Aquachem Ltd v Delphis Bank Ltd ((in Receivership)) and Others
| Jurisdiction | UK Non-devolved |
| Judge | Lord Hoffmann |
| Judgment Date | 24 January 2008 |
| Neutral Citation | [2008] UKPC 7 |
| Date | 24 January 2008 |
| Court | Privy Council |
| Docket Number | Appeal No 92 of 2005 |
[2008] UKPC 7
Privy Council
Present at the hearing:-
Lord Hoffmann
Lord Scott of Foscote
Lord Walker of Gestingthorpe
Lord Mance
Lord Neuberger of Abbotsbury
Aquachem Ltd ("the company") carried on business making textiles dyes and related products at a factory on Phoenix Industrial Estate, Phoenix, Mauritius. Its principal customer was Quality Towels and Linen Ltd ("QTL"). In 1990, both the company and QTL banked and had credit facilities with the Bank and Credit and Commerce International ("BCCI"). It appears to have been the practice for QTL to pay the company for its goods by accepting bills of exchange drawn upon it by the company. The bills were deposited with BCCI as security for itsadvances to the company and upon maturity (sometimes after extension by the company) were credited to the account of the company, guaranteed by BCCI and debited to QTL.
On 5 July 1991 the company executed an all monies floating charge over all its moveable and immoveable assets. On the same day, banking regulators round the world closed down BCCI. At that time, the company owed BCCI just over RS1m on overdraft and loan account and BCCI held about RS600,000 worth of bills accepted by QTL but not yet credited to the company or guaranteed by BCCI. Shortly afterwards, QTL went into liquidation. On 9 December 1991 BCCI transferred its assets and undertaking in Mauritius, including the benefit of the floating charge, to Delphis Bank Ltd ("the bank"). Over the following months, the bank invited the company's directors to discussions about settling its indebtedness but received no response. On 9 June 1992 it wrote saying that unless some arrangements were made within 3 weeks it would take steps for recovery.
On 2 September 1992, under a power contained in the floating charge, the bank appointed Mr Vedanand Mohadeb of Price Waterhouse receiver and manager of the company and on 10 September he notified the company of his appointment. On 25 September 1992 the company wrote to say that the bank was not entitled to appoint a receiver and that they would be taking steps to have the appointment declared invalid. Early in October 1992 the receiver put notices in the newspapers advertising the company's premises for sale. The company's response was to apply to the judge in chambers for an interlocutory injunction to restrain the receiver from acting. The judge refused the application but it was granted by the Supreme Court on 30 August 1993. The result was that, apart from the abortive advertisements, the receiver has done nothing.
In 1994 the company served a statement of claim alleging that the appointment of the receiver was invalid and that the receiver had acted unlawfully by inserting the sale advertisements. In consequence, the company claimed to have suffered RS 7m damage. The action was tried by Lam Shang Leen J on various dates between October 1998 and July 2000. On 7 October 2002 he gave a judgment holding that the receiver had been validly appointed and dismissing the action. His judgment was affirmed by the Supreme Court on appeal and the company now appeals to the Privy Council.
Of the various points upon which the appellants have relied in the course of the proceedings, only three remain. The first is that the receiver was not entitled to take any steps with a view to selling the company'sproperty until the floating charge had been formally crystallised within the meaning of Chapter 10 of Title 18 of Book 3 of the Code Napoléon, as amended by the Code Napoléon (Amendment No 2) Act 1983. The second is that the appointment was invalid because the bank failed to give credit for the amounts due under the QTL bills of exchange in its hands. The third is that Mr Mohadeb was disqualified from being appointed a receiver because Price Waterhouse, of which he was a member, were the bank's auditors. Their Lordships will take these points in turn.
The concept of a floating charge is not native to the civilian system of property law which exists in Mauritius and was introduced by the Loans, Charges and Privileges Act 1969. This Act was repealed when its provisions (with amendments) were inserted into the Code Napoléon by the 1983 Act as Chapter 10 of Title 18. Section 2202 permits the creation of floating charges. By section 2202-1 they may be created only in favour of "approved institutions", but these include banks and it is agreed that the bank is therefore an approved institution. Unlike the law in England, it would appear from section 2202-35 that floating charges may be granted by individuals as well as by companies.
Sections 2202-41 to 2202-43 deal with the circumstances in which the floating charge may be crystallised, a term which is not expressly defined but which is well understood in English law and which by section 2202-40 converts the floating charge into a fixed charge on the chargor's assets at the time of crystallisation. Until then he has, by section 2202-38, the right to deal with the...
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