Central Bank of Ecuador and Others v Conticorp SA and Others (Bahamas)

JurisdictionUK Non-devolved
JudgeLord Mance
Judgment Date23 March 2015
Neutral Citation[2015] UKPC 11
Date23 March 2015
Docket NumberAppeal No 0072 of 2013
CourtPrivy Council
Central Bank of Ecuador and others
Conticorp SA and others
(Respondents) (Bahamas)

[2015] UKPC 11


Lord Mance

Lord Clarke

Lord Sumption

Lord Carnwath

Lord Toulson

Appeal No 0072 of 2013

Privy Council

From the Court of Appeal of the Commonwealth of The Bahamas


Richard Salter QC Matthew Parker

(Instructed by K&L Gates LLP)


Julian Malins QC Ruth Jordan

(Instructed by Sheridans)


Heard on 10, 11, 12 and 13 November 2014


Table of Contents


(page references)



The law


The three transactions


The litigation to date


Analysis of the judgments below


(i) The difference between the judge and Court of Appeal as to whether Mr Taylor was in breach of fiduciary duty:


(ii) Anbacher's role:


(iii) Piercing the corporate veil and shadow directors:


(iv) The issue about the value of the GDRs:


(v) The Court of Appeal's doubt about the value of the loans:


(vi) The conclusion that the three transactions were part of a long-standing "debt to equity" plan:


(vii) The Board's conclusion that a full review of the conclusions reached below is necessary:


The history of IAMF, the GDRs and the three transactions


Analysis regarding liability


(1) Mr Taylor's breach of fiduciary duty in relation to the transactions and (2) whether the respondents could have assisted such breach, if Mr Taylor was relying on Ansbacher to vet the transactions?:


(3) Were all four respondents responsible for assisting Mr Taylor's breach?:


(4) Were the transactions part of a plan to convert "debt to equity"?:


(5) When were the transactions decided upon?:


(6) In what circumstances were the transactions decided upon?:


(7) What attention was given to IAMF's interests in entering into the transactions?:


(8) What was Banco Continental and BCO Curacao's financial position when the transactions were entered into?:


(9) Was there any reason for IAMF to enter into the first transaction in late December 1995?:


(10) Was there any reason for IAMF to enter into the second transaction in late January 1996?:


(11) The relationship between the transactions and any plan or program:


(a) Evaluation of the oral evidence against the background of the documentation and probabilities:


(b) Obscurity of Structural Reorganisation Program:


(c) Dr Intriago's cross-examination:


(d) The capitalisation:


(e) The judge's conclusions based on Dr Intriago's cross-examination:


(12) The third transaction:


(13) Dr Luis and Leonidas Ortega's explanations for the transactions:


(14) The exposure of IAMF to the risk that the GDRs and shares might prove worthless:


(15) The values assigned to the GDRs and the GFC shares:


(a) Comparisons with other pricing information:


(b) Expert evidence:


(c) The respondents' explanations for the pricing:


(d) The pricing of the third transaction:


(e) The Board's conclusions on pricing:


(16) The probity of the transactions:


Conclusions on liability




(a) Preliminary:


(b) Analysis:


(c) Conclusion on loss:


Overall summary and Advice to Her Majesty


Lord Mance

1. The central issue on this appeal is the probity of three transactions entered into by the appellant, Interamerican Asset Management Fund Limited ("IAMF") incorporated and based in The Bahamas, in December 1995 and January and March 1996 with the first respondent, Conticorp SA ("Conticorp"), an Ecuadorian company. Conticorp was the owner of Grupo Financiero Conticorp SA ("GFC"), whose principal subsidiary was Banco Continental SA ("Banco Continental"), which in turn owned Banco Continental Overseas NV ("BCO Curacao"). GFC and Banco Continental were both also Ecuadorian companies, while BCO Curacao was a Netherlands Antilles company. The Board will call GFC and its subsidiaries "the GFC group". BCO Curacao had invested its assets heavily in equity participations in IAMF. Conticorp had other subsidiaries or related companies, not part of the GFC group, and the Board will refer to these as "Conticorp-related companies". The personal respondents were three of Conticorp's principal shareholding owners and officers. IAMF's case is that they and through them Conticorp controlled all IAMF's decisions and affairs, and that, although IAMF was presented to the world as an independent investment management fund, Mr Michael Taylor, its sole director and nominated investment adviser, was never more than an instrument executing the respondents' instructions.


