Wight v Eckhardt Marine GmbH
| Jurisdiction | UK Non-devolved |
| Judge | (Lord Hoffmann, Lord Nolan, Lord Hobhouse of Woodborough, Lord Scott of Foscote and Lord Walker of Gestingthorpe) |
| Judgment Date | 14 May 2003 |
| Court | Privy Council |
| Date | 14 May 2003 |
(Lord Hoffmann, Lord Nolan, Lord Hobhouse of Woodborough, Lord Scott of Foscote and Lord Walker of Gestingthorpe)
R.M. Sheldon, Q.C. and J.M. Dingemans, Q.C. for the appellants;
T.W.G. Lowe for the respondent.
(1) Ayerst (Inspector of Taxes) v. C. & K. (Constr.) Ltd., [1976] A.C. 167; [1975] 2 All E.R. 537, considered.
(2) Banque des Marchands de Moscou (Koupetschesky), Re, UNK[1952] 1 All E.R. 1269; [1952] 1 T.L.R. 739, considered.
(3) Banque des Marchands de Moscou (Koupetschesky) (No. 2), Re, WLR[1954] 1 W.L.R. 1108; 98 Sol. Jo. 557; [1954] 2 All E.R. 746, considered.
(4) Dynamics Corp. of America, In re, WLR[1976] 1 W.L.R. 757; 120 Sol. Jo. 450; [1976] 2 All E.R. 669, dicta of Oliver J. applied.
(5) European Assur. Socy. Arbitration, In re (Wallberg”s Case)(1872), 17 Sol. Jo. 69, dicta of Lord Westbury considered.
(6) Humber Ironworks & Shipbuilding Co., In reELR(1869), L.R. 4 Ch. App. 643; 38 L.J. Ch. 712, dicta of Selwyn, L.J. not followed.
(7) Jabbour (F. & K.) v. Custodian of Israeli Absentee Property, [1954] 1 W.L.R. 139; [1954] 1 All E.R. 145, distinguished.
(8) Lines Bros. Ltd., In re, ELR[1983] Ch. 1; [1982] 2 All E.R. 183, dicta of Brightman, L.J. applied.
(9) Northern Counties Fire Ins. Co., In reELR(1880), 17 Ch. D. 337, applied.
(10) Raiffeisen Zentralbank Osterreich A.G. v. Five Star Trading LLC, [2001] Q.B. 825; [2001] 3 All E.R. 257, considered.
(11) Russian Bank for Foreign Trade, In re, [1933] Ch. 745; 102 L.J. Ch. 309, considered.
(12) United Railways of Havana, In re, ELR[1960] Ch. 52; [1959] 1 All E.R. 214, dicta of Jenkins, L.J. applied.
Companies Law (2002 Revision) (Laws of the Cayman Islands, 1963, cap. 22, revised 2002): s.136(a): The relevant terms of this sub-section are set out at para. 28.
Insolvency Rules 1986 (S.I. 1986/1925), r.4.77 and Form 4.26: The relevant terms of this rule and Form are set out at para. 33.
Conflict of Laws-companies-compulsory winding up-proper law of debt-foreign proper law of original debt remains constant and not changed by winding-up order for debtor company in Cayman Islands-no new right to participate in Cayman winding up if debt already discharged under proper law
Companies-compulsory winding up-creditors-to participate in distribution, creditor must be creditor at date of distribution-no entitlement under principle of pari passu distribution for creditor at date of order to participate in distribution if debt since discharged
The respondent applied to the Grand Court to set aside liquidators” rejection of its proof of debt.
The respondent entered a contract of sale, the performance of which was guaranteed by the Bangladeshi branch of BCCI (Overseas), a bank incorporated in the Cayman Islands. When the purchaser defaulted on the contract, the respondent demanded payment from the bank on the guarantee. In the meantime, however, the Bangladeshi Government had closed the bank and it therefore did not honour the guarantee. The respondent commenced proceedings against the bank in Bangladesh.
A winding-up order against BCCI(O) was made in the Cayman Islands and the respondent subsequently filed a proof of debt in respect of the guarantee. The Bangladeshi Bank, in the exercise of its statutory powers, then imposed a reconstruction scheme establishing a new bank which assumed all the liabilities of BCCI(O) and all legal proceedings against BCCI(O) were deemed to be against the new bank. The respondent”s proof of debt was rejected by the liquidators on the basis that, pursuant to the reconstruction scheme, all claims against the Bangladeshi branch of BCCI(O) had been assumed by the new bank.
On appeal to the Grand Court (Murphy, J.), the court dismissed the application, stating that the respondent”s claim failed because under Bangladeshi law-the law of the situs of the debt and the proper law to be applied-the claim had been extinguished.
