVA. That does seem to have been its effect, since it contained complex options and other provisions superseding those in the JVA. But there is no reason to suppose that the agreement of 14 April 1992 was intended to put an end to the collateral stipulations in the letter of 27 October 1990, so far they were still operative at the latter date. As already mentioned, an agreement dated 17 January 1992 had recited Mr Benichou’s secured liability for bridging finance provided to Woventex in the amount of R36m. For the reasons already mentioned their Lordships conclude that the collateral stipulations were still operative, and recital (D) did not bring them to an end.
Their Lordships can deal more briefly with the objections taken in regard to the pledges. They accept the submission of Mr Sauzier that, if the Bank had succeeded in obtaining custody of the share certificates which Mr Benichou had promised to deliver, it could have enforced its security (by a commercial sale) without the need for any judicial intervention. As it was, it had to go through the procedure of attachment. But that procedure was available, as the Supreme Court held, under section 85(2) of the Companies Act 1984 and article 2077 of the Civil Code.