2. IAMF's assets originated from funds raised by BCO Curacao from Ecuadorian depositors. Prior to the three transactions, the assets included portfolios of loans granted to Conticorp and Conticorp-related companies and shareholdings, to a total face value of about USD 192m. By the three transactions IAMF transferred or surrendered such portfolios and shareholdings to Conticorp. IAMF's case is that Conticorp gave IAMF in exchange under the first two transactions global depository receipts ("GDRs") representing shares in GFC and under the third simply shares in GFC, which were not or could not honestly have been thought to have value, or at least value in any way commensurate with that of the cash, loans and shares which IAMF was surrendering and the risks it was incurring by accepting the GDRs and shares in place of its previous assets.


3. The three transactions took place during a period of ever increasing financial difficulties affecting both Banco Continental and BCO Curacao. Very heavy withdrawals in November 1995 were followed by public rumours of financial collapse in early December 1995. To meet the run on both banks, they were forced increasingly to rely on borrowings at stringent interest rates (c 50% per annum) from the Central Bank of Ecuador. Eventually, in March 1996, the Central Bank of Ecuador was obliged to rescue them by an extensive subordinated loan. This loan was accompanied by a transfer of control over GFC under a trust agreement, it was supplemented in 1996 by further lending and it was ultimately converted, following a default in repayment, into new equity, with all old equity being cancelled. In these circumstances, IAMF claims the whole value of the cash, loans and shares which it transferred to Conticorp, primarily on the basis that the respondents were, by bringing about the three transactions, all involved in dishonestly assisting breaches of trust by Mr Taylor in agreeing, on their instructions, the documentation by which the three transactions were implemented. The trial judge, Adderley J, and the Court of Appeal rejected IAMF's challenge to the probity of the transactions on a variety of grounds. For the reasons given in this judgment, the Board has reached a contrary conclusion and will humbly advise Her Majesty as summarised in para 176 below.

The law

4. In the light of the rejection of IAMF's case in both courts below, IAMF faces a heavy onus in seeking to persuade the Board to reach a conclusion that the respondents were guilty of a lack of probity. First, the Board will as a matter of settled practice decline to interfere with concurrent findings of pure fact, save in very limited circumstances. The well-established position remains as stated in Devi v Roy [1946] AC 508, where the Board said:

"(4.) That, in order to obviate the practice, there must be some miscarriage of justice or violation of some principle of law or procedure. That miscarriage of justice means such a departure from the rules which permeate all judicial procedure as to make that which happened not in the proper sense of the word judicial procedure at all. That the violation of some principle of law or procedure must be such an erroneous proposition of law that if that proposition be corrected the finding cannot stand; or it may be the neglect of some principle of law or procedure, whose application will have the same effect. The question whether there is evidence on which the courts could arrive at their finding is such a question of law.

(5.) That the question of admissibility of evidence is a proposition of law, but it must be such as to affect materially the finding. The question of the value of evidence is not a sufficient reason for departure from the practice.

(6.) That the practice is not a cast-iron one, and the foregoing statement as to reasons which will justify departure is illustrative only, and there may occur cases of such an unusual nature as will constrain the Board to depart from the practice."


5. Second, quite apart from the settled rule relating to concurrent findings, any appeal court must be extremely cautious about upsetting a conclusion of primary fact. Very careful consideration must be given to the weight to be attached to the judge's findings and position, and in particular the extent to which, he or she had, as the trial judge, an advantage over any appellate court. The greater that advantage, the more reluctant the appellate court should be to interfere. Some conclusions of fact are, however, not conclusions of primary fact, but involve an assessment of a number of different factors which have to be weighed against each other. This is sometimes called an evaluation of the facts and is often a matter of degree upon which different judges can legitimately differ: see Assicurazioni Generali SpA v Arab Insurance Group (Practice Note) [2003] 1 WLR 577, paras 15–17, per Clarke LJ, cited with approval in Datec Electronics Holdings Ltd v United Parcels Service Ltd [2007] UKHL 23, [2007] 1 WLR 1325, para 46.


6. The Supreme Court of the United Kingdom recently re-emphasised the force...

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