On further appeal, the Court of Appeal reversed the Grand Court
decision and held that the validity of the debt was governed not by its proper law, but by its situs. The situs of the debt had originally been Bangladesh, but when the winding-up order was made, the debt became a claim to participate in the distribution of assets in the Cayman Islands, the situs of that claim being the Cayman Islands. It was not therefore affected by the Bangladeshi scheme. The proceedings in the Court of Appeal are reported at 2000 CILR 325.
On the liquidators” further appeal, they submitted that (a) the question was whether the Bangladeshi scheme had the effect of discharging BCCI(O)”s obligation to the respondent, which was governed by Bangladeshi law; (b) under the Bangladeshi scheme, the new bank assumed the liabilities of BCCI(O) and thus the latter”s obligation to the respondent was discharged; (c) the Court of Appeal had wrongly found that, despite the discharge of BCCI(O)”s obligation under the Bangladeshi scheme, the respondent had a further right under Cayman law, created by the winding-up order, to take part in the liquidation process; and (d) furthermore, it did not follow from the principle of pari passu distribution that the respondent could prove a debt, if that debt had been discharged subsequent to the date of the winding-up order.
The respondent submitted in reply that (a) in identifying the proper law of the debt it was important to look to the substance of the issue rather than to apply the characterization mechanistically; (b) the Bangladeshi scheme did not affect the respondent”s claim against BCCI(O), because on its true construction it merely created an additional liability on the part of the new bank; and (c) as it had a debt at the date of the winding-up order, the principle of pari passu distribution (by which all debts were valued at the date of the winding-up order) meant that its right to participate in the distribution of assets was not later divested by the discharge of the obligation under the Bangladeshi scheme.
Held, allowing the appeal:
(1) Whether the debt owed by BCCI(O) to the respondent had been discharged depended on the proper law of the debt, which was the law of Bangladesh. Under Bangladeshi law, the effect of the reconstruction scheme, whereby the new bank assumed all the liabilities of BCCI(O), was to discharge the debt owed by BCCI(O) (para. 14; para. 19).
(2) The Court of Appeal had erred in finding that the winding-up order had created a new right in the respondent to participate in the distribution of assets, such right being based in the Cayman Islands and thus unaffected by the Bangladeshi scheme. The effect of the winding-up order was in fact to create a process for the collective enforcement of debts owed by BCCI(O), and did not affect the nature of the debts but merely the method for enforcing them. The winding-up order was not the equivalent of a judgment against the bank, converting the respondent”s claim into something juridicially different, like a judgment debt. The winding-up order in the Cayman Islands did not alter the fact that the respondent had a debt against BCCI(O), the lex situs of which remained
Bangladesh. Therefore, after the respondent”s debt was discharged by the Bangladeshi scheme, the respondent did not have a right in Cayman law to apply in the liquidation process, and its proof of debt had been properly rejected (paras. 25–26; para. 34).
(3) The right to participate in the liquidation depended on being a creditor until the time of distribution-as emphasized in the wording of the statutory form of proof of debt. The principle of pari passu...
To continue reading
Request your trial
-
Ritchie Capital Management LLC et Al v Lancelot Investors Fund Ltd and General Electric Company
...[2020] 1 A.C. 1045; [2019] 2 W.L.R. 1051; [2019] 3 All E.R. 1013; [2019] BCC 520, referred to. (52) Wight v. Eckhardt Marine G.m.b.H., 2003 CILR 211, referred to. The plaintiffs applied for leave to serve a writ out of the jurisdiction. In the late 1990s and early 2000s, Mr. Thomas Petters ......
-
Re Caledonian Securities Ltd (in official liquidation)
...Jun. 438; 33 E.R. 589, referred to. (15) SPhinX Group, In re, 2012 (2) CILR N[11], considered. (16) Wight v. Eckhardt Marine G.m.b.H., 2003 CILR 211; [2004] 1 A.C. 147; [2003] 3 W.L.R. 414; [2003] BCC 702; [2004] 2 BCLC 539; [2003] UKPC 37, referred to. Companies—liquidators—liquidation of ......
-
The Companies Law (2013 Revision) Caledonian Securities Ltd (in Official Liquidation) (“CSL”)
.... Considered and approved on appeal from this jurisdiction by the Privy Council in Wight, Pilling and Mackey v. Eckhardt Marine G.m.b.H. 2003 CILR 211, 219 para 12 And so regarded in the leading text books: see Underhill and Hayton: Law of Trusts ad Trustees, 17th Ed. Para 43.14; Snell's Eq......
-
Re SPhinX Group
...207; on further appeal, sub nom.Cleaver v. Delta American Reins. Co., 2001 CILR 34, referred to. (17) Wight v. Eckhardt Marine G.m.b.H., 2003 CILR 211, referred to. Legislation construed: Companies Law (2009 Revision), s.140(1): The relevant terms of this sub-section are set out at para. 